sv4
As filed with the Securities and Exchange Commission on
February 26, 2008
Registration
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
COMMUNITY BANKERS ACQUISITION
CORP.
(Exact name of registrant as
specified in its charter)
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Delaware
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6022
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20-2652949
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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9912 Georgetown Pike,
Suite D-203
Great Falls, Virginia
22066
(703) 759-0751
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Gary A. Simanson, President and
Chief Executive Officer
Community Bankers Acquisition
Corp.
9912 Georgetown Pike,
Suite D-203
Great Falls, Virginia
22066
(703) 759-0751
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies to:
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Jonathan H. Talcott
Kathryn C. Kling
Nelson Mullins Riley & Scarborough LLP
101 Constitution Avenue, N.W., Suite 900
Washington, D.C. 20001
(202) 712-2806
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Kathleen L. Cerveny
Ellenoff Grossman & Schole LLP
1627 K Street, N.W.,
10th
Floor
Washington, D.C. 20006
(202) 470-4921
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George P. Whitley
Christopher J. Lange
Scott H. Richter
LeClairRyan, A Professional Corporation
951 East Byrd Street,
8th
Floor
Richmond, Virginia 23219
(804) 343-4089
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Approximate date of commencement of the proposed sale to the
public: As soon as practicable after the
effectiveness of this registration statement and the
satisfaction or waiver of all other conditions to the merger
described in the joint proxy statement/prospectus.
If the securities being registered on this form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated
filer o Accelerated
filer o Non-accelerated
filer o Smaller
reporting
company þ
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(Do
not check if a smaller reporting company)
CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Title of Each Class
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Amount to be
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Proposed Maximum
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Aggregate
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Amount of
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of Securities to be Registered
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Registered(1)
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Offering Price
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Offering Price(2)
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Registration Fee
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Common Stock
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7,106,057
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N/A
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$34,737,528
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$1,365.18
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(1)
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Based upon the maximum number of
shares of common stock of Community Bankers Acquisition Corp.
that may be issued in exchange for shares of common stock of BOE
Financial Services of Virginia, Inc. pursuant to the merger
described in the joint proxy statement/prospectus which is a
part of this registration statement. Pursuant to Rule 416,
this registration statement also covers an indeterminate number
of shares of common stock as may become issuable as a result of
stock splits, stock dividends, or similar transactions.
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(2)
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Estimated solely for purposes of
calculating the registration fee, and calculated in accordance
with Rules 457(f)(1) and 457(c) under the Securities Act by
multiplying $28.00, the average of the high and low prices for
BOE Financial Services of Virginia, Inc. common stock as
reported on the Nasdaq Capital Market on February 21, 2008
by the estimated maximum number of shares of BOE Financial
Services of Virginia, Inc. common stock that may be cancelled in
the merger.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement will become effective on such date as the Securities
and Exchange Commission, acting pursuant to Section 8(a),
may determine.
COMMUNITY
BANKERS ACQUISITION CORP.
9912 Georgetown Pike,
Suite D-203
Great Falls, Virginia 22066
Telephone:
(703) 759-0751
,
2008
Dear Community Bankers Acquisition Corp. Stockholder:
You are cordially invited to attend the special meeting of the
stockholders of Community Bankers Acquisition Corp., a Delaware
corporation (Community Bankers). The special meeting
will be held
on ,
2008, at .m., local time,
at .
At the special meeting, you will be asked to consider and vote
on (1) a proposal to adopt the Agreement and Plan of
Merger, dated as of December 13, 2007, by and between
Community Bankers Acquisition Corp. and BOE Financial Services
of Virginia, Inc.; (2) a proposal to adopt an amendment to
the certificate of incorporation of Community Bankers to reset
the terms of the classes of Community Bankers directors,
effective upon consummation of the merger with BOE; and
(3) a proposal to authorize the board of directors to
adjourn the special meeting to allow time for further
solicitation of proxies.
Adoption of the merger agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of
Community Bankers common stock entitled to vote at the special
meeting.
Adoption of the amendment to the certificate of incorporation
requires the affirmative vote of a majority of the shares of
Community Bankers outstanding common stock entitled to
vote at the special meeting.
Authorization for the board of directors to adjourn the special
meeting until a later date requires the affirmative vote of the
holders of a majority of the shares of Community Bankers common
stock present in person or represented by proxy and entitled to
vote at the special meeting, whether or not a quorum is present.
Each of these proposals is more fully described in the
accompanying joint proxy statement/prospectus.
The Community Bankers board of directors has unanimously
determined that each of the proposals and the merger with BOE
are in the best interests of Community Bankers and its
stockholders. The board of directors recommends that you vote,
or give instruction to vote, FOR the adoption
of each of the proposals.
Enclosed is a notice of special meeting and the joint proxy
statement/prospectus containing detailed information concerning
the merger proposal and the transactions contemplated by the
merger agreement, as well as detailed information concerning
each of the proposals. We urge you to read the joint proxy
statement/prospectus and attached annexes carefully.
Your vote is important. Because adoption of the merger agreement
and the amendment to the certificate of incorporation requires
the affirmative vote of a majority of the outstanding shares of
Community Bankers common stock entitled to vote at the meeting,
your failure to vote will have the same effect as a vote against
these proposals. Whether or not you plan to attend the special
meeting in person, please sign, date and return the enclosed
proxy card as soon as possible in the envelope provided.
I look forward to seeing you at the meeting.
Sincerely,
Eugene S. Putnam, Jr.
Chairman of the Board
COMMUNITY
BANKERS ACQUISITION CORP.
9912 Georgetown Pike,
Suite D-203
Great Falls, Virginia 22066
Telephone:
(703) 759-0751
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
To Be Held
On ,
2008
To the Stockholders of Community Bankers Acquisition Corp.:
Community Bankers Acquisition Corp. will hold a special meeting
of stockholders
on ,
2008, at .m., local time,
at
for the following purposes:
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1.
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To consider and vote upon a proposal to adopt the Agreement and
Plan of Merger, dated as of December 13, 2007, by and
between Community Bankers Acquisition Corp. and BOE Financial
Services of Virginia, Inc., pursuant to which BOE Financial
Services of Virginia, Inc. will merge with and into Community
Bankers Acquisition Corp., as described in more detail in the
enclosed joint proxy statement/prospectus;
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2.
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To consider and vote upon a proposal to adopt an amendment to
the certificate of incorporation of Community Bankers to revise
Section F of Article SIXTH to reset the terms of the
classes of Community Bankers directors; and
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3.
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To consider and vote on a proposal to authorize the board of
directors to adjourn the special meeting to allow time for
further solicitation of proxies, in the event there are
insufficient votes present in person or represented by proxy at
the special meeting to approve the proposals.
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Unless Community Bankers and BOE agree otherwise, the merger
will only be consummated if the stockholders of Community
Bankers adopt the amendment to the certificate of incorporation
of Community Bankers. In addition, the amendment to the
certificate of incorporation will only be effected in the event
and at the time the merger with BOE is consummated.
Community Bankers has fixed the close of business
on ,
2008 as the record date for determining those stockholders
entitled to vote at the special meeting and any adjournments or
postponements of the special meeting. Accordingly, only
stockholders of record on that date are entitled to notice of,
and to vote at, the special meeting and any adjournments or
postponements of the special meeting.
Whether or not you plan to attend the special meeting in person,
please complete, date, sign and return the enclosed proxy card
as promptly as possible. Community Bankers has enclosed a
postage prepaid envelope for that purpose. Any Community Bankers
stockholder may revoke his or her proxy by following the
instructions in the joint proxy statement/prospectus at any time
before the proxy has been voted at the special meeting. Even if
you have given your proxy, you may still vote in person if you
attend the special meeting. Please do not send any stock
certificates to us at this time.
Community Bankers encourages you to vote on these very important
matters. The board of directors of Community Bankers
unanimously recommends that Community Bankers stockholders vote
FOR each of the proposals above.
By Order of the Board of Directors,
Eugene S. Putnam, Jr.
Chairman of the Board
,
2008
BOE
FINANCIAL SERVICES OF VIRGINIA, INC.
1325 Tappahannock Boulevard
Tappahannock, Virginia 22560
(804) 443-4343
,
2008
Dear BOE Financial Services of Virginia, Inc. Stockholder:
You are cordially invited to attend a special meeting of the
stockholders of BOE Financial Services of Virginia, Inc.
(BOE). The special meeting will be held
on ,
2008,
at .m.,
local time,
at .
At the special meeting, you will be asked to consider and vote
on a proposal to adopt the Agreement and Plan of Merger, dated
December 13, 2007, by and between BOE and Community Bankers
Acquisition Corp. You will also be asked to vote on a proposal
to authorize the board of directors to adjourn the special
meeting to allow time for further solicitation of proxies,
should that be necessary.
Approval of the merger proposal requires approval by more than
two-thirds of all votes entitled to be cast by the holders of
BOE common stock.
Approval of the proposal to authorize the board of directors to
adjourn the special meeting until a later date requires the
votes cast favoring the action to exceed the votes cast opposing
the action, whether or not a quorum is present.
Each of these proposals is more fully described in the
accompanying joint proxy statement/prospectus.
The BOE board of directors has determined unanimously that the
proposals and the merger are in the best interests of BOE and
its stockholders. The board of directors recommends that you
vote, or give instruction to vote, FOR the
adoption of each of the proposals.
Enclosed is a notice of special meeting and the joint proxy
statement/prospectus containing detailed information concerning
the merger proposal and the transactions contemplated by the
merger agreement. We urge you to read the joint proxy
statement/prospectus and attached annexes carefully.
Your vote is important. Because approval of the merger proposal
requires more than two-thirds of all votes entitled to be cast
by the holders of BOE common stock, abstaining from voting
(including by way of a broker non-vote), either in person or by
proxy, will have the same effect as a vote against approval of
the merger agreement. Whether or not you plan to attend the
special meeting in person, please sign, date and return the
enclosed proxy card as soon as possible in the envelope
provided. We look forward to seeing you at the special
meeting, and we appreciate your continued loyalty and support.
Sincerely,
George M. Longest, Jr.
President & Chief Executive Officer
BOE
FINANCIAL SERVICES OF VIRGINIA, INC.
1325 Tappahannock Boulevard
Tappahannock, Virginia 22560
(804) 443-4343
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
To Be Held
On ,
2008
To the Stockholders of BOE Financial Services of Virginia, Inc.:
BOE Financial Services of Virginia, Inc. will hold a special
meeting of stockholders
on ,
2008, at .m., local time,
at
for the following purposes:
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1.
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To consider and vote upon a proposal to approve the Agreement
and Plan of Merger, dated as of December 13, 2007, by and
between Community Bankers Acquisition Corp. and BOE Financial
Services of Virginia, Inc., pursuant to which BOE Financial
Services of Virginia, Inc. will merge with and into Community
Bankers Acquisition Corp., as more particularly described in the
enclosed joint proxy statement/prospectus; and
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2.
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To consider and vote on a proposal to authorize the board of
directors to adjourn the special meeting to allow time for
further solicitation of proxies, in the event there are
insufficient votes represented in person or by proxy at the
special meeting to approve the merger proposal.
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BOE has fixed the close of business
on ,
2008, as the record date for determining those stockholders
entitled to vote at the special meeting and any adjournments or
postponements of the special meeting. Accordingly, only
stockholders of record on that date are entitled to notice of,
and to vote at, the special meeting and any adjournments or
postponements of the special meeting.
Whether or not you plan to attend the special meeting in person,
please complete, date, sign and return the enclosed proxy card
as promptly as possible. BOE has enclosed a postage prepaid
envelope for that purpose. Any BOE stockholder may revoke his or
her proxy by following the instructions in the joint proxy
statement/prospectus at any time before the proxy has been voted
at the special meeting. Even if you have given your proxy, you
may still vote in person if you attend the special meeting.
Please do not send any stock certificates to BOE at this time.
BOE encourages you to vote on this very important matter. The
board of directors of BOE Financial Services of Virginia, Inc.
unanimously recommends that BOE Financial Services of Virginia,
Inc.s stockholders vote FOR the
proposals above.
By Order of the board of directors,
George M. Longest, Jr.
President and Chief Executive Officer
,
2008
JOINT
PROXY STATEMENT/PROSPECTUS
FOR THE
PROPOSED MERGER OF
COMMUNITY BANKERS ACQUISITION CORP.
AND
BOE FINANCIAL SERVICES OF VIRGINIA, INC.
The boards of directors of Community Bankers Acquisition Corp.
and BOE Financial Services of Virginia, Inc. have unanimously
agreed to a merger of our companies. If the proposed merger is
completed, BOE stockholders will receive 5.7278 shares of
Community Bankers common stock for each share of BOE common
stock they own, subject to possible adjustment as described in
this joint proxy statement/prospectus. This 5.7278 multiple, as
it may be adjusted, is referred to as the exchange
ratio.
Community Bankers was formed to effect a merger, capital stock
exchange, asset acquisition or other similar business
combination with an operating business in the banking industry.
Its common stock is listed on the American Stock Exchange under
the symbol BTC. BOE common stock is listed on the
Nasdaq Capital Market under the symbol BSXT. Based
on the closing price of Community Bankers common stock
on ,
2008 of $ , BOE stockholders will
receive approximately $ worth of
Community Bankers common stock for each share of BOE stock they
own. The actual value of the Community Bankers common stock
received by BOE stockholders in the merger will depend on the
market value of Community Bankers common stock at the time of
closing.
This joint proxy statement/prospectus provides detailed
information about the merger and the special meeting of
Community Bankers stockholders and the special meeting of BOE
stockholders. It also provides information about the Community
Bankers common stock to be issued to BOE stockholders in the
event the merger is approved. As described in this proxy
statement/prospectus, we cannot complete the merger unless we
obtain the necessary government approvals and unless the
stockholders of both Community Bankers and BOE approve the
merger proposal.
In addition to the proposed merger of Community Bankers with
BOE, Community Bankers has entered into an agreement and plan of
merger, dated as of September 5, 2007, with TransCommunity
Financial Corporation, a financial holding company based in Glen
Allen, Virginia. TransCommunity common stock is quoted on the
OTC Bulletin Board under the symbol TCYF.OB.
Although the stockholders of BOE will not be voting on Community
Bankers proposed merger with TransCommunity at its special
meeting, this joint proxy statement/prospectus contains certain
information about TransCommunity, and the proposed merger with
TransCommunity. Community Bankers must complete its merger with
TransCommunity prior to closing its merger with BOE. If
Community Bankers does not complete its merger with
TransCommunity by June 7, 2008, Community Bankers will be
forced to dissolve and liquidate and will not be able to close
the merger with BOE.
Please carefully review and consider this joint proxy
statement/prospectus which explains the merger proposal in
detail, including the discussion under the heading Risk
Factors beginning on page . It is
important that your shares are represented at your stockholders
meeting, whether or not you plan to attend. Accordingly, please
complete, date, sign, and return promptly your proxy card in the
enclosed envelope. You may attend the meeting and vote your
shares in person if you wish, even if you have previously
returned your proxy.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved the securities
to be issued under this joint proxy statement/prospectus or
determined if this joint proxy statement/prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense.
This joint proxy statement/prospectus is
dated ,
2008. It is first being mailed to Community Bankers and
BOEs stockholders on or
about ,
2008.
TABLE OF
CONTENTS
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F-1
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APPENDIX A
|
|
Agreement and Plan of Merger by and between Community Bankers
and BOE
|
APPENDIX B
|
|
Proposed Amended and Restated Certificate of Incorporation
|
APPENDIX C
|
|
Fairness Opinion of Keefe, Bruyette & Woods, Inc.
|
APPENDIX D
|
|
Fairness Opinion of Feldman Financial Advisors, Inc.
|
APPENDIX E
|
|
Agreement and Plan of Merger by and between Community Bankers
and TransCommunity
|
iv
QUESTIONS
AND ANSWERS FOR ALL STOCKHOLDERS
|
|
|
Q: |
|
Why is BOE merging with and into Community Bankers? |
|
A: |
|
BOE is merging with and into Community Bankers because the
boards of directors of both companies believe that the merger
will provide stockholders of both companies with substantial
benefits and enable Community Bankers, following the completion
of its merger with TransCommunity, to use BOE as a growth
platform to build a larger banking franchise and further
increase the operating efficiencies and the growth opportunities
of the surviving corporation. It is anticipated that
TransCommunity Bank, N.A., the bank subsidiary of
TransCommunity, will merge with and into Bank of Essex, the bank
subsidiary of BOE, in the event Community Bankers merger
with BOE is consummated. A detailed discussion of the background
of and reasons for the proposed merger is contained under the
headings The Merger Background of the
Merger, The Merger Community
Bankers Reasons for the Merger, and The
Merger BOEs Reasons for the Merger. |
|
Q: |
|
How does the board recommend that I vote on the merger? |
|
A: |
|
You are being asked to vote FOR the approval
of the merger of BOE with and into Community Bankers pursuant to
the terms of the merger agreement. The board of directors of
each of Community Bankers and BOE has unanimously determined
that the proposed merger is in the best interests of its
stockholders, unanimously approved the merger agreement and
unanimously recommend that its stockholders vote
FOR the approval of the merger. |
|
Q: |
|
What vote is required to approve the merger? |
|
A: |
|
Community Bankers. Pursuant to Delaware law,
adoption of the merger agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of
Community Bankers common stock entitled to vote at the special
meeting. As of the Community Bankers record date, there were
shares of Community Bankers common stock outstanding.
Because a majority vote of all outstanding shares of Community
Bankers common stock is required to adopt the merger
agreement, your failure to vote will have the same effect as a
vote against the merger proposal. |
|
|
|
BOE. Pursuant to Virginia law, approval of the
merger proposal requires approval by more than two-thirds of all
votes entitled to be cast by holders of BOE common stock. As of
the BOE record date, there were
shares of BOE common stock outstanding. Because a two-thirds
vote of all outstanding shares of BOE common stock is required
to approve the merger, your failure to vote will have the same
effect as a vote against the merger proposal. |
|
Q: |
|
What is required for Community Bankers to complete the merger
with BOE? |
|
A: |
|
In order to complete the merger with BOE, the approval of the
Community Bankers and BOE stockholders and the necessary
regulatory approvals must be received. Community Bankers filed
applications for approval to merge with BOE with the Board of
Governors of the Federal Reserve System, or the Federal Reserve,
and the Bureau of Financial Institutions of the Virginia State
Corporation Commission on January 25, 2008. In addition,
Community Bankers must complete its merger with TransCommunity
prior to closing its merger with BOE. |
|
Q: |
|
What happens if the merger with TransCommunity is not
completed? |
|
A: |
|
If the merger with TransCommunity is not completed, then the
merger with BOE cannot be consummated. In addition, if Community
Bankers does not effect the merger with TransCommunity by
June 7, 2008, Community Bankers must dissolve and liquidate. |
|
Q: |
|
Why must Community Bankers complete its merger with
TransCommunity prior to closing its merger with BOE? |
|
A: |
|
The merger with TransCommunity is an initial business
combination under Community Bankers certificate of
incorporation and therefore must be completed prior to the
closing of the merger with BOE. As Community Bankers must
dissolve and liquidate if the merger with TransCommunity is not
completed by June 7, 2008, it would not be advisable to
complete the merger with BOE prior to completing the merger with
TransCommunity. |
1
|
|
|
Q: |
|
What should I do now? |
|
A: |
|
After you have carefully read this joint proxy
statement/prospectus, please indicate on your proxy card how you
want to vote, and then date, sign and mail your proxy card in
the enclosed envelope as soon as possible so that your shares
will be represented at the meeting. If you date, sign and send
in a proxy card but do not indicate how you want to vote, your
proxy will be voted in favor of the merger proposal. |
|
Q: |
|
If my shares are held in street name by my
broker, will my broker vote my shares for me? |
|
A: |
|
It depends. A broker holding your shares in street
name must vote those shares according to any specific
instructions it receives from you. You should instruct your
broker how to vote your shares following the directions your
broker provides. If specific instructions are not received, in
certain limited circumstances your broker may vote your shares
in its discretion. On certain routine matters,
brokers have authority to vote their customers shares if
their customers do not provide voting instructions. When brokers
vote their customers shares on a routine matter without
receiving voting instructions, these shares are counted both for
establishing a quorum to conduct business at the meeting and in
determining the number of shares voted FOR or
AGAINST the routine matter. On
non-routine matters, brokers cannot vote the shares
on that proposal if they have not received voting instructions
from the beneficial owner of such shares. If you hold your
shares in street name, you can either obtain
physical delivery of the shares into your name, and then vote
your shares yourself, or request a legal proxy
directly from your broker and bring it to the special meeting,
and then vote your shares yourself. In order to obtain shares
directly into your name, you must contact your brokerage house
representative. Brokerage firms may assess a fee for your
conversion; the amount of such fee varies from firm to firm. |
|
|
|
Community Bankers. Your broker may not vote
your shares, unless you provide voting instructions, with regard
to adoption of the merger agreement, adoption of the amendment
to the certificate of incorporation and the proposal to adjourn
the special meeting to allow time for further solicitation of
proxies in the event there are insufficient votes present at the
meeting to approve the proposals, since these matters are not
routine. Failure to instruct your broker how to vote your shares
will have the same effect as a vote against the adoption of the
merger agreement and the adoption of the amendment to the
certificate of incorporation, but will have no effect on the
proposal to adjourn the special meeting to allow time for
further solicitation of proxies in the event there are
insufficient votes present at the meeting to approve the
proposals. |
|
|
|
BOE. Your broker may not vote your shares,
unless you provide voting instructions, with regard to approval
of the merger proposal and the proposal to adjourn the special
meeting to allow time for further solicitation of proxies in the
event there are insufficient votes present at the meeting to
approve the merger proposal, since these matters are not
routine. Failure to instruct your broker how to vote your shares
will have the same effect as a vote against the merger proposal,
but will have no effect on the proposal to adjourn the special
meeting to allow time for further solicitation of proxies in the
event there are insufficient votes present at the meeting to
approve the merger proposal. |
|
Q: |
|
Can I change my vote after I have submitted my proxy? |
|
A: |
|
Yes. There are a number of ways you can change your
vote. First, you may send a written notice to the person to whom
you submitted your proxy stating that you would like to revoke
your proxy. Second, you may complete and submit a later-dated
proxy with new voting instructions. The latest vote actually
received by Community Bankers or BOE prior to the applicable
special meetings, will be your vote. Any earlier votes will be
revoked. Third, you may attend the applicable special meeting
and vote in person. Any earlier votes will be revoked. Simply
attending the applicable special meeting without voting,
however, will not revoke your proxy. If you have instructed a
broker to vote your shares, you must follow the directions you
will receive from your broker to change or revoke your proxy. |
2
|
|
|
Q: |
|
Must Community Bankers complete its proposed merger with
TransCommunity prior to closing the merger with BOE? |
|
A: |
|
Yes. Community Bankers must complete its merger with
TransCommunity prior to closing its merger with BOE. If
Community Bankers does not complete its merger with
TransCommunity by June 7, 2008, Community Bankers will be
forced to dissolve and liquidate and will not be able to close
the merger with BOE. |
|
Q: |
|
When do you expect to complete the merger of Community
Bankers and BOE? |
|
A: |
|
We presently expect to complete the merger in the second quarter
of 2008. However, we cannot assure you when or if the merger
will occur. We must first obtain the approval of Community
Bankers and BOEs stockholders at their respective
special meetings and receive the necessary regulatory approvals,
and Community Bankers must complete the merger with
TransCommunity. |
|
Q: |
|
Whom should I contact with questions about the merger of
Community Bankers and BOE? |
|
A: |
|
If you want additional copies of this joint proxy
statement/prospectus, or if you want to ask questions about the
merger, you should contact: |
|
|
|
Gary A. Simanson
President and Chief Executive Officer
Community Bankers Acquisition Corp.
9912 Georgetown Pike,
Suite D-203
Great Falls, Virginia 22066
(703) 759-0751
|
|
George M. Longest, Jr.
President and Chief Executive Officer
BOE Financial Services of Virginia, Inc.
1325 Tappahannock Boulevard
Tappahannock, Virginia 22560
(804) 443-4343
|
3
QUESTIONS
AND ANSWERS FOR COMMUNITY BANKERS STOCKHOLDERS
|
|
|
Q: |
|
Why is Community Bankers proposing the merger? |
|
A: |
|
Community Bankers was organized for the purpose of effecting a
business combination with an operating business in the banking
industry. Community Bankers believes that BOE, a registered bank
holding company, is positioned for significant growth in its
current and expected future markets and believes that following
the completion of its merger with TransCommunity a business
combination with BOE will provide Community Bankers stockholders
with an opportunity to participate in a company with significant
potential and will further enhance the management expertise,
operating efficiencies and growth opportunities of the surviving
corporation. |
|
Q: |
|
What is being proposed, other than the merger, to be voted on
at the Community Bankers special meeting? |
|
A: |
|
At the annual meeting of stockholders
on , 2008, Community Bankers
stockholders are being asked to adopt two amendments to the
certificate of incorporation to be effected upon consummation of
the merger with TransCommunity: an amendment to reset the terms
of the classes of Community Bankers directors and an
amendment to change the corporations name to
Community Bankers Trust Corporation. At the
special meeting, Community Bankers is asking its stockholders to
adopt an additional amendment to the certificate of
incorporation, the purpose of which is to further reset the
terms of the various classes of Community Bankers directors.
Community Bankers is also asking its stockholders to authorize
the board of directors to adjourn the special meeting to allow
time for further solicitation of proxies in the event there are
insufficient votes present at the meeting to approve the
proposals. |
|
|
|
Unless Community Bankers and BOE agree otherwise, the merger
will only be consummated if the stockholders of Community
Bankers adopt the amendment to the certificate of incorporation.
In addition, the amendment to the certificate of incorporation
will only be effected in the event and at the time the merger
with BOE is consummated. |
|
Q: |
|
What will Community Bankers stockholders receive in the
proposed merger? |
|
A: |
|
Community Bankers stockholders will receive nothing in the
merger. Community Bankers stockholders will continue to hold the
same number of shares of Community Bankers common stock that
they owned prior to the merger. Community Bankers stockholders
do not have appraisal rights in connection with the merger under
applicable Delaware corporate law. |
|
Q: |
|
How much of Community Bankers voting interests will
existing Community Bankers stockholders own upon completion of
the merger? |
|
A: |
|
It depends. The percentage of Community Bankers voting
interests that existing Community Bankers stockholders will own
after the merger will vary depending on whether: |
|
|
|
any TransCommunity stockholders exercise appraisal
rights with respect to the merger of Community Bankers and
TransCommunity;
|
|
|
|
any of Community Bankers 7,500,000 outstanding
warrants are exercised;
|
|
|
|
I-Bankers Securities, Inc., Maxim Group LLC and
Legend Merchant Group, Inc., the representatives of the
underwriters in Community Bankers initial public offering,
exercise their unit purchase option to purchase
525,000 units (each unit comprised of one share of common
stock and one warrant to purchase one share of common stock); and
|
|
|
|
any holders of Community Bankers common stock issued
in Community Bankers initial public offering exercise
their right to convert their shares into cash equal to a pro
rata portion of the Community Bankers trust account with respect
to the merger with TransCommunity.
|
|
|
|
Depending on the scenario, Community Bankers stockholders
will own from 36.93% to 57.13% of Community Bankers voting
interests after the merger, based on the number of shares of
each of Community Bankers, TransCommunity and BOE issued and
outstanding as of the date of their respective merger
agreements. For a |
4
|
|
|
|
|
table outlining the effect of the various scenarios on the
percentage of Community Bankers voting interests that
existing Community Bankers stockholders will own after the
merger with BOE is completed, see The Merger
Stock Ownership of Existing Community Bankers and BOE
Stockholders After the Merger. |
|
Q: |
|
Do the Community Bankers stockholders have conversion
rights? |
|
A: |
|
No. As the merger with BOE will not be Community
Bankers initial business combination, no Community Bankers
stockholder will have conversion rights in connection with the
merger. |
|
Q: |
|
Will I lose my warrants or will they be converted to shares
of common stock if the merger is consummated? |
|
A: |
|
No. After we complete the merger with TransCommunity, your
warrants will become exercisable. Consummation of the merger
with BOE will not in any way affect your warrants. However, in
the event that Community Bankers does not consummate the merger
with TransCommunity by June 7, 2008, Community Bankers will
be required to liquidate and any Community Bankers warrants you
own will expire without value. |
|
Q: |
|
What happens if the merger is not consummated or is
terminated? |
|
A: |
|
If the merger is not consummated, Community Bankers
certificate of incorporation will not be further amended
pursuant to the proposal to adopt an amendment to the
certificate of incorporation. |
|
|
|
Should the merger agreement be terminated due to a material
breach of such agreement by Community Bankers, then a
termination fee of $500,000 would be payable by Community
Bankers to BOE. Further, if either party terminates because the
stockholders of the other party fail to approve the merger or if
either party terminates because the transactions contemplated
are not consummated by June 30, 2008, and another
acquisition transaction, involving a change in control, is
announced and results in a definitive agreement or a consummated
acquisition transaction with the terminating party within
12 months of termination, then the party entering into the
definitive agreement or consummating the acquisition transaction
will owe the other party a termination fee of $500,000. If a
party terminates the merger agreement due to a material breach
of the other party or the failure of the other party to
recommend the merger to its stockholders, the termination fee of
$500,000 is payable upon termination. In the case of a
termination involving a competing acquisition transaction, the
termination fee of $500,000 is payable upon the earlier of the
execution of a definitive agreement or the consummation of the
transaction. In those cases where a competing acquisition
transaction with a third party is consummated, an additional
termination fee of $1,200,000 will also be payable upon
consummation of the acquisition transaction. |
5
QUESTIONS
AND ANSWERS FOR BOE STOCKHOLDERS
|
|
|
Q: |
|
Why is BOE proposing the merger? |
|
A: |
|
We believe that the proposed merger will provide substantial
benefits to BOE stockholders. The BOE board of directors
believes the merger provides BOE stockholders with liquidity,
capital raising and strategic and growth opportunities, such as
the merger with TransCommunity, that would not have been readily
available to BOE on a stand-alone basis. To review the BOE
reasons for the transaction in greater detail, see The
Merger BOEs Reasons for the Merger. |
|
Q: |
|
What will BOE stockholders receive in the merger? |
|
A: |
|
Each issued and outstanding share of BOE common stock you own
will be converted into 5.7278 shares of Community Bankers
common stock, subject to possible adjustment. In the event the
average of the daily closing prices for Community Bankers common
stock as reported on the American Stock Exchange for the 20
consecutive full trading days ending on the fifth day before the
anticipated closing date of the merger is less than $7.42, the
exchange ratio will be increased to the quotient obtained by
dividing $42.50 by the average of the daily closing prices
during those 20 consecutive full trading days, rounded to the
nearest one-ten-thousandth. In addition, holders of outstanding
options for BOE common stock will receive options exercisable
for of Community Bankers common stock. The number of shares
underlying the options and the exercise price of the options
will be adjusted to reflect the 5.7278 exchange ratio. |
|
Q: |
|
Will BOE stockholders be taxed on the Community Bankers
common stock that they receive in exchange for their BOE
shares? |
|
A: |
|
No. We expect the merger to qualify as a
reorganization for United States federal income tax purposes. If
the merger qualifies as a reorganization for United States
federal income tax purposes, BOE stockholders will not recognize
any gain or loss to the extent BOE stockholders receive
Community Bankers common stock in exchange for their BOE shares.
We recommend that BOE stockholders carefully read the complete
explanation of the material United States federal income tax
consequences of the merger beginning on page ,
and that BOE stockholders consult their tax advisors for a full
understanding of the tax consequences of their participation in
the merger. |
|
Q: |
|
How much of Community Bankers voting interests will BOE
stockholders own upon completion of the merger? |
|
A: |
|
It depends. The percentage of BOEs voting interests that
existing BOE stockholders will own after the merger will vary
depending on whether: |
|
|
|
any TransCommunity stockholder exercises appraisal
rights with respect to the merger with TransCommunity;
|
|
|
|
any of Community Bankers 7,500,000 outstanding
warrants are exercised;
|
|
|
|
I-Bankers Securities, Inc., Maxim Group LLC and
Legend Merchant Group, Inc., the representatives in Community
Bankers initial public offering, exercise their unit
purchase option to purchase 525,000 units (each unit
comprised of one share of common stock and one warrant to
purchase one share of common stock); and
|
|
|
|
any holders of Community Bankers common stock issued
in Community Bankers initial public offering exercise
their right to convert their shares into cash equal to a pro
rata portion of the Community Bankers Trust account with respect
to the merger between Community Bankers and TransCommunity.
|
6
|
|
|
|
|
Depending on the scenario, BOE stockholders will own from 22.11%
to 32.53% of Community Bankers voting interests after the
merger, based on the number of shares of each of Community
Bankers, TransCommunity and BOE issued and outstanding as of the
date of their respective merger agreements. For a table
outlining the effect of the various scenarios on the percentage
of Community Bankers voting interests that existing BOE
stockholders will own after the merger with BOE is completed,
see The Merger Stock Ownership of Existing
Community Bankers and BOE Stockholders After the Merger. |
|
Q: |
|
Will I have appraisal rights in the merger? |
|
A: |
|
No. BOE stockholders do not have appraisal rights in
connection with the merger under applicable Virginia law. |
|
Q: |
|
Should I send in my stock certificates now? |
|
A: |
|
No. You should not send in your stock certificates at
this time. Promptly after the effective time of the merger, you
will receive transmittal materials with instructions for
surrendering your BOE shares. You should follow the
instructions in the post-closing letter of transmittal regarding
how and when to surrender your stock certificates. |
7
SUMMARY
This summary highlights selected information from this joint
proxy statement/prospectus. It may not contain all of the
information that is important to you. To better understand the
merger and its potential impact on you, we urge you to read this
entire document carefully, including the appendices, exhibits
and enclosures. Each item in this summary includes a page
reference directing you to a more complete discussion of the
item.
The
Companies (page )
Community
Bankers.
Community Bankers Acquisition Corp.
9912 Georgetown Pike,
Suite D-203
Great Falls, Virginia 22066
(703) 759-0751
Community Bankers was organized under the laws of the State of
Delaware on April 6, 2005. As a Targeted Acquisition
Corporationsm,
or
TACsm,
Community Bankers was formed to effect a merger, capital stock
exchange, asset acquisition or other similar business
combination with an operating business in the banking industry.
Community Bankers consummated its initial public offering on
June 8, 2006, raising approximately $60 million,
approximately $58 million of which is currently held in a
trust account at J.P. Morgan Chase Bank. Shares of
Community Bankers common stock trade on the American Stock
Exchange under the symbol BTC.
On September 5, 2007, Community Bankers entered into the
agreement and plan of merger with TransCommunity. TransCommunity
is a registered financial holding company incorporated under the
laws of Virginia and is the holding company for TransCommunity
Bank, N.A. TransCommunity is headquartered in Glen Allen,
Virginia and operates five full service offices in its four
operating divisions in Goochland, Powhatan, Louisa and
Rockbridge, Virginia. TransCommunity Bank had deposits of
$192.0 million, loans of $189.0 million, assets of
$223.0 million and equity of $29.9 million, at
September 30, 2007. Community Bankers must complete its
merger with TransCommunity by June 7, 2008, or, under its
certificate of incorporation, Community Bankers must dissolve
and liquidate.
As a result of the merger of Community Bankers and
TransCommunity, each share of TransCommunity common stock will
be converted into 1.4200 shares of Community Bankers common
stock, subject to possible adjustment. Community Bankers and
TransCommunity have prepared a separate joint proxy
statement/prospectus relating to the merger of Community Bankers
and TransCommunity which has been mailed to Community Bankers
and TransCommunity stockholders in connection with the annual
meeting of the stockholders of Community Bankers and the special
meeting of the stockholders of TransCommunity at which a
proposal to approve the merger of Community Bankers and
TransCommunity will be considered.
The merger with TransCommunity is Community Bankers
initial business combination, and Community Bankers
certificate of incorporation mandates certain voting
requirements for its initial business combination. Pursuant to
Community Bankers certificate of incorporation, adoption
of the merger agreement relating to the initial business
combination requires the affirmative vote of holders of a
majority of Community Bankers outstanding shares of common stock
issued in Community Bankers initial public offering and
voted at the meeting.
In addition, for an initial business combination the holders of
the shares of common stock issued in Community Bankers initial
public offering have the right to convert their stock into cash
equal to a pro rata portion of the Community Bankers trust
account if they vote against the merger. For Community Bankers
to complete its merger with TransCommunity, the holders of less
than 20% of the outstanding shares of common stock issued in the
Community Bankers initial public offering must have
exercised their conversion rights.
Pursuant to Delaware law, adoption of the merger agreement with
TransCommunity requires the affirmative vote of the holders of a
majority of the outstanding shares of Community Bankers common
stock entitled to vote at the annual meeting.
8
BOE.
BOE Financial Services of Virginia, Inc.
1325 Tappahannock Boulevard
Tappahannock, Virginia 22560
(804) 443-4343
BOE is a bank holding company incorporated under the laws of
Virginia and is the holding company of Bank of Essex. Bank of
Essex operates eight full-service offices, two in Tappahannock,
and one each in Manquin, Mechanicsville, West Point, Glen Allen,
Burgess and Callao, Virginia, respectively. Bank of Essex had
deposits of $241.0 million, loans of $213.5 million,
assets of $294.8 million and equity of $29.3 million,
at September 30, 2007.
Recent
Developments (page )
Community
Bankers.
On February 15, 2008, Community Bankers announced its
results of operations for the period from April 1, 2007
until December 31, 2007. For the period from April 1,
2007 to December 31, 2007, interest income on its trust
fund investments, including interest allocable to shares subject
to possible conversion, amounted to $1,933,962. This resulted in
net income for the period from April 1, 2007 to
December 31, 2007 of $1,105,034 or net income
per share, basic and diluted, of $0.12 and $0.09,
respectively. The aggregate amount of cash and United States
treasury securities held in the trust fund as of
December 31, 2007, was $58,452,512.
BOE.
On February 4, 2008, BOE announced its results of
operations for the fourth quarter of 2007. Net income for the
fourth quarter of 2007 was $596,000, a decrease of $317,000, or
34.7%, from net income of $913,000 for the same period in 2006.
The decrease to net income for the fourth quarter of 2007
compared to the same period in 2006 was due to a December 2006
sale of a former branch banking facility. This nonrecurring item
caused gain on sale of other properties to be $477,000 in the
fourth quarter of 2006 compared to $0 for the same period in
2007. Additionally, there was an increase of $187,000 in
noninterest expenses, from $2.2 million in the fourth
quarter of 2006 to $2.4 million in the fourth quarter 2007.
Offsetting these decreases to net income was an increase of
8.9%, or $209,000, in net interest income. Net interest income
was $2.6 million for the fourth quarter 2007 compared to
$2.4 million for the fourth quarter of 2006. Also, there
was an increase of $55,000, or 11.5%, in noninterest income,
from $479,000 in the fourth quarter of 2006, to $534,000 for the
same period in 2007. Income tax expense declined 42.0%, or
$84,000, from $200,000 in the fourth quarter of 2006 to $116,000
in the fourth quarter of 2007. Additionally, strong asset
quality resulted in no additional expense in provision for loan
losses for the fourth quarter of both years. On
December 31, 2007 loans past due 90 days or more and
accruing interest was $17,000 and loans not accruing interest
totaled $96,000. For the year ending December 31, 2007
charged-off loans were $272,000 against recoveries of $461,000.
Earnings per common share were $0.49 for the fourth quarter in
2007 compared to $0.75 for the same period in 2006.
For the year ended December 31, 2007, BOE reported net
income of $2.608 million, compared to net income of
$3.1 million for 2006, a decrease of $515,000, or 16.5%.
This decrease in earnings was primarily the result of an
increase of $876,000, or 11.1%, in noninterest expenses.
Salaries was the largest component of this increase, $432,000,
which increased primarily from the addition of staff that was
hired and trained in 2007 to operate two new full service
offices of Bank of Essex in Northumberland County, Virginia.
The year 2007 was the first full year of operations for
BOEs corporate headquarters and branch banking facility
that opened in June 2006, accounting for the majority of
increases in occupancy expenses of $159,000. Gain on sale of
other properties decreased $467,000 from 2006 to 2007 due to the
sale of bank property referred to above. Additionally, legal and
professional fees increased $236,000 in 2007 compared to 2006 as
a result of BOEs due diligence process prior to announcing
the merger agreement with Community Bankers. Offsetting these
decreases to net income was an increase of $237,000, or 2.4%, in
net interest income, from $9.8 million in 2006 to
$10.0 million in 2007. Noninterest income increased
$204,000, or 11.4%, from $1.8 million in 2006 to
$2.0 million
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in 2007. Also improving net income was a 95.2%, or $119,000,
reduction in provision for loan losses and a 33.5%, or $292,000,
decrease in income tax expense for 2007 compared to 2006.
Earnings per common share were $2.15 for the full year 2007
compared to $2.58 for the same period in 2006. Average diluted
shares outstanding increased by 5,143 during 2007.
Loans, net of allowance for loan losses, increased 12.6%, or
$24.5 million, and were $219.0 million on
December 31, 2007. Total deposits grew 5.9%, or
$13.7 million, to end 2007 at $244.6 million.
TransCommunity.
Net income for the year ended December 31, 2007 was
$2.5 million, or $0.54 per share (basic and diluted),
versus net income of $117 thousand, or $0.03 per share for the
same period during 2006.
Results for 2007 were significantly affected by recognition at
year-end of a deferred tax asset totaling $3.3 million,
arising primarily from recognition by TransCommunity of the net
operating loss carry forwards generated since
TransCommunitys inception, in accordance with Generally
Accepted Accounting Principles. As a result of recognizing this
deferred tax asset, TransCommunity expects to incur tax expense
related to income earned in 2008 and subsequent years.
Without recognition of this deferred tax asset, performance for
2007 would have been a loss of $829 thousand, versus net income
of $117 thousand for 2006. Inclusive of the deferred tax asset,
the return on average assets for 2007 was 1.16% compared to .06%
for 2006. Return on average equity for 2007 was 8.23% compared
to 0.39% for 2006.
During 2007, total assets grew by 20%, led by strong growth in
the loan portfolio of 36%. Although TransCommunitys
employee headcount remained constant during 2007, noninterest
expenses grew 19% to $10.6 million, reflecting one-time
costs associated with the consolidation of TransCommunitys
four banking charters, and centralization of many back-room
operational functions.
TransCommunitys net interest margin for 2007 was 5.13%
versus 5.14% for 2006. Although TransCommunity was able to
maintain its historic high level of net interest margin during
2007, this key profitability indicator is expected to decline in
2008 as a result of the actions of the Federal Reserve Board to
lower interest rates.
During 2007, as part of the consolidation of its bank charters,
TransCommunity centralized its credit administration function,
and hired its first chief credit officer. Following
consolidation, the new chief credit officer performed a full
review of the entire loan portfolio. This review, plus several
credit downgrades in the final quarter of the year, resulted in
an increase in the allowance for loan losses during 2007 of $1.6
Million. At December 31, 2007 the allowance for loan losses
stands at $3.0 million, or 1.48% of total loans. At
December 31, 2006, the allowance for loan losses was
$2,100,000, or 1.36% of total loans.
At December 31, 2007, total assets were $238.2 million
versus $198.4 million at December 31, 2006. Loans, net
of the allowance for loan losses, equaled $202.4 million,
as compared with $149.3 million at year-end 2006. Total
deposits at December 31, 2007 were $203.6 million,
representing growth of 23.4% from $165.0 million at
year-end 2006.
The
Merger (page )
The merger agreement with BOE is attached as Appendix A to
this joint proxy statement/prospectus. You should read the
merger agreement because it is the legal document that governs
the merger. The merger agreement provides for the merger of BOE
with and into Community Bankers. Following the merger:
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the board of directors of the surviving corporation will be
comprised of fourteen directors; six directors will be nominated
by BOE, one of which shall serve as chairman of Community
Bankers upon consummation of the merger; six directors will be
nominated by TransCommunity; and two directors will be nominated
by Community Bankers;
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the president and chief executive officer of TransCommunity,
Bruce B. Nolte, will become the chief executive officer of the
surviving corporation through December 31, 2009;
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the president and chief executive officer of BOE, George M.
Longest, Jr., will become president of the surviving
corporation and chief executive officer of the surviving bank
and, commencing on January 1, 2010, will become president
and chief executive officer of the surviving corporation and
will remain chief executive officer of the surviving bank;
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Gary A. Simanson, the current president and chief executive
officer of Community Bankers will become its chief strategic
officer; and
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Bank of Essex, will become a subsidiary bank of Community
Bankers by merging with TransCommunity Bank, which will have
become a subsidiary of Community Bankers upon the closing of the
merger by Community Bankers with TransCommunity; following the
merger, the board of directors of the surviving bank will be
comprised of fourteen directors: two nominated by Community
Bankers, six nominated by TransCommunity and six nominated by
BOE.
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As a result of the merger, each share of BOE stock will be
converted into 5.7278 shares of Community Bankers common
stock, subject to possible adjustment. In the event the average
of the daily closing prices of Community Bankers common stock as
reported on the American Stock Exchange for the 20 consecutive
full trading days ending on the fifth day before the anticipated
closing date of the merger is less than $7.42, the exchange
ratio will be increased to equal the quotient obtained by
dividing $42.50 by the average of the daily closing prices
during those 20 consecutive full trading days, rounded to the
nearest one-ten thousandth. Community Bankers common stock is
listed on the American Stock Exchange under the symbol
BTC. BOE common stock is listed on the Nasdaq
Capital Market under the symbol BSXT.
Upon completion of the merger, Community Bankers expects to pay
regular dividends to its stockholders. Subject to board and
regulatory approval, Community Bankers expects to pay quarterly
cash dividends in an amount not less than the quotient obtained
by dividing $0.22 by the BOE exchange ratio, for the foreseeable
future.
We cannot complete the merger unless, among other things, we
obtain the necessary government approvals and the stockholders
of each of Community Bankers and BOE approve the merger
proposal. Community Bankers must also complete its merger with
TransCommunity prior to closing its merger with BOE. If
Community Bankers does not complete its merger with
TransCommunity by June 7, 2008, Community Bankers will be
forced to dissolve and liquidate and will not be able to close
the merger with BOE.
Reasons
for the Merger (page )
Community Bankers. In reaching its decision to
approve the merger agreement and recommend the merger to its
stockholders, the Community Bankers board of directors reviewed
various financial data and due diligence and evaluation
materials. In addition, in reaching its decision to approve the
merger agreement, the board of directors considered a number of
factors and believes that the non-exhaustive list of factors
below strongly supports its determination to approve the merger
agreement and recommendation that its stockholders adopt the
merger agreement:
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the attractive nature of the markets in which BOE operates and
its branch network;
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BOEs demonstrated deposit and loan growth and history of
consistent earnings;
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BOEs attractive balance sheet
make-up and
product mix, including the loan and deposit mix of BOE and the
compatibility of that mix with TransCommunitys balance
sheet;
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opportunities to grow existing revenue streams and create new
revenue streams associated with BOE and the strength of the
combined balance sheets, equity levels, and projected market
capitalization of Community Bankers, TransCommunity and BOE;
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the competitive position and market share of BOE within its
operating markets and the likely ability for Bank of Essex,
following its merger with TransCommunity Bank, to increase its
market share;
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the experience of BOEs board of directors and management,
including George M. Longest, Jr., the current president and
chief executive officer of BOE who will become president of
Community Bankers after the merger and chief executive officer
commencing on January 1, 2010;
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the potential operating efficiencies and management enhancements
of merging Bank of Essex with TransCommunity Bank, and the
compatibility of management of Community Bankers, TransCommunity
and BOE;
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the valuation of comparable companies and the reasonable pricing
of the transaction;
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the similar operating philosophies and community banking culture
of Community Bankers, TransCommunity and BOE;
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the all stock for stock nature of the merger consideration,
preserving capital for future growth and acquisitions;
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the attractiveness of the surviving corporation following the
merger to additional merger candidates;
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the strong desire of management and the board of directors of
BOE to stay involved in future growth of the company; and
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Keefe, Bruyette & Woods, Inc.s fairness opinion
that the merger is fair to Community Bankers from a financial
point of view.
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The board of directors of Community Bankers did not ascertain
any negative factors related to the proposed merger with BOE
other than the risk of the ability to successfully integrate BOE
with TransCommunity and achieve the associated cost savings and
efficiencies.
In addition, Community Bankers board knew and considered
the financial interests of certain Community Bankers directors
and executives when it approved the merger agreement. These
financial interests are addressed in greater detail under the
heading The Merger Certain Benefits of
Directors and Officers of Community Bankers and BOE.
BOE. In reaching its decision to approve the
merger agreement and recommend the merger to its stockholders,
the BOE board of directors consulted with BOE management, as
well as with its outside financial and legal advisors, reviewed
various financial data, due diligence and evaluation materials,
and made an independent determination that the proposed merger
with Community Bankers was in the best interests of BOE and its
stockholders. The board of directors considered a number of
positive factors that it believes support its recommendation
that BOEs stockholders approve the merger agreement,
including:
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the premium over BOEs prevailing stock price to be
received by BOEs stockholders (see The
Merger Background of the Merger);
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the financial analysis and presentation of Feldman Financial,
and its oral opinion that, as of December 12, 2007, the
exchange ratio was fair, from a financial point of view, to
BOEs stockholders (see The Merger
Opinion of BOEs Financial Advisor);
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the fact that the exchange ratio is fixed in the event that
Community Bankers stock price increases before closing,
but is adjustable in the event that Community Bankers
stock price decreases, thereby affording BOEs stockholders
a combination of upside participation and downside protection
(see The Merger Merger Consideration);
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its belief that the surviving corporations increased size
and scale, including its significantly larger pro forma capital
base, would better position it to compete and grow its business
and to attract other high quality merger candidates;
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its belief that the surviving corporation will be positioned to
benefit from increased credit portfolio diversity and increased
lending capacity;
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the corporate governance provisions established for the merger,
including the composition of the surviving corporations
board of directors and the designation of key senior management
of the surviving corporation and their proposed employment
arrangements;
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its knowledge and analysis of the current competitive and
regulatory environment for financial institutions generally,
BOEs current competitive position and the other potential
strategic alternatives available to BOE,
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including remaining independent, accelerating branch growth,
making acquisitions, developing or acquiring non-bank businesses
and selling BOE to a larger financial institution;
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the skills and experience offered by the Community Bankers
management;
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its review of Community Bankers financial condition and
TransCommunitys financial condition, earnings, business
operations and prospects, taking into account the results of
BOEs due diligence investigation of Community Bankers and
TransCommunity, and the anticipated compatibility of management
and shared business philosophy of Community Bankers,
TransCommunity, and BOE;
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the assessment of the likelihood that the merger would be
completed in a timely manner without unacceptable regulatory
conditions or requirements, including that no branch
divestitures would likely be required, and the ability of the
management team to successfully integrate and operate the
business of the surviving corporation after the merger; and
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the fact that the merger will enable BOEs stockholders to
exchange their shares of BOE, in a tax-free transaction, for
registered shares of common stock of a company that will have a
significantly larger pro forma market capitalization.
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The BOE board also considered the risks and potentially negative
factors outlined below, but concluded that the anticipated
benefits of combining with Community Bankers were likely to
outweigh substantially these risks and factors. The risks and
factors included:
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the dilution of ownership rights of BOEs stockholders;
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no special purposes acquisition company transactions have been
completed in the banking industry;
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the risk that Community Bankers may not be able to close the
proposed merger with TransCommunity due to potential stockholder
opposition;
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whether other banks would be attracted to join the franchise;
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the poor earnings history of TransCommunity;
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the possibility that the merger and the related integration
process could result in the loss of key employees, in the
disruption of BOEs on-going business, and in the loss of
customers; and
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the risks of the type and nature described under A Warning
about Forward-Looking Statements and Risk
Factors.
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BOEs board of directors knew and considered the financial
interests of certain BOE directors and executives when it
approved the merger agreement. These financial interests are
addressed in greater detail under the heading The
Merger Certain Benefits of Directors and Officers of
Community Bankers and BOE.
Regulatory
Approvals (page )
We cannot complete the merger unless we obtain the approval of
the Federal Reserve and the Bureau of Financial Institutions of
the Virginia State Corporation Commission. Community Bankers
filed applications with the Federal Reserve and the Bureau of
Financial Institutions of the Virginia State Corporation
Commission on January 25, 2008. As of the date of this
joint proxy statement/prospectus, we have not yet received the
required regulatory approvals. Although we expect to obtain the
necessary approvals in a timely manner, we cannot be certain
when, or if, they will be received.
Community Bankers cannot complete the merger with TransCommunity
unless Community Bankers obtains the approval of the Federal
Reserve and the Bureau of Financial Institutions of the Virginia
State Corporation Commission. Community Bankers filed
applications for approval to merge with TransCommunity with the
Federal Reserve and the Bureau of Financial Institutions of the
Virginia State Corporation Commission on January 18, 2008.
As of the date of this joint proxy statement/prospectus, we have
not yet received the required regulatory approvals for the
merger with TransCommunity. Although we expect to obtain the
necessary approvals to merger with TransCommunity to in a timely
manner, we cannot be certain when, or if, they will be received.
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Community
Bankers Special Meeting (page )
Community Bankers will hold its special meeting of stockholders
on ,
2008, at .m., local time,
at .
At the special meeting, Community Bankers stockholders
will be asked to vote to approve the merger proposal, adopt the
amendment to the certificate of incorporation and authorize the
board of directors to adjourn the special meeting to allow time
for further solicitation of proxies in the event there are
insufficient votes present in person or represented by proxy at
the special meeting to approve the proposals.
Community
Bankers Stockholders Meeting Record Date and Voting
(page )
If you owned shares of Community Bankers common stock at the
close of business
on ,
2008, Community Bankers record date, you are entitled to
vote at the special meeting. On the record date, there were
shares of Community Bankers stock outstanding. You will have one
vote at the meeting for each share of Community Bankers stock
you owned on the record date.
Adoption of the merger agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of
Community Bankers common stock entitled to vote at the special
meeting. Adoption of the amendment to the certificate of
incorporation of Community Bankers, requires the affirmative
vote of a majority of Community Bankers outstanding stock
entitled to vote at the special meeting. Authorization for the
board of directors to adjourn the special meeting until a later
date requires the affirmative vote of the holders of a majority
of the shares of Community Bankers common stock present in
person or represented by proxy and entitled to vote at the
special meeting, whether or not a quorum is present. As
of ,
2008, Community Bankers current directors, executive
officers, and their affiliates beneficially owned
approximately % of the outstanding
shares of Community Bankers common stock. All of Community
Bankers directors and executive officers have indicated
they will vote in favor of the merger and each of the other
proposals to be considered at the special meeting.
The
Board of Directors of Community Bankers Recommends Stockholder
Approval (page )
The board of directors of Community Bankers has unanimously
approved each of the proposals to be brought before the special
meeting, believes that the merger, the adoption of the amendment
to the certificate of incorporation, and authorizing the board
of directors to adjourn the special meeting are each in the best
interest of Community Bankers and its stockholders, and
recommends that the Community Bankers stockholders vote
FOR approval of each of the proposals.
The
Financial Advisor for Community Bankers Believes the Merger
Proposal Consideration is Fair to Community Bankers
(page )
Keefe, Bruyette & Woods, Inc. has served as financial
advisor to Community Bankers in connection with the merger
proposal and has given an opinion to the Community Bankers board
of directors that, as of December 13, 2007, the
consideration Community Bankers will pay for the BOE common
stock is fair to Community Bankers from a financial point of
view. A copy of the opinion delivered by Keefe,
Bruyette & Woods, Inc. is attached to this joint proxy
statement/prospectus as Appendix C. Community Bankers
stockholders should read the opinion completely to understand
the assumptions made, matters considered, and limitations of the
review undertaken by Keefe, Bruyette & Woods, Inc. in
providing its opinion.
BOEs
Special Meeting (page )
BOE will hold its special meeting of stockholders
on ,
2008, at .m., local time,
at .
At the special meeting, BOEs stockholders will be asked to
vote to approve the merger proposal and the proposal to
authorize the board of directors to adjourn the special meeting
to allow time for further solicitation of proxies in the event
there are insufficient votes at the special meeting, represented
in person or by proxy, to approve the merger proposal.
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BOE
Stockholders Meeting Record Date and Voting
(page )
If you owned shares of BOE common stock at the close of business
on ,
2008, the BOE record date, you are entitled to vote on the
merger proposal. On the record date, there were
shares of BOE stock outstanding. You will have one vote at
the meeting for each share of BOE stock you owned on the record
date. Approval of the merger proposal requires approval by more
than two-thirds of all votes entitled to be cast by the holders
of BOE common stock. Approval of the proposal to authorize the
board of directors to adjourn the special meeting until a later
date requires the votes cast favoring the action to exceed the
votes cast opposing the action, whether or not a quorum is
present. As
of ,
2008, BOEs current directors, executive officers, and
their affiliates beneficially owned
approximately % of the outstanding
shares of BOE common stock. Each of BOE directors and executive
officers has agreed, subject to several conditions, to vote his
or her shares of BOE common stock in favor of the merger
proposal.
The
Board of Directors of BOE Recommends Stockholder Approval
(page )
The board of directors of BOE has unanimously approved the
merger proposal, believes that the merger proposal is in the
best interest of BOE and its stockholders, and recommends that
the BOE stockholders vote FOR approval of the
merger proposal.
The
Financial Advisor for BOE Believes the Merger
Proposal Consideration is Fair to BOEs Stockholders
(page )
Feldman Financial Advisors, Inc. has served as financial advisor
to BOE in connection with the merger proposal and has given an
opinion to the BOE board of directors that, as of
December 13, 2007, the consideration to be received in the
transaction was fair, from a financial point of view, to
BOEs stockholders. A copy of the opinion delivered by
Feldman Financial Advisors, Inc. is attached to this joint proxy
statement/prospectus as Appendix D. BOEs stockholders
should read the opinion completely to understand the assumptions
made, matters considered, and limitations of the review
undertaken by Feldman Financial Advisors, Inc. in providing its
opinion.
Certain
Benefits of Directors and Officers of Community Bankers
(page )
When considering the recommendations of the Community Bankers
board of directors, you should be aware that some directors and
officers have interests in the merger proposal that differ from
the interests of other stockholders:
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two of the five members of the board of directors of Community
Bankers will continue to serve as members of the board of
Community Bankers following the merger; and
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following the merger, Gary A. Simanson, the current president
and chief executive officer of Community Bankers, will become
the vice chairman of the board of directors and chief strategic
officer of Community Bankers, at a salary of $270,000.
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Each board member was aware of these and other interests and
considered them before approving and adopting the merger
proposal.
Certain
Benefits of Directors and Officers of BOE
(page )
When considering the recommendations of the BOE board of
directors, you should be aware that some directors and officers
have interests in the merger proposal that differ from the
interests of other stockholders, including the following:
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following the merger, six members of the board of directors of
BOE, will join the board of directors of Community Bankers, and
Alexander F. Dillard, Jr., the chairman of BOE, will become
the chairman of Community Bankers;
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following the merger, George M. Longest, Jr. will become
president of Community Bankers and commencing January 1,
2010 will become its president and chief executive officer, and
Bruce E. Thomas, BOEs chief financial officer, will become
chief financial officer of Community Bankers;
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for six years following the merger, Community Bankers will
generally indemnify and provide liability insurance for up to
three years following the merger to the present directors and
officers of BOE and Bank of Essex, subject to certain exceptions;
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following the merger, Community Bankers will generally provide
benefits to officers and employees of BOE and Bank of Essex
under benefit plans on terms and conditions which when taken as
a whole are comparable to or better than those then provided by
BOE or Bank of Essex to similarly situated officers and
employees; and
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following the merger, the stock options held by the officers and
directors of BOE will be converted into options to purchase
common stock of Community Bankers, with adjustments to the
number of shares and the exercise price to reflect the exchange
ratio.
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Each board member was aware of these and other interests and
considered them before approving and adopting the merger
proposal.
Federal
Income Tax Consequences (page )
We have structured the merger so that it will be considered a
reorganization for United States federal income tax purposes. If
the merger is a reorganization for United States federal income
tax purposes, BOEs stockholders generally will not
recognize any gain or loss on the exchange of shares of BOE
common stock for shares of Community Bankers common stock. Any
gain or loss which is recognized will be a capital gain or loss,
provided that such shares were held as capital assets of the BOE
stockholder at the effective time of the merger.
Determining the actual tax consequences of the merger to a BOE
stockholder may be complex. These tax consequences will depend
on each stockholders specific situation and on factors not
within our control. BOEs stockholders should consult their
own tax advisors for a full understanding of the tax
consequences of their participation in the merger.
Comparative
Rights of Stockholders (page )
The rights of Community Bankers stockholders are currently
governed by Delaware corporate law and Community Bankers
certificate of incorporation and bylaws. The rights of
BOEs stockholders are currently governed by Virginia
corporate law and BOEs articles of incorporation and
bylaws. Upon consummation of the merger, the stockholders of BOE
will become stockholders of Community Bankers and the
certificate of incorporation, as proposed to be further amended
and restated, and bylaws of Community Bankers and Delaware law
will govern their rights. Community Bankers certificate of
incorporation and bylaws differ somewhat from the articles of
incorporation and bylaws of BOE. Material differences include:
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Community Bankers bylaws provide that any director may be
removed, with or without cause, by holders of a majority of the
shares entitled to vote at the election of directors; in
comparison BOEs articles of incorporation and bylaws
provide that a director may be removed from office by the
stockholders of a majority of the votes entitled to be cast at
an election of directors only with cause.
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Community Bankers bylaws provide that the election of
directors is determined by a vote of the holders of a majority
of the shares represented in person or by proxy and entitled to
vote, at a meeting of stockholders at which a quorum is present;
in comparison BOEs bylaws provide that all elections are
determined by a plurality of the votes cast, in person or by
proxy, at a meeting of stockholders at which a quorum is present.
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Community Bankers bylaws provide that stockholder action
may be taken by written consent, without prior notice and
without a vote, if the written consent is signed by the holders
of outstanding stock having at least the minimum number of votes
that would be necessary to take such action at a meeting at
which all shares entitled to vote thereon were present and
voted; in comparison BOEs bylaws provide that stockholder
action may be taken by written consent if the action is
unanimous.
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Community Bankers bylaws provide that special meetings of
the stockholders may be called by a majority of the board of
directors or by the Chairman, the Chief Executive Officer or the
President and will be called by the Secretary at the request in
writing of stockholders owning a majority of the shares of
capital stock of
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Community Bankers issued and outstanding and entitled to vote;
in comparison BOEs bylaws provide that a special meeting
of the stockholders may be called only by the Chairman, the
President or the board of directors.
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Community Bankers has elected not to be governed by
Section 203 of the DGCL, which limits engaging in a
business combination with any interested stockholder; in
comparison BOE is subject to 13.1-725.1 and related provisions
of the Virginia Stock Corporation Act known as the
Affiliated Transaction Statute, which limits
engaging in a business combination with any interested
stockholder. BOE is also subject to 13.1-728.4 of the Virginia
Stock Corporation Act, which provides that certain notice and
informational filings and special stockholder meetings and
voting procedures must occur prior to consummation of a proposed
control share acquisition.
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Termination
of the Merger Agreement (page )
Notwithstanding the approval of the merger proposal by Community
Bankers and BOE stockholders, Community Bankers and BOE can
mutually agree at any time to terminate the merger agreement
before completing the merger.
Either Community Bankers or BOE can also terminate the merger
agreement:
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if the other party is in breach of any of its representations or
warranties under the merger agreement and fails to cure the
violation and the breach relates to an inaccuracy that, without
considering any qualification in such representation, is likely
to have a material adverse effect on the breaching party;
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if required regulatory approval is denied by final nonappealable
action of a regulatory authority or if any action taken by such
authority is not appealed within the time limit for appeal;
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if any law or order permanently restraining, enjoining, or
otherwise prohibiting the consummation of the merger has become
final and nonappealable;
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if the approval of the stockholders of Community Bankers and BOE
is not obtained;
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if we do not complete the merger by June 30, 2008;
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if a partys board of directors fails to reaffirm its
approval upon the other partys request for such
reaffirmation of the merger or if the partys board of
directors resolves not to reaffirm the merger; or
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if the Community Bankers or the BOE board of directors
withdraws, modifies, or changes in a manner adverse to the other
party, its recommendation that the stockholders approve the
merger in certain instances where failure to do so would likely
result in a breach of the board of directors respective
fiduciary duties.
|
Stock
Ownership of Existing Community Bankers, TransCommunity and BOE
Stockholders After the Merger
(page )
The table below outlines the effect of the various scenarios on
the percentage of Community Bankers voting interests that
existing Community Bankers, TransCommunity and BOE stockholders
will own after the merger with BOE is completed, based on the
number of shares of each of Community Bankers, TransCommunity
and BOE issued and outstanding as of the date of their
respective merger agreements. Depending on the scenario,
Community Bankers stockholders will own from 36.93% to
57.13% of Community Bankers voting interests after the
merger, TransCommunity stockholders will own from 20.76% to
30.54% of Community Bankers voting interests after the
merger and BOE stockholders will own from 22.11% to 32.53% of
Community Bankers voting interests after the merger. The
table assumes that none of the TransCommunity stockholders
exercised appraisal rights in Community Bankers merger
with TransCommunity and that Community Bankers existing
stockholders continue to own the warrants to be exercised. The
unit purchase option refers to the unit purchase option to
purchase 525,000 units (each unit comprised of one share of
common stock and one warrant to purchase one share of common
stock) held by
17
I-Bankers
Securities, Inc., Maxim Group LLC and Legend Merchant Group,
Inc., the representatives of the underwriters in Community
Bankers initial public offering.
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The 525,000
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Warrants
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525,000
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Included in
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Units
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the Units
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Issuable
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Issuable
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19.99% of
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Community
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Upon
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Upon
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Community
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Bankers
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Exercise of
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Exercise of
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Bankers
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7,500,000
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the Unit
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the Unit
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Percent Ownership
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Conversion
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Warrants
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Purchase
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Purchase
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Community
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Rights are
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are
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Option are
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Option are
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Bankers
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TransCommunity
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BOE
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Total
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Exercised
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Exercised
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Exercised
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Exercised
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57.13%
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20.76%
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22.11%
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100.00%
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X
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X
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X
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56.40%
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21.11%
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22.49%
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100.00%
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X
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X
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55.65%
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21.48%
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22.88%
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100.00%
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X
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54.98%
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21.80%
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23.22%
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100.00%
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X
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X
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X
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X
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54.17%
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22.19%
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23.64%
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100.00%
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X
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X
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X
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53.34%
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22.59%
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24.07%
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100.00%
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X
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X
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43.66%
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27.28%
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29.06%
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100.00%
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X
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X
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42.40%
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27.89%
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29.71%
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100.00%
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X
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41.07%
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28.53%
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30.39%
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100/00%
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39.89%
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29.11%
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31.00%
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100.00%
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X
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X
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X
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38.44%
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29.81%
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31.75%
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100.00%
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X
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X
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36.93%
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30.54%
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32.53%
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100.00%
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X
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X-denotes that event occurred
The
Merger is Expected to Occur in the Second Quarter of 2008
(page )
The merger will occur shortly after all of the conditions to its
completion have been satisfied or waived. Currently, we
anticipate that the merger will occur in the second quarter of
2008. However, we cannot assure you when or if the merger will
occur. We must first obtain the approval of the Community
Bankers stockholders and BOEs stockholders at their
respective special meetings and all the necessary regulatory
approvals. In addition, Community Bankers must complete its
merger with TransCommunity prior to closing its merger with BOE.
If Community Bankers does not complete its merger with
TransCommunity by June 7, 2008, Community Bankers will be
forced to dissolve and liquidate and will not be able to close
the merger with BOE.
Accounting
Treatment (page )
The merger will be accounted for using the purchase method of
accounting, with Community Bankers being treated as the
acquiring entity for accounting purposes. Under the purchase
method of accounting, the assets and liabilities of BOE as of
the effective time of the merger will be recorded at their
respective fair values and added to those of Community Bankers.
Completion
of the Merger is Subject to Certain Conditions
(page )
Completion of the merger is subject to a number of conditions,
including the approval of the merger proposal by the Community
Bankers and BOE stockholders and the receipt of all the
regulatory consents and approvals that are necessary to permit
the completion of the merger and the completion of the merger
with TransCommunity. Certain conditions to the merger may be
waived by Community Bankers or BOE, as applicable;
however, the merger with TransCommunity must be completed
by June 7, 2008, or Community Bankers will be forced to
dissolve and liquidate and will not be able to close the merger
with BOE.
18
Comparative
Market Value of Securities
(page )
The following table sets forth the closing price per share of
Community Bankers common stock and the closing price per share
of BOE common stock on December 13, 2007 (the last business
day preceding the public announcement of the merger)
and ,
2008 (the most recent practicable trading date prior to the
mailing this joint proxy statement/prospectus). The table also
presents the equivalent market value per share of BOE common
stock based on the exchange ratio of 5.7278 shares of
Community Bankers common stock for each share of BOE common
stock. In the event the average of the daily closing prices of
Community Bankers common stock as reported on the American Stock
Exchange for the 20 consecutive full trading days ending on the
fifth day before the anticipated closing date of the merger is
less than $7.42, the exchange ratio will be increased to equal
the quotient obtained by dividing $42.50 by the average of the
daily closing prices during those 20 consecutive full trading
days, rounded to the nearest one-ten thousandth. You are urged
to obtain current market quotations for shares of Community
Bankers and BOE common stock before making a decision with
respect to the merger. Community Bankers common stock is listed
on the American Stock Exchange under the symbol BTC,
and BOE common stock is quoted on the Nasdaq Capital Market
under the symbol BSXT.
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Equivalent Price
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Community Bankers
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BOE
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Per Share of
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Common Stock
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Common Stock
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BOE Common Stock(1)
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December 13, 2007
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$
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7.42
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$
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26.47
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$
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42.50
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,
2008
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$
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$
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$
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(1) |
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The equivalent prices per share of BOE common stock have been
calculated by multiplying the closing price per share of
Community Bankers common stock on each of the two dates by the
exchange ratio of 5.7278. |
Because the market price of Community Bankers common stock is
subject to fluctuation, the market value of the shares of
Community Bankers common stock that you may receive in the
merger may increase or decrease prior to and following the
merger. You are urged to obtain current market quotations for
Community Bankers common stock.
19
RISK
FACTORS
If the merger is consummated, BOE stockholders will receive
shares of Community Bankers common stock in exchange for their
shares of BOE common stock. An investment in Community Bankers
common stock is subject to a number of risks and uncertainties,
many of which also apply to an existing investment in BOE common
stock. Risks and uncertainties relating to general economic
conditions are not summarized below. Those risks, among others,
are highlighted on page under the heading
A Warning About Forward-Looking Statements.
However, there are a number of other risks and uncertainties
relating to Community Bankers and your decision on the merger
proposal that you should consider in addition to the risks and
uncertainties associated with financial institutions generally.
Many of these risks and uncertainties could affect Community
Bankers future financial results and may cause Community
Bankers future earnings and financial condition to be less
favorable than expected. This section summarizes those risks.
Risks
Related To The Merger
If
Community Bankers does not complete the merger with
TransCommunity by June 7, 2008, Community Bankers must dissolve
and liquidate. In that event, Community Bankers will not close
the merger with BOE.
The merger with TransCommunity is an initial business
combination under Community Bankers certificate of
incorporation and therefore must be completed prior to the
closing of the merger with BOE. As Community Bankers must
dissolve and liquidate if the merger with TransCommunity is not
completed by June 7, 2008, it would not be advisable to
complete the merger with BOE prior to completing the merger with
TransCommunity, and we would not proceed with the merger.
Community
Bankers may not be able to successfully integrate
TransCommunitys businesses with BOEs.
There are uncertainties in integrating the operations of
TransCommunity with BOE, and the operations of TransCommunity
Bank into Bank of Essex, that could affect whether the merger
will enhance the earnings of surviving corporation. The
surviving corporations failure to successfully integrate
TransCommunity and BOE may harm our financial condition and
results of operations, and, accordingly, our stock price. The
success of the mergers will depend on a number of factors,
including, but not limited to, the surviving corporations
ability to:
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integrate the operations of TransCommunity and BOE and
TransCommunity Bank and Bank of Essex;
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maintain existing relationships with TransCommunitys and
BOEs depositors to minimize withdrawals of deposits
subsequent to the acquisition;
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maintain and enhance existing relationships with borrowers to
limit unanticipated losses from TransCommunitys and
BOEs loans;
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achieve expected cost savings and revenue enhancements from the
surviving corporation;
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control the incremental non-interest expense to maintain overall
operating efficiencies;
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retain and attract qualified personnel; and
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compete effectively in the communities served by TransCommunity
and BOE, and in nearby communities.
|
Community
Bankers may not be able to successfully deploy its
capital.
Upon consummation of the merger with TransCommunity, the funds
currently held in the trust account, less any amounts paid to
stockholders who exercise their conversion rights and the
deferred underwriting compensation, will be released to
Community Bankers. Community Bankers intends to pay any
additional expenses related to the mergers with TransCommunity
and BOE and hold the remaining funds as capital at the holding
company level pending use for general corporate and strategic
purposes. Such purposes could include increasing the capital of
Bank of Essex, future mergers and acquisitions, branch
construction, asset purchases, payment of dividends, repurchases
of shares of Community Bankers common stock and general
corporate purposes. Until such capital is
20
fully leveraged or deployed, Community Bankers may not be able
to successfully deploy such capital and Community Bankers
return on equity could be negatively impacted.
To
implement its growth strategy following the merger, Community
Bankers must successfully identify opportunities for
expansion.
Following the merger, Community Bankers intends to continue to
implement a growth strategy of entering underserved or
over-consolidated markets in Virginia by opportunistically
acquiring or merging with other banking institutions or
establishing new branches of Bank of Essex or any successor bank
subsidiary. If following the merger, Community Bankers is unable
to identify additional attractive markets to enter or suitable
acquisition or merger candidates, an important component of our
growth strategy may be lost. Additionally, any future expansion
or acquisition efforts may entail substantial costs and may not
produce the revenue, earnings or synergies that Community
Bankers had anticipated. Any future expansion or acquisitions
that Community Bankers undertakes will involve operational risks
and uncertainties. Acquired companies may have unforeseen
liabilities, exposure to asset quality problems, key employee
and customer retention problems and other problems that could
negatively affect Community Bankers.
A
substantial number of Community Bankers shares will be
issued in the merger and will be eligible for future resale in
the public market after the merger, which could result in
dilution and have an adverse effect on the market price of those
shares.
If the merger with BOE is consummated, assuming the exchange
ratio is not adjusted, up to 7,105,942 shares of Community
Bankers common stock will be issued to the former stockholders
of BOE common stock. When the merger with TransCommunity is
consummated, assuming the exchange ratio is not adjusted, up to
6,956,213 shares of Community Bankers common stock will be
issued to the former stockholders of TransCommunity common stock.
Additionally:
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warrants to purchase 7,500,000 shares of Community Bankers
common stock that were issued in Community Bankers initial
public offering will become exercisable at $5.00 per share upon
consummation of the merger with TransCommunity, as described
under Description of Securities of Community Bankers;
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Community Bankers has issued to I-Bankers Securities, Inc.,
Maxim Group LLC and Legend Merchant Group, Inc., the
representatives of the underwriters in Community Bankers
initial public offering, unit purchase options to acquire
525,000 units (each unit comprised of one share of common
stock and one warrant to purchase one share of common stock),
including 525,000 warrants; and
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1,875,000 shares of Community Bankers common stock
purchased by stockholders prior to its initial public offering
will be released from escrow on June 2, 2009 and thereby be
eligible for resale in the public market subject to compliance
with applicable law.
|
Gary A. Simanson, president and chief executive officer of
Community Bankers, and David Zalman, a stockholder, agreed as
part of Community Bankers initial public offering,
pursuant to an agreement with the representatives of the
underwriters in the initial public offering, that they or their
affiliates or designees, would purchase up to 1,000,000 warrants
in the aggregate in open market transactions at market prices
not to exceed $0.80 per warrant. Under this agreement, the
representatives of the underwriters also agreed to place an
irrevocable order for the purchase by them, or their affiliates
or designees, of up to 500,000 warrants in the aggregate under
identical terms and conditions as the purchases by
Mr. Simanson and Mr. Zalman. As a result of the
agreement, Community Bankers Acquisition LLC, an affiliate of
Mr. Simanson, acquired an aggregate of 349,724 warrants and
the representatives of the underwriters acquired an aggregate of
300,000 warrants. Warrants acquired by any of these parties
pursuant to these purchases cannot be sold or transferred in the
open market until after the consummation of the merger with
TransCommunity and are not callable by Community Bankers while
held by the purchasers.
In addition, Community Bankers plans to pursue other acquisition
opportunities following completion of the merger with BOE.
Community Bankers is likely to issue shares of common stock as
consideration in any such future acquisitions.
21
Consequently, at various times after the date of this joint
proxy statement/prospectus, a substantial number of additional
shares of Community Bankers common stock will be eligible for
resale in the public market. Sales of substantial numbers of
such shares in the public market could cause dilution and
adversely affect the market price of such shares and of the
warrants.
Stockholders
of both Community Bankers and BOE will incur immediate and
substantial dilution of their ownership and voting interests
upon completion of the merger.
Community Bankers existing stockholders voting
interest would be diluted from 100% to as little as 36.93% or as
much as 57.13%, and BOEs existing stockholders
voting interest would be diluted to as little as 22.11% or as
much as 32.53% after the merger with BOE, assuming that no
TransCommunity stockholders exercise appraisal rights, based on
the number of shares of each of Community Bankers,
TransCommunity and BOE issued and outstanding as of the date of
their respective merger agreements. Factors that would affect
the percentage of Community Bankers voting interests that
existing Community Bankers and BOE stockholders would own after
the merger include:
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whether any of Community Bankers 7,500,000 outstanding
warrants are exercised;
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whether the 525,000 units issuable to the representatives
of the underwriters in Community Bankers initial public
offering upon exercise of their unit purchase options are
issued; and
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whether any Community Bankers stockholders exercise their right
to convert their shares into cash equal to a pro rata portion of
the Community Bankers trust account.
|
For a table outlining the effect of the various scenarios on the
percentage of Community Bankers voting interests that
existing Community Bankers and BOE stockholders will own after
the merger with BOE is completed, see The
Merger Stock Ownership of Existing Community Bankers
and BOE Stockholders After the Merger.
If the
mergers benefits do not meet the expectations of financial
or industry analysts, the market price of Community Bankers
common stock may decline.
The market price of Community Bankers common stock may decline
as a result of the mergers if:
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Community Bankers does not achieve the perceived benefits of the
merger as rapidly, or to the extent anticipated by, financial or
industry analysts;
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Community Bankers is unable to achieve the perceived benefits of
combining TransCommunity Bank with Bank of Essex; or
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the effect of the merger on Community Bankers financial
results is not consistent with the expectations of financial or
industry analysts.
|
Accordingly, investors may experience a loss as a result of a
decline in the market price of Community Bankers common stock
following the merger. A decline in the market price of Community
Bankers common stock also could adversely affect its ability to
issue additional securities and its ability to obtain additional
financing in the future.
Risks
Related to the Business of Community Bankers following the
Merger with TransCommunity
TransCommunity
has a limited operating history upon which to base any estimate
of its future success.
TransCommunity was organized in 2001, and it and its subsidiary,
TransCommunity Bank, have limited operating histories. As a
consequence, there is limited historical financial information
on which to base an evaluation of TransCommunitys current
business or to make any estimate of its future performance.
22
Many
of the loans in TransCommunitys loan portfolio have been
originated in the last five years, which may not be
representative of credit defaults in the future.
Approximately 96% of TransCommunity Banks loans have been
originated in the past five years and have a short term
maturity. In general, loans do not begin to show signs of credit
deterioration or default until they have been outstanding for
some period of time. As a result, a portfolio of older loans
will usually behave more predictably than a newer portfolio.
Because TransCommunitys loan portfolio is relatively new
with short term maturities, the current level of delinquencies
and defaults may not be representative of the level that will
prevail in the event TransCommunity makes loans with longer
maturity periods. If delinquencies and defaults increase,
TransCommunity may be required to increase its provision for
loan losses, which would adversely affect its results of
operations and financial condition.
TransCommunitys
concentrations of loans may create a greater risk of loan
defaults and losses.
TransCommunity has a substantial amount of loans secured by real
estate in the central Virginia area, and substantially all of
its loans are to borrowers in that area. Additionally, at
September 30, 2007, approximately 80% of its loan portfolio
consisted of commercial and residential construction loans,
commercial real estate loans, commercial business loans and
commercial lines of credit. These types of loans typically have
a higher risk of default than other types of loans, such as
fixed-rate single family residential mortgage loans. In
addition, the repayments of these loans, which generally have
larger balances than single family mortgage loans, often depend
on the successful operation of a business or the sale or
development of the underlying property, and as a result are more
likely to be adversely affected by deteriorating conditions in
the real estate market or the economy in general. These
concentrations expose TransCommunity to the risk that adverse
developments in the real estate market, or in general economic
conditions in the central Virginia/Richmond metropolitan area,
could increase the levels of nonperforming loans and
charge-offs, and reduce loan demand. In that event,
TransCommunity would likely experience additional losses.
Additionally, if, for any reason, economic conditions in the
area deteriorate, or there is significant volatility or weakness
in the economy or any significant sector of the areas
economy, TransCommunitys ability to develop its business
relationships may be diminished, the quality and collectibility
of its loans may be adversely affected, the value of collateral
may decline and loan demand may be reduced.
If
TransCommunitys allowance for loan losses becomes
inadequate, its results of operations may be adversely
affected.
TransCommunity maintains an allowance for loan losses that it
believes is adequate to absorb the estimated losses in its loan
portfolio. Through periodic review of the loan portfolio,
management determines the amount of the allowance for loan
losses by considering, among other factors, general market
conditions, credit quality of the loan portfolio and performance
of TransCommunity customers relative to their financial
obligations with TransCommunity. The amount of future losses is
susceptible to changes in economic, operating and other
conditions, including changes in interest rates that may be
beyond its control, and these future losses may exceed its
current estimates. There is no precise method for predicting
credit losses since any estimate of loan losses is necessarily
subjective and the accuracy depends on the outcome of future
events. As a result, charge-offs in future periods may exceed
its allowance for loan losses and additional increases in the
allowance for loan losses would be required. If TransCommunity
needs to make significant and unanticipated increases in its
loan loss allowance in the future, its results of operations and
financial condition would be materially adversely affected at
that time.
The
markets for TransCommunitys services are highly
competitive, and TransCommunity faces substantial
competition.
The banking business is highly competitive. TransCommunity
competes with other commercial banks, savings and loan
associations, credit unions, finance companies, mutual funds,
insurance companies and brokerage and investment banking firms
soliciting business from residents of and businesses located in
its markets. Many of its competitors enjoy competitive
advantages, including greater financial resources, a wider
geographic presence or more accessible branch office locations,
the ability to offer additional services, more favorable pricing
alternatives and lower origination and operating costs. Failure
to compete effectively to attract new and to retain existing
23
customers could result in a decrease in loans TransCommunity
originates and could negatively affect its results of operations.
In attracting deposits, TransCommunity competes with insured
depository institutions such as banks, savings institutions and
credit unions, as well as institutions offering uninsured
investment alternatives, including money market funds.
Traditional banking institutions, as well as entities intending
to transact business online, are increasingly using the Internet
to attract deposits without geographic or physical limitations.
In addition, many non-bank competitors are not subject to the
same extensive regulations that govern TransCommunity. These
competitors may offer higher interest rates on deposits than
TransCommunity offers, which could result in either
TransCommunity attracting fewer deposits or increasing its
interest rates in order to attract deposits. Increased deposit
competition could raise TransCommunitys cost of funds and
could adversely affect its ability to generate the funds
necessary for its lending operations, which would negatively
affect its results of operations.
Changes
in interest rates could have an adverse effect on
TransCommunitys income.
TransCommunitys profitability depends to a large extent
upon its net interest income. Net interest income is the
difference between interest income on interest-earning assets,
such as loans and investments, and interest expense on
interest-bearing liabilities, such as deposits and borrowings.
TransCommunitys net interest income will be adversely
affected if market interest rates change so that the interest it
pays on deposits and borrowings increases faster than the
interest it earns on loans and investments. Changes in interest
rates also affect the value of its loans. An increase in
interest rates could adversely affect borrowers ability to
pay the principal or interest on existing loans or reduce their
ability to borrow more money. This may lead to an increase in
TransCommunitys nonperforming assets or a decrease in loan
originations, either of which could have a material and negative
effect on TransCommunitys results of operations. A
decrease in interest rates could also negatively impact earnings
in the event TransCommunitys loans reprice more quickly
than its sources of funds. TransCommunitys loans are
primarily variable rate assets and TransCommunity relies
substantially on fixed-rate certificates of deposits for its
funding sources.
Interest rates are highly sensitive to many factors that are
partly or completely outside of its control, including
governmental monetary policies, domestic and international
economic and political conditions and general economic
conditions such as inflation, recession, unemployment and money
supply. Fluctuations in market interest rates are neither
predictable nor controllable and may have a material and
negative effect on TransCommunitys business, financial
condition and results of operations.
TransCommunity
is subject to significant government regulations that affect its
operations and may result in higher operating costs or increased
competition for TransCommunity.
TransCommunitys success will depend not only on
competitive factors, but also on state and federal regulations
affecting financial and bank holding companies generally.
TransCommunity is subject to extensive regulation by the Board
of Governors of the Federal Reserve System, the Office of
Comptroller of the Currency and, to a lesser extent, the Bureau
of Financial Institutions of the Virginia State Corporation
Commission. Supervision, regulation and examination of banks and
bank holding companies by bank regulatory agencies are intended
primarily for the protection of depositors rather than
stockholders. These agencies examine financial and bank holding
companies and commercial banks, establish capital and other
financial requirements and approve new branches, acquisitions or
other changes of control. TransCommunitys ability to
establish new banks or branches or make acquisitions is
conditioned on receiving required regulatory approvals from the
applicable regulators.
Regulations now affecting TransCommunity may change at any time,
and these changes could affect it in unpredictable and adverse
ways. Such changes could subject TransCommunity to additional
costs, limit the types of financial services and products it may
offer, increase the ability of non-banks to offer competing
financial services and products,
and/or
assist competitors that are not subject to similar regulation,
among other things. Failure to comply with laws, regulations or
policies could result in sanctions by regulatory agencies, civil
money penalties and damage to TransCommunitys reputation,
which could have a material adverse effect on its business,
financial condition and results of operation.
24
TransCommunitys
success will depend significantly upon general economic
conditions in central Virginia and nationally.
TransCommunitys success will depend significantly upon
general economic conditions in central Virginia as well as
national economic conditions affecting Virginia. Any prolonged
economic downturn or recession affecting central Virginia could
impair borrowers ability to repay existing loans,
potentially causing an increase in TransCommunitys
nonperforming assets and charge-offs; deter customers from
incurring more debt, possibly decreasing loan originations; or
cause customers to draw down their savings, potentially
decreasing deposits. In that event, TransCommunity may
experience lower earnings or losses, impaired liquidity and the
erosion of capital. Such an economic downturn or recession could
result from a variety of causes, including natural disasters, a
prolonged downturn in various industries upon which the economy
of central Virginia depends, or a national recession.
In addition, one of the focal points of TransCommunitys
business is serving the banking and financial services needs of
small to medium-sized businesses. These businesses generally
have fewer financial resources in terms of capital or borrowing
capacity relative to larger entities. As such, the businesses of
many of TransCommunitys customers and their ability to
repay outstanding loans may be more sensitive to changes in
general economic conditions than larger entities. As a
consequence, TransCommunitys results of operations and
financial condition could be adversely affected by weakening
economic conditions in central Virginia and nationally.
TransCommunity
could be negatively impacted by recent developments in the
mortgage industry.
Industry concerns over asset quality have increased nationally
due in large part to issues related to subprime mortgage
lending, declining real estate activity and general economic
concerns. The markets in which TransCommunity currently operates
remain stable and to date there has been no significant
deterioration in the quality of TransCommunitys loan
portfolio. In addition, TransCommunity closed Main Street
Mortgage, its former mortgage brokerage subsidiary, in late
2006. Management will continue to monitor delinquencies, risk
rating changes, charge-offs and other indicators of risk in
TransCommunitys portfolio, but even with these efforts,
TransCommunity may be impacted by negative developments in the
mortgage industry and the real estate market.
Concentrations
in loans secured by real estate may increase credit losses,
which would have a negative affect on TransCommunitys
financial results.
Many of TransCommunitys loans are secured by real estate
(both commercial and residential) in TransCommunitys
market area. A variety of loans secured by real estate are
offered, including commercial lines of credit, commercial term
loans, real estate, construction, home equity, consumer and
other loans. At September 30, 2007, approximately 76% of
TransCommunitys loans were secured by real estate. A major
change in the real estate market, such as deterioration in value
of the property, or in the local or national economy, could
adversely affect TransCommunitys customers ability
to pay these loans, which in turn could adversely impact
TransCommunity.
TransCommunity
depends on the services of key personnel, and a loss of any of
those personnel could disrupt its operations and could have a
material adverse effect on its operations.
TransCommunity is a customer-focused and relationship-driven
organization. Its growth and success has been in large part
driven by the personal customer relationships maintained by its
executives. TransCommunity depends on the performance of its
management at the holding company as well as the presidents of
each of its bank divisions. Although TransCommunity has entered
into change in control agreements with certain of its officers,
and Community Bankers intends to enter into employment
agreements with certain TransCommunity executive officers, which
would become effective at the effective time of the merger,
these officers and other key employees may leave the employ of
the surviving corporation and seek opportunities elsewhere.
Moreover, TransCommunitys does not maintain key man life
insurance on any of its executive officers. The loss of services
of one or more of these key employees could have a material
adverse impact on TransCommunitys operations.
25
Failure
to maintain effective systems of internal and disclosure
controls could have a material adverse effect on
TransCommunitys results of operation and financial
condition.
Effective internal and disclosure controls are necessary for
TransCommunity to provide reliable financial reports and
effectively prevent fraud and to operate successfully as a
public company. If TransCommunity cannot provide reliable
financial reports or prevent fraud, its reputation and operating
results would be harmed. As part of TransCommunitys
ongoing monitoring of internal control it may discover material
weaknesses or significant deficiencies in its internal control
as defined under standards adopted by the Public Company
Accounting Oversight Board, or PCAOB, that require remediation.
TransCommunity has discovered a material weakness and
significant deficiency in its internal control over financial
reporting. The material weakness relates to
TransCommunitys accounting and documentation for loans
participated to third parties, and the significant deficiency
relates to TransCommunitys accounting and record
generation and maintenance for loan origination costs and for
amortizing fees. TransCommunity has adopted and implemented
measures in connection with its efforts to improve internal
control processes, including reviewing and modifying certain
loan operating policies to provide guidance on daily operations,
providing additional training to loan personnel, hiring a new
chief credit officer and centralizing the credit administration
function.
Despite efforts to strengthen its internal and disclosure
controls, TransCommunity may identify additional other internal
or disclosure control deficiencies in the future. Any failure to
maintain effective controls or timely effect any necessary
improvement of its internal and disclosure controls could, among
other things, result in losses from fraud or error, harm its
reputation or cause investors to lose confidence in its reported
financial information, all of which could have a material
adverse effect on its results of operation and financial
condition.
The
success of TransCommunitys future recruiting efforts will
impact its ability to grow.
The implementation of TransCommunitys business strategy
will require it to continue to attract, hire, motivate and
retain skilled personnel to develop new customer relationships
as well as new financial products and services. Many experienced
banking professionals employed by TransCommunitys
competitors are covered by agreements not to compete or solicit
their existing customers if they were to leave their current
employment. These agreements make the recruitment of these
professionals more difficult. The market for these people is
competitive, and TransCommunitys may not be successful in
attracting, hiring, motivating or retaining them. The success of
TransCommunitys recruiting efforts may impact its ability
to grow and its future profitability.
Changes
in accounting standards could impact reported
earnings.
The accounting standard setters, including the Financial
Accounting Standards Board, or the FASB, the Securities and
Exchange Commission, or the SEC, and other regulatory bodies,
periodically change the financial accounting and reporting
standards that govern the preparation of consolidated financial
statements. These changes can materially impact how
TransCommunity records and reports its financial condition and
results of operations. In some instances, TransCommunity could
be required to apply a new or revised standard retroactively,
resulting in the restatement of prior period financial
statements.
Other
Risks Related To Community Bankers
The
financial statements included in this proxy statement/prospectus
do not take into account the consequences of a failure to
complete the merger with TransCommunity by June 7,
2008.
The financial statements included in this joint proxy
statement/prospectus have been prepared assuming that Community
Bankers would continue as a going concern. As discussed in
Note 1 to the Notes to the Community Bankers Financial
Statements for the year ended March 31, 2007, Community
Bankers is required to complete the merger with TransCommunity
by June 7, 2008. The possibility of such business
combination not being consummated raises substantial doubt as to
Community Bankers ability to continue as a going concern
and the financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
26
Community
Bankers working capital could be reduced if Community
Bankers stockholders exercise their right in the
TransCommunity merger to convert their shares into cash equal to
a pro rata portion of the Community Bankers trust account or if
TransCommunitys stockholders exercise their appraisal
rights.
Pursuant to Community Bankers certificate of
incorporation, holders of shares issued in Community
Bankers initial public offering may vote against the
merger with TransCommunity and demand that Community Bankers
convert their shares into cash equal to a pro rata portion of
the Community Bankers trust account. Community Bankers will not
consummate the merger with TransCommunity if holders of 20% or
more of the shares of common stock issued in its initial public
offering exercise these conversion rights. To the extent the
merger with TransCommunity is consummated and holders of less
than 20% of the common stock issued in Community Bankers
initial public offering have demanded to convert their shares,
working capital available to Community Bankers following the
merger with TransCommunity will be reduced by the amount paid
out of the trust to stockholders exercising their conversion
rights. Additionally, if holders demand to convert their shares,
there may be a corresponding reduction in the value of each
share of common stock of Community Bankers. As
of ,
2008, assuming the merger proposal with TransCommunity is
adopted, the maximum amount of funds that could be disbursed to
Community Bankers stockholders upon the exercise of the
conversion rights would be approximately
$ , or
approximately % of the funds
currently held in trust as of the record date for the Community
Bankers annual meeting.
TransCommunity stockholders have the right to assert appraisal
rights with respect to the merger with TransCommunity and demand
in writing that Community Bankers pay the fair value of their
shares of TransCommunity common stock under applicable
provisions of Virginia law. To the extent the merger with
TransCommunity is consummated and any TransCommunity
stockholders have asserted their appraisal rights, working
capital available to Community Bankers following the merger will
be reduced by the amount paid to stockholders exercising their
appraisal rights in the TransCommunity merger.
If
Community Bankers does not complete the merger with
TransCommunity by June 7, 2008, Community Bankers must dissolve
and liquidate. In that event, Community Bankers will not be able
to close the merger with BOE.
The merger with TransCommunity is an initial business
combination under Community Bankers certificate of
incorporation and therefore must be completed prior to the
closing of the merger with BOE. As Community Bankers must
dissolve and liquidate if the merger with TransCommunity is not
completed by June 7, 2008, it would not be advisable to
complete the merger with BOE prior to completing the merger with
TransCommunity.
Risks
Related to the Business of BOE
Fluctuations
in interest rates may affect profitability.
BOEs profitability and cash flows depend substantially
upon net interest margin. Net interest margin is the difference
between interest earned on loans and investments, and rates paid
on deposits and other borrowings. The rates described above are
highly sensitive to many factors not in BOEs control, such
as general economic conditions and policies of regulatory and
governmental agencies. Changes in interest rates will affect net
interest margin and thus profitability and cash flows. BOE
attempts to manage BOEs interest rate risk but cannot
eliminate this risk.
BOEs
profitability depends upon and may be affected by local economic
conditions.
The general economic conditions in the markets in which BOE
operates are a key component to BOEs success. This comes
from both the rural Middle Peninsula and urban Richmond markets
in which BOE operates. Changes in the general economic
conditions in these markets, caused by inflation, recession,
acts of terrorism, unemployment or other factors beyond
BOEs control, may influence the rate of growth experienced
for both loans and deposits and negatively affect financial
condition, performance and profitability.
27
BOEs
future success is dependent upon its ability to compete
effectively in the highly competitive banking
industry.
BOE competes for deposits, loans and other financial services in
markets with numerous other banks, thrifts and financial
institutions. There are many financial institutions in these
markets that have been in business for many years and are
significantly larger, have customer bases well established and
have higher lending limits and greater financial resources.
Concentrations
in loans secured by real estate may increase credit losses,
which would have a negative affect on BOEs financial
results.
Many of BOEs loans are secured by real estate (both
commercial and residential) in its market area. A variety of
loans secured by real estate are offered, including commercial
lines of credit, commercial term loans, real estate,
construction, home equity, consumer and other loans. At
December 31, 2007, approximately 86.6% of BOEs loans
were secured by real estate. A major change in the real estate
market, such as deterioration in value of the property, or in
the local or national economy, could adversely affect BOEs
customers ability to pay these loans, which in turn could
adversely impact BOE.
If
BOEs allowance for loan losses becomes inadequate, its
results of operations may be adversely affected.
An essential element of BOEs business is to make loans.
BOE maintains an allowance for loan losses that it believes is a
reasonable estimate of known and inherent losses within the loan
portfolio. Experience in the banking industry indicates that
some portion of BOEs loans may only be partially repaid or
may never be repaid at all. Loan losses occur for many reasons
beyond BOEs control. Although BOE believes that it
maintains its allowance for loan losses at a level adequate to
absorb losses in its loan portfolio, estimates of loan losses
are subjective and their accuracy may depend on the outcome of
future events. BOE may be required to make significant and
unanticipated increases in the allowance for loan and lease
losses during future periods, which could materially affect its
financial position, results of operations and liquidity. Bank
regulatory authorities, as an integral part of their respective
supervisory functions, periodically review BOEs allowance
for loan losses. These regulatory authorities may require
adjustments to the allowance for loan losses or may require
recognition of additional loan losses or charge-offs based upon
their own judgment. Any change in the allowance for loan losses
or charge-offs required by bank regulatory authorities could
have an adverse effect on BOEs financial condition,
results of operations and liquidity.
BOEs
profitability and the value of stockholders investments
may suffer because of rapid and unpredictable changes in the
highly regulated environment in which BOE
operates.
BOE is subject to extensive supervision by several governmental
regulatory agencies at the federal and state levels in the
financial services area. Recently enacted, proposed and future
legislation and regulations have had, and will continue to have,
or may have a significant impact on the financial services
industry. These regulations, which are generally intended to
protect depositors and not stockholders, and the interpretation
and application of them by federal and state regulators, are
beyond BOEs control, may change rapidly and unpredictably
and can be expected to influence earnings and growth. BOEs
success depends on BOEs continued ability to maintain
compliance with these regulations. Some of these regulations may
increase costs and thus place other financial institutions that
are not subject to similar regulation in stronger, more
favorable competitive positions.
BOE
depends on key personnel for success.
BOEs operating results and ability to adequately manage
its growth and minimize loan and lease losses are highly
dependent on the services, managerial abilities and performance
of BOEs current executive officers and other key
personnel. BOE has an experienced management team that the Board
of Directors believes is capable of managing and growing
BOEs operations. However, losses of or changes in
BOEs current executive officers or other key personnel and
their responsibilities may disrupt BOEs business and could
adversely affect financial condition, results of operations and
liquidity. BOE may not be successful in retaining its current
executive officers or other key personnel.
28
If
additional capital were needed in the future to continue growth,
BOE may not be able to obtain it on terms that are favorable.
This could negatively affect performance and the value of
BOEs common stock.
BOEs business strategy calls for continued
growth. It is anticipated that BOE will be able
to support this growth through the generation of additional
deposits at branch locations as well as investment
opportunities. However, BOE may need to raise additional capital
in the future to support continued growth and to maintain
capital levels. The ability to raise capital through the sale of
additional securities will depend primarily upon its financial
condition and the condition of financial markets at that time.
BOE may not be able to obtain additional capital in the amounts
or on terms satisfactory to it. BOEs growth may be
constrained if it is unable to raise additional capital as
needed.
Changes
in accounting standards could impact reported
earnings.
The accounting standard setters, including the FASB, SEC and
other regulatory bodies, periodically change the financial
accounting and reporting standards that govern the preparation
of BOEs consolidated financial statements. These changes
can materially impact how BOE records and reports its financial
condition and results of operations. In some instances, BOE
could be required to apply a new or revised standard
retroactively, resulting in the restatement of prior period
financial statements.
29
A WARNING
ABOUT FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus contains forward-looking
statements with respect to the financial condition, results of
operations, plans, objectives, future performance, and business
of Community Bankers following the merger. These statements are
preceded by, followed by, or include the words
believes, expects,
anticipates, or estimates, or similar
expressions. Many possible events or factors could affect the
future financial results and performance of Community Bankers.
This could cause the results or performance of Community Bankers
to differ materially from those expressed in the forward-looking
statements. You should consider these important factors when you
vote on the merger proposal. Factors that may cause actual
results to differ materially from those contemplated by the
forward-looking statements include the following:
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we may experience delays in closing the merger whether due to
inability to obtain stockholder or regulatory approval or
otherwise;
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we could lose key personnel or spend a greater amount of
resources attracting, retaining and motivating key personnel
than we have in the past;
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competition among depository and other financial institutions
may increase significantly;
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changes in the interest rate environment may reduce operating
margins;
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general economic conditions, either nationally or in Virginia,
may be less favorable than expected resulting in, among other
things, a deterioration in credit quality and an increase in
credit risk-related losses and expenses;
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loan losses may exceed the level of allowance for loan losses of
the surviving corporation;
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the rate of delinquencies and amount of charge-offs may be
greater than expected;
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the rates of loan growth and deposit growth may not increase as
expected;
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legislative or regulatory changes may adversely affect our
businesses;
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Community Bankers may not consummate its merger with
TransCommunity and be required to dissolve and liquidate;
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Community Bankers may not find suitable merger or acquisition
candidates in addition to TransCommunity and BOE or find other
suitable ways in which to invest its excess capital;
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Community Bankers must successfully integrate BOEs
operations with its existing operating platforms if the merger
is consummated;
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Costs related to the merger or the merger with TransCommunity,
including conversion and appraisal rights, may reduce Community
Bankers working capital; and
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We may fail to obtain the required approvals of Community
Bankers, TransCommunity or BOE stockholders.
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The forward-looking statements are based on current expectations
about future events. Although Community Bankers believes that
the expectations reflected in the forward-looking statements are
reasonable, Community Bankers cannot guarantee you that these
expectations actually will be achieved. Community Bankers is
under no duty to update any of the forward-looking statements
after the date of this joint proxy statement/prospectus to
conform those statements to actual results. In evaluating these
statements, you should consider various factors, including the
risks outlined in the section entitled Risk Factors,
beginning on page .
30
SELECTED
HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
Selected
Financial Data of Community Bankers
The following table presents for Community Bankers, selected
financial data for the year ended March 31, 2007, and the
period April 6, 2005 to March 31, 2006, and the
six-month periods ended September 30, 2007 and
September 30, 2006. On October 29, 2007, Community
Bankers board of directors acted pursuant to Community
Bankers bylaws to change Community Bankers fiscal
year-end from March 31 to December 31, commencing with the
nine months ending December 31, 2007. The information is
based on the consolidated financial statements of Community
Bankers included in this joint proxy statement/prospectus.
You should read the following tables in conjunction with the
consolidated financial statements of Community Bankers described
above and with the notes to them.
Historical results are not necessarily indicative of results to
be expected for any future period. In the opinion of the
management of Community Bankers, all adjustments (which include
only normal recurring adjustments) necessary to arrive at a fair
statement of interim results of operations of Community Bankers
have been included. With respect to Community Bankers, results
for the six-month period ended September 30, 2007, are not
necessarily indicative of results which may be expected for any
other interim period or for the year as a whole.
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For the Period
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from April 6,
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Six-Months
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Six-Months
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2005
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Ended
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Ended
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Year Ended
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(inception) to
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September 30,
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September 30,
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March 31,
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March 31,
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2007
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2006
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2007
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2006
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(Unaudited)
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(Unaudited)
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(Audited)
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(Audited)
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Statement of Income Data:
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Interest on cash and short-term investments held in trust
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$
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1,428,970
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$
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868,096
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$
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2,268,760
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$
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Operating costs
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171,886
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93,132
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338,661
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Income before taxes
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1,257,084
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774,964
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1,930,099
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Provision for income taxes
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477,692
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294,486
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806,000
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Net income
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$
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779,392
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$
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480,478
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$
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1,124,099
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$
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Weighted average shares outstanding-basic
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9,375,000
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7,520,455
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7,997,740
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1,807,292
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Weighted average shares outstanding-diluted
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11,807,432
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9,731,315
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10,256,708
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1,807,292
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Net income per share-basic
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$
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0.08
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$
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0.06
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$
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0.14
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$
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Net income per share-diluted
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$
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0.07
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$
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0.05
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$
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0.11
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$
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September 30, 2007
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March 31, 2007
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March 31, 2006
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(Unaudited)
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(Audited)
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(Audited)
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Balance Sheet Data:
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Total assets
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$
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59,021,312
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$
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58,812,412
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$
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436,957
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Total current liabilities
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2,344,692
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2,915,185
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390,082
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Common stock, subject to conversion, 1,499,250 shares at
conversion value
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11,581,624
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11,617,934
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Total stockholders equity
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45,094,996
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44,279,293
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46,875
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Total liabilities and stockholders equity
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$
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59,021,312
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$
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58,812,412
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$
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436,957
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31
Selected
Financial Data of TransCommunity
The following table presents for TransCommunity, selected
consolidated financial data for the years ended
December 31, 2006, 2005, 2004, 2003, and 2002, and the
nine-month periods ended September 30, 2007 and
September 30, 2006. The information is based on the
consolidated financial statements of TransCommunity included in
this joint proxy statement/prospectus.
You should read the following tables in conjunction with the
consolidated financial statements of TransCommunity described
above and with the notes to them.
Historical results are not necessarily indicative of results to
be expected for any future period. In the opinion of the
management of TransCommunity, all adjustments (which include
only normal recurring adjustments) necessary to arrive at a fair
statement of interim results of operations of TransCommunity
have been included. With respect to TransCommunity, results for
the nine-month period ended September 30, 2007 are not
necessarily indicative of results which may be expected for any
other interim period or for the year as a whole.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Month
|
|
|
|
|
|
|
Periods Ending
|
|
|
|
|
|
|
September 30,
|
|
|
For the Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(numbers in thousands, except Per Share Data)
|
|
|
Balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
223,048
|
|
|
$
|
193,382
|
|
|
$
|
198,445
|
|
|
$
|
190,648
|
|
|
$
|
150,267
|
|
|
$
|
99,752
|
|
|
$
|
51,123
|
|
Investment securities
|
|
|
16,714
|
|
|
|
32,533
|
|
|
|
35,017
|
|
|
|
31,237
|
|
|
|
27,775
|
|
|
|
19,753
|
|
|
|
4,198
|
|
Loans
|
|
|
189,003
|
|
|
|
140,468
|
|
|
|
151,399
|
|
|
|
134,930
|
|
|
|
112,134
|
|
|
|
66,120
|
|
|
|
37,117
|
|
Allowance for loan losses
|
|
|
(2,663
|
)
|
|
|
(1,912
|
)
|
|
|
(2,065
|
)
|
|
|
(1,602
|
)
|
|
|
(1,401
|
)
|
|
|
(870
|
)
|
|
|
(527
|
)
|
Deposits
|
|
|
191,964
|
|
|
|
160,335
|
|
|
|
164,973
|
|
|
|
146,603
|
|
|
|
123,662
|
|
|
|
82,675
|
|
|
|
36,712
|
|
Other borrowed funds
|
|
|
0
|
|
|
|
1,601
|
|
|
|
2,017
|
|
|
|
12,787
|
|
|
|
10,946
|
|
|
|
1,699
|
|
|
|
1,448
|
|
Stockholders equity
|
|
|
29,932
|
|
|
|
30,428
|
|
|
|
30,553
|
|
|
|
30,370
|
|
|
|
14,939
|
|
|
|
14,901
|
|
|
|
12,471
|
|
Summary results of operations data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income
|
|
$
|
12,649
|
|
|
$
|
10,466
|
|
|
$
|
14,307
|
|
|
$
|
10,957
|
|
|
$
|
6,894
|
|
|
$
|
3,997
|
|
|
$
|
2,283
|
|
Interest expense
|
|
|
4,795
|
|
|
|
3,584
|
|
|
|
4,958
|
|
|
|
3,497
|
|
|
|
1,994
|
|
|
|
1,159
|
|
|
|
713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
7,884
|
|
|
|
6,882
|
|
|
|
9,349
|
|
|
|
7,460
|
|
|
|
4,900
|
|
|
|
2,838
|
|
|
|
1,570
|
|
Provision for loan losses
|
|
|
1,134
|
|
|
|
311
|
|
|
|
493
|
|
|
|
266
|
|
|
|
549
|
|
|
|
386
|
|
|
|
227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
6,750
|
|
|
|
6,571
|
|
|
|
8,856
|
|
|
|
7,194
|
|
|
|
4,351
|
|
|
|
2,452
|
|
|
|
1,343
|
|
Noninterest income
|
|
|
832
|
|
|
|
768
|
|
|
|
1,011
|
|
|
|
791
|
|
|
|
762
|
|
|
|
282
|
|
|
|
175
|
|
Noninterest expense
|
|
|
8,272
|
|
|
|
6,684
|
|
|
|
8,933
|
|
|
|
9,334
|
|
|
|
7,401
|
|
|
|
4,909
|
|
|
|
2,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(690
|
)
|
|
|
655
|
|
|
|
934
|
|
|
|
(1,349
|
)
|
|
|
(2,288
|
)
|
|
|
(2,175
|
)
|
|
|
(1,152
|
)
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
(690
|
)
|
|
|
655
|
|
|
|
919
|
|
|
|
(1,349
|
)
|
|
|
(2,288
|
)
|
|
|
(2,175
|
)
|
|
|
(1,152
|
)
|
Net loss from discontinued operations
|
|
|
(77
|
)
|
|
|
(651
|
)
|
|
|
(802
|
)
|
|
|
(423
|
)
|
|
|
(293
|
)
|
|
|
(62
|
)
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss )
|
|
$
|
(767
|
)
|
|
$
|
4
|
|
|
$
|
117
|
|
|
$
|
(1,772
|
)
|
|
$
|
(2,581
|
)
|
|
$
|
(2,237
|
)
|
|
$
|
(1,197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share from continuing operations- basic
and diluted
|
|
$
|
(0.15
|
)
|
|
$
|
0.14
|
|
|
$
|
0.20
|
|
|
$
|
(0.41
|
)
|
|
$
|
(1.08
|
)
|
|
$
|
(1.19
|
)
|
|
$
|
(1.05
|
)
|
Net income (loss) per share basic and diluted
|
|
$
|
(0.17
|
)
|
|
$
|
0.00
|
|
|
$
|
0.03
|
|
|
$
|
(0.53
|
)
|
|
$
|
(1.22
|
)
|
|
$
|
(1.19
|
)
|
|
$
|
(1.05
|
)
|
Weighted average number of shares outstanding
|
|
|
4,587
|
|
|
|
4,582
|
|
|
|
4,582
|
|
|
|
3,315
|
|
|
|
2,114
|
|
|
|
1,887
|
|
|
|
1,143
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Month
|
|
|
|
|
|
|
Periods Ending
|
|
|
|
|
|
|
September 30,
|
|
|
For the Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(numbers in thousands, except Per Share Data)
|
|
|
Operating ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) on average equity from continuing operations
|
|
|
(2.29
|
)%
|
|
|
2.17
|
%
|
|
|
3.08
|
%
|
|
|
(5.97
|
)%
|
|
|
(17.21
|
)%
|
|
|
(16.22
|
)%
|
|
|
(14.06
|
)%
|
Income (Loss) on average assets from continuing operations
|
|
|
(0.33
|
)%
|
|
|
0.34
|
%
|
|
|
0.49
|
%
|
|
|
(0.84
|
)%
|
|
|
(0.24
|
)%
|
|
|
(2.96
|
)%
|
|
|
(3.04
|
)%
|
Income (Loss) on average equity
|
|
|
(2.55
|
)%
|
|
|
0.01
|
%
|
|
|
0.39
|
%
|
|
|
(7.84
|
)%
|
|
|
(19.42
|
)%
|
|
|
(16.22
|
)%
|
|
|
(14.06
|
)%
|
Income (Loss) on average assets
|
|
|
(0.37
|
)%
|
|
|
0.00
|
%
|
|
|
0.06
|
%
|
|
|
(1.04
|
)%
|
|
|
(2.07
|
)%
|
|
|
(2.96
|
)%
|
|
|
(3.04
|
)%
|
Net interest margin
|
|
|
5.32
|
%
|
|
|
5.10
|
%
|
|
|
5.14
|
%
|
|
|
4.68
|
%
|
|
|
4.23
|
%
|
|
|
4.16
|
%
|
|
|
4.43
|
%
|
Loan to deposit ratio:
|
|
|
98.46
|
%
|
|
|
87.61
|
%
|
|
|
91.78
|
%
|
|
|
92.15
|
%
|
|
|
90.68
|
%
|
|
|
79.98
|
%
|
|
|
101.10
|
%
|
Asset quality ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to nonperforming loans
|
|
|
255.81
|
%
|
|
|
427.77
|
%
|
|
|
214.86
|
%
|
|
|
970.91
|
%
|
|
|
0.00
|
%
|
|
|
703.52
|
%
|
|
|
0.00
|
%
|
Allowance for loan losses to total loans
|
|
|
1.41
|
%
|
|
|
1.36
|
%
|
|
|
1.36
|
%
|
|
|
1.19
|
%
|
|
|
1.25
|
%
|
|
|
1.32
|
%
|
|
|
1.42
|
%
|
Net charge-offs to average loans
|
|
|
0.37
|
%
|
|
|
0.09
|
%
|
|
|
0.02
|
%
|
|
|
0.05
|
%
|
|
|
0.02
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Nonperforming assets to total loans
|
|
|
0.55
|
%
|
|
|
0.32
|
%
|
|
|
0.63
|
%
|
|
|
0.12
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average equity to average assets
|
|
|
14.41
|
%
|
|
|
15.86
|
%
|
|
|
15.79
|
%
|
|
|
13.28
|
%
|
|
|
10.67
|
%
|
|
|
18.24
|
%
|
|
|
21.62
|
%
|
Leverage ratio
|
|
|
13.62
|
%
|
|
|
15.94
|
%
|
|
|
15.86
|
%
|
|
|
17.59
|
%
|
|
|
11.58
|
%
|
|
|
19.72
|
%
|
|
|
30.42
|
%
|
Tier 1 risk-based capital ratio
|
|
|
13.85
|
%
|
|
|
18.22
|
%
|
|
|
17.16
|
%
|
|
|
18.91
|
%
|
|
|
13.75
|
%
|
|
|
20.29
|
%
|
|
|
46.12
|
%
|
Total risk-based capital ratio
|
|
|
15.09
|
%
|
|
|
19.37
|
%
|
|
|
18.32
|
%
|
|
|
19.92
|
%
|
|
|
15.10
|
%
|
|
|
21.44
|
%
|
|
|
47.37
|
%
|
Selected
Financial Data of BOE
The following table presents for BOE, selected consolidated
financial data for the years ended December 31, 2006, 2005,
2004, 2003 and 2002 and the nine-month periods ended
September 30, 2007 and September 30, 2006.
The information is based on the consolidated financial
statements of BOE included in this joint proxy
statement/prospectus.
You should read the following tables in conjunction with the
consolidated financial statements of BOE described above and
with the notes to them.
Historical results are not necessarily indicative of results to
be expected for any future period. In the opinion of the
management of BOE, all adjustments (which include only normal
recurring adjustments) necessary to arrive at a fair statement
of interim results of operations of BOE have been included. With
respect to BOE, results for the nine-month period ended
September 30, 2007, are not necessarily indicative of
results which may be expected for any other interim period or
for the year as a whole.
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Month Periods Ending September 30,
|
|
|
For the Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(numbers in thousands, except Per Share Data)
|
|
|
STATEMENT OF INCOME INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
13,847
|
|
|
$
|
12,348
|
|
|
$
|
16,734
|
|
|
$
|
14,343
|
|
|
$
|
12,875
|
|
|
$
|
13,071
|
|
|
$
|
13,741
|
|
Interest expense
|
|
|
6,417
|
|
|
|
4,946
|
|
|
|
6,972
|
|
|
|
4,469
|
|
|
|
3,606
|
|
|
|
4,073
|
|
|
|
5,695
|
|
Net interest income
|
|
|
7,430
|
|
|
|
7,402
|
|
|
|
9,762
|
|
|
|
9,874
|
|
|
|
9,269
|
|
|
|
8,998
|
|
|
|
8,046
|
|
Provision for loan losses
|
|
|
|
|
|
|
125
|
|
|
|
125
|
|
|
|
240
|
|
|
|
305
|
|
|
|
700
|
|
|
|
1,208
|
|
Noninterest income
|
|
|
1,423
|
|
|
|
1,289
|
|
|
|
2,251
|
|
|
|
1,601
|
|
|
|
1,627
|
|
|
|
1,384
|
|
|
|
1,078
|
|
Noninterest expense
|
|
|
6,378
|
|
|
|
5,684
|
|
|
|
7,893
|
|
|
|
7,262
|
|
|
|
6,882
|
|
|
|
6,627
|
|
|
|
5,766
|
|
Income taxes
|
|
|
463
|
|
|
|
672
|
|
|
|
872
|
|
|
|
872
|
|
|
|
823
|
|
|
|
648
|
|
|
|
368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,012
|
|
|
$
|
2,210
|
|
|
$
|
3,123
|
|
|
$
|
3,101
|
|
|
$
|
2,885
|
|
|
$
|
2,407
|
|
|
$
|
1,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, basic
|
|
$
|
1.66
|
|
|
$
|
1.84
|
|
|
$
|
2.60
|
|
|
$
|
2.60
|
|
|
$
|
2.43
|
|
|
$
|
2.04
|
|
|
$
|
1.52
|
|
Net income, diluted
|
|
|
1.66
|
|
|
|
1.83
|
|
|
|
2.58
|
|
|
|
2.58
|
|
|
|
2.42
|
|
|
|
2.03
|
|
|
|
1.51
|
|
Cash dividend
|
|
|
0.60
|
|
|
|
0.38
|
|
|
|
0.77
|
|
|
|
0.73
|
|
|
|
0.63
|
|
|
|
0.56
|
|
|
|
0.53
|
|
Book value at period end
|
|
|
24.23
|
|
|
|
23.34
|
|
|
|
23.22
|
|
|
|
21.90
|
|
|
|
20.76
|
|
|
|
19.37
|
|
|
|
18.12
|
|
Tangible book value at period end
|
|
|
23.87
|
|
|
|
22.88
|
|
|
|
22.78
|
|
|
|
21.36
|
|
|
|
20.10
|
|
|
|
18.61
|
|
|
|
17.25
|
|
BALANCE SHEET DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
294,767
|
|
|
$
|
278,088
|
|
|
$
|
281,378
|
|
|
$
|
261,931
|
|
|
$
|
237,126
|
|
|
$
|
231,840
|
|
|
$
|
228,111
|
|
Loans, net
|
|
|
213,500
|
|
|
|
187,354
|
|
|
|
194,491
|
|
|
|
180,207
|
|
|
|
157,471
|
|
|
|
158,381
|
|
|
|
161,722
|
|
Securities
|
|
|
54,143
|
|
|
|
58,490
|
|
|
|
60,516
|
|
|
|
56,581
|
|
|
|
58,788
|
|
|
|
53,147
|
|
|
|
46,568
|
|
Deposits
|
|
|
240,990
|
|
|
|
232,091
|
|
|
|
230,865
|
|
|
|
223,132
|
|
|
|
206,973
|
|
|
|
203,282
|
|
|
|
201,261
|
|
Stockholders equity
|
|
|
29,348
|
|
|
|
28,101
|
|
|
|
28,047
|
|
|
|
26,235
|
|
|
|
24,681
|
|
|
|
22,922
|
|
|
|
21,346
|
|
PERFORMANCE RATIOS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
0.94
|
%
|
|
|
1.09
|
%
|
|
|
1.15
|
%
|
|
|
1.24
|
%
|
|
|
1.23
|
%
|
|
|
1.04
|
%
|
|
|
0.80
|
%
|
Return on average equity
|
|
|
9.39
|
%
|
|
|
10.90
|
%
|
|
|
11.47
|
%
|
|
|
12.18
|
%
|
|
|
12.12
|
%
|
|
|
10.80
|
%
|
|
|
8.87
|
%
|
Net interest margin
|
|
|
4.03
|
%
|
|
|
4.23
|
%
|
|
|
4.23
|
%
|
|
|
4.55
|
%
|
|
|
4.54
|
%
|
|
|
4.45
|
%
|
|
|
4.13
|
%
|
Dividend payout
|
|
|
35.98
|
%
|
|
|
20.36
|
%
|
|
|
29.67
|
%
|
|
|
28.13
|
%
|
|
|
25.90
|
%
|
|
|
27.45
|
%
|
|
|
34.96
|
%
|
ASSET QUALITY RATIOS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to period end loans
|
|
|
1.24
|
%
|
|
|
1.25
|
%
|
|
|
1.22
|
%
|
|
|
1.23
|
%
|
|
|
1.31
|
%
|
|
|
1.33
|
%
|
|
|
1.29
|
%
|
Allowance for loan losses to nonperforming assets
|
|
|
100.56
|
%
|
|
|
113.62
|
%
|
|
|
136.67
|
%
|
|
|
118.93
|
%
|
|
|
68.13
|
%
|
|
|
122.57
|
%
|
|
|
87.76
|
%
|
Nonperforming assets to total assets
|
|
|
0.80
|
%
|
|
|
0.74
|
%
|
|
|
0.62
|
%
|
|
|
0.72
|
%
|
|
|
1.29
|
%
|
|
|
0.75
|
%
|
|
|
1.06
|
%
|
Net chargeoffs to average loans
|
|
|
(0.17
|
)%
|
|
|
0.01
|
%
|
|
|
(0.01
|
)%
|
|
|
0.05
|
%
|
|
|
0.21
|
%
|
|
|
0.42
|
%
|
|
|
0.74
|
%
|
CAPITAL AND LIQUIDITY RATIOS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage
|
|
|
11.64
|
%
|
|
|
10.21
|
%
|
|
|
11.62
|
%
|
|
|
11.55
|
%
|
|
|
11.50
|
%
|
|
|
10.80
|
%
|
|
|
8.13
|
%
|
Tier 1 Risk-Based Capital
|
|
|
14.85
|
%
|
|
|
13.49
|
%
|
|
|
15.35
|
%
|
|
|
14.76
|
%
|
|
|
15.31
|
%
|
|
|
13.70
|
%
|
|
|
10.42
|
%
|
Total Risk-Based Capital
|
|
|
15.92
|
%
|
|
|
14.45
|
%
|
|
|
16.35
|
%
|
|
|
15.67
|
%
|
|
|
16.49
|
%
|
|
|
14.88
|
%
|
|
|
11.59
|
%
|
34
Selected
Unaudited Pro Forma Combined Financial Information
The following selected unaudited pro forma condensed combined
consolidated balance sheet data combines the pro forma
consolidated balance sheets of Community Bankers and
TransCommunity as of September 30, 2007 giving effect to
the merger of Community Bankers and TransCommunity, as if the
merger with TransCommunity had been consummated on
September 30, 2007, and combines the pro forma consolidated
balance sheets of Community Bankers, TransCommunity and BOE as
of September 30, 2007, giving effect to the merger of
Community Bankers and TransCommunity and the merger of Community
Bankers and BOE, as if the mergers had been consummated on
September 30, 2007. The following selected unaudited pro
forma condensed combined consolidated income statement data
combines the pro forma statements of income of Community Bankers
and the historical statements of operations of TransCommunity
for the six-month period ended September 30, 2007, and the
year ended March 31, 2007, giving effect to the merger with
TransCommunity, as if it had occurred at the beginning of all
periods presented and combine the pro forma statements of income
of Community Bankers and the historic statements of operations
of TransCommunity, and the historic statements of income of BOE
for the six-month period ended September 30, 2007, and the
year ended March 31, 2007, giving effect to both the merger
with TransCommunity and the merger with BOE, as if they had
occurred at the beginning of all periods presented.
The selected unaudited pro forma condensed combined consolidated
balance sheet data at September 30, 2007 and the selected
unaudited pro forma condensed combined consolidated income
statement data for the periods ended September 30, 2007,
and March 31, 2007 have been prepared using two different
levels of approval of the merger with TransCommunity by the
Community Bankers stockholders, as follows:
|
|
|
|
|
Assuming Maximum Approval: This presentation assumes
that 100% of Community Bankers stockholders approve the merger
with TransCommunity; and
|
|
|
|
Assuming Minimum Approval: This presentation assumes
that only 80.1% of Community Bankers stockholders approve the
merger with TransCommunity and the remaining 19.9% all vote
against the merger and elect to exercise their conversion rights.
|
We are providing this information to aid you in your analysis of
the financial aspects of the merger. The selected unaudited pro
forma condensed combined consolidated financial data described
above should be read in conjunction with the historical
financial statements of Community Bankers, TransCommunity and
BOE and the related notes thereto. The unaudited pro forma
information is not necessarily indicative of the financial
position or results of operations that may have actually
occurred had the merger taken place on the dates noted, or the
future financial position or operating results of the combined
company. For more information, see Pro Forma Financial
Information.
35
COMMUNITY
BANKERS ACQUISITION CORP.
TRANSCOMMUNITY FINANCIAL CORPORATION
BOE FINANCIAL SERVICES OF VIRGINIA, INC.
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2007
|
|
|
|
Assuming Maximum Approval
|
|
|
Assuming Minimum Approval
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Combined (CBA
|
|
|
Combined (CBA,
|
|
|
Combined (CBA
|
|
|
Combined (CBA,
|
|
|
|
& TFC)
|
|
|
TFC & BOE
|
|
|
& TFC)
|
|
|
TFC & BOE)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Selected Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
305,292
|
|
|
$
|
625,635
|
|
|
$
|
293,710
|
|
|
$
|
614,053
|
|
Loans, net
|
|
|
186,412
|
|
|
|
399,613
|
|
|
|
186,412
|
|
|
|
399,613
|
|
Securities
|
|
|
16,670
|
|
|
|
70,762
|
|
|
|
16,670
|
|
|
|
70,762
|
|
Deposits
|
|
|
192,255
|
|
|
|
433,042
|
|
|
|
192,255
|
|
|
|
433,042
|
|
Borrowings
|
|
|
|
|
|
|
21,124
|
|
|
|
|
|
|
|
21,124
|
|
Stockholders equity
|
|
|
108.141
|
|
|
|
160,868
|
|
|
|
96,559
|
|
|
|
149,286
|
|
Shares outstanding
|
|
|
15,919,945
|
|
|
|
22,857,840
|
|
|
|
14,420,695
|
|
|
|
21,358,590
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share
|
|
$
|
6.79
|
|
|
$
|
7.04
|
|
|
$
|
6.70
|
|
|
$
|
6.99
|
|
Capital Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk weighted assets
|
|
|
43.35
|
%
|
|
|
28.78
|
%
|
|
|
37.84
|
%
|
|
|
26.13
|
%
|
Tier 1 capital to risk weighted assets
|
|
|
42.10
|
%
|
|
|
27.62
|
%
|
|
|
36.59
|
%
|
|
|
24.97
|
%
|
Tier 1 capital to average assets
|
|
|
32.86
|
%
|
|
|
21.61
|
%
|
|
|
28.56
|
%
|
|
|
19.53
|
%
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
For the Six Months Ended
|
|
|
|
March 31, 2007(1)
|
|
|
September 30, 2007(2)
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Combined (CBA
|
|
|
Combined (CBA,
|
|
|
Combined (CBA
|
|
|
Combined (CBA,
|
|
|
|
& TFC)
|
|
|
TFC & BOE
|
|
|
& TFC)
|
|
|
TFC & BOE)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Selected Income Statement Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
16,567
|
|
|
$
|
33,418
|
|
|
$
|
9,557
|
|
|
$
|
18,770
|
|
Interest expense
|
|
|
4,812
|
|
|
|
11,886
|
|
|
|
2,942
|
|
|
|
7,221
|
|
Net interest income
|
|
|
11,755
|
|
|
|
21,532
|
|
|
|
6,615
|
|
|
|
11,549
|
|
Provision for loan losses
|
|
|
493
|
|
|
|
618
|
|
|
|
512
|
|
|
|
512
|
|
Net interest income after provision for loan losses
|
|
|
11,262
|
|
|
|
20,914
|
|
|
|
6,103
|
|
|
|
11,037
|
|
Noninterest income
|
|
|
1,011
|
|
|
|
3,261
|
|
|
|
563
|
|
|
|
1,552
|
|
Noninterest expense
|
|
|
9,272
|
|
|
|
17,165
|
|
|
|
5,870
|
|
|
|
10,114
|
|
Amortization of intangibles
|
|
|
711
|
|
|
|
1,924
|
|
|
|
355
|
|
|
|
961
|
|
Income from continuing operations before income taxes
|
|
|
2,290
|
|
|
|
5,087
|
|
|
|
441
|
|
|
|
1,514
|
|
Provision for income taxes
|
|
|
821
|
|
|
|
1,286
|
|
|
|
478
|
|
|
|
574
|
|
Net income (loss) from continuing operations
|
|
|
1,469
|
|
|
|
3,801
|
|
|
|
(37
|
)
|
|
|
940
|
|
Net (loss) from discontinued operations
|
|
|
(802
|
)
|
|
|
(802
|
)
|
|
|
(77
|
)
|
|
|
(77
|
)
|
Net income (loss)
|
|
|
667
|
|
|
|
2,999
|
|
|
|
(114
|
)
|
|
|
863
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No conversions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share basic
|
|
$
|
0.05
|
|
|
$
|
0.14
|
|
|
$
|
(0.002
|
)
|
|
$
|
0.04
|
|
Net income (loss) per common share diluted
|
|
|
0.04
|
|
|
|
0.13
|
|
|
|
(0.002
|
)
|
|
|
0.04
|
|
Maximum conversions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share basic
|
|
$
|
0.05
|
|
|
$
|
0.15
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.04
|
|
Net income (loss) per common share diluted
|
|
|
0.04
|
|
|
|
0.14
|
|
|
|
(0.01
|
)
|
|
|
0.04
|
|
Weighted Average Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No conversions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
14,503,812
|
|
|
|
21,385,563
|
|
|
|
15,588,540
|
|
|
|
22,811,915
|
|
Diluted
|
|
|
16,762,780
|
|
|
|
23,698,699
|
|
|
|
18,320,972
|
|
|
|
25,282,855
|
|
Maximum conversions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
13,004,562
|
|
|
|
19,886,313
|
|
|
|
14,389,290
|
|
|
|
21,312,665
|
|
Diluted
|
|
|
15,263,530
|
|
|
|
22,199,449
|
|
|
|
16,821,722
|
|
|
|
23,783,605
|
|
|
|
|
(1) |
|
The year ended information for Community Bankers is as of
March 31, 2007; the year ended information for
TransCommunity and BOE is as of December 31, 2006. |
|
(2) |
|
The six month period is as of September 30, 2007 for
Community Bankers; the six month period is as of June 30,
2007 for TransCommunity and BOE. |
37
COMPARATIVE
PER SHARE DATA
The following table sets forth for Community Bankers common
stock, TransCommunity common stock and BOE common stock certain
historical, pro forma and pro forma-equivalent per share
financial information. The pro forma and pro forma-equivalent
per share information gives effect to the merger with
TransCommunity as if the merger had been effective at the
beginning of all periods presented and gives effect to the
mergers with TransCommunity and BOE as if both mergers had been
effective at the beginning of all periods presented. The pro
forma data in the tables assumes that the merger with
TransCommunity is accounted for as an acquisition by Community
Bankers of TransCommunity using the purchase method of
accounting and the merger with BOE is accounted for as an
acquisition by Community Bankers of BOE using the purchase
method of accounting. See The Merger
Accounting Treatment. The information in the following
table is based on, and should be read together with, the
historical and pro forma financial information that appears
elsewhere in this joint proxy statement/prospectus. See
Index to Financial Statements on
page F-1
and Pro Forma Financial Information on
page .
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community
|
|
|
TransCommunity
|
|
|
|
|
|
|
|
|
BOE Financial
|
|
|
Pro Forma
|
|
|
|
|
|
|
Bankers
|
|
|
Financial
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
Services of
|
|
|
Combined
|
|
|
Pro Forma
|
|
|
|
Acquisition
|
|
|
Corporation(2)
|
|
|
Combined
|
|
|
Equivalent(4)
|
|
|
Virginia,
|
|
|
(CBA, TFC &
|
|
|
Equivalent(4)
|
|
|
|
Corp.(1) (CBA)
|
|
|
(TFC)
|
|
|
(CBA & TFC)
|
|
|
(TFC)
|
|
|
Inc (BOE)
|
|
|
BOE)
|
|
|
(BOE)
|
|
|
Number of shares of common stock outstanding upon
consummation of the merger:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assuming no conversions
|
|
|
9,375,000
|
|
|
|
6,544.945
|
|
|
|
15,919,945
|
|
|
|
|
|
|
|
6,937,895
|
|
|
|
22,857,840
|
|
|
|
|
|
|
|
|
58.89
|
%
|
|
|
41.11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assuming maximum conversions
|
|
|
7,875,750
|
|
|
|
6,544,945
|
|
|
|
14,420,695
|
|
|
|
|
|
|
|
6,937,895
|
|
|
|
21,358,590
|
|
|
|
|
|
|
|
|
54.61
|
%
|
|
|
45.39
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share historical:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.14
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
$
|
2.60
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.11
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
$
|
2.58
|
|
|
|
|
|
|
|
|
|
Book value per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
historical-Year End(2)
|
|
$
|
5.62
|
|
|
$
|
6.67
|
|
|
|
|
|
|
|
|
|
|
$
|
23.22
|
|
|
|
|
|
|
|
|
|
Dividends per share historical Year End(2)(5)
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
Net Income (loss) per share historical
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six month period:(3) Basic
|
|
$
|
0.08
|
|
|
$
|
(0.13
|
)
|
|
|
|
|
|
|
|
|
|
$
|
1.14
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.07
|
|
|
$
|
(0.13
|
)
|
|
|
|
|
|
|
|
|
|
$
|
1.13
|
|
|
|
|
|
|
|
|
|
Book value per share historical September 30,
2007
|
|
$
|
5.73
|
|
|
$
|
6.53
|
|
|
|
|
|
|
|
|
|
|
$
|
24.23
|
|
|
|
|
|
|
|
|
|
Dividends per share historical for the six month
period(3)(5)
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.39
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share pro forma:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No conversions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
$
|
0.05
|
|
|
|
0.07
|
|
|
|
|
|
|
$
|
0.14
|
|
|
|
0.80
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
$
|
0.04
|
|
|
|
0.06
|
|
|
|
|
|
|
$
|
0.13
|
|
|
|
0.74
|
|
Maximum conversions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
$
|
0.05
|
|
|
|
0.07
|
|
|
|
|
|
|
$
|
0.15
|
|
|
|
0.86
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
$
|
0.04
|
|
|
|
0.06
|
|
|
|
|
|
|
$
|
0.14
|
|
|
|
0.80
|
|
For the six month period:(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No conversions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
$
|
(0.002
|
)
|
|
|
(0.003
|
)
|
|
|
|
|
|
$
|
0.04
|
|
|
|
0.23
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
$
|
(0.002
|
)
|
|
|
(0.003
|
)
|
|
|
|
|
|
$
|
0.04
|
|
|
|
0.23
|
|
Maximum conversions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
$
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
$
|
0.04
|
|
|
|
0.23
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
$
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
$
|
0.04
|
|
|
|
0.23
|
|
Dividends per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No conversions
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.04
|
|
|
|
0.23
|
|
Maximum conversions
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.04
|
|
|
|
0.25
|
|
For the six month period:(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No conversions
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.02
|
|
|
|
0.12
|
|
Maximum conversions
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.02
|
|
|
|
0.13
|
|
Book value per share pro forma September 30,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No conversions
|
|
|
|
|
|
|
|
|
|
$
|
6.79
|
|
|
|
9.65
|
|
|
|
|
|
|
$
|
7.04
|
|
|
|
40.31
|
|
Maximum conversions
|
|
|
|
|
|
|
|
|
|
$
|
6.70
|
|
|
|
9.51
|
|
|
|
|
|
|
$
|
6.99
|
|
|
|
40.03
|
|
|
|
|
(1) |
|
The year end is as of March 31, 2007 for Community Bankers;
the year end is as of December 31, 2006 for TransCommunity
and BOE. |
|
(2) |
|
The year ended information for Community Bankers is as of
March 31, 2007; the year ended information for
TransCommunity and BOE is as of December 31, 2006.
Historical book value per share for Community |
38
|
|
|
|
|
Bankers was calculated by dividing total stockholders equity by
total shares outstanding (excluding shares subject to
conversion). |
|
(3) |
|
The six month period is as of September 30, 2007 for
Community Bankers; the six month period is as of June 30,
2007 for TransCommunity and BOE. |
|
(4) |
|
TransCommunity stockholders will receive 1.42 shares of
Community Bankers common stock for each share of TransCommunity
stock. BOE stockholders will receive 5.7278 shares of
Community Bankers stock for each share of BOE stock. |
|
(5) |
|
If the Community Bankers merger with BOE is consummated,
Community Bankers expects to pay quarterly dividends in an
amount not less than the quotient of dividing $0.22 by the BOE
exchange ratio for the foreseeable future subject to board and
regulatory approval. |
COMMUNITY
BANKERS SPECIAL MEETING
General
The Community Bankers board of directors is providing this joint
proxy statement/prospectus to you in connection with its
solicitation of proxies for use at the special meeting of
Community Bankers stockholders and at any adjournments or
postponements of the special meeting.
Your vote is important. Please complete, date and sign the
accompanying proxy card and return it in the enclosed, postage
prepaid envelope. If your shares are held in street
name, you should instruct your broker how to vote by
following the directions provided by your broker.
Meeting
Date, Time, and Place and Record Date
Community Bankers will hold the special meeting
on ,
2008, at .m., local time,
at .
Only holders of Community Bankers common stock of record at the
close of business
on ,
2008, the Community Bankers record date, will be entitled to
receive notice of and to vote at the special meeting. As of the
record date, there
were shares
of Community Bankers common stock outstanding and entitled to
vote, with each such share entitled to one vote.
Matters
to be Considered
At the special meeting, Community Bankers stockholders
will be asked to:
|
|
|
|
|
adopt the Agreement and Plan of Merger, dated as of
December 13, 2007, by and between Community Bankers and
BOE, pursuant to which BOE will merge with and into Community
Bankers and shares of BOE common stock will be converted into
the right to receive 5.7278 shares of Community Bankers
common stock, subject to possible adjustment as described in
this joint proxy statement/prospectus and cash instead of
fractional shares as further described in this joint proxy
statement/prospectus;
|
|
|
|
adopt an amendment to the certificate of incorporation of
Community Bankers. At the annual meeting of stockholders
on ,
2008, Community Bankers stockholders are being asked to adopt
two amendments to the certificate of incorporation to be
effected upon consummation of the merger with TransCommunity: an
amendment to reset the terms of the classes of Community
Bankers directors and an amendment to change the
corporations name to Community Bankers Trust
Corporation. At the special meeting, Community Bankers is
asking its stockholders to adopt an additional amendment to the
certificate of incorporation, the purpose of which is to further
reset the terms of the classes of Community Bankers
directors. If Community Bankers stockholders adopt the
amendment to the certificate of incorporation, then upon
consummation of the merger Community Bankers certificate
of incorporation will be amended to continue the staggered board
and reset the terms of the various classes of directors; and
|
|
|
|
authorize the board of directors to adjourn the special meeting
to allow time for further solicitation of proxies in the event
there are insufficient votes, present in person or represented
by proxy at the special meeting, to approve the proposals.
|
39
Unless Community Bankers and BOE agree otherwise, the merger
will only be consummated if the stockholders of Community
Bankers approve the to adopt the amendment to the certificate of
incorporation. In addition, the amendment to the certificate of
incorporation will only be effected in the event and at the time
the merger with BOE is consummated.
Finally, Community Bankers stockholders may also be asked
to consider any other business that properly comes before the
special meeting. Each copy of this joint proxy
statement/prospectus mailed to Community Bankers
stockholders is accompanied by a proxy card for use at the
special meeting.
Vote
Required
|
|
|
|
|
Adoption of the merger agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of
Community Bankers common stock entitled to vote at the special
meeting.
|
|
|
|
Adoption of the amendment to the certificate of incorporation
requires the affirmative vote of the holders of a majority of
the outstanding shares of Community Bankers common stock
entitled to vote at the special meeting.
|
|
|
|
Authorization for the board of directors to adjourn the special
meeting requires the affirmative vote of the holders of a
majority of the shares of Community Bankers common stock,
present in person or represented by proxy and entitled to vote
at the special meeting, whether or not a quorum is present.
|
On the record date, there were
outstanding shares of Community Bankers common stock, each
of which is entitled to one vote at the special meeting. On that
date, the directors and executive officers of Community Bankers
and their affiliates beneficially owned a total of
approximately % of the outstanding
shares of Community Bankers common stock.
Quorum
The presence in person or representation by proxy, of shares of
Community Bankers common stock representing a majority of
Community Bankers outstanding shares entitled to vote at the
special meeting is necessary in order for there to be a quorum
at the special meeting. A quorum must be present in order for
the vote on the merger agreement and the proposal to adopt the
amendment to the certificate of incorporation. If there is no
quorum present at the opening of the meeting, the special
meeting may be adjourned by the vote of a majority of the shares
of Community Bankers common stock, present in person or
represented by proxy and entitled to vote at the special meeting.
Voting of
Proxies
Shares of common stock represented by properly executed proxies
received at or prior to the Community Bankers special meeting
will be voted at the special meeting in the manner specified by
the holders of such shares. If you are a stockholder of record
(that is, you hold stock certificates registered in your own
name), you may vote by following the instructions described on
your proxy card. If your shares are held in nominee or
street name, you will receive separate voting
instructions from your broker or nominee with your proxy
materials. If you hold your shares in street name,
you can either obtain physical delivery of the shares directly
into your name, and then vote your shares yourself, or request a
legal proxy directly from your broker and bring it
to the special meeting, and then vote your shares yourself. In
order to obtain shares directly into your name, you must contact
your brokerage house representative. Brokerage firms may assess
a fee for your conversion; the amount of such fee varies.
Properly executed proxies that do not contain voting
instructions will be voted FOR
approval of the merger agreement, approval of the
proposal to adopt the amendment to the certificate of
incorporation, and approval of the proposal to authorize
adjournment.
Shares of any stockholder present in person or represented by
proxy (including broker non-votes, which generally occur when a
broker who holds shares in street name for a customer does not
have the authority to vote on certain non-routine matters
because its customer has not provided any voting instructions
with respect to the matter)
40
at the special meeting who abstains from voting will be counted
for purposes of determining whether a quorum exists.
Abstaining from voting (including by way of a broker
non-vote), either in person or by proxy, will have the same
effect as a vote against the adoption of the merger agreement
and adoption of the amendment to the certificate of
incorporation, but will have no effect on authorization to
adjourn the special meeting. Accordingly, Community
Bankers board of directors urges its stockholders to
complete, date and sign the accompanying proxy card and return
it promptly in the enclosed, postage-paid envelope.
Revocability
of Proxies
The grant of a proxy on the enclosed proxy card does not
preclude you from voting in person or otherwise revoking your
proxy. If you are a stockholder of record, there are a number of
ways you can change your vote. First, you may send a written
notice to the person to whom you submitted your proxy stating
that you would like to revoke your proxy. Second, you may
complete and submit a later dated proxy with new voting
instructions. Third, you may attend the special meeting and vote
in person. The latest vote actually received by Community
Bankers prior to or at the special meeting will be your vote.
Any earlier votes will be revoked. Simply attending the special
meeting without voting, however, will not revoke your proxy.
If you have instructed a broker to vote your shares, you must
follow the directions you will receive from your broker to
change or revoke your proxy.
Solicitation
of Proxies
Community Bankers will pay all of the costs of filing the
registration statement with the SEC (of which this joint proxy
statement/prospectus is a part) and of soliciting proxies in
connection with the special meeting. Community Bankers will also
pay the costs associated with printing the copies of this joint
proxy statement/prospectus that are sent to Community Bankers
stockholders and the mailing fees associated with mailing this
joint proxy statement/prospectus to Community Bankers
stockholders. Solicitation of proxies may be made in person or
by mail, telephone, or facsimile, or other form of communication
by directors, officers, and employees of Community Bankers who
will not be specially compensated for such solicitation.
Nominees, fiduciaries, and other custodians will be requested to
forward solicitation materials to beneficial owners and to
secure their voting instructions, if necessary, and will be
reimbursed for the expenses incurred in sending proxy materials
to beneficial owners.
No person is authorized to give any information or to make any
representation not contained in this joint proxy
statement/prospectus and, if given or made, such information or
representation should not be relied upon as having been
authorized by Community Bankers, BOE, or any other person. The
delivery of this joint proxy statement/prospectus does not,
under any circumstances, create any implication that there has
been no change in the business or affairs of Community Bankers
or BOE since the date of this joint proxy statement/prospectus.
Authorization
to Vote on Adjournment
At the special meeting, you are being asked to grant authority
to the board of directors to adjourn the special meeting to
allow time for further solicitation of proxies in the event
there are insufficient votes present in person or represented by
proxy at the special meeting, to approve the proposals to be
considered by Community Bankers stockholders. If you do not
specify whether authority is granted or withheld, the proxy will
be voted to grant authority to adjourn. Community Bankers has no
plans to adjourn the special meeting at this time, but intends
to do so, if needed, to promote stockholder interests.
Recommendation
of the Board of Directors
The Community Bankers board of directors has unanimously
determined that the proposals and the transactions contemplated
thereby are in the best interests of Community Bankers and its
stockholders. The members of the Community Bankers board of
directors unanimously recommend that the Community Bankers
stockholders vote at the special meeting to adopt the merger
agreement, adopt the amendment to the certificate of
incorporation
41
and authorize the board of directors to adjourn the special
meeting to allow time for further solicitation of proxies in the
event there are insufficient votes present in person or
represented by proxy at the special meeting, to approve the
proposals.
In the course of reaching its decision to approve the merger
agreement and the transactions contemplated thereby, the
Community Bankers board of directors, among other things,
consulted with its legal advisors, Nelson Mullins
Riley & Scarborough LLP, regarding the legal terms of
the merger agreement and with its financial advisor, Keefe,
Bruyette & Woods, Inc., as to the fairness, from a
financial point of view, to Community Bankers, of the
consideration to be received by the holders of BOE common stock
in the merger. For a discussion of the factors considered by the
Community Bankers board of directors in reaching its conclusion,
see The Merger Community Bankers Reasons
for the Merger and The Merger Opinion of
Community Bankers Financial Advisor.
Community Bankers stockholders should note that Community
Bankers directors and officers have certain interests in,
and may derive benefits as a result of, the merger that are in
addition to their interests as stockholders of Community
Bankers. See The Merger Certain Benefits of
Directors and Officers of Community Bankers and BOE.
BOE
SPECIAL MEETING
General
The BOE board of directors is providing this joint proxy
statement/prospectus to you in connection with its solicitation
of proxies for use at the special meeting of BOEs
stockholders and at any adjournments or postponements of the
special meeting.
Community Bankers is also providing this joint proxy
statement/prospectus to you as a prospectus in connection with
the offer and sale by Community Bankers of shares of its common
stock to stockholders of BOE in the merger.
Your vote is important. Please complete, date and sign the
accompanying proxy card and return it in the enclosed, postage
prepaid envelope. If your shares are held in street
name, you should instruct your broker how to vote by
following the directions provided by your broker.
Meeting
Date, Time, and Place and Record Date
BOE will hold the special meeting
on ,
2008, at .m., local time,
at .
Only holders of BOE common stock of record at the close of
business
on ,
2008, the BOE record date, will be entitled to receive notice of
and to vote at the special meeting. As of the record date, there
were shares
of BOE common stock outstanding and entitled to vote, with each
such share entitled to one vote.
Matters
to be Considered
At the special meeting, BOEs stockholders will be asked to:
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approve the Agreement and Plan of Merger, dated as of
December 13, 2007, by and between Community Bankers and
BOE, pursuant to which BOE will merge with and into Community
Bankers and shares of BOE common stock will be converted into
the right to receive 5.7278 shares of Community Bankers
common stock, subject to possible adjustment as described in
this joint proxy statement/prospectus and cash instead of
fractional shares as further described in this joint proxy
statement/prospectus; and
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authorize the board of directors to adjourn the special meeting
to allow time for further solicitation of proxies in the event
there are insufficient votes present at the special meeting, in
person or by proxy, to approve the merger agreement.
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Each copy of this joint proxy statement/prospectus mailed to
BOEs stockholders is accompanied by a proxy card for use
at the special meeting.
42
Vote
Required
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Approval of the merger proposal requires approval by more than
two-thirds of all votes entitled to be cast by the holders of
BOE common stock.
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Approval of the proposal to authorize adjournment requires that
the votes cast favoring the action to exceed the votes cast
opposing the action, whether or not a quorum is present.
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On the record date, there
were
outstanding shares of BOE common stock, each of which is
entitled to one vote at the special meeting. On that date, the
directors and executive officers of BOE and their affiliates
beneficially owned a total of
approximately % of the outstanding
shares of BOE common stock. Each of BOEs directors and
executive officers has agreed, subject to several conditions, to
vote his or her shares of BOE common stock in favor of the
merger agreement.
Quorum
The presence, in person or by proxy, of a majority of the votes
entitled to be cast on a matter is necessary in order for there
to be a quorum at the special meeting. A quorum must be present
in order for the vote on the merger agreement to occur. If there
is no quorum present at the opening of the meeting, the special
meeting may be adjourned by the vote of a majority of shares
voting on the motion to adjourn.
Voting of
Proxies
Shares of common stock represented by properly executed proxies
received at or prior to the BOE special meeting will be voted at
the special meeting in the manner specified by the holders of
such shares. If you are a stockholder of record (that is, you
hold stock certificates registered in your own name), you may
vote by following the instructions described on your proxy card.
If your shares are held in nominee or street name,
you will receive separate voting instructions from your broker
or nominee with your proxy materials. If you hold your shares in
street name, you can either obtain physical delivery
of the shares directly into your name, and then vote your shares
yourself, or request a legal proxy directly from
your broker and bring it to the special meeting, and then vote
your shares yourself. In order to obtain shares directly into
your name, you must contact your brokerage house representative.
Brokerage firms may assess a fee for your conversion; the amount
of such fee varies.
Properly executed proxies which do not contain voting
instructions will be voted FOR
approval of the merger agreement and of the proposal to
authorize adjournment.
Shares of any stockholder represented in person or by proxy
(including broker non-votes, which generally occur when a broker
who holds shares in street name for a customer does not have the
authority to vote on certain non-routine matters because its
customer has not provided any voting instructions with respect
to the matter) at the special meeting who abstains from voting
will be counted for purposes of determining whether a quorum
exists.
Abstaining from voting (including by way of a broker
non-vote), either in person or by proxy, will have the same
effect as a vote against approval of the merger agreement.
Accordingly, the BOE board of directors urges its stockholders
to complete, date and sign the accompanying proxy card and
return it promptly in the enclosed, postage-paid envelope.
Revocability
of Proxies
The grant of a proxy on the enclosed proxy card does not
preclude you from voting in person or otherwise revoking your
proxy. If you are a stockholder of record, there are a number of
ways you can change your vote. First, you may send a written
notice to the person to whom you submitted your proxy stating
that you would like to revoke your proxy. Second, you may
complete and submit a later dated proxy with new voting
instructions. Third, you may attend the special meeting and vote
in person. The latest vote actually received by BOE prior to or
at the special meeting will be your vote. Any earlier votes will
be revoked. Simply attending the special meeting without voting,
however, will not revoke your proxy.
If you have instructed a broker to vote your shares, you must
follow the directions you will receive from your broker to
change or revoke your proxy.
43
Solicitation
of Proxies
BOE will pay all of the costs of soliciting proxies in
connection with the BOE special meeting, except that Community
Bankers will pay the costs of filing the registration statement
with the SEC, of which this joint proxy statement/prospectus is
a part. BOE will also pay costs associated with the printing of
the copies of this joint proxy statement/prospectus that are
sent to BOE stockholders and the mailing fees associated with
mailing this joint proxy statement/prospectus to BOE
stockholders. Solicitation of proxies may be made in person or
by mail, telephone, or facsimile, or other form of communication
by directors, officers and employees of BOE who will not be
specially compensated for such solicitation. Nominees,
fiduciaries, and other custodians will be requested to forward
solicitation materials to beneficial owners and to secure their
voting instructions, if necessary, and will be reimbursed for
the expenses incurred in sending proxy materials to beneficial
owners.
No person is authorized to give any information or to make any
representation not contained in this joint proxy
statement/prospectus and, if given or made, such information or
representation should not be relied upon as having been
authorized by BOE, Community Bankers or any other person. The
delivery of this joint proxy statement/prospectus does not,
under any circumstances, create any implication that there has
been no change in the business or affairs of BOE or Community
Bankers since the date of this joint proxy statement/prospectus.
Authorization
to Vote on Adjournment
At the special meeting, you are being asked to grant authority
to the board of directors to adjourn the special meeting to
allow time for further solicitation of proxies in the event
there are insufficient votes represented in person or by proxy
at the special meeting, to approve the merger agreement. If you
do not specify whether authority is granted or withheld, the
proxy will be voted to grant authority to adjourn. BOE has no
plans to adjourn the special meeting at this time, but intends
to do so, if needed, to promote stockholder interests.
Recommendation
of the Board of Directors
The BOE board of directors has unanimously determined that the
merger proposal and the transactions contemplated thereby are in
the best interests of BOE and its stockholders. The members of
the BOE board of directors unanimously recommend that the BOE
stockholders vote at the special meeting to approve the merger
proposal and the proposal to adjourn the special meeting to
allow time for further solicitation of proxies in the event
there are insufficient votes represented in person or by proxy
at the special meeting to approve the merger proposal.
In the course of reaching its decision to approve the merger
proposal and the transactions contemplated thereby, the BOE
board of directors, among other things, consulted with its legal
advisors, LeClairRyan, A Professional Corporation, regarding the
legal terms of the merger agreement and with its financial
advisor, Feldman Financial Advisors, Inc., as to the fairness,
from a financial point of view, to BOE stockholders of the
consideration to be received by the holders of BOE common stock
in the merger. For a discussion of the factors considered by the
BOE board of directors in reaching its conclusion, see The
Merger BOEs Reasons for the Merger and
The Merger Opinion of BOEs Financial
Advisor.
BOEs stockholders should note that BOE directors and
officers have certain interests in, and may derive benefits as a
result of, the merger that are in addition to their interests as
stockholders of BOE. See The Merger Certain
Benefits of Directors and Officers of Community Bankers and
BOE.
THE
MERGER
The descriptions of the terms and conditions of the merger
proposal, the merger agreement and any related documents in this
joint proxy statement/prospectus are qualified in their entirety
by reference to the copy of the merger agreement attached as
Appendix A to this joint proxy statement/prospectus, to the
registration statement, of which this joint proxy
statement/prospectus is a part, and to the exhibits to the
registration statement.
44
Structure
of the Merger
The merger agreement provides for the merger of BOE with and
into Community Bankers. Community Bankers will be the surviving
corporation in the merger. Bank of Essex, a wholly owned
subsidiary of BOE, will merge with TransCommunity Bank, which
will have become a wholly owned subsidiary of Community Bankers
following the merger with TransCommunity, with Bank of Essex as
the surviving bank. Each share of BOE common stock issued and
outstanding at the effective time of the merger (except for
shares held by Community Bankers, BOE and Bank of Essex that are
not held in a fiduciary capacity or as a result of previously
contracted for debts), will be converted into shares of
Community Bankers common stock and cash instead of fractional
shares, as described below. The directors of Community Bankers
will be comprised of fourteen directors: two directors nominated
by Community Bankers, six directors nominated by TransCommunity
and six directors nominated by BOE. Following the merger, the
directors of the surviving bank also will be comprised of
fourteen directors: two nominated by Community Bankers, six
nominated by TransCommunity and six nominated by BOE. Alexander
F. Dillard, Jr., current chairman of BOE, will be chairman
of Community Bankers upon consummation of the merger.
Upon completion of the merger, Community Bankers expects to pay
regular dividends to its stockholders. Subject to board and
regulatory approval, Community Bankers expects to pay quarterly
cash dividends in an amount not less than the quotient obtained
by dividing $0.22 by the BOE exchange ratio, for the foreseeable
future.
Following the merger, the surviving corporation will file an
amended and restated certificate of incorporation, substantially
in the form attached as Appendix B to this joint proxy
statement/prospectus, including the amendment being considered
by Community Bankers stockholders at the special meeting,
assuming it is adopted. In the event the Community Bankers
stockholders do not approve the proposal to adopt the amendment
to the certificate of incorporation, the merger will not be
completed unless Community Bankers and BOE agree otherwise.
Background
of the Merger
In early November 2006, Gary A. Simanson, president and chief
executive officer of Community Bankers, contacted Alexander F.
Dillard, Jr., chairman of BOE, to introduce himself and
engage in a general discussion regarding the banking environment
in Virginia, the history of BOE and its subsidiary bank, Bank of
Essex. Mr. Simanson and Mr. Dillard also discussed
Mr. Simansons experience and the concept of offering
community banks in the region a different alternative for
consolidating that would still maintain a local identity.
On November 21, 2006, Mr. Simanson met with
Mr. Dillard at his offices in Tappahannock, Virginia, to
continue their general discussion. Based on this meeting,
Mr. Dillard invited Mr. Simanson to return to
Tappahannock to meet with the executive management team of BOE.
On November 30, 2006, Mr. Simanson met with
Mr. Dillard, together with the executive management of BOE
that included George M. Longest, Jr., president and chief
executive officer of BOE, Bruce E. Thomas, chief financial
officer of BOE, and William E. Saunders, Jr., chief risk
and compliance officer of BOE, to discuss further their
backgrounds and views on the banking industry in Virginia and to
explore on a preliminary basis the advisability of a possible
business combination between Community Bankers and BOE.
Based on this meeting, Mr. Simanson contacted Keefe,
Bruyette & Woods, Inc. to serve as financial advisor
for Community Bankers in connection with a potential transaction
with BOE. Mr. Simanson also contacted Nelson Mullins
Riley & Scarborough LLP to serve as legal counsel to
Community Bankers.
On January 16, 2007, Messrs. Simanson, Dillard,
Longest, Thomas and Saunders met in Richmond, Virginia, at the
offices of BOEs legal counsel to discuss the relative
merits and risks of a possible merger transaction. At this
meeting, Mr. Simanson presented a proposal for a merger of
the companies and the basic proposed terms of a definitive
merger agreement. Subsequent to this meeting, the parties held a
number of further discussions and meetings and reviewed the
proposed transaction with their respective legal and financial
advisors and boards of directors.
In March 2007, the parties determined that BOE, at that time,
was not interested in entering into a merger upon the general
terms proposed by Community Bankers, and the parties
discontinued any further discussions.
45
In June 2007, Community Bankers initiated discussions with
TransCommunity, which ultimately led to Community Bankers and
TransCommunity entering into a definitive agreement, dated
September 5, 2007, whereby TransCommunity would merge with
and into Community Bankers.
Shortly after the announcement of the proposed transaction with
TransCommunity, Mr. Simanson contacted Messrs. Dillard
and Longest to discuss the TransCommunity transaction and to
inquire about arranging a meeting with representatives of
TransCommunity, BOE and Mr. Simanson. On September 27,
2007, Mr. Simanson advised TransCommunity of the interest
of Community Bankers in exploring a merger with BOE and in
having representatives of management of TransCommunity attend a
meeting with BOE.
At its monthly meeting on September 27, 2007,
Mr. Longest advised the BOE board of directors that
Mr. Simanson had contacted him regarding the announced
transaction with TransCommunity and the interest of Community
Bankers in pursuing further discussions with BOE. The BOE board
of directors appointed a special committee to explore whether
BOE should engage in further discussions with Community Bankers
concerning a possible merger. The BOE special committee included
Messrs. Dillard and Longest, together with L. McCauley
Chenault, Page Emerson Hughes, Jr., and Philip T.
Minor. The BOE special committee determined that it would be
advisable for BOE to engage in further discussions with
Community Bankers and to obtain the information necessary to
make an informed recommendation to the full board of directors.
On October 1, 2007, Mr. Simanson met with
Mr. Longest to convey Community Bankers interest in
re-examining a potential merger with BOE and how such a merger
would fit in with the proposed merger of TransCommunity and
Community Bankers.
On October 4, 2007, Mr. Simanson, along with Bruce B.
Nolte, president and chief executive officer of TransCommunity,
and M. Andrew McLean, president of TransCommunity Bank, met with
Messrs. Dillard and Longest. A general discussion was
shared regarding the proposed merger of Community Bankers with
TransCommunity and the common experiences of BOE and
TransCommunity in the Richmond banking market.
On October 10, 2007, Messrs. Simanson, Dillard and
Longest met with representatives of the Federal Reserve Bank of
Richmond and the Bureau of Financial Institutions of the
Virginia State Corporation Commission with respect to the
regulatory and related issues involved in a potential merger of
BOE and Community Bankers and the impact such a transaction may
have on the proposed merger of TransCommunity and Community
Bankers. Mr. Simanson also met with Mr. Nolte on
October 10, 2007, to discuss the potential merits of a
merger transaction with BOE. Discussions between representatives
of BOE and Community Bankers continued over the next couple of
weeks.
In a conference call on October 23, 2007 with the BOE
special committee, Mr. Longest brought the committee up to
date on managements analysis of Community Bankers and
TransCommunity. The BOE special committee determined that the
full board of directors should be informed and brought up to
date concerning the developments with Community Bankers, with a
recommendation that BOE continue its discussions with Community
Bankers.
At its regular monthly meeting on October 24, 2007, the BOE
board of directors was advised of the work of the special
committee and managements analysis of a potential merger
with Community Bankers. The BOE board of directors authorized
management to continue discussions with Community Bankers, to
proceed with the necessary and appropriate
on-site due
diligence investigations, and to retain a financial advisory
firm and legal counsel. Feldman Financial Advisors, Inc. was
retained to serve as the financial advisor for BOE, and
LeClairRyan, A Professional Corporation, was retained as legal
counsel.
During Community Bankers regularly scheduled board of
directors meeting on October 29, 2007, Mr. Simanson
apprised the board of directors of the developments in the
discussions with BOE and requested formal approval of and
authority to continue discussions with BOE. The Community
Bankers board of directors unanimously authorized
Mr. Simanson to continue to pursue discussions with BOE to
the end that a definitive agreement be presented to the board of
directors for further consideration.
On November 4, 2007, members of BOEs and
TransCommunitys respective special committees, along with
Mr. Simanson, held a dinner meeting at the offices of
Mr. Dillard to discuss further a potential merger of BOE
with Community Bankers and to get acquainted socially.
46
On November 5, 2007, counsel for Community Bankers
delivered to BOE and its counsel a draft of the definitive
merger agreement. Negotiations began immediately between counsel
for Community Bankers and BOE over the terms and conditions of
the draft merger agreement.
During the weekend of November 9-11, 2007, Community Bankers,
TransCommunity and Keefe, Bruyette & Woods, Inc.
conducted
on-site due
diligence investigation of BOE. During the following weekend,
BOE and its financial and legal advisors performed an
on-site due
diligence investigation of TransCommunity that included
interviews with Mr. Simanson and members of management of
TransCommunity.
On November 20, 2007, the BOE special committee held a
conference call with its financial and legal advisors. The BOE
special committee agreed on a price range that represented what
they considered a fair price and directed Trent R. Feldman, of
Feldman Financial, to negotiate directly with Community Bankers
on the its behalf with respect to certain financial issues.
Negotiations continued between counsel concerning various other
terms and conditions set forth in the merger agreement,
including the terms and conditions of the proposed employment
agreements between Community Bankers and Messrs. Longest
and Thomas that would become effective upon the closing of the
merger.
On November 28, 2007, the BOE special committee met with
BOEs financial and legal advisors. Mr. Feldman
presented certain financial information and indicated that
Community Bankers was willing to offer $42.50 for each share of
BOE common stock, which corresponded to 5.7278 shares of
Community Bankers common stock based on an agreed value of
$7.42 for each share of such stock. After discussion, the BOE
special committee requested that management call a special board
meeting on November 30, 2007, to bring the BOE board of
directors up to date and hear the presentations from BOEs
financial and legal advisors.
On November 30, 2007, the BOE board of directors met to
consider the proposed merger. Representatives from LeClairRyan,
A Professional Corporation, and Feldman Financial were present.
Management reviewed for the BOE board of directors the progress
of its negotiations with Community Bankers and reported on the
status of its due diligence investigation of Community Bankers
and TransCommunity. Counsel for BOE discussed with the board of
directors the legal standards applicable to its decisions and
actions with respect to its consideration of the proposed
merger, and reviewed the structure and legal terms and
conditions of the proposed merger agreement and related
agreements, including the terms of the proposed employment
agreements for Messrs. Longest and Thomas. Representatives
of Feldman Financial reviewed with the BOE board of directors
the financial terms of the merger and financial information
regarding Community Bankers, TransCommunity, BOE and the merger,
as well as information regarding peer companies and comparable
transactions. Representatives from Feldman Financial indicated
to the BOE board of directors that it would be prepared to
render an opinion that the exchange ratio was fair, from a
financial point of view, to BOEs stockholders. After
discussion, the BOE board of directors decided to meet on
December 3, 2007, without the participation of its
financial and legal advisors, to discuss further the potential
merger.
On November 30, 2007, the Community Bankers board of
directors held a special meeting. At that meeting,
Mr. Simanson apprised the board of directors that he
believed that substantial agreement with BOE had been reached
and that BOEs board of directors was expected to meet on
December 5, 2007, and approve the transaction with
Community Bankers. Among other things, the Community
Bankers board of directors discussed the BOE transaction
as well as the strategic implications with respect to the merger
with TransCommunity, financial statements required for the
mergers as a whole and the impact on the timing and cost of the
mergers.
The BOE board of directors met on the afternoon of
December 3, 2007, with Messrs. Longest and Thomas to
discuss and consider the information presented at its meeting on
November 30, 2007. The BOE board of directors discussed the
history of BOE, its potential for growth going forward
considering the current banking environment, and the structure
of the combined company after consummation of the merger. There
was also a discussion regarding alternatives and how the
interest of the stockholders would be best served. After further
discussion, the BOE board of directors decided to meet on
December 5, 2007, to receive the final reports from its
financial and legal advisors.
On December 5, 2007, Community Bankers board of
directors held a special meeting. At its meeting the Community
Bankers board of directors received presentations from
Nelson Mullins Riley & Scarborough LLP on
47
the legal terms of the merger and merger agreement. The
Community Bankers board of directors also received a
presentation by Keefe, Bruyette & Woods, Inc. on the
economics of the proposed BOE transaction. Keefe,
Bruyette & Woods, Inc. advised the Community Bankers
board of directors that his firm was prepared to issue an
opinion that the transaction was fair from a financial point of
view to Community Bankers. Community Bankers board of
directors thereupon approved the form of the BOE merger
agreement and authorized the chief executive officer to execute
and deliver the merger agreement, subject to the consent of
TransCommunity.
Also on December 5, 2007, the BOE board of directors
continued its consideration of the proposed merger agreement.
Representatives from its financial and legal advisory firms were
present. In connection with its deliberations, Feldman Financial
rendered to the BOE board of directors its oral opinion that, as
of that date, the exchange ratio was fair, from a financial
point of view, to BOEs stockholders. After further review
and discussion, the BOE board of directors determined that the
transaction contemplated by the merger agreement and the related
agreements are advisable and in the best interests of BOE and
its stockholders, and the directors voted unanimously to approve
the merger with Community Bankers, to approve the merger
agreement, and to approve the related agreements. The approvals
were made expressly subject to, and contingent upon, the receipt
from TransCommunity of its consent to the merger. Accordingly,
no executed copies of the merger agreement and related
agreements were exchanged with Community Bankers and no public
announcement was made.
Over the course of the following week, discussions continued
between Community Bankers and TransCommunity concerning the
delivery of its consent to the BOE transaction.
On December 12, 2007, Community Bankers board of
directors held a special meeting at which Community
Bankers chief executive officer reported on the status of
the proposed merger with BOE. Mr. Simanson also reported
that, subject to Community Bankers board of
directors approval, he had consented to the payment by
TransCommunity of a one-time special dividend payable to its
stockholders immediately prior to the closing of the merger with
Community Bankers. Community Bankers board of directors
reaffirmed its approval on December 5, 2007, of the BOE
merger agreement and approved Community Bankers consent to
the payment of the special dividend by TransCommunity.
On December 12, 2007, the BOE board of directors met to
receive an update by from management and its financial and legal
advisors on the status of the consent from TransCommunity. The
meeting was adjourned and reconvened at
5:30 p.m. Management reported that the TransCommunity
board of directors voted unanimously to consent to the proposed
merger between BOE and Community Bankers and that in
anticipation of the mergers, TransCommunity planned to declare a
one-time special dividend in the amount of $0.25 per share to
TransCommunity stockholders, which would be paid immediately
prior to the effective time of the merger with TransCommunity
and after all conditions to the closing are satisfied.
Representatives of Feldman Financial provided an updated
financial analysis of the transaction after taking into account
the effect of the payment of the proposed special dividend.
Feldman Financial rendered to the BOE board of directors its
updated oral opinion, which was subsequently confirmed in
writing, as described under Opinion of
BOEs Financial Advisor, that, as of the date of its
opinion, the exchange ratio was fair, from a financial point of
view, to BOEs stockholders. After further review and
discussion, the BOE board of directors unanimously approved and
adopted the merger agreement, dated as of December 13,
2007, and the related agreements, provided that TransCommunity
deliver its consent to Community Bankers by 5:00 p.m. on
December 13, 2007, with such consent to be in form and
substance satisfactory to management of BOE and its counsel.
On December 13, 2007, TransCommunity delivered its consent
to Community Bankers approving the merger with BOE, and
Community Bankers delivered its consent to TransCommunity to pay
the special dividend. Community Bankers and BOE executed the
merger agreement on that date and the following day issued a
joint press release announcing the transaction.
The
Proposed Merger between Community Bankers and
TransCommunity
On September 5, 2007, Community Bankers entered into the
agreement and plan of merger with TransCommunity. TransCommunity
is a registered financial holding company incorporated under the
laws of Virginia and is the holding company of TransCommunity
Bank. TransCommunity is headquartered in Glen Allen, Virginia
and TransCommunity Bank operates five full service offices in
its four operating divisions in Goochland, Powhatan,
48
Louisa and Rockbridge, Virginia. TransCommunity Bank had
deposits of $192.0 million, loans of $189.0 million,
assets of $223.0 million and equity of $29.9 million,
at September 30, 2007. The merger agreement by and between
Community Bankers and TransCommunity provides for the merger of
TransCommunity with and into Community Bankers with Community
Bankers as the surviving corporation. The headquarters of the
surviving corporation will be the current headquarters of
TransCommunity. Following the merger with BOE, TransCommunity
Bank will merge with and into Bank of Essex which will be a
wholly-owned subsidiary bank of Community Bankers, and will
operate each bank division of Bank of Essex under their current
names. Community Bankers must complete its merger with
TransCommunity by June 7, 2008 or under its certificate of
incorporation it must dissolve and liquidate.
Based on the respective companies balance sheet at
September 30, 2007, assuming no Community Bankers
stockholders exercise their conversion rights in the merger with
TransCommunity, by combining Community Bankers with
TransCommunity and BOE, the resulting company would have
approximately $625.6 million in assets, $399.6 million
in loans, $433.0 million in deposits and have stockholders
equity of approximately $160.9 million. As a result of the
proposed merger of Community Bankers and TransCommunity, each
share of TransCommunity common stock will be converted into
1.4200 shares of Community Bankers common stock, subject to
possible adjustment. If the daily average closing price for
Community Bankers common stock for the 20 consecutive days
of trading in such stock ending five days before the closing
date is less than $7.42, Community Bankers will increase the
exchange ratio to the quotient obtained by dividing $10.5364 by
such daily average closing price. The aggregate consideration to
be paid to the stockholders of TransCommunity will be
approximately $48.7 million. Upon completion of Community
Bankers merger with TransCommunity, each award, option, or
other right to purchase or acquire shares of TransCommunity
common stock pursuant to stock options, stock appreciation
rights, or stock awards granted by TransCommunity under
TransCommunitys stock incentive plans, equity compensation
plans and stock option plans, which are outstanding immediately
prior to the merger, whether or not exercisable, will be
converted into and become rights with respect to Community
Bankers common stock, and Community Bankers will assume each
right, in accordance with the terms of the relevant
TransCommunity stock plan and stock option agreement.
In reaching its decision to approve the merger agreement and
recommend the merger to its stockholders, the Community Bankers
board of directors reviewed various financial data and due
diligence and evaluation materials and made an independent
determination of fair market value. In addition, in reaching its
decision to approve the merger agreement, the board of directors
considered a number of factors, both positive and negative. It
believes that the non-exhaustive list of factors below strongly
supports its determination to approve the merger agreement and
recommendation that its stockholders adopt the merger agreement.
The positive factors included:
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the markets in which TransCommunity operates;
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the growth prospects associated with TransCommunity;
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the balance sheet
make-up and
product mix, including the loan and deposit mix of
TransCommunity;
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opportunities to grow existing revenue streams and create new
revenue streams associated with TransCommunity;
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the competitive position of TransCommunity within its operating
markets;
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the industry dynamics, including barriers to entry;
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the experience of the TransCommunitys board of directors
and management, including Bruce Nolte, the current president and
chief executive officer of TransCommunity who will become
president and chief executive officer of Community Bankers,
including their recent experience in consolidating
TransCommunitys subsidiary banks charters and
existing non-core business lines;
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acquisition opportunities in the industry;
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the opportunity for further consolidation and cost savings in
the banking industry;
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the valuation of comparable companies;
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the companies similar community banking philosophies;
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the financial results of TransCommunity, including potential for
revenue growth, enhanced operating margins and operating
efficiencies; and
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Keefe, Bruyette & Woods, Inc.s fairness opinion
that the merger is fair to Community Bankers from a financial
point of view.
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Negative factors that Community Bankers board of directors
considered included:
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TransCommunitys poor earnings history;
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the disruption that TransCommunity had experienced with its
management and board of directors;
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the reputational risk that these issues could raise;
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TransCommunitys ability to successfully integrate its
subsidiary banks; and
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whether other banks would be attracted to join the franchise,
although there were and are no plans, arrangements, agreements
or understandings other than Community Bankers proposed
merger with BOE.
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After reviewing all of these factors, the Community Bankers
board of directors unanimously determined that the merger
proposal and the transactions contemplated thereby are in the
best interests of Community Bankers and unanimously recommended
that Community Bankers stockholders vote at the annual
meeting to adopt the merger agreement.
In reaching its decision to approve the merger agreement and
recommend the merger to its stockholders, the TransCommunity
board of directors relied heavily on a special committee
comprised of three independent directors who have substantial
experience in financial and strategic matters involving public
companies. The board also consulted with TransCommunity
management, engaged legal and financial advisors, reviewed
various financial data, due diligence and evaluation materials,
and made an independent determination that the proposed merger
with Community Bankers was fair to TransCommunitys
stockholders from a financial point of view. The board of
directors considered a number of factors, positive and negative,
in determining whether to recommend that TransCommunitys
stockholders approve the merger agreement. The positive factors
included:
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the premium over the companys prevailing stock price to be
received by TransCommunitys stockholders;
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the value of the consideration TransCommunitys
stockholders will receive relative to the projected book value
and earnings per share of TransCommunity common stock;
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Sandler ONeills opinion that the consideration
TransCommunitys stockholders will receive as a result of
the merger is fair from a financial point of view;
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the fact that TransCommunitys stockholders will receive
shares in a larger company traded on the American Stock
Exchange, which will potentially provide greater liquidity for
TransCommunity stockholders to sell their shares quickly and
efficiently than under the existing OTC Bulletin Board
system;
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the fact that the exchange ratio is fixed in the event that
Community Bankers stock price increases before closing,
but is adjustable in the event that Community Bankers
stock price decreases, thereby affording TransCommunitys
stockholders a combination of upside participation and downside
protection;
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the additional capital to support a larger bank;
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the potential for the combined company to attract merger
candidates that TransCommunity would not be likely to attract on
its own;
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the proposed merger would be a strategic merger of equals in
which the combined companies may achieve a level of growth that
neither company could achieve on its own;
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the financial terms of recent business combinations in the
financial services industry and a comparison of the multiples of
selected combinations with the terms of the merger;
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the skills and experience offered by the Community Bankers
management and board of directors;
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the anticipated compatibility of management and business
philosophy of Community Bankers and TransCommunity;
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the projected positive value of Community Bankers shares
offered to TransCommunitys stockholders in relation to the
estimated market value, book value, and earnings per share of
TransCommunity common stock;
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the competitive and regulatory environment for financial
institutions generally; and
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the fact that the merger will enable TransCommunitys
stockholders to exchange their shares of common stock in a
tax-free transaction.
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The negative factors included:
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the dilution of ownership rights of TransCommunitys
stockholders;
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the reduction in the level of control that TransCommunitys
stockholders would have in the surviving corporation;
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no special purposes acquisition company transactions have been
completed in the banking industry;
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TransCommunity was enjoying progress with its strategic plan,
including recently consolidating its subsidiary banks into one
subsidiary; and
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potential stockholder opposition to the merger.
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After reviewing all of these factors, the TransCommunity board
of directors unanimously determined that the merger proposal and
the transactions contemplated thereby are in the best interests
of TransCommunity and unanimously recommended that
TransCommunitys stockholders vote at the special meeting
to approve the merger proposal.
Under the merger agreement by and between Community Bankers and
TransCommunity, each of Community Bankers and TransCommunity has
agreed, except as otherwise contemplated by the merger agreement
or with the prior written consent of the other party, and to
cause its subsidiaries to:
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operate its business only in the usual, regular, and ordinary
course;
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use reasonable efforts to preserve intact its business
organization and assets and maintain its rights and franchises;
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use reasonable efforts to cause its representations and
warranties to be correct at all times;
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in the case of TransCommunity only, use reasonable efforts to
provide all information requested by Community Bankers related
to loans or other transactions made by TransCommunity with a
value equal to or exceeding $250,000;
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in the case of TransCommunity only, consult with Community
Bankers prior to entering into or making any loans or other
transactions with a value equal to or exceeding
$500,000; and
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take no action which would (1) adversely affect the ability
of any party to obtain any consents required for the
transactions contemplated by the merger agreement without
imposition of a condition or restriction which, in the
reasonable judgment of the board of directors of Community
Bankers or the board of directors of TransCommunity, would so
materially adversely impact the economic or business benefits of
the transactions contemplated by the merger agreement as to
render inadvisable the consummation of the merger, or
(2) materially adversely affect the ability of either party
to perform its covenants and agreements under the merger
agreement.
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Consummation of Community Bankers merger with
TransCommunity is subject to a number of conditions, including
receipt of the required stockholder approval from both Community
Bankers and TransCommunity stockholders, regulatory (Federal
Reserve Board and Virginia State Corporation Commissions
Bureau of Financial Institutions) approvals as well as
satisfaction of certain other customary closing conditions.
51
Community Bankers and TransCommunity have prepared a separate
joint proxy statement/prospectus relating to the merger of
Community Bankers and TransCommunity, which has been mailed to
Community Bankers and TransCommunity stockholders in connection
with the annual meeting of the stockholders of Community Bankers
and the special meeting of the stockholders of TransCommunity at
which a proposal to approve the merger of Community Bankers and
TransCommunity will be considered.
The merger with TransCommunity is Community Bankers
initial business combination, and Community Bankers
certificate of incorporation mandates certain voting
requirements for its initial business combination. Pursuant to
Community Bankers certificate of incorporation, adoption
of the merger agreement relating to the initial business
combination requires the affirmative vote of holders of a
majority of Community Bankers outstanding shares of common stock
issued in Community Bankers initial public offering and
voted at the meeting.
In addition, for an initial business combination, the holders of
the shares of common stock issued in Community Bankers initial
public offering have the right to convert their shares into cash
equal to a pro rata portion of the Community Bankers trust
account if they vote against the merger. For Community Bankers
to complete its merger with TransCommunity, the holders of less
than 20% of the outstanding shares of common stock issued in the
Community Bankers initial public offering must have
exercised their conversion rights.
Also pursuant to Delaware law, adoption of the merger agreement
with TransCommunity requires the affirmative vote of the holders
of a majority of the outstanding shares of Community Bankers
common stock entitled to vote at the annual meeting.
Community
Bankers Reasons for the Merger with BOE
In reaching its decision to approve the merger agreement and
recommend the merger to its stockholders, the Community Bankers
board of directors reviewed various financial data and due
diligence and evaluation materials. In addition, in reaching its
decision to approve the merger agreement, the board of directors
considered a number of factors and believes that the
non-exhaustive list of factors below strongly supports its
determination to approve the merger agreement and recommendation
that its stockholders adopt the merger agreement:
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the attractive nature of the markets in which BOE operates and
its branch network;
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BOEs demonstrated deposit and loan growth and history of
consistent earnings;
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BOEs attractive balance sheet
make-up and
product mix, including the loan and deposit mix of BOE and the
compatibility of that mix with TransCommunitys balance
sheet;
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opportunities to grow existing revenue streams and create new
revenue streams associated with BOE and the strength of the
combined balance sheets, equity levels, and projected market
capitalization of Community Bankers, TransCommunity and BOE;
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the competitive position and market share of BOE within its
operating markets and the likely ability for Bank of Essex,
following its merger with TransCommunity Bank, to increase its
market share;
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the experience of BOEs board of directors and management,
including George M. Longest, Jr., the current president and
chief executive officer of BOE who will become president of
Community Bankers after the merger and chief executive officer
commencing on January 1, 2010;
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the potential operating efficiencies and management enhancements
of merging Bank of Essex with TransCommunity Bank, and the
compatibility of management of Community Bankers, TransCommunity
and BOE;
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the valuation of comparable companies and the reasonable pricing
of the transaction;
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the similar operating philosophies and community banking culture
of Community Bankers, TransCommunity and BOE;
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the all stock for stock nature of the merger consideration,
preserving capital for future growth and acquisitions;
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the attractiveness of the surviving corporation following the
merger to additional merger candidates;
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the strong desire of management and the board of directors of
BOE to stay involved in future growth of the company; and
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Keefe, Bruyette & Woods, Inc.s fairness opinion
that the merger is fair to Community Bankers from a financial
point of view.
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The board of directors of Community Bankers did not ascertain
any negative factors related to the proposed merger with BOE
other than the risk of the ability to successfully integrate BOE
with TransCommunity and achieve the associated cost savings and
efficiencies.
After reviewing all of these factors, the Community Bankers
board of directors unanimously determined that the merger
proposal and the transactions contemplated thereby are in the
best interests of Community Bankers and unanimously recommended
that Community Bankers stockholders vote at the special
meeting to adopt the merger agreement.
In addition, Community Bankers board knew and considered
the financial interests of certain Community Bankers directors
and executives when it approved the merger agreement. These
financial interests are addressed in greater detail under the
heading Certain Benefits of Directors and
Officers of Community Bankers and BOE.
The foregoing discussion of the factors considered by Community
Bankers board of directors is not intended to be
exhaustive but is believed to include all material factors
considered by Community Bankers board of directors. In
view of the wide variety of factors considered in connection
with its evaluation of the merger and the complexity of these
matters, Community Bankers board of directors did not find
it useful and did not attempt to quantify or assign any relative
or specific weight to the various factors that it considered in
reaching its determination to approve the merger.
The Community Bankers board of directors believes the merger
is in the best interests of Community Bankers and its
stockholders. The Community Bankers board of directors
recommends that Community Bankers stockholders vote
FOR the approval of the merger proposal and
the consummation of the transactions contemplated thereby.
BOEs
Reasons for the Merger
In reaching its decision to approve the merger agreement and
recommend the merger to its stockholders, the BOE board of
directors consulted with BOE management, as well as with its
outside financial and legal advisors, reviewed various financial
data, due diligence and evaluation materials and made an
independent determination that the proposed merger with
Community Bankers was in the best interests of BOE and its
stockholders. The board of directors considered a number of
positive factors that it believes support its recommendation
that BOEs stockholders approve the merger agreement,
including:
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the premium over BOEs prevailing stock price to be
received by BOEs stockholders;
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the financial analysis and presentation of Feldman Financial,
and its oral opinion that, as of December 12, 2007, the
exchange ratio was fair, from a financial point of view, to
BOEs stockholders. For more information, see
Opinion of BOEs Financial Advisor;
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the fact that the exchange ratio is fixed in the event that
Community Bankers stock price increases before closing,
but is adjustable in the event that Community Bankers
stock price decreases, thereby affording BOEs stockholders
a combination of upside participation and downside protection;
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its belief that the surviving corporations increased size
and scale, including its significantly larger pro forma capital
base, would better position it to compete and grow its business
and to attract other high quality merger candidates;
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its belief that the surviving corporation will be positioned to
benefit from increased credit portfolio diversity and increased
lending capacity;
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the corporate governance provisions established for the merger,
including the composition of the surviving corporations
board of directors and the designation of key senior management
of the surviving corporation and their proposed employment
arrangements;
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its knowledge and analysis of the current competitive and
regulatory environment for financial institutions generally,
BOEs current competitive position and the other potential
strategic alternatives available to BOE, including remaining
independent, accelerating branch growth, making acquisitions,
developing or acquiring non-bank businesses and selling BOE to a
larger financial institution;
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the skills and experience offered by the Community Bankers
management;
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its review of Community Bankers financial condition and
TransCommunitys financial condition, earnings, business
operations and prospects, taking into account the results of
BOEs due diligence investigation of Community Bankers and
TransCommunity, and the anticipated compatibility of management
and shared business philosophy of Community Bankers,
TransCommunity, and BOE;
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the assessment of the likelihood that the merger would be
completed in a timely manner without unacceptable regulatory
conditions or requirements, including that no branch
divestitures would likely be required, and the ability of the
management team to successfully integrate and operate the
business of the surviving corporation after the merger; and
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the fact that the merger will enable BOEs stockholders to
exchange their shares of BOE, in a tax-free transaction, for
registered shares of common stock of a company that will have a
significantly larger pro forma market capitalization.
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The BOE board also considered the risks and potentially negative
factors outlined below, but concluded that the anticipated
benefits of combining with Community Bankers were likely to
outweigh substantially these risks and factors. The risks and
factors included:
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the dilution of ownership rights of BOEs stockholders;
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no special purposes acquisition company transactions have been
completed in the banking industry;
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the risk that Community Bankers may not be able to close the
proposed merger with TransCommunity due to potential stockholder
opposition;
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whether other banks would be attracted to join the franchise;
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the poor earnings history of TransCommunity;
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the possibility that the merger and the related integration
process could result in the loss of key employees, in the
disruption of BOEs on-going business, and in the loss of
customers; and
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the risks of the type and nature described under A Warning
about Forward-Looking Statements and Risk Factors.
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After reviewing all of these factors, the BOE board of directors
unanimously determined that the merger proposal and the
transactions contemplated thereby are in the best interests of
BOE and unanimously recommended that BOEs stockholders
vote at the special meeting to adopt the merger agreement.
BOEs board of directors knew and considered the financial
interests of certain BOE directors and executives when it
approved the merger agreement. These financial interests are
addressed in greater detail under the heading
Certain Benefits of Directors and Officers of
Community Bankers and BOE.
The foregoing discussion of the factors considered by BOEs
board of directors is not intended to be exhaustive but is
believed to include all material factors considered by
BOEs board of directors. In view of the wide variety of
factors considered in connection with its evaluation of the
merger and the complexity of these matters, the BOE board of
directors did not find it useful and did not attempt to quantify
or assign any relative or specific weight to the various factors
that it considered in reaching its determination to approve the
merger.
54
Based on the foregoing, the BOE board of directors believes
the merger is in the best interests of BOE and its stockholders.
The BOE board of directors recommends that BOEs
stockholders vote FOR the approval of the
merger proposal and the consummation of the transactions
contemplated thereby.
Opinion
of Community Bankers Financial Advisor
On January 10, 2007, Community Bankers executed an
engagement agreement with Keefe, Bruyette & Woods,
Inc. Keefe, Bruyette & Woods, Inc.s engagement
encompassed assisting Community Bankers in analyzing,
structuring, negotiating and effecting a transaction with BOE.
Community Bankers selected Keefe, Bruyette & Woods,
Inc. because Keefe, Bruyette & Woods, Inc. is a
nationally recognized investment-banking firm with substantial
experience in transactions similar to the merger and is familiar
with Community Bankers and its business. As part of its
investment banking business, Keefe, Bruyette & Woods,
Inc. is continually engaged in the valuation of financial
businesses and their securities in connection with mergers and
acquisitions.
On December 5, 2007, the Community Bankers board of
directors held a meeting to evaluate the proposed merger of BOE
with and into Community Bankers. At this meeting, Keefe,
Bruyette & Woods, Inc. reviewed the financial aspects
of the proposed merger. On December 13, 2007, Keefe,
Bruyette & Woods, Inc. rendered a written opinion to
Community Bankers as to the fairness to Community Bankers, from
a financial point of view, of the exchange ratio to be paid in
the merger.
The full text of Keefe, Bruyette & Woods,
Inc.s written opinion is attached as Appendix C to
this joint proxy statement/prospectus and is incorporated herein
by reference. Community Bankers stockholders are urged to
read the opinion in its entirety for a description of the
procedures followed, assumptions made, matters considered, and
qualifications and limitations on the review undertaken by
Keefe, Bruyette & Woods, Inc. The description of the
opinion set forth herein is qualified in its entirety by
reference to the full text of such opinion.
Keefe, Bruyette & Woods, Inc.s opinion speaks
only as of the date of the opinion. The opinion is directed to
the Community Bankers board and addresses only the fairness,
from a financial point of view to Community Bankers, of the
exchange ratio offered in the merger. It does not address the
underlying business decision to proceed with the merger and does
not constitute a recommendation to any Community Bankers
stockholder as to how the stockholder should vote at the
Community Bankers special meeting on the merger or any related
matter.
During the past two years Keefe, Bruyette & Woods,
Inc. acted as financial advisor to Community Bankers in its
proposed acquisition of TransCommunity.
In rendering its opinion, Keefe, Bruyette & Woods,
Inc.:
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reviewed, among other things,
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the merger agreement,
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annual reports to stockholders and annual reports on
Form 10-K
of BOE,
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quarterly reports on
Form 10-Q
of BOE,
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annual reports to stockholders and annual reports on
Form 10-K
of Community Bankers, and
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quarterly reports on
Form 10-Q
of Community Bankers;
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held discussions with members of senior management of Community
Bankers and BOE regarding,
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past and current business operations,
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regulatory relationships,
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financial condition, and
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future prospects of the respective companies;
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reviewed the market prices, valuation multiples, publicly
reported financial condition and results of operations for BOE
and compared them with those of certain publicly traded
companies that Keefe, Bruyette & Woods, Inc. deemed to
be relevant;
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compared the proposed financial terms of the merger with the
financial terms of certain other transactions that Keefe,
Bruyette & Woods, Inc. deemed to be relevant;
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evaluated the potential pro forma impact of the merger with
Community Bankers, including cost savings, that management of
Community Bankers expects to result from a combination of the
businesses of Community Bankers and BOE; and
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performed other studies and analyses that it considered
appropriate.
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In conducting its review and arriving at its opinion, Keefe,
Bruyette & Woods, Inc. relied upon and assumed the
accuracy and completeness of all of the financial and other
information provided to or otherwise made available to Keefe,
Bruyette & Woods, Inc. or that was discussed with, or
reviewed by Keefe, Bruyette & Woods, Inc., or that was
publicly available. Keefe, Bruyette & Woods, Inc. did
not attempt, or assume any responsibility, to verify such
information independently. Keefe, Bruyette & Woods,
Inc. relied upon the management of BOE and Community Bankers as
to the reasonableness and achievability of the financial and
operating forecasts and projections (and assumptions and bases
therefor) provided to Keefe, Bruyette & Woods, Inc.
Keefe, Bruyette & Woods, Inc. assumed, without
independent verification, that the aggregate allowances for loan
and lease losses for BOE are adequate to cover those losses.
Keefe, Bruyette & Woods, Inc. did not make or obtain
any evaluations or appraisals of any assets or liabilities of
BOE or Community Bankers, nor did they examine or review any
individual credit files.
At the direction of Community Bankers board of directors,
Keefe, Bruyette & Woods, Inc. was not asked to, and it
did not, offer any opinion as to the terms of the merger
agreement or the form of the merger, other than the exchange
ratio, to the extent expressly specified in Keefe,
Bruyette & Woods, Inc.s opinion. Keefe,
Bruyette & Woods, Inc. expressed no opinion as to what
the value of Community Bankers common stock would be when issued
pursuant to the merger or the prices at which Community Bankers
common stock or BOE common stock would trade at any time.
Additionally, Keefe, Bruyette & Woods, Inc.s
opinion did not address the relative merits of the merger as
compared to any alternative business strategies that might exist
for Community Bankers, nor did it address the effect of any
other business combination in which Community Bankers might
engage.
For purposes of rendering its opinion, Keefe,
Bruyette & Woods, Inc. assumed that, in all respects
material to its analyses:
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the merger will be completed substantially in accordance with
the terms set forth in the merger agreement;
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|
the representations and warranties of each party in the merger
agreement and in all related documents and instruments referred
to in the merger agreement are true and correct;
|
|
|
|
each party to the merger agreement and all related documents
will perform all of the covenants and agreements required to be
performed by such party under such documents;
|
|
|
|
all conditions to the completion of the merger will be satisfied
without any waivers; and
|
|
|
|
in the course of obtaining the necessary regulatory,
contractual, or other consents or approvals for the merger, no
restrictions, including any divestiture requirements,
termination or other payments or amendments or modifications,
that may be imposed, will have a material adverse effect on the
future results of operations or financial condition of the
combined entity or the contemplated benefits of the merger,
including the cost savings, revenue enhancements and related
expenses expected to result from the merger.
|
Keefe, Bruyette & Woods, Inc. further assumed that the
merger will be accounted for as a purchase transaction under
generally accepted accounting principles, and that the merger
will qualify as a tax-free reorganization for United States
federal income tax purposes. Keefe, Bruyette & Woods,
Inc.s opinion is not an expression of an opinion as to the
prices at which shares of BOE common stock or Community Bankers
common stock will trade since the announcement of the proposed
merger or the actual value of the Community Bankers common
shares
56
when issued pursuant to the merger, or the prices at which the
Community Bankers common shares will trade following the
completion of the merger.
In performing its analyses, Keefe, Bruyette & Woods,
Inc. made numerous assumptions with respect to industry
performance, general business, economic, market and financial
conditions and other matters, which are beyond the control of
Keefe, Bruyette & Woods, Inc., BOE and Community
Bankers. Any estimates contained in the analyses performed by
Keefe, Bruyette & Woods, Inc. are not necessarily
indicative of actual values or future results, which may be
significantly more or less favorable than suggested by these
analyses. Additionally, estimates of the value of businesses or
securities do not purport to be appraisals or to reflect the
prices at which such businesses or securities might actually be
sold. Accordingly, these analyses and estimates are inherently
subject to substantial uncertainty.
The exchange ratio was determined through negotiation between
Community Bankers and BOE and the decision to enter into the
merger was made solely by Community Bankers board of
directors. In addition, the Keefe, Bruyette & Woods,
Inc. opinion was among several factors taken into consideration
by the Community Bankers board in making its determination to
approve the merger agreement and the merger. Consequently, the
analyses described below should not be viewed as determinative
of the decision of the Community Bankers board with respect to
the fairness of the consideration to be paid in the merger.
Summary
of Analysis by Keefe, Bruyette & Woods,
Inc.
The following is a summary of the material analyses presented by
Keefe, Bruyette & Woods, Inc. to the Community Bankers
board, in connection with its written fairness opinion. The
summary is not a complete description of the analyses underlying
the Keefe, Bruyette & Woods, Inc. opinion or the
presentation made by Keefe, Bruyette & Woods, Inc. to
the Community Bankers board, but summarizes the material
analyses performed and presented in connection with such
opinion. The preparation of a fairness opinion is a complex
analytic process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances.
Therefore, a fairness opinion is not readily susceptible to
partial analysis or summary description. In arriving at its
opinion, Keefe, Bruyette & Woods, Inc. did not
attribute any particular weight to any analysis or factor that
it considered, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. The
financial analyses summarized below include information
presented in tabular format. Accordingly, Keefe,
Bruyette & Woods, Inc. believes that its analyses and
the summary of its analyses must be considered as a whole and
that selecting portions of its analyses and factors or focusing
on the information presented below in tabular format, without
considering all analyses and factors or the full narrative
description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of the process underlying
its analyses and opinion. The tables alone do not constitute a
complete description of the financial analyses.
Summary of Proposal. BOE stockholders will
receive 5.7278 shares of Community Bankers common stock,
subject to possible adjustment. Based on Community Bankers
closing stock price on December 4, 2007 of $7.44, the
exchange ratio represented a value of $42.61 per share to BOE.
Selected Peer Group Analysis. Using publicly
available information, Keefe, Bruyette & Woods, Inc.
compared the financial performance, financial condition and
market performance of BOE to the following depository
institutions that Keefe, Bruyette & Woods, Inc.
considered comparable to BOE.
Companies included in BOE s peer group were:
Fauquier Bankshares, Inc.
Chesapeake Financial Shares, Inc.
Central Virginia Bankshares, Inc.
Monarch Financial Holdings, Inc.
F & M Bank Corp.
Village Bank and Trust Financial Corp.
57
Southern National Bancorp of Virginia, Inc.
Grayson Bankshares, Inc.
Benchmark Bankshares, Inc.
Bay Banks of Virginia, Inc.
Virginia National Bank
First Capital Bancorp, Inc.
Citizens Bancorp of Virginia, Inc.
Botetourt Bankshares, Inc.
Pinnacle Bankshares Corporation
Shore Financial Corporation
Bank of the James Financial Group, Inc.
Heritage Bankshares, Inc.
Cardinal Bankshares Corporation
MainStreet BankShares, Inc.
To perform this analysis, Keefe, Bruyette & Woods,
Inc. used financial information as of or for the three or twelve
month period ended September 30, 2007. Market price
information was as of December 4, 2007. Certain financial
data prepared by Keefe, Bruyette & Woods, Inc., and as
referenced in the tables presented below may not correspond to
the data presented in BOEs historical financial
statements, or to the data prepared by Feldman Financial
Advisors, Inc. presented under the section Opinion of
BOEs Financial Advisor, as a result of the different
periods, assumptions and methods used by Keefe,
Bruyette & Woods, Inc. to compute the financial data
presented.
Keefe, Bruyette & Woods, Inc.s analysis showed
the following concerning BOEs financial performance:
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|
|
|
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|
BOE Peer Group
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|
BOE Peer Group
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|
BOE Peer Group
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|
Financial Performance Measures:
|
|
BOE
|
|
|
Median
|
|
|
Maximum
|
|
|
Minimum
|
|
|
Latest Twelve Months Core Return on
Average Equity(1)
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|
|
10.54
|
%
|
|
|
10.13
|
%
|
|
|
13.82
|
%
|
|
|
1.22
|
%
|
Latest Twelve Months Core Return on
Average Assets(1)
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|
|
1.06
|
%
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|
|
0.94
|
%
|
|
|
1.27
|
%
|
|
|
0.13
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%
|
Most Recent Quarter Net Interest Margin
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|
3.82
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%
|
|
|
3.85
|
%
|
|
|
4.68
|
%
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|
|
3.54
|
%
|
Latest Twelve Months Efficiency Ratio
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|
68
|
%
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|
|
68
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%
|
|
|
94
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%
|
|
|
56
|
%
|
|
|
|
(1) |
|
Core income is defined as net income before extraordinary items,
less the after-tax portion of investment securities gains or
losses and nonrecurring items |
Keefe, Bruyette & Woods, Inc.s analysis showed
the following concerning BOEs financial condition:
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|
BOE Peer Group
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|
BOE Peer Group
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|
BOE Peer Group
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|
Financial Condition Measures:
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|
BOE
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|
|
Median
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|
Maximum
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|
|
Minimum
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|
Tangible Equity / Tangible Assets
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|
9.82
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%
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|
|
9.26
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%
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|
|
17.02
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%
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|
|
6.95
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%
|
Loans / Deposits
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|
|
90
|
%
|
|
|
94
|
%
|
|
|
113
|
%
|
|
|
66
|
%
|
Latest Twelve Months
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|
|
|
|
|
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|
|
|
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|
|
|
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|
Net Charge-offs / Avg. Loans
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|
(0.15
|
)%
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|
|
0.07
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%
|
|
|
0.31
|
%
|
|
|
(0.04
|
)%
|
Loan Loss Reserves / Loans
|
|
|
1.24
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%
|
|
|
1.03
|
%
|
|
|
1.45
|
%
|
|
|
0.59
|
%
|
58
Keefe, Bruyette & Woods, Inc.s analysis showed
the following concerning BOEs market performance:
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BOE Peer
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BOE Peer
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BOE
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Group
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Group
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|
Market Performance Measures:
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|
BOE
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|
|
Peer Group Median
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|
|
Maximum
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|
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Minimum
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|
Price to earnings multiple, based on Last Twelve Months GAAP
estimated earnings
|
|
|
11.0
|
x
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|
|
14.6
|
x
|
|
|
50.0
|
x
|
|
|
10.3
|
X
|
Price to book multiple value
|
|
|
1.09
|
x
|
|
|
1.30
|
x
|
|
|
1.96
|
x
|
|
|
0.94
|
X
|
Price to tangible book multiple value
|
|
|
1.11
|
x
|
|
|
1.37
|
x
|
|
|
2.13
|
x
|
|
|
0.94
|
X
|
Dividend Yield
|
|
|
3.8
|
%
|
|
|
2.5
|
%
|
|
|
5.0
|
%
|
|
|
0.0
|
%
|
Selected Transaction Analysis. Keefe,
Bruyette & Woods, Inc. reviewed publicly available
information related to selected comparably sized acquisitions of
bank holding companies announced after January 1, 2005,
with headquarters in Virginia, Maryland and North Carolina with
aggregate transaction values between $25 million and
$100 million. The transactions included in the group were:
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Acquiror:
|
|
Acquired Company:
|
|
Community Bankers Acquisition Corp.
|
|
TransCommunity Financial Corporation
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SCBT Financial Corporation
|
|
TSB Financial Corporation
|
Yadkin Valley Financial Corporation
|
|
Cardinal State Bank
|
Bradford Bancorp, Inc.
|
|
Patapsco Bancorp, Inc.
|
Gateway Financial Holdings, Inc.
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|
Bank of Richmond, N.A.
|
Sandy Spring Bancorp, Inc.
|
|
CN Bancorp, Inc.
|
Sandy Spring Bancorp, Inc.
|
|
Potomac Bank of Virginia
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Crescent Financial Corporation
|
|
Port City Capital Bank
|
BNC Bancorp
|
|
SterlingSouth Bank & Trust Company
|
Premier Community Bankshares, Inc.
|
|
Albemarle First Bank
|
Union Bankshares Corporation
|
|
Prosperity Bank & Trust Company
|
American National Bankshares, Inc.
|
|
Community First Financial Corporation
|
Citizens South Banking Corporation
|
|
Trinity Bank
|
Transaction multiples for the merger were derived from an offer
price of $42.61 per share for BOE. For each precedent
transaction, Keefe, Bruyette & Woods, Inc. derived and
compared, among other things, the implied ratio of price per
common share paid for the acquired company to:
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|
|
|
|
the earnings per share of the acquired company for the latest
12 months of results publicly available prior to the time
the transaction was announced;
|
|
|
|
book value per share of the acquired company based on the latest
publicly available financial statements of the company available
prior to the announcement of the acquisition.
|
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|
tangible book value per share of the acquired company based on
the latest publicly available financial statements of the
company available prior to the announcement of the acquisition.
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|
Additionally, for each precedent transaction, Keefe,
Bruyette & Woods, Inc. derived and compared the
premium paid in aggregate consideration over tangible book value
to core deposits. Core deposits were defined as total deposits
less jumbo CDs (CDs with balances greater than $100,000).
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market premium based on the latest closing price
1-day prior
to the announcement of the acquisition.
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59
The results of the analysis are set forth in the following table:
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|
Comparable
|
|
|
Comparable
|
|
|
Comparable
|
|
|
|
Community Bankers/
|
|
|
Transactions
|
|
|
Transactions
|
|
|
Transactions
|
|
|
|
BOE
|
|
|
Median
|
|
|
Maximum
|
|
|
Minimum
|
|
|
Price / Trailing 12 months earnings per share
|
|
|
17.8x
|
|
|
|
30.1x
|
|
|
|
41.2x
|
|
|
|
17.4x
|
|
Price / Book value
|
|
|
176
|
%
|
|
|
235
|
%
|
|
|
336
|
%
|
|
|
161
|
%
|
Price / Tangible Book value
|
|
|
178
|
%
|
|
|
254
|
%
|
|
|
336
|
%
|
|
|
161
|
%
|
Core Deposit Premium
|
|
|
12.0
|
%
|
|
|
20.4
|
%
|
|
|
32.8
|
%
|
|
|
13.9
|
%
|
Market Premium(1)
|
|
|
61.5
|
%
|
|
|
45.4
|
%
|
|
|
91.0
|
%
|
|
|
21.9
|
%
|
|
|
|
(1) |
|
Based on BOEs closing price of $26.38 on December 4,
2007 |
No company or transaction used as a comparison in the above
analysis is identical to Community Bankers, BOE or the proposed
merger. Accordingly, an analysis of these results is not
mathematical. Rather, it involves complex considerations and
judgments concerning differences in financial and operating
characteristics of the companies involved.
Discounted Cash Flow Analysis. Keefe,
Bruyette & Woods, Inc. performed a discounted cash
flow analysis to estimate a range for the implied equity value
per share of BOE common stock. In this analysis, Keefe,
Bruyette & Woods, Inc. assumed discount rates ranging
from 11.0% to 14.0% to derive (1) the present value of the
estimated free cash flows that BOE could generate over a five
year period, including certain cost savings forecasted as a
result of the merger, and (2) the present value of
BOEs terminal value at the end of year five. Terminal
values for BOE were calculated based on a range of 13.0x to
15.0x estimated year six earnings per share. In performing this
analysis, Keefe, Bruyette & Woods, Inc. used
BOEs managements estimates for the first year. Based
on managements estimates, Keefe, Bruyette &
Woods, Inc. assumed 8% earnings per share growth thereafter.
Certain data was adjusted to account for certain restructuring
charges anticipated by management to result from the merger.
Keefe, Bruyette & Woods, Inc. assumed that BOE would
maintain a tangible equity / tangible asset ratio of
6.00% and would retain sufficient earnings to maintain that
level. Any earnings in excess of what would need to be retained
represented dividendable cash flows for BOE.
Based on these assumptions, Keefe, Bruyette & Woods,
Inc. derived a range of implied equity values per share of BOE
common stock of $40.96 to $51.62.
The discounted cash flow analysis is a widely used valuation
methodology, but the results of such methodology are highly
dependent on the assumptions that must be made, including asset
and earnings growth rates, terminal values, dividend payout
rates, and discount rates. The analysis did not purport to be
indicative of the actual values or expected values of BOE common
stock.
Forecasted Pro Forma Financial
Analysis. Keefe, Bruyette & Woods, Inc.
analyzed the estimated financial impact of the merger on
Community Bankers 2008 estimated earnings per share. For
both Community Bankers and BOE, Keefe, Bruyette &
Woods, Inc. used management estimates of earnings per share for
2008. In addition, Keefe, Bruyette & Woods, Inc.
assumed that the merger will result in cost savings equal to
Community Bankers managements estimates. Based on
its analysis, Keefe, Bruyette & Woods, Inc. determined
that the merger would be accretive to Community Bankers
estimated GAAP earnings per share in 2008.
Furthermore, the analysis indicated that Community Bankers
Leverage Ratio, Tier 1 Risk-Based Capital Ratio and Total
Risk Based Capital Ratio would all remain well
capitalized by regulatory standards. This analysis was
based on internal projections provided by Community
Bankers and BOEs senior management teams. For all of
the above analysis, the actual results achieved by Community
Bankers following the merger may vary from the projected
results, and the variations may be material.
Other Analyses. Keefe, Bruyette &
Woods, Inc. reviewed the relative financial and market
performance BOE to a variety of relevant industry peer groups
and indices. Keefe, Bruyette & Woods, Inc. also
reviewed earnings estimates, balance sheet composition,
historical stock performance and other financial data for BOE.
60
The Community Bankers board retained Keefe, Bruyette &
Woods, Inc. as an independent contractor to act as financial
adviser to Community Bankers regarding the merger. As part of
its investment banking business, Keefe, Bruyette &
Woods, Inc. is continually engaged in the valuation of banking
businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and
other purposes. As specialists in the securities of banking
companies, Keefe, Bruyette & Woods, Inc. has
experience in, and knowledge of, the valuation of banking
enterprises. In the ordinary course of its business as a
broker-dealer, Keefe, Bruyette & Woods, Inc. may, from
time to time, purchase securities from, and sell securities to,
Community Bankers and BOE. As a market maker in securities
Keefe, Bruyette & Woods, Inc. may from time to time
have a long or short position in, and buy or sell, debt or
equity securities of Community Bankers and BOE for Keefe,
Bruyette & Woods, Inc.s own account and for the
accounts of its customers.
Community Bankers and Keefe, Bruyette & Woods, Inc.
have entered into an agreement relating to the services to be
provided by Keefe, Bruyette & Woods, Inc. in
connection with the merger. Community Bankers paid to Keefe,
Bruyette & Woods, Inc. at the time Keefe,
Bruyette & Woods, Inc. issued the fairness opinion in
connection with the proposed merger with BOE, a cash fee of
$125,000 and has agreed to pay to Keefe, Bruyette &
Woods, Inc. an additional cash fee of $375,000 at the time of
and contingent upon the closing of the proposed merger with BOE.
Pursuant to the Keefe, Bruyette & Woods, Inc.
engagement agreement, Community Bankers also agreed to reimburse
Keefe, Bruyette & Woods, Inc. for reasonable
out-of-pocket expenses and disbursements incurred in connection
with its retention and to indemnify Keefe, Bruyette &
Woods, Inc. and related parties against certain liabilities,
including liabilities under federal securities laws, relating
to, or arising out of, its engagement.
Opinion
of BOEs Financial Advisor
BOE retained Feldman Financial on November 16, 2007 to
provide strategic financial advice to the BOE board on various
matters, including the evaluation of a strategic business
combination and the potential enhancement of stockholder value.
At the December 13, 2007 meeting of the BOE board of
directors, Feldman Financial delivered an oral opinion to the
BOE board, which opinion was subsequently confirmed in writing,
that as of such date and subject to certain considerations set
forth in such opinion, the merger consideration to be received
by the holders of BOE common stock was fair, from a financial
point of view, to BOEs stockholders.
The full text of Feldman Financials written opinion
dated December 13, 2007, which sets forth a description of
the procedures followed, assumptions made, matters considered
and limitations on the review undertaken, is attached as
Appendix D to this document. You should read the opinion
carefully and in its entirety. Feldman Financials opinion
is directed to the BOE board and addresses only the merger
consideration. The opinion does not address the underlying
business decision of BOE to engage in the transaction and does
not constitute a recommendation to you as to how to vote at the
special meeting. The summary of Feldman Financials opinion
set forth in this joint proxy statement/prospectus is qualified
in its entirety by reference to the full text of such
opinion.
In rendering its opinion, Feldman Financial, among other things:
|
|
|
|
|
reviewed the merger agreement;
|
|
|
|
analyzed audited and unaudited historical financial information
contained in
Forms 10-K
and 10-Q
concerning BOE and TransCommunity for the last three fiscal
years ending December 31, 2006 and monthly and quarterly
financial information through September 30, 2007;
|
|
|
|
analyzed audited and unaudited historical financial information
contained in
Forms 10-K
and 10-Q
concerning Community Bankers from its inception on April 6,
2005 through September 30, 2007;
|
|
|
|
the merger agreement by and between Community Bankers and
TransCommunity dated September 5, 2007 and the written
consent and waiver by and between Community Bankers and
TransCommunity dated December 13, 2007 relating to
Community Bankers entering into the merger agreement with
BOE;
|
|
|
|
discussed past, present, and future financial performance and
operating philosophies with the senior management of BOE and
TransCommunity;
|
61
|
|
|
|
|
reviewed certain internal financial data and financial
projections of BOE and TransCommunity;
|
|
|
|
compared the financial condition, operating performance and
market trading characteristics of BOE and TransCommunity to
similar financial institutions;
|
|
|
|
reviewed the stock price trading history of BOE, TransCommunity
and Community Bankers;
|
|
|
|
reviewed the terms of recent acquisitions of companies which we
deemed appropriate; and
|
|
|
|
conducted such other studies, analyses, inquiries, and
investigations as we deemed appropriate for the purposes of this
opinion.
|
In preparing its opinion, Feldman Financial assumed and relied
upon the accuracy and completeness of all financial and other
information that it received, reviewed, or discussed. With
respect to certain financial forecasts, Feldman Financial
assumed that such forecasts were reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the management of BOE and TransCommunity. Neither BOE nor
TransCommunity publicly discloses internal financial projections
of the type provided to Feldman Financial and, as a result, such
projections were not prepared with a view towards public
disclosure. The projections were based on numerous variables and
assumptions which are inherently uncertain, including, without
limitation, factors related to general economic and competitive
conditions, and accordingly, actual results could vary
significantly from those set forth in such projections. Feldman
Financial did not assume any responsibility for independently
verifying such information, did not undertake an independent
evaluation or appraisal of the assets or liabilities of BOE,
TransCommunity or Community Bankers, and was not furnished with
any such appraisal or evaluation. Feldman Financial was not
retained to and did not review any individual loan credit files.
Feldman Financials opinion was necessarily based upon
financial, economic, market and other conditions as they existed
and could be evaluated on the date of its opinion.
In formulating its opinion to the BOE board, Feldman Financial
prepared a variety of financial and comparative analyses,
including those described below. The following is a summary of
the material financial analyses performed by Feldman Financial
and reviewed with the BOE board in connection with its opinion
dated December 13, 2007, and does not purport to be a
comprehensive description of the analyses underlying Feldman
Financials opinion. The preparation of a fairness opinion
is a complex process, involving various determinations as to the
most relevant and appropriate methods of financial analyses and
the application of these methods to the particular
circumstances. Therefore, such an opinion is not readily
susceptible to partial analysis or summary description.
Accordingly, Feldman Financial believes that its analyses must
be considered as a whole, and selecting portions of the analyses
and factors, without considering all factors and analyses, could
create a misleading or incomplete view of the processes
underlying such analyses and its opinion.
Calculation of Implied Value of the Merger
Consideration. Feldman Financial calculated the
implied value of the consideration to be received by the
stockholders of BOE. As detailed in the merger agreement, as
consideration for the merger, each issued and outstanding share
of BOE Common Stock shall be converted into the right to receive
5.7278 shares of Community Bankers common stock, subject to
adjustment if the average closing price, as defined in the
merger agreement, of Community Bankers common stock is less than
$7.42. Assuming an average closing price of $7.42 for the
Community Bankers common stock, the exchange ratio implies
merger consideration of $42.50 for each BOE share of common
stock. Given the capital structure of BOE at September 30,
2007 comprised of 1,211,267 shares of common stock
outstanding and options to purchase BOE common stock totaling
29,359 as of the same date, the aggregate merger consideration
approximates $52.0 million. This aggregate merger
consideration equated to multiples for BOE of 177.3% of stated
book value and 179.9% of tangible book value as of
September 30, 2007. The aggregate merger consideration was
17.8x earnings for the most recent twelve month period ended
September 30, 2007 and 17.7% of total assets at
September 30, 2007. In comparison to BOEs core
deposits at September 30, 2007, the premium in excess of
tangible book value as a percentage of such core deposits was
12.0%.
Calculation of Implied Value of the Exchange
Ratio. Feldman Financial calculated the implied
value of the consideration to be received by the stockholders of
BOE based upon changes in the market value of the Community
Bankers common stock. For purposes of this analysis, Feldman
Financial assumed a range of Community Bankers trading prices of
$5.92 to $8.92 per share. In applying this range of trading
prices, the implied value of the merger
62
consideration ranged from $42.50 to $51.09 for each share of BOE
common stock outstanding. The results of this analysis are
summarized in the table below.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBAC Trading Price
|
|
$
|
5.92
|
|
|
$
|
6.22
|
|
|
$
|
6.52
|
|
|
$
|
6.82
|
|
|
$
|
7.12
|
|
|
$
|
7.42
|
|
|
$
|
7.72
|
|
|
$
|
8.02
|
|
|
$
|
8.32
|
|
|
$
|
8.62
|
|
|
$
|
8.92
|
|
Imputed Offer Price
|
|
$
|
42.50
|
|
|
$
|
42.50
|
|
|
$
|
42.50
|
|
|
$
|
42.50
|
|
|
$
|
42.50
|
|
|
$
|
42.50
|
|
|
$
|
44.22
|
|
|
$
|
45.94
|
|
|
$
|
47.65
|
|
|
$
|
49.37
|
|
|
$
|
51.09
|
|
Exchange Ratio
|
|
|
7.1791
|
|
|
|
6.8328
|
|
|
|
6.5184
|
|
|
|
6.2317
|
|
|
|
5.9691
|
|
|
|
5.7278
|
|
|
|
5.7278
|
|
|
|
5.7278
|
|
|
|
5.7278
|
|
|
|
5.7278
|
|
|
|
5.7278
|
|
Deal Value ($ Mil.)
|
|
$
|
52.0
|
|
|
$
|
52.0
|
|
|
$
|
52.0
|
|
|
$
|
52.0
|
|
|
$
|
52.0
|
|
|
$
|
52.0
|
|
|
$
|
54.2
|
|
|
$
|
56.3
|
|
|
$
|
58.4
|
|
|
$
|
60.6
|
|
|
$
|
62.7
|
|
Price/Book
|
|
|
177.27
|
%
|
|
|
177.27
|
%
|
|
|
177.27
|
%
|
|
|
177.27
|
%
|
|
|
177.27
|
%
|
|
|
177.27
|
%
|
|
|
184.54
|
%
|
|
|
191.80
|
%
|
|
|
199.06
|
%
|
|
|
206.33
|
%
|
|
|
213.59
|
%
|
Price/Tang. Book
|
|
|
179.91
|
%
|
|
|
179.91
|
%
|
|
|
179.91
|
%
|
|
|
179.91
|
%
|
|
|
179.91
|
%
|
|
|
179.91
|
%
|
|
|
187.28
|
%
|
|
|
194.65
|
%
|
|
|
202.02
|
%
|
|
|
209.40
|
%
|
|
|
216.77
|
%
|
Price/LTM EPS
|
|
|
17.79
|
|
|
|
17.79
|
|
|
|
17.79
|
|
|
|
17.79
|
|
|
|
17.79
|
|
|
|
17.79
|
|
|
|
18.52
|
|
|
|
19.24
|
|
|
|
19.97
|
|
|
|
20.70
|
|
|
|
21.43
|
|
Comparable Company Analysis. As part of its
analysis, Feldman Financial compared certain financial
performance and market valuation data of BOE and TransCommunity
with corresponding publicly available information for two groups
of comparable community banks comprised of (1) 14 publicly
traded community banks headquartered in the Southeast region
with assets between $150 and $500 million and equity ratios
as a percent of assets in excess of 8.0% (Small
Southeastern Banks) and (2) eight publicly traded
community banks based in Virginia with total assets less than
$500 million (Small Virginia Banks). The
historical financial data used in connection with the ratios
provided below was the latest available as of September 30,
2007 and market price data was as of November 27, 2007. The
results of the comparisons between BOE, TransCommunity and the
median values of the comparative groups are outlined below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small
|
|
|
Small
|
|
|
|
BOE
|
|
|
TransCommunity
|
|
|
Southeastern
|
|
|
Virginia
|
|
|
|
Financial
|
|
|
Financial
|
|
|
Banks
|
|
|
Banks
|
|
|
Total Assets ($ Mil.)
|
|
$
|
294.8
|
|
|
$
|
223.0
|
|
|
$
|
329.0
|
|
|
$
|
319.8
|
|
Equity/Assets
|
|
|
9.96
|
%
|
|
|
13.42
|
%
|
|
|
9.26
|
%
|
|
|
9.26
|
%
|
Tangible Equity/Assets
|
|
|
9.82
|
%
|
|
|
13.42
|
%
|
|
|
9.03
|
%
|
|
|
9.17
|
%
|
Loans/Assets
|
|
|
72.68
|
%
|
|
|
83.74
|
%
|
|
|
77.30
|
|
|
|
79.27
|
%
|
Deposits/Assets
|
|
|
81.76
|
%
|
|
|
86.06
|
%
|
|
|
82.44
|
%
|
|
|
79.57
|
%
|
ROAA
|
|
|
1.03
|
%
|
|
|
(0.32
|
)%
|
|
|
0.78
|
%
|
|
|
0.83
|
%
|
ROAE
|
|
|
10.30
|
%
|
|
|
(2.16
|
)%
|
|
|
7.71
|
%
|
|
|
8.19
|
%
|
NPAs/Assets
|
|
|
0.07
|
%
|
|
|
0.47
|
%
|
|
|
0.58
|
%
|
|
|
0.27
|
%
|
Reserves/NPAs
|
|
|
1,297.09
|
%
|
|
|
255.81
|
%
|
|
|
135.80
|
%
|
|
|
186.35
|
%
|
Market Value ($ Mil.)
|
|
$
|
31.1
|
|
|
$
|
33.7
|
|
|
$
|
36.2
|
|
|
$
|
36.2
|
|
Price/LTM Earnings
|
|
|
10.7
|
x
|
|
|
NMx
|
|
|
|
13.9
|
x
|
|
|
16.5
|
x
|
Price/QTR Annualized Earnings
|
|
|
12.1
|
x
|
|
|
NMx
|
|
|
|
15.6
|
x
|
|
|
15.6
|
x
|
Price/Book Value
|
|
|
105.99
|
%
|
|
|
112.56
|
%
|
|
|
110.58
|
%
|
|
|
113.81
|
%
|
Price/Tangible Book
|
|
|
107.56
|
%
|
|
|
112.56
|
%
|
|
|
111.11
|
%
|
|
|
121.88
|
%
|
Price/Assets
|
|
|
10.55
|
%
|
|
|
15.10
|
%
|
|
|
10.19
|
%
|
|
|
11.44
|
%
|
Comparable Transaction Analysis. Feldman
Financial reviewed publicly available information for announced
acquisitions of financial institutions comprising two comparable
groups. Feldman Financial reviewed nine transactions that were
announced after January 1, 2006 that involved acquisitions
of financial institutions headquartered in Virginia
(Virginia Transactions). In addition, Feldman
Financial reviewed publicly available information for sales of
18 financial institutions operating in rural areas of the
Southeast region having assets less than $400 million
(Non-Urban Transactions). The various offer price
ratios analyzed were based upon information available at the
time of announcement. Feldman Financial compared the median
ratios of price-to-book value, price-to-tangible book value,
price-to-last twelve months earnings, price-to-assets, tangible
book premium-to-core deposits and premium in relation to
previous trading prices as offered in the comparable
transactions to the
63
corresponding ratios offered in the merger to BOE. The analysis
medians of the comparable transactions yielded the ratios shown
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BOE
|
|
|
Virginia
|
|
|
Non-Urban
|
|
|
|
Transaction
|
|
|
Transactions
|
|
|
Transactions
|
|
|
Total Assets ($ Mil.)
|
|
$
|
294.8
|
|
|
$
|
247.4
|
|
|
$
|
86.7
|
|
Tangible Equity/Assets
|
|
|
9.82
|
%
|
|
|
8.71
|
%
|
|
|
13.10
|
%
|
NPAs/Assets
|
|
|
0.07
|
%
|
|
|
0.06
|
%
|
|
|
0.39
|
%
|
ROAA
|
|
|
1.03
|
%
|
|
|
0.66
|
%
|
|
|
0.74
|
%
|
ROAE
|
|
|
10.30
|
%
|
|
|
6.37
|
%
|
|
|
6.33
|
%
|
Deal Value ($ Mil.)
|
|
$
|
52.0
|
|
|
$
|
55.8
|
|
|
$
|
18.1
|
|
Deal Value/Book Value
|
|
|
177.27
|
%
|
|
|
246.03
|
%
|
|
|
166.13
|
%
|
Deal Value/Tangible Book
|
|
|
179.91
|
%
|
|
|
246.12
|
%
|
|
|
166.13
|
%
|
Deal Value/LTM Earnings
|
|
|
17.79
|
x
|
|
|
29.87
|
x
|
|
|
23.68
|
x
|
Deal Value/Assets
|
|
|
17.65
|
%
|
|
|
23.26
|
%
|
|
|
21.92
|
%
|
Premium/Core Deposits
|
|
|
11.96
|
%
|
|
|
22.65
|
%
|
|
|
13.12
|
%
|
Premium/prior day market price
|
|
|
65.50
|
%
|
|
|
33.81
|
%
|
|
|
60.77
|
%
|
The acquisition transaction ratios for BOE were based on
aggregate merger consideration of $52.0 million as of
December 13, 2007, as described in the discussion entitled
Calculation of Implied Value of the Merger
Consideration.
No company or transaction used in the comparable company or
comparable transaction analysis is identical to BOE or the
merger. Accordingly, an analysis of the results involves complex
considerations and judgments concerning differences in financial
and operating characteristics of the various companies as well
as other factors that may affect trading values or announced
merger values of BOE or the comparable companies.
Discounted Dividend Stream and Terminal Value
Analysis. Feldman Financial performed a
discounted cash flow analysis to determine a range of present
values of BOE on an acquisition basis, assuming BOE continued to
operate as an independent company for a five-year period and
sold at the end of the period. This range was determined by
adding (1) the present value of the estimated future
dividend stream that BOE would generate over the five-year
period from 2008 through 2012, and (2) the present value of
the terminal value of BOE at the end of year 2012. The terminal
values of BOE at the end of the period were determined by
applying a range of market valuation ratios representing pricing
ratios in relation to earnings ranging from 20.0x to 25.0x and
pricing ratios in relation to book value ranging from 160% to
260%. The dividend stream and terminal values were discounted to
present values using discount rates from 11% to 15%.
Present
Values Based on Price/Earnings Multiple in Year 5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price/
|
|
|
|
|
Earnings
|
|
|
(Dollars Per Share)
|
|
Multiple
|
|
|
Discount Rate
|
|
|
|
|
|
|
|
11.0
|
%
|
|
|
12.0
|
%
|
|
|
13.0
|
%
|
|
|
14.0
|
%
|
|
|
15.0
|
%
|
|
20.0x
|
|
|
$
|
36.22
|
|
|
$
|
34.65
|
|
|
$
|
33.16
|
|
|
$
|
31.75
|
|
|
$
|
30.41
|
|
|
21.0x
|
|
|
$
|
37.99
|
|
|
$
|
36.34
|
|
|
$
|
34.78
|
|
|
$
|
33.29
|
|
|
$
|
31.89
|
|
|
22.0x
|
|
|
$
|
39.76
|
|
|
$
|
38.03
|
|
|
$
|
36.39
|
|
|
$
|
34.84
|
|
|
$
|
33.37
|
|
|
23.0x
|
|
|
$
|
41.52
|
|
|
$
|
39.72
|
|
|
$
|
38.01
|
|
|
$
|
36.39
|
|
|
$
|
34.85
|
|
|
24.0x
|
|
|
$
|
43.29
|
|
|
$
|
41.41
|
|
|
$
|
39.62
|
|
|
$
|
37.93
|
|
|
$
|
36.33
|
|
|
25.0x
|
|
|
$
|
45.06
|
|
|
$
|
43.10
|
|
|
$
|
41.24
|
|
|
$
|
39.48
|
|
|
$
|
37.81
|
|
64
Present
Values Based on Price/Book Multiple in Year 5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price/
|
|
|
|
|
Earnings
|
|
|
(Dollars Per Share)
|
|
Multiple
|
|
|
Discount Rate
|
|
|
|
|
|
|
|
11.0
|
%
|
|
|
12.0
|
%
|
|
|
13.0
|
%
|
|
|
14.0
|
%
|
|
|
15.0
|
%
|
|
160
|
%
|
|
$
|
35.34
|
|
|
$
|
33.80
|
|
|
$
|
32.35
|
|
|
$
|
30.97
|
|
|
$
|
29.66
|
|
|
180
|
%
|
|
$
|
39.64
|
|
|
$
|
37.92
|
|
|
$
|
36.29
|
|
|
$
|
34.74
|
|
|
$
|
33.27
|
|
|
200
|
%
|
|
$
|
43.95
|
|
|
$
|
42.04
|
|
|
$
|
40.23
|
|
|
$
|
38.51
|
|
|
$
|
36.88
|
|
|
220
|
%
|
|
$
|
48.25
|
|
|
$
|
46.15
|
|
|
$
|
44.16
|
|
|
$
|
42.28
|
|
|
$
|
40.48
|
|
|
240
|
%
|
|
$
|
52.56
|
|
|
$
|
50.27
|
|
|
$
|
48.10
|
|
|
$
|
46.04
|
|
|
$
|
44.09
|
|
|
260
|
%
|
|
$
|
56.87
|
|
|
$
|
54.39
|
|
|
$
|
52.04
|
|
|
$
|
49.81
|
|
|
$
|
47.70
|
|
Pro Forma Merger Analysis. Feldman Financial
performed a pro forma merger analysis that analyzed certain pro
forma effects of the merger with Community Bankers assuming a
simultaneous closing with TransCommunity. Using financial data
as of September 30, 2007 for Community Bankers, BOE and
TransCommunity, the respective managements earnings
estimates for 2008 and an estimated cost savings of 5.0% of the
combined expense base of BOE and TransCommunity, the Feldman
Financial analysis showed that the merger would be accretive to
Community Bankers earnings per share and accretive to Community
Bankers book value per share on a pro forma basis in 2008.
Feldman Financial indicated in its analysis that actual results
achieved in the merger may vary significantly from the pro forma
results.
In performing its analyses, Feldman Financial made numerous
assumptions with respect to industry performance, general
business and economic conditions and other matters, many of
which are beyond the control of BOE, TransCommunity or Community
Bankers. The analyses performed by Feldman Financial are not
necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely
as a part of Feldman Financials evaluation of the fairness
from a financial point of view of the merger consideration and
were conducted in connection with the rendering of Feldman
Financials opinion. As described above, Feldman
Financials opinion and the information provided by Feldman
Financial to the BOE board were among various factors taken into
consideration by the BOE board in making its determination to
approve the merger agreement. The merger consideration was
determined through negotiations between BOE and Community
Bankers, and was approved by the BOE board.
BOEs board of directors retained Feldman Financial to act
as financial advisor to BOE in connection with the merger based
upon Feldman Financials experience and expertise and its
familiarity with transactions similar to the acquisition. As
part of its business, Feldman Financial is regularly engaged in
the valuation of businesses and securities in connection with
mergers and acquisitions, initial public offerings, private
placements, and recapitalizations. Pursuant to a letter
agreement signed November 16, 2007 by and between BOE and
Feldman Financial, BOE has agreed to pay Feldman Financial a
financial advisory fee of $150,000. To date, BOE has paid
Feldman Financial a $10,000 retainer fee and $25,000 in
connection with its issuance of the financial fairness opinion,
and the balance of which is payable upon the closing of the
merger. The letter agreement with Feldman Financial also
provides that BOE will reimburse Feldman Financial for its
reasonable out-of-pocket expenses incurred in connection with
its engagement and indemnify Feldman Financial and any related
parties against certain expenses and liabilities, which may
include certain liabilities under securities laws. Prior to its
engagement on November 16, 2007, Feldman had no prior
professional relationship with BOE, Community Bankers or
TransCommunity.
Merger
Consideration
If you are a BOE stockholder, as a result of the merger, each
share of BOE common stock you own immediately prior to the
completion of the merger will be automatically converted into
the right to receive 5.7278 shares of Community Bankers
common stock (subject to possible adjustment, as further
described below and cash instead of fractional shares.
As of the record date for the BOE special meeting, BOE
had shares
of common stock issued and outstanding
and shares
of common stock subject to options. Based on the exchange ratio
of 5.7278, Community Bankers would issue
approximately shares
of Community Bankers common stock in
65
consideration of the merger, excluding shares subject to BOE
options that are converted to options with respect to Community
Bankers common stock. Accordingly, Community Bankers would have
then issued and outstanding
approximately shares
of Community Bankers common stock based on the number of shares
of Community Bankers common stock issued and outstanding on the
record date for Community Bankers special meeting. Based on the
closing price of Community Bankers common stock of
$
on ,
2008, the total value of the consideration Community Bankers
will pay in the merger to the stockholders of BOE is
approximately $ million.
In the event the average of the daily closing prices of
Community Bankers common stock as reported on the American Stock
Exchange for the 20 consecutive full trading days ending on the
fifth day before the anticipated closing date of the merger is
less than $7.42, the exchange ratio will be increased to equal
the quotient obtained by dividing $42.50 by the average of the
daily closing prices during those 20 consecutive full trading
days, rounded to the nearest one-ten thousandth.
No assurance can be given that the current fair market value
of Community Bankers common stock will be equivalent to the fair
market value of Community Bankers common stock on the date that
stock is received by a BOE stockholder or at any other time. The
fair market value of Community Bankers common stock received by
a BOE stockholder may be greater or less than the current fair
market value of Community Bankers due to numerous market
factors.
Fractional
Shares
No fractional shares of Community Bankers common stock will be
issued to any holder of BOE common stock in the merger. Each
holder of shares of BOE common stock exchanged pursuant to the
merger who would otherwise have been entitled to receive a
fraction of a share of Community Bankers common stock (after
taking into account all certificates delivered by such holder)
shall receive, instead of such fraction of a share, cash
(without interest) in an amount equal to such fractional part of
a share of Community Bankers common stock multiplied by the
market value of one share of Community Bankers common stock at
the effective time of the merger. The market value of one share
of Community Bankers common stock at the effective time of the
merger will be the closing price on the American Stock Exchange
(as reported by The Wall Street Journal or, if not
reported thereby, any other authoritative source selected by
Community Bankers) on the last trading day preceding the
effective time of the merger.
Treatment
of Options
Upon completion of the merger, each award, option, or other
right to purchase or acquire shares of BOE common stock pursuant
to stock options, stock appreciation rights, or stock awards
granted by BOE under BOEs stock incentive plans, equity
compensation plans and stock option plans, which are outstanding
immediately prior to the merger, whether or not exercisable,
will be converted into and become rights with respect to
Community Bankers common stock, and Community Bankers will
assume each right, in accordance with the terms of the relevant
BOE stock plan and stock option agreement. Each of BOEs
options has vested and is exercisable and will remain vested and
exercisable upon completion of the merger with BOE. Community
Bankers and BOE anticipate that the fair value of the old
options and the fair value of the new options will be the same
because the number of shares which are subject to exercise under
the predecessor BOE stock options will be converted into a
number of shares under the Community Bankers stock options based
on the same conversion ratio used to convert BOE stock into
Community Bankers stock pursuant to the merger.
Upon completion of the merger, each award, option, or other
right to purchase or acquire shares of TransCommunity common
stock pursuant to stock options, stock appreciation rights, or
stock awards granted by TransCommunity under
TransCommunitys stock incentive plans, equity compensation
plans and stock option plans, which are outstanding immediately
prior to the merger, whether or not exercisable, will be
converted into and become rights with respect to Community
Bankers common stock, and Community Bankers will assume each
right, in accordance with the terms of the relevant
TransCommunity stock plan and stock option agreement. Each of
TransCommunitys stock options will vest and become
immediately exercisable upon completion of the merger, as the
merger constitutes a change in control under
TransCommunitys stock plan. Community Bankers and
TransCommunity anticipate that the fair value of the old options
and the fair value of the new options will be
66
the same because the number of shares which are subject to
exercise under the predecessor TransCommunity stock options will
be converted into a number of shares under the Community Bankers
stock options based on the same conversion ratio used to convert
TransCommunity stock into Community Bankers stock pursuant to
the merger. Additionally, each outstanding share of
TransCommunity restricted stock under any of
TransCommunitys stock plans shall vest pursuant to its
terms and shall be converted into and become rights with respect
to Community Bankers common stock.
Exchange
of Certificates
As soon as reasonably practicable after the effective time of
the merger, Community Bankers will mail appropriate transmittal
materials to each record holder of BOE common stock for use in
effecting the surrender and cancellation of those certificates
in exchange for Community Bankers common stock. Risk of loss and
title to the certificates will remain with the holder until
proper delivery of such certificates to Community Bankers by
BOEs stockholders. BOEs stockholders should not
surrender their certificates for exchange until they receive a
letter of transmittal and instructions from Community
Bankers. After the effective time of the merger, each holder
of shares of BOE common stock issued and outstanding at the
effective time must surrender the certificate or certificates
representing their shares of BOE common stock to Community
Bankers and will, as soon as reasonably practicable after
surrender, receive the consideration they are entitled to under
the merger agreement, together with all undelivered dividends or
distributions in respect of such shares (without interest).
Community Bankers will not be obligated to deliver the
consideration to which any former holder of BOE common stock is
entitled until the holder surrenders the certificate or
certificates representing his or her shares for exchange. The
certificate or certificates so surrendered must be duly endorsed
as Community Bankers may require. Community Bankers will not be
liable to a holder of BOE common stock for any property
delivered in good faith to a public official pursuant to any
applicable abandoned property law.
After the effective time of the merger (and prior to the
surrender of certificates of BOE common stock to Community
Bankers), record holders of certificates that represented
outstanding BOE common stock immediately prior to the effective
time of the merger will have no rights with respect to the
certificates for BOE common stock other than the right to
surrender the certificates and receive the merger consideration
in exchange for the certificates.
In the event that any dividend or distribution, the record date
for which is on or after the effective time of the merger, is
declared by Community Bankers on Community Bankers common stock,
no such dividend or other distributions will be delivered to the
holder of a certificate representing shares of BOE common stock
immediately prior to the effective time of the merger until such
holder surrenders such certificate as set forth above.
In addition, holders of certificates that represent outstanding
BOE common stock immediately prior to the effective time of the
merger will be entitled to vote after the effective time of the
merger at any meeting of Community Bankers stockholders the
number of whole shares of Community Bankers common stock into
which such shares have been converted, even if such holder has
not surrendered such certificates for exchange as described
above.
Community Bankers stockholders will not be required to exchange
certificates representing their shares of Community Bankers
common stock or otherwise take any action after the merger is
completed.
Expected
Tax Treatment as a Result of the Merger
Community Bankers and BOE have not and do not intend to seek a
ruling from the Internal Revenue Service, or IRS, as to the
federal income tax consequences of the merger. The following
discussion describes the anticipated tax consequences of the
merger, but does not address, among other matters:
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state, local, or foreign tax consequences of the merger;
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federal income tax consequences to BOE stockholders who are
subject to special rules under the Internal Revenue Code, such
as foreign persons, tax-exempt organizations, insurance
companies, financial institutions, dealers in stocks and
securities, and persons who hold their stock as part of a
straddle or conversion transaction;
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67
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federal income tax consequences affecting shares of BOE common
stock acquired upon the exercise of stock options, stock
purchase plan rights, or otherwise as compensation;
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the tax consequences to holders of options to acquire shares of
BOE common stock; and
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the tax consequences to Community Bankers and BOE of any income
and deferred gain recognized pursuant to Treasury Regulations
issued under Section 1502 of the Internal Revenue Code.
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Assuming that the merger is consummated in accordance with the
merger agreement, it is anticipated that the following federal
income tax consequences will occur:
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the merger will constitute a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code;
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no gain or loss will be recognized by Community Bankers or BOE
as a result of the merger;
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no gain or loss will be recognized by the stockholders of BOE as
a result of the exchange of all of the shares of BOE common
stock that they own for Community Bankers common stock pursuant
to the merger, except that gain or loss will be recognized on
the receipt of any cash instead of a fractional share;
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the tax basis of Community Bankers common stock to be received
by the BOE stockholders, who exchange all of their BOE common
stock for Community Bankers common stock in the merger, will be
the same as the tax basis of the BOE common stock surrendered in
exchange therefore (reduced by any amount allocable to a
fractional share interest for which cash is received);
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the holding period of the Community Bankers common stock to be
received by BOE stockholders, who exchange all of their BOE
common stock for Community Bankers common stock in the merger
(and cash received instead of fractional shares of Community
Bankers common stock), will include the holding period of the
BOE common stock surrendered in exchange therefore, provided the
BOE shares were held as a capital asset by the BOE stockholders
on the date of the exchange; and
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the payment of cash to BOE stockholders instead of fractional
share interests of Community Bankers common stock will be
treated for federal income tax purposes as if the fractional
shares were distributed as part of the exchange and then were
redeemed by Community Bankers. These cash payments will be
treated as having been received as distributions in full payment
in exchange for the Community Bankers common stock redeemed, as
provided in Section 302 of the Internal Revenue Code.
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The obligation of Community Bankers and BOE to complete the
merger is conditioned on, among other things, receipt by
Community Bankers of an opinion of Nelson Mullins
Riley & Scarborough LLP and receipt by BOE of an
opinion of LeClairRyan, A Professional Corporation, with respect
to certain of the federal income tax consequences of the merger.
The conditions relating to receipt of the tax opinion may be
waived by both Community Bankers and BOE. Neither Community
Bankers nor BOE currently intends to waive the conditions
relating to the receipt of the tax opinion. If the conditions
relating to the receipt of the tax opinion were waived and the
material federal income tax consequences of the merger were
substantially different from those described in this joint proxy
statement/prospectus, Community Bankers and BOE would resolicit
the approval of its stockholders prior to completing the merger.
Tax consequences of the merger may vary depending upon the
particular circumstances of each BOE stockholder. Accordingly,
BOE stockholders are urged to consult their own tax advisors as
to the specific tax consequences to them of the merger,
including the applicability and effect of state, local, and
foreign tax laws.
Certain
Benefits of Directors and Officers of Community Bankers and
BOE
General. Some of the officers and directors of
Community Bankers and BOE may be deemed to have interests in the
merger in addition to their interests as stockholders of BOE
generally. These interests include, among others, proposed
employee benefits for those who become employees of Community
Bankers or a Community Bankers subsidiary after the merger,
proposed employment agreements with two of BOEs current
executive officers and one of Community Bankers executive
officers, the appointment of six current BOE directors to the
board of directors of Community Bankers and the continuation of
two directors of Community Bankers as
68
directors of Community Bankers after the merger, the appointment
of six directors designated by BOE and two directors designated
by Community Bankers to the board of directors of the surviving
bank and insurance coverage for BOEs directors and
officers, as described below.
Employee Benefits. Following the merger
Community Bankers will provide generally to officers and
employees of BOE and Bank of Essex employee benefits under
benefit and welfare plans, other than stock plans, on terms and
conditions which when taken as a whole are comparable to or
better than those then provided by BOE or Bank of Essex to
similarly situated officers and employees. For purposes of
participation, vesting and benefit accrual under Community
Bankers employee benefit plans, service with BOE prior to
the effective time of the merger will be treated as service with
Community Bankers or its subsidiaries.
Director Retention Agreements. In connection
with the merger, each of the current directors of BOE has
entered into a retention agreement with Community Bankers.
Employment Agreements. Prior to the completion
of the merger, Community Bankers will enter into employment
agreements with each of George M. Longest, Jr. and Bruce E.
Thomas. Mr. Longest will become president of the surviving
corporation and, commencing on January 1, 2010, will also
become chief executive officer of the surviving corporation.
Mr. Thomas will become chief financial officer of the
surviving corporation. The term of their employment agreements
is for three years after the merger date. On each anniversary of
the merger date, upon the review and approval of the board of
directors, the terms of the agreements will be extended by an
additional year unless the surviving corporation or the employee
gives written notice at least 30 days prior to an
anniversary date that no further extensions should occur. The
employment agreements provide for the payment of two months
salary if the employee dies. In the case of termination by the
surviving corporation without cause or by the employee for good
reason, the agreements require that the employee receive his
base salary and certain health benefits for 24 months
following the date of termination. The agreements also provide
that within two years following a change in control, if
employment is terminated by the surviving corporation without
cause or by the employee for good reason within 120 days
after the occurrence of good reason, the employee will be
entitled to accrued obligations, a salary continuance benefit
equal to 2.99 times the employees final compensation and
health care continuance. The employment agreements impose
certain limitations on each employee, precluding the employee
from soliciting the surviving corporations or surviving
banks employees and customers and, without prior written
consent of the surviving corporation, competing with the
surviving corporation or the surviving bank by forming, serving
as an organizer, director, officer or consultant to, or
maintaining more than one percent passive investment in a
depository financial institution or holding company if such
entity has one or more offices or branches located within a
10-mile
radius of the headquarters or any branch banking office of the
surviving corporation or surviving bank. This limitation will be
for a period of two years from the date on which the employee
ceased to be an employee of the surviving corporation except
that in the case of a termination without cause or for good
reason following a change in control, the non-compete and
customer solicitation restrictions will be in force for only one
year.
Directors. Community Bankers has agreed to
expand the board of directors to 14 members and appoint six
directors selected by BOE to its board of directors as soon as
practicable following the effective time of the merger. BOE will
also nominate six directors and Community Bankers will nominate
two directors to the board of the surviving bank following the
merger. For more information, see The Merger
Management and Operations After the Merger.
Indemnification and Insurance. For six years
following the merger, Community Bankers will generally provide
indemnification to the present directors and officers of BOE and
Bank of Essex against all liabilities arising out of actions or
omissions arising out of their service or services as directors
and officers of BOE and Bank of Essex. In addition, Community
Bankers has agreed to use its reasonable efforts to maintain in
effect for a period of up to three years after the effective
time of the merger BOEs current policy for directors and
officers, provided that Community Bankers may
(1) substitute policies of substantially the same coverage
and amounts containing terms and conditions which are
substantially no less advantageous as BOEs current policy
for directors and officers or (2), with the consent of BOE prior
to the effective time of the merger, substitute any other policy
with respect to claims arising from facts or events which
occurred prior to the effective time of the merger and covering
persons covered by such insurance on the date of the merger
agreement. Community Bankers has agreed to make premium
69
payments in an amount not to exceed $114,480 during the
three-year period. If the amount of premiums necessary to
maintain directors and officers insurance coverage
exceeds $114,480, Community Bankers will use its reasonable
efforts to maintain the most advantageous policies of
directors and officers liability insurance
obtainable for a premium equal to $114,480 but is not obligated
to maintain coverage to the extent the cost of such coverage
exceeds that amount.
Stock Options. Certain of the directors and
executive officers of BOE hold stock options granted to them
under BOEs option plans. BOE has two stock option plans:
the BOE Stock Incentive Plan for employees and the BOE Stock
Option Plan for Outside Directors. Upon completion of the
merger, each option to purchase or acquire shares of BOE common
stock granted by BOE under BOEs stock option plans, which
are outstanding immediately prior to the merger, whether or not
exercisable, will be converted into and become rights with
respect to Community Bankers common stock, and Community Bankers
will assume each right, in accordance with the terms of the
relevant BOE stock option plan and stock option agreement. The
number of shares of Community Bankers common stock for which
each option will be exercisable will be equal to the number of
shares of BOE common stock for which such option was exercisable
multiplied by the exchange ratio. The per share exercise price
of Community Bankers common stock at which the option will be
exercisable will be determined by dividing the exercise price
per share of BOE common stock at which the option was
exercisable by the exchange ratio and rounding up to the nearest
cent.
At September 30, 2007, options to acquire
29,359 shares were outstanding, of which 29,359 were
exercisable at that date.
The table below sets forth, as of January 28, 2008,
information with respect to options under the various BOE stock
option plans held by each of BOEs current directors and
officers. All of the stock options are fully vested.
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Number of
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Name(1)
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Options Held
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George M. Longest, Jr.
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2,129
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Bruce E. Thomas
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831
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K. Wayne Aylor
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0
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Terrell D. Vaughan
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1,192
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R. Tyler Bland, III
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260
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L. McCauley Chenault
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470
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Alexander F. Dillard, Jr.
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520
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George B. Elliott
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470
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Frances H. Ellis
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380
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Page Emerson Hughes, Jr.
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150
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Philip T. Minor
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600
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L. Edelyn Dawson
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0
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(1) |
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The table sets forth the aggregate total number of options
granted by BOE to the individuals listed. Each of the
individuals received multiple option grants from BOE, at various
exercise prices depending on the date of the grant. The exercise
prices for the option grants range from $12.25 per share to
$28.70 per share. |
Management
and Operations After the Merger
At the completion of the merger, the board of directors,
executive officers and significant employees of Community
Bankers will be as set forth below.
The board of directors will be comprised of 14 members,
including six directors to be nominated by BOE, two directors
nominated by Community Bankers, and six directors nominated by
TransCommunity. Alexander F. Dillard, Jr. the current
chairman of the board of BOE, would be chairman of the surviving
corporation, with Troy A. Peery, Jr. the current chairman
of the board of TransCommunity, and Gary A. Simanson, the
current president and chief executive officer of Community
Bankers, each serving as vice chairman. Chris A. Bagley and
Keith Walz would resign as members of the board of directors of
Community Bankers after consummation of the merger with BOE.
70
Following the merger with BOE, the president and chief executive
officer of TransCommunity, Bruce B. Nolte, would become the
chief executive officer of the surviving corporation through
December 31, 2009. The president and chief executive
officer of BOE, George M. Longest, Jr., would become the
president of the surviving corporation and chief executive
officer of the surviving bank and, commencing on January 1,
2010, would become president and chief executive officer of the
surviving corporation and would remain the chief executive
officer of the surviving bank. The current chief financial
officer of BOE, Bruce E. Thomas, would become the chief
financial officer of the surviving corporation and the surviving
bank. The current chief financial officer of TransCommunity,
Patrick J. Tewell, would become the chief accounting officer of
the surviving bank. Gary A. Simanson would serve as chief
strategic officer of the surviving corporation.
The following table sets forth the board of directors, executive
officers and significant employees following the completion of
the merger with BOE. The directors noted in the following table
as TransCommunity directors, will be appointed to the Community
Bankers board of directors upon completion of the merger
with TransCommunity.
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Name
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Age
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Original Entity
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Position
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Bruce B. Nolte
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61
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TransCommunity
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Chief Executive Officer through December 31, 2009 and Director
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George M. Longest, Jr.
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47
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BOE
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President, Chief Executive Officer after December 31, 2009,
Director
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Bruce E. Thomas
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44
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BOE
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Chief Financial Officer
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Patrick J. Tewell
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43
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TransCommunity
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Chief Accounting Officer
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Gary A. Simanson
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47
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Community Bankers
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Chief Strategic Officer and Vice Chairman
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Alexander F. Dillard, Jr.
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69
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BOE
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Chairman
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Troy A. Peery, Jr.
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61
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TransCommunity
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Vice Chairman
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Richard F. Bozard
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60
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TransCommunity
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Director
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L. McCauley Chenault
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56
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BOE
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Director
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George B. Elliot
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73
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BOE
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Director
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Page Emerson Hughes, Jr.
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64
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BOE
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Director
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Christopher G. Miller
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48
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TransCommunity
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Director
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Philip T. Minor
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73
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BOE
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Director
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Eugene S. Putnam, Jr.
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48
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Community Bankers
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Director
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Robin Traywick Williams
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57
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TransCommunity
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Director
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Jack C. Zoeller
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58
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TransCommunity
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Director
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Mr. Simanson is currently president, chief executive
officer and director of Community Bankers, and Mr. Putnam
is currently a director of Community Bankers. For more
information see Information About Community Bankers
Acquisition Corp. Current Directors.
Messrs. Longest and Thomas are currently the chief
executive officer and chief financial officer, respectively, of
BOE. Messrs. Longest, Dillard, Chenault, Elliott, Hughes
and Minor are currently directors of BOE. For more information
see Information about BOE Directors and
Executive Officers.
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Certain information regarding TransCommunitys executive
officers and directors who will become executive officers and
directors of Community Bankers following the merger with
TransCommunity is set forth below:
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Name
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Principal Occupation During Past Five Years
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Bruce B. Nolte
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Chief Executive Officer and President, TransCommunity since
January 1, 2006; President, TransCommunity since May 1, 2001.
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Patrick J. Tewell
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Chief Financial Officer since March 12, 2007; Senior
Financial/IT Auditor of the Federal Reserve Bank, Richmond,
Virginia, from 2004 to 2007; Vice President and Controller,
Hanover Bank, from 2002 to 2004; and Vice President and
Controller, Commerce Bank, from 2000 to 2002.
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Troy A. Peery, Jr.
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Chairman of the Board of TransCommunity since January 1, 2006;
President, Peery Enterprises (real estate development),
Manakin-Sabot, Virginia, since October 1998.
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Richard F. Bozard
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Vice President and Treasurer, Owens & Minor, Inc. (medical
and surgical supplies distributor), Mechanicsville, Virginia,
since 1991; Senior Vice President and Treasurer of Owens &
Minor Medical, Inc., a subsidiary of Owens & Minor, since
2004.
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Robin Traywick Williams
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Chairman, Virginia Racing Commission, Richmond, Virginia, from
1998 to 2003; Chief of Staff, Lieutenant Governor of Virginia,
during 2001; Director, Bank of Goochland, N.A., Goochland,
Virginia
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Christopher G. Miller
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Chief Financial Officer, Bio-Star Ventures (manager of
biotechnology funds), InteliTap LLC, CodeBlue Solutions, LLC,
and MileFile, LLC, since 2007. Chief Financial Officer, Star
Scientific Inc. (tobacco company), Chester, Virginia, from 2000
to 2007; Chief Executive Officer, The Special Opportunities
Group LLC (technology venture capital fund), since 1999.
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Jack C. Zoeller
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Visiting Research Professor, George Washington University, since
2005; President and Chief Executive Officer, AtlantiCare Risk
Management Corp., Vienna, Virginia and Barbados, 1995 to 2005;
President and Chief Executive Officer, North American Health
& Life Insurance Co., since 1996.
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Community Bankers believes that Messrs. Peery, Putnam,
Bozard, Miller, Zoeller, Elliott, Hughes and Minor and
Ms. Williams are independent as that term is
defined under the rules of the American Stock Exchange and the
rules and regulations of the SEC. After the consummation of the
merger, the board of directors of Community Bankers will make a
formal determination with respect to the independence of each of
its directors.
Following the merger of TransCommunity Bank and Bank of Essex,
the board of directors of the surviving bank will be comprised
of fourteen directors: two nominated by Community Bankers, six
nominated by TransCommunity and six nominated by BOE. George M.
Longest, Jr. will become the chief executive officer of the
surviving bank, Bruce E. Thomas will become the chief financial
officer of the surviving bank, Patrick J. Tewell will become the
chief accounting officer of the surviving bank and M. Andrew
McLean, the current president of TransCommunity Bank, will
become president of the surviving bank.