SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _________TO_________
Commission File Number 33-76644
COMMUNITYCORP
(Exact name of registrant as specified in its charter)
South Carolina 57-1019001
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1100 N. JEFFERIES BOULEVARD
WALTERBORO, SC 29488
(Address of principal executive
offices, including zip code)
(843) 549-2265
(Registrant's telephone number, including area code)
------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the date of this filing.
300,000 SHARES OF COMMON STOCK, $5.00 PAR VALUE
PAGE 1 OF 14
EXHIBIT INDEX ON PAGE 2
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COMMUNITYCORP
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements (Unaudited)
<S> <C>
Condensed Consolidated Balance Sheets - September 30, 1998 and December 31, 1997...................3
Condensed Consolidated Statements of Income - Nine months ended September 30, 1998 and 1997
and Three months ended September 30, 1998 and 1997.................................................4
Condensed Consolidated Statement of Shareholders' Equity - Nine months ended September 30, 1998....5
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1998 and 1997.......................................................................6
Notes to Condensed Consolidated Financial Statements.............................................7-8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...........8-13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................................................................13
(a) Exhibits.........................................................................................13
(b) Reports on Form 8-K..............................................................................13
</TABLE>
2
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<TABLE>
<CAPTION>
COMMUNITYCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- --------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents:
Cash and due from banks $ 3,606,025 $ 2,602,260
Federal funds sold & repurchase agreements 8,630,000 3,130,000
------------- -------------
12,236,025 5,732,260
Securities available-for-sale 10,235,069 9,394,736
Securities held-to-maturity (estimated market value
of $3,808,733 and $6,343,032 at September 30, 1998
and December 31, 1997, respectively) 3,747,976 6,301,318
Loans receivable 48,185,800 41,357,114
Less allowance for loan losses (836,554) (743,260)
------------- ----------------
Loans, net 47,349,246 40,613,854
Accrued interest receivable 680,563 726,318
Premises, furniture & equipment, net 1,933,816 1,999,055
Other assets 316,361 307,321
------------- -------------
Total assets $ 76,499,056 $ 65,074,862
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits:
Non-interest bearing $ 7,163,440 $ 6,063,801
Interest bearing 60,528,500 50,879,287
------------- -------------
67,691,940 56,943,088
Short-term borrowings 390,000 480,000
Accrued interest payable 416,215 342,661
Other liabilities 112,126 75,553
------------- -------------
Total liabilities 68,610,281 57,841,302
------------- -------------
SHAREHOLDERS' EQUITY:
Preferred stock, $5 par value, 3,000,000 shares authorized and unissued- Common
stock, $5 par value, 3,000,000 shares
authorized, 300,000 shares issued and outstanding 1,500,000 1,500,000
Capital surplus 1,731,708 1,731,708
Accumulated other comprehensive income 64,290 38,431
Retained earnings 4,620,188 3,991,832
Treasury stock (1,543 shares in 1998 and 1,083 shares in 1997) (27,411) (28,411)
----------- -------------
Total shareholders' equity 7,888,775 7,233,560
------------- -------------
Total liabilities and shareholders' equity $ 76,499,056 $ 65,074,862
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
COMMUNITYCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months Ended Three Months Ended
September 30, September 30,
----------------------------------------------------------
1998 1997 1998 1997
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $ 3,236,096 $ 2,597,864 $ 1,147,999 $ 909,748
Securities 616,975 754,508 191,633 245,122
Other interest income 327,189 165,710 163,774 76,715
------------- ------------- ------------- -------------
Total 4,180,260 3,518,082 1,503,406 1,231,585
------------- ------------- ------------- -------------
Interest expense:
Deposit accounts 1,922,301 1,572,524 705,634 537,069
Other interest expense 14,918 12,415 4,616 9,363
------------- ------------- ------------- -------------
1,937,219 1,584,939 710,250 546,432
------------- ------------- ------------- -------------
Net interest income 2,243,041 1,933,143 793,156 685,153
Provision for loan losses 170,000 105,000 90,000 40,000
------------- ------------- ------------- -------------
Net interest income after
provision for loan losses 2,073,041 1,828,143 703,156 645,153
------------- ------------- ------------- -------------
Other operating income:
Service charges 223,068 174,208 81,654 57,205
Other income 23,519 14,970 6,155 3,193
------------- ------------- ------------- -------------
Total 246,587 189,178 87,809 60,398
------------- ------------- ------------- -------------
Other operating expenses:
Salaries and benefits 606,081 414,944 204,692 145,931
Net occupancy expense 89,504 60,002 30,536 22,464
Equipment expense 171,892 132,605 59,786 47,758
Other operating expenses 377,706 319,914 122,646 106,270
------------- ------------- ------------- -------------
Total 1,245,183 927,465 417,660 322,423
------------- ------------- ------------- -------------
Income before taxes 1,074,445 1,089,856 373,305 383,128
Income tax provision 353,580 364,500 126,040 127,000
------------- ------------- ------------- -------------
Net income 720,865 725,356 247,265 256,128
============= ============= ============= =============
Other comprehensive income,
net of tax:
Unrealized gains (losses)
on securities
during the period 25,859 (17,025) 22,725 35,271
------------- ------------- ------------- -------------
Other comprehensive income 25,859 (17,025) 22,725 35,271
------------- ------------- ------------- -------------
Comprehensive income $ 746,724 $ 708,331 $ 269,990 $ 291,399
============= ============= ============= =============
Earnings per share:
Weighted average common sharea
4
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C>
outstanding 298,669 298,723 298,686 298,648
============= ============= ============= =============
Net income per common share $ 2.41 $ 2.43 $ 0.83 $ 0.86
============= ============= ============= =============
</TABLE>
See notes to condensed consolidated financial statements.
COMMUNITYCORP
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Accumulated Other Total
------------------ Capital Comprehensive Retained Treasury Shareholders'
Shares Amount Surplus Income Earnings Stock Equity
------ ------ ------- ------------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1997 300,000 $1,500,000 $1,731,708 $ 38,431 $3,991,832 $ (28,411) $7,233,560
Cash dividends declared
- $.31 per share (92,509) (92,509)
Other comprehensive
income 25,859 25,859
Sale of treasury stock 1,000 1,000
Net income
for the period 720,865 720,865
-------- ---------- ----------- ---------- ---------- ---------- ----------
Balance,
September 30, 1998 300,000 $1,500,000 $1,731,708 $ 64,290 $4,620,188 $ (27,411) $7,888,775
========= ========== ========== ========== ========== ========= ==========
</TABLE>
5
<PAGE>
See notes to condensed consolidated financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
COMMUNITYCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
1998 1997
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 720,865 $ 725,356
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 137,967 124,600
Provision for possible loan losses 170,000 105,000
Amortization less accretion on investments (5,297) 19,702
Amortization of deferred loan costs 20,594 28,035
(Increase) decrease in interest receivable and other assets (34,024) 44,222
Increase (decrease) in interest payable and other liabilities 167,231 75,707
-------- -------------
Net cash provided by operating activities 1,177,336 1,122,622
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans to customers (6,925,986) (3,119,178)
Purchases of securities available-for-sale (5,999,349) (2,217,357)
Maturities of securities available-for-sale 5,208,505 2,790,354
Purchases of securities held-to-maturity (409,571) (99,709)
Maturities of securities held-to-maturity 2,958,215 535,895
Purchases of premises and equipment (74,155) (719,699)
Disposal of premises and equipment 1,427 6,313
------------- -------------
Net cash used by investing activities (5,240,914) (2,823,381)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits accounts 10,748,852 3,689,485
Increase (decrease) in short-term borrowings (90,000) 610,000
Sale (purchase) of treasury stock 1,000 (10,000)
Dividends paid (92,509) (83,696)
------------- -------------
Net cash provided by financing activities 10,567,343 4,205,789
------------- -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 6,503,765 2,505,030
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,732,260 3,022,087
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 12,236,025 $ 5,527,117
============= =============
Cash paid during the period for:
Income taxes $ 457,301 $ 427,024
Interest $ 1,863,665 $ 1,529,009
</TABLE>
7
<PAGE>
See notes to condensed consolidated financial statements.
8
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COMMUNITYCORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with the requirements for interim financial statements and,
accordingly, they are condensed and omit disclosures which would substantially
duplicate those contained in the most recent annual report to shareholders. The
financial statements as of September 30, 1998 and for the interim periods ended
September 30, 1998 and 1997 are unaudited and, in the opinion of management,
include all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation. The financial information as of December 31,
1997 has been derived from the audited financial statements as of that date. For
further information, refer to the financial statements and the notes included in
Communitycorp's 1997 Annual Report.
NOTE 2 - ADOPTION OF ACCOUNTING PRINCIPLE
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130), "Reporting Comprehensive Income." SFAS 130
establishes standards for reporting comprehensive income. Comprehensive income
includes net income and other comprehensive income which is defined as non-owner
related transactions in equity. Prior periods have been reclassified to reflect
the application of the provisions of SFAS 130. The following table sets forth
the amounts of other comprehensive income included in equity along with the
related tax effect for the nine months ended September 30, 1998 and 1997 and for
the three months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Pre-tax (Expense) Net of tax
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998: Amount Benefit Amount
------------- ---------- -----------
<S> <C> <C> <C>
Net unrealized gains (losses) on securities
available for sale arising in 1998 $ 39,494 $ (13,635) $ 25,859
------------- ------------- -----------
Other comprehensive income $ 39,494 $ (13,635) $ 25,859
============= ============= ===========
Pre-tax (Expense) Net of tax
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997: Amount Benefit Amount
------------- ---------- -----------
Net unrealized gains (losses) on securities
available for sale arising in 1997 $ (26,011) $ 8,986 $ (17,025)
------------- ------------- -----------
Other comprehensive income $ (26,011) $ 8,986 $ (17,025)
============= ============= ===========
Pre-tax (Expense) Net of tax
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998: Amount Benefit Amount
------------- ---------- -----------
Net unrealized gains (losses) on securities
available for sale arising in 1998 $ 34,694 $ (11,969) $ 22,725
------------- ------------- -----------
Other comprehensive income $ 34,694 $ (11,969) $ 22,725
============= ============= ===========
9
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<CAPTION>
COMMUNITYCORP
NOTE 2 - ADOPTION OF ACCOUNTING PRINCIPLE -- continued
Pre-tax (Expense) Net of tax
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997: Amount Benefit Amount
Net unrealized gains (losses) on securities
<S> <C> <C> <C>
available for sale arising in 1997 $ 53,850 $ (18,579) $ 35,271
------------ ------------- -----------
Other comprehensive income $ 53,850 $ (18,579) $ 35,271
============= ============= ===========
</TABLE>
Accumulated other comprehensive income consists solely of the unrealized gain
(losses) on securities available for sale, net of the deferred tax effects.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following is a discussion of the Company's financial condition as of
September 30, 1998 compared to December 31, 1997, and the results of operations
for the three and nine months ended September 30, 1998 compared to the three and
nine months ended September 30, 1997. These comments should be read in
conjunction with the Company's condensed consolidated financial statements and
accompanying footnotes appearing in this report.
RESULTS OF OPERATIONS
NET INTEREST INCOME
For the nine months ended September 30, 1998, net interest income increased
$309,898 or 16.03% over the same period in 1997. The net interest margin
realized on earning assets decreased slightly from 4.58% for the nine months
ended September 30, 1997 to 4.54% for the same period in 1998. Yields on earning
assets increased slightly as a result of growth in loans while the increase in
interest rates of deposits resulted in higher yields on interest bearing
liabilities. The interest rate spread decreased by 1 basis point from 3.83% at
September 30, 1997 to 3.82% at September 30, 1998.
Net interest income increased from $685,153 for the quarter ending September 30,
1997 to $793,156 for the quarter ending September 30, 1998. This represents an
increase of $108,003 or 15.76%. The net interest margin realized on earning
assets decreased from 4.70% for the quarter ended September 30, 1997 to 4.48%
for the quarter ended September 30, 1998. The interest rate spread also
decreased by 6 basis points from 3.93% at September 30, 1997 to 3.87% at
September 30, 1998.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses is the charge to operating earnings that
management feels is necessary to maintain the allowance for possible loan losses
at an adequate level. For the nine months ended September 30, 1998, the
provision charged to expense was $170,000. The increase of $65,000 from the
comparable period in 1997 is a result of management's efforts to increase the
allowance for loan losses to correspond with the growth in the loan portfolio.
For the quarter ended September 30, 1998 and 1997, the provision charged to
expense was $90,000 and 40,000, respectively. Based on present information,
management believes the allowance for loan losses is adequate at September 30,
1998 to meet presently known and inherent risks in the loan portfolio.
10
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COMMUNITYCORP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -- continued
NON-INTEREST INCOME
Non-interest income during the nine months ended September 30, 1998 was
$246,587, an increase of $57,409 or 30.35% from the comparable period in 1997.
The increase is primarily a result of an increase in service charges from
$174,208 to $223,068 for the nine months ended September 30, 1998. Overdraft and
NSF fees increased by $26,597 to $147,688 for the nine months ended September
30, 1998. This change is a result of the increase in deposit accounts over the
two periods. Deposits at September 30, 1997 were $53,754,683 compared to
$67,691,940 at September 30, 1998.
For the quarter ended September 30, 1998, non-interest income increased $27,411
or 45.38% over the same period in 1997. This increase is primarily due to an
increase in service charges which increased $24,359 or 42.58% from the quarter
ended September 30, 1997 to the quarter ended September 30, 1998.
NON-INTEREST EXPENSE
Total non-interest expense for the nine months ended September 30, 1998 was
$1,245,183 or 34.26% higher than the nine months ended September 30, 1997.
Salaries and employee benefits increased from $414,944 at September 30, 1997 to
$606,081 for the nine months ended September 30, 1998. This increase is due to
annual pay raises and salaries for the staff of the Ravenel branch that opened
in October 1997.
For the quarter ended September 30, 1998, non-interest expense increased $95,237
or 29.54% over the same period in 1997. The largest increase between the quarter
ended September 30, 1998 and the quarter ended September 30, 1997 was in
salaries and benefits which increased $58,761 or 40.27%. As mentioned above,
1998 included salaries for the Ravenel branch that did not exist in 1997.
INCOME TAXES
The income tax provision for the nine months ended September 30, 1998 was
$353,580 as compared to $364,500 for the same period in 1997. The effective tax
rates were 32.91% and 33.44% at September 30, 1998 and 1997, respectively. The
effective tax rates were 33.76% and 33.15% for the quarter ended September 30,
1998 and September 30, 1997, respectively.
NET INCOME
The combination of the above factors resulted in net income for the nine months
ended September 30, 1998 of $720,865 as compared to $725,356 for the same period
in 1997. This represents an decrease of $4,491 or 0.62% over the same period in
1997. For the quarter ended September 30, 1998, net income was $247,265 as
compared to $256,128 for the quarter ended September 30, 1997. This represents
an decrease of $8,863 or 3.46% from the quarter ending September 30, 1998 as
compared to the quarter ending September 30, 1997.
ASSETS AND LIABILITIES
During the first nine months of 1998, total assets increased $11,424,194 or
17.56% when compared to December 31, 1997. The primary reason for the increase
in assets was due to an increase in gross loans which increased $6,828,686 or
16.51% from December 31, 1997 to September 30, 1998. Total deposits increased
$10,748,852 or 18.88% from the December 31, 1997 amount of $56,943,088 to
$67,691,940 at September 30, 1998. Within the deposit area, certificates of
deposit increased $8,448,463 or 34.36% during the first nine months of 1998.
11
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COMMUNITYCORP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -- continued
INVESTMENT SECURITIES
Investment securities decreased from $15,696,054 at December 31, 1997 to
$13,983,045 at September 30, 1998. Securities held-to-maturity decreased
$2,553,342 or 40.52% from December 31, 1997 to September 30, 1998. The maturing
funds were invested in higher yielding loans.
LOANS
The demand for loans increased significantly in the Walterboro marketplace
during the first nine months of 1998. Net loans increased $6,735,392 or 16.58%
during the period. Balances within the major loans receivable categories as of
September 30, 1998 and December 31, 1997 are as follows:
September 30, December 31,
1998 1997
-------------- -------------
Commercial and industrial $ 32,002,217 $ 28,463,885
Real estate 6,764,105 5,080,608
Consumer 8,883,313 7,104,280
Agricultural 200,176 265,792
Other, net 335,989 442,549
------------- --------------
$ 48,185,800 $ 41,357,114
============= ==============
RISK ELEMENTS IN THE LOAN PORTFOLIO
The following is a summary of risk elements in the loan portfolio:
September 30,
1998 1997
--------- ------------
Loans: Nonaccrual loans $ 810,560 $ 518,869
Accruing loans more than 90
days past due $ 4,000 $ 0
Loans identified by the internal review mechanism:
Criticized $ 197,758 $ 205,712
Classified $ 700,796 $ 681,791
12
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COMMUNITYCORP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -- continued
RISK ELEMENTS IN THE LOAN PORTFOLIO -- continued
Activity in the Allowance for Loan Losses is as follows:
September 30,
1998 1997
--------- -------------
Balance, January 1, $ 743,260 $ 638,688
Provision for loan losses for the period 170,000 105,000
Net loans (charged off) recovered for
the period (76,706) (11,791)
------------- --------------
Balance, end of period $ 836,554 $ 731,897
============= ==============
Gross loans outstanding, end of period $ 48,185,800 $ 38,233,197
Allowance for Loan Losses to
loans outstanding 1.73% 1.91%
DEPOSITS
At September 30, 1998, total deposits increased by $10,748,852 or 18.88% from
December 31, 1997. Expressed in percentages, non-interest bearing deposits
increased 18.13% and interest bearing deposits increased 18.97%.
Balances within the major deposit categories as of September 30, 1998 and
December 31, 1997 are as follows:
September 30, December 31,
1998 1997
------------- ------------
Non-interest bearing demand deposits $ 7,163,440 $ 6,063,801
Interest bearing demand deposits 10,837,899 11,263,207
Savings deposits 16,655,353 15,029,295
Certificates of deposit 33,035,248 24,586,785
------------- --------------
$ 67,691,940 $ 56,943,088
============= ==============
LIQUIDITY
Liquidity needs are met by the Company through scheduled maturities of loans and
investments on the asset side and through pricing policies on the liability side
for interest-bearing deposit accounts. The level of liquidity is measured by the
loan-to-total borrowed funds ratio which was at 70.66% at September 30, 1998 and
72.02% at December 31, 1997.
Securities available-for-sale which totaled $10,235,069 at September 30, 1998,
serve as a ready source of liquidity. The Company also has lines of credit
available with correspondent banks to purchase federal funds for periods from
one to seven days. At September 30, 1998, unused lines of credit totaled
$2,500,000.
14
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COMMUNITYCORP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -- continued
CAPITAL RESOURCES
Total shareholders' equity increased from $7,233,560 at December 31, 1997 to
$7,888,775 at September 30, 1998. The increase of $655,215 is primarily
attributable to earnings for the period of $720,865 with dividends paid out of
$92,509. An increase of $25,859 in the fair value of securities
available-for-sale resulted in an increase to total equity. The sale of $1,000
of treasury stock increased total equity.
Bank holding companies, such as the Company, and their banking subsidiaries are
required by banking regulators to meet certain minimum levels of capital
adequacy which are expressed in the form of certain ratios. Capital is separated
into Tier I capital (essentially common shareholders' equity less intangible
assets) and Tier II capital (essentially the allowance for loan losses limited
to 1.25% of risk-weighted assets). The first two ratios, which are based on the
degree of credit risk in the Company's assets, provide the weighting of assets
based on assigned risk factors and include off-balance sheet items such as loan
commitments and stand-by letters of credit. The ratio of Tier I capital to
risk-weighted assets must be at least 4.0% and the ratio of total capital (Tier
I capital plus Tier 2 capital) to risk-weighted assets must be at least 8.0%.
The capital leverage ratio supplements the risk-based capital guidelines. Banks
and bank holding companies are required to maintain a minimum ratio of Tier I
capital to adjusted quarterly average total assets of 3.0%.
The following table summarizes the Company's risk-based capital at September 30,
1998:
Shareholders' equity $ 7,824,485
Less: intangibles 21,772
-------------
Tier I capital 7,802,713
Plus: allowance for loan losses (1) 662,305
-------------
Total capital $ 8,465,018
=============
Risk-weighted assets $ 52,984,431
=============
Risk based capital ratios
Tier I 14.73%
Total capital 15.98%
Leverage ratio 10.12%
(1) limited to 1.25% of risk-weighted assets
REGULATORY MATTERS
The management of the Company is not aware of any current recommendations by
regulatory authorities which, if they were to be implemented, would have a
material effect on liquidity, capital resources, or operations.
14
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COMMUNITYCORP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -- continued
YEAR 2000
Like many financial institutions, the Bank relies upon computers for the daily
conduct of its business and for information systems processing. There is concern
among industry experts that on January 1, 2000 computers will be unable to
"read" the new year, which may result in widespread computer malfunctions. While
the Bank believes that it has available resources and has adopted a plan to
address Year 2000 compliance, it is still dependent to a certain degree on other
third party vendors. The Bank acquired a new data processing system in early
1997 which the Bank believes is Year 2000 compliant. However, testing for this
new system will not be completed until the first quarter 1999, and there can be
no assurances that the testing will be successful. The Bank anticipates
incurring approximately $15,000 in expenses to upgrade its computer systems to
become Year 2000 compliant.
The Bank anticipates that the costs to upgrade other ancillary systems will not
materially differ from normal costs incurred during prior years to upgrade and
maintain its computer systems. However, the Bank has not completed an evaluation
of all its internal systems and software and the network connections it
maintains, and it may incur additional costs. The Bank is seeking assurances
about the Year 2000 compliance with respect to the other third party hardware
and software systems it uses, and the Bank believes that its internal systems
and software and the network connections it maintains will be adequately
programmed to address the Year 2000 issue. The Bank has established time lines
for testing all ancillary systems, such as telephone systems and security
devices, by December 31, 1998. There can be no assurances that all hardware and
software that the Bank uses will be Year 2000 compliant, and the Bank cannot
predict with any certainty the costs it will incur to respond to any Year 2000
issues. Factors which may affect the amount of these costs include the Bank's
inability to control third party modification plans, the Bank's ability to
identify and correct all relevant computer codes, the availability and cost of
engaging personnel trained in solving Year 2000 issues, and other similar
uncertainties.
Further, the business of many of the Bank's customers may be negatively affected
by the Year 2000 issue, and any financial difficulties incurred by the Bank's
customers in solving Year 2000 issues could negatively affect those customers'
ability to repay any loans which the Bank may have extended. Therefore, even if
the Bank does not incur significant direct costs in connection with responding
to the Year 2000 issue, there can be no assurance that the failure or delay of
the Bank's customers or other third parties in addressing the Year 2000 issue or
the costs involved in such process will not have a material adverse effect on
the Bank's business, financial condition, or results of operations.
The Bank has developed a Contingency Plan (Plan) to ensure its ability to
continue as a functioning entity after January 1, 2000. The Plan includes
remediation contingency planning and business resumption contingency planning.
The remediation contingency plans are designed to ensure that responsible
personnel, vendors and service providers adhere to the Bank's Year 2000 plans
and objectives. The business resumption contingency plans are designed to
provide assurance that mission-critical functions will continue in the event
that systems or applications fail as a result of year 2000 problems.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter ended September 30, 1998.
Items 1, 2, 3, 4 and 5 are not applicable.
15
<PAGE>
COMMUNITYCORP
PART II - OTHER INFORMATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITYCORP
By:__________________________________
W. Roger Crook
President & Chief Executive Officer
Date:___________ By:___________________________________
Gwen P. Bunton
Chief Financial Officer
16
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<PERIOD-END> SEP-30-1998
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