SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE) FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
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
<PAGE>
COMMUNITYCORP
INDEX
PART I. FINANCIAL INFORMATION Page No.
- -----------------------------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
September 30, 1999 and December 31, 1998.............................3
Condensed Consolidated Statements of Income -
Nine months ended September 30, 1999 and 1998 and
Three months ended September 30, 1999 and 1998.......................4
Condensed Consolidated Statement of Shareholders'
Equity - Nine months ended September 30, 1999........................5
Condensed Consolidated Statements of Cash Flows -
Nine months ended September 30, 1999 and 1998........................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
2
<PAGE>
COMMUNITYCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- --------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents:
Cash and due from banks $ 3,829,330 $ 3,864,460
Federal funds sold & repurchase agreements 8,100,000 15,610,000
------------- --------------
11,929,330 19,474,460
Securities available-for-sale 18,608,976 10,743,854
Securities held-to-maturity (estimated market value
of $5,693,133 and $5,259,426 at September 30, 1999
and December 31, 1998, respectively) 5,789,035 5,192,632
Loans receivable 57,685,035 51,879,654
Less allowance for loan losses (1,019,347) (929,482)
------------- ------------
Loans, net 56,665,688 50,950,172
Accrued interest receivable 976,539 790,130
Premises, furniture & equipment, net 1,805,678 1,905,761
Other assets 857,697 445,961
------------- --------------
Total assets $ 96,632,943 $ 89,502,970
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits:
Non-interest bearing $ 10,622,611 $ 8,532,818
Interest bearing 76,533,512 71,815,951
------------- --------------
87,156,123 80,348,769
Short-term borrowings 230,000 410,000
Accrued interest payable 482,614 498,256
Other liabilities 246,571 76,367
------------- --------------
Total liabilities 88,115,308 81,333,392
------------- --------------
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 (269,782) 39,620
Retained earnings 5,808,120 4,925,661
Treasury stock (6,543 shares in 1999 and 1,543 shares in 1998) (252,411) (27,411)
------------- --------------
Total shareholders' equity 8,517,635 8,169,578
------------- --------------
Total liabilities and shareholders' equity $ 96,632,943 $ 89,502,970
============= ==============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COMMUNITYCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $ 3,841,315 $ 3,236,096 $ 1,317,761 $ 1,147,999
Securities 801,581 616,975 319,329 191,633
Other interest income 458,262 327,189 119,859 163,774
------------ ------------ ------------ ------------
Total 5,101,158 4,180,260 1,756,949 1,503,406
------------ ------------ ------------ ------------
Interest expense:
Deposit accounts 2,345,570 1,922,301 789,070 705,634
Other interest expense 16,012 14,918 5,281 4,616
------------ ------------ ------------ ------------
2,361,582 1,937,219 794,351 710,250
------------ ------------ ------------ ------------
Net interest income 2,739,576 2,243,041 962,598 793,156
Provision for loan losses 250,000 170,000 70,000 90,000
------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 2,489,576 2,073,041 892,598 703,156
------------ ------------ ------------ ------------
Other operating income:
Service charges 308,134 223,068 110,595 81,654
Other income 53,008 23,519 12,544 6,155
------------ ------------ ------------ ------------
Total 361,142 246,587 123,139 87,809
------------ ------------ ------------ ------------
Other operating expenses:
Salaries and benefits 654,248 606,081 224,678 204,692
Net occupancy expense 93,401 89,504 33,056 30,536
Equipment expense 182,621 171,892 63,485 59,786
Other operating expenses 426,890 377,706 149,280 122,646
------------ ------------ ------------ ------------
Total 1,357,160 1,245,183 470,499 417,660
------------ ------------ ------------ ------------
Income before taxes 1,493,558 1,074,445 545,238 373,305
Income tax provision 491,716 353,580 174,272 126,040
------------ ------------ ------------ ------------
Net income 1,001,842 720,865 370,966 247,265
============ ============ ============ ============
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities
during the period (309,402) 25,859 (67,106) 22,725
------------ ------------ ------------ ------------
Other comprehensive income (309,402) 25,859 (67,106) 22,725
------------ ------------ ------------ ------------
Comprehensive income $ 692,440 $ 746,724 $ 303,860 $ 269,990
============ ============ ============ ============
Earnings per share:
Weighted average common shares
outstanding 297,608 298,669 296,094 298,686
============ ============ ============ ============
Net income per common share $ 3.37 $ 2.41 $ 1.25 $ 0.83
============ ============ ============ ============
</TABLE>
4
<PAGE>
See notes to condensed consolidated financial statements.
5
<PAGE>
COMMUNITYCORP
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Common Stock 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, 1998 300,000 $ 1,500,000 $ 1,731,708 $ 39,620 $ 4,925,661 $ (27,411) $ 8,169,578
Cash dividends declared
- $.40 per share (119,383) (119,383)
Other comprehensive
income (309,402) (309,402)
Purchase of treasury stock (225,000) (225,000)
Net income
for the period 1,001,842 1,001,842
------------ ----------- ----------- ---------- ------------ ----------- ------------
Balance,
September 30, 1999 300,000 $ 1,500,000 $ 1,731,708 $ (269,782) $ 5,808,120 $ (252,411) $ 8,517,635
============ ============ =========== ========== ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
COMMUNITYCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,001,842 $ 720,865
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 136,417 137,967
Provision for possible loan losses 250,000 170,000
Amortization less accretion on investments 5,651 (5,297)
Amortization of deferred loan costs 9,081 20,594
Gain on sale of premises and equipment (18,500) -
(Increase) decrease in interest receivable (186,409) 45,755
Increase (decrease) in interest payable (15,642) 73,554
(Increase) decrease in other assets (249,453) (79,779)
Increase (decrease) in other liabilities 170,204 93,677
------------- -------------
Net cash provided by operating activities 1,103,191 1,177,336
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans to customers (5,974,597) (6,925,986)
Purchases of securities available-for-sale (10,408,731) (5,999,349)
Maturities of securities available-for-sale 2,241,551 5,208,505
Purchases of securities held-to-maturity (1,683,927) (409,571)
Maturities of securities held-to-maturity 912,246 2,958,215
Proceeds from disposal of premises and equipment 18,500 1,427
Purchases of premises and equipment (36,334) (74,155)
------------- -------------
Net cash used by investing activities (14,931,292) (5,240,914)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits accounts 6,807,354 10,748,852
Increase (decrease) in short-term borrowings (180,000) (90,000)
Sale (purchase) of treasury stock (225,000) 1,000
Dividends paid (119,383) (92,509)
------------- -------------
Net cash provided by financing activities 6,282,971 10,567,343
------------- -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (7,545,130) 6,503,765
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 19,474,460 5,732,260
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11,929,330 $ 12,236,025
============= =============
Cash paid during the period for:
Income taxes $ 421,200 $ 457,301
Interest $ 2,377,224 $ 1,863,665
</TABLE>
7
<PAGE>
See notes to condensed consolidated financial statements.
8
<PAGE>
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, 1999 and for the interim periods ended
September 30, 1999 and 1998 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,
1998 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 1998 Annual Report.
NOTE 2 - COMPREHENSIVE INCOME
- -----------------------------
The following table sets forth the amounts of other comprehensive income
included in equity along with the related tax effects for the nine months ended
September 30, 1999 and 1998 and for the three months ended September 30, 1999
and 1998:
<TABLE>
<CAPTION>
Pre-tax (Expense) Net of tax
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999: Amount Benefit Amount
----------- ------------ ------------
<S> <C> <C> <C>
Net unrealized gains (losses) on securities
available for sale arising in 1999 $ (471,685) $ 162,283 $ (309,402)
----------- ------------ ------------
Other comprehensive income $ (471,685) $ 162,283 $ (309,402)
=========== ============ ============
Pre-tax (Expense) Net of tax
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998: Amount Benefit Amount
----------- ------------ ------------
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 THREE MONTHS ENDED SEPTEMBER 30, 1999: Amount Benefit Amount
----------- ------------ ------------
Net unrealized gains (losses) on securities
available for sale arising in 1999 $ (102,452) $ 35,346 $ (67,106)
----------- ------------ ------------
Other comprehensive income $ (102,452) $ 35,346 $ (67,106)
=========== ============ ============
</TABLE>
9
<PAGE>
COMMUNITYCORP
NOTE 2 - COMPREHENSIVE INCOME -- continued
<TABLE>
<CAPTION>
Pre-tax (Expense) Net of tax
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998: Amount Benefit Amount
----------- ------------ ------------
<S> <C> <C> <C>
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
=========== ============ ============
</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, 1999 compared to December 31, 1998, and the results of operations
for the three and nine months ended September 30, 1999 compared to the three and
nine months ended September 30, 1998. 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, 1999, net interest income increased
$496,535 or 22.14% over the same period in 1998. The net interest margin
realized on earning assets decreased from 4.54% for the nine months ended
September 30, 1998 to 4.23% for the same period in 1999. Yields on earning
assets decreased as a result of lower loans rates while the decrease in interest
rates of deposits resulted in lower yields on interest bearing liabilities. The
interest rate spread decreased by 19 basis points from 3.82% at September 30,
1998 to 3.63% at September 30, 1999.
Net interest income increased from $793,156 for the quarter ending September 30,
1998 to $962,598 for the quarter ending September 30, 1999. This represents an
increase of $169,442 or 21.36%. The net interest margin realized on earning
assets decreased from 4.48% for the quarter ended September 30, 1998 to 4.33%
for the quarter ended September 30, 1999. The interest rate spread also
decreased by 11 basis points from 3.87% at September 30, 1998 to 3.76% at
September 30, 1999.
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, 1999, the
provision charged to expense was $250,000. The increase of $80,000 from the
comparable period in 1998 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, 1999 and 1998, the provision charged to
expense was $70,000 and 90,000, respectively. Based on present information,
management believes the allowance for loan losses is adequate at September 30,
1999 to meet presently known and inherent risks in the loan portfolio.
10
<PAGE>
COMMUNITYCORP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -- continued
NON-INTEREST INCOME
- -------------------
Non-interest income during the nine months ended September 30, 1999 was
$361,142, an increase of $114,555 or 46.46% from the comparable period in 1998.
The increase is primarily a result of an increase in service charges from
$223,068 to $308,134 for the nine months ended September 30, 1999. Overdraft and
NSF fees increased by $67,982 to $215,415 for the nine months ended September
30, 1999. This change is a result of the increase in deposit accounts over the
two periods. Deposits at September 30, 1998 were $67,691,940 compared to
$87,156,123 at September 30, 1999.
For the quarter ended September 30, 1999, non-interest income increased $35,330
or 40.24% over the same period in 1998. This increase is primarily due to an
increase in service charges which increased $28,941 or 35.44% from the quarter
ended September 30, 1998 to the quarter ended September 30, 1999.
NON-INTEREST EXPENSE
- --------------------
Total non-interest expense for the nine months ended September 30, 1999 was
$1,357,160 or 8.99% higher than the nine months ended September 30, 1998.
Salaries and employee benefits increased from $606,081 at September 30, 1998 to
$654,248 for the nine months ended September 30, 1999.
For the quarter ended September 30, 1999, non-interest expense increased $52,839
or 12.65% over the same period in 1998. The largest increase between the quarter
ended September 30, 1999 and the quarter ended September 30, 1998 was in other
operating expenses which increased $26,634 or 21.72%.
INCOME TAXES
- ------------
The income tax provision for the nine months ended September 30, 1999 was
$491,716 as compared to $353,580 for the same period in 1998. The effective tax
rates were 32.92% and 32.91% at September 30, 1999 and 1998, respectively. The
effective tax rates were 31.96% and 33.76% for the quarter ended September 30,
1999 and September 30, 1998, respectively.
NET INCOME
- ----------
The combination of the above factors resulted in net income for the nine months
ended September 30, 1999 of $1,001,842 as compared to $720,865 for the same
period in 1998. This represents an increase of $280,977 or 38.98% over the same
period in 1998. For the quarter ended September 30, 1999, net income was
$370,966 as compared to $247,265 for the quarter ended September 30, 1998. This
represents an increase of $123,701 or 50.03% from the quarter ending September
30, 1999 as compared to the quarter ending September 30, 1998.
ASSETS AND LIABILITIES
- ----------------------
During the first nine months of 1999, total assets increased $7,129,973 or 7.97%
when compared to December 31, 1998. The primary reason for the increase in
assets was due to an increase in securities available for sale which increased
$7,865,122 or 73.21% from December 31, 1998 to September 30, 1999. Growth in
gross loans of $5,805,381 or 11.19% from December 31, 1998 to September 30, 1999
also contributed to the growth in total assets. During the same period, federal
funds sold and repurchase agreements decreased $7,510,000 or 48.11%. Total
deposits increased $6,807,354 or 8.47% from the December 31, 1998 amount of
$80,348,769 to $87,156,123 at September 30, 1999. Within the deposit area,
savings accounts increased $4,245,961 or 30.92% during the first nine months of
1999.
11
<PAGE>
COMMUNITYCORP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -- continued
------------------------------------
INVESTMENT SECURITIES
- ---------------------
Investment securities increased from $15,936,486 at December 31, 1998 to
$24,398,011 at September 30, 1999. Securities held-to-maturity increased
$596,403 or 11.49% from December 31, 1998 to September 30, 1999.
LOANS
- -----
The demand for loans increased in the Walterboro marketplace during the first
nine months of 1999. Net loans increased $5,715,516 or 11.22% during the period.
Balances within the major loans receivable categories as of September 30, 1999
and December 31, 1998 are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------------- --------------------
<S> <C> <C>
Commercial and industrial $ 39,492,264 $ 34,733,571
Real estate 7,122,827 7,813,792
Consumer 10,497,941 8,864,037
Agricultural 137,867 161,719
Other, net 434,136 306,535
-------------------- --------------------
$ 57,685,035 $ 51,879,654
==================== ====================
</TABLE>
RISK ELEMENTS IN THE LOAN PORTFOLIO
- -----------------------------------
The following is a summary of risk elements in the loan portfolio:
<TABLE>
<CAPTION>
September 30,
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
Loans: Nonaccrual loans $ 760,443 $ 810,560
Accruing loans more than 90
days past due $ 8,000 $ 4,000
Loans identified by the internal
review mechanism:
Criticized $ 170,852 $ 197,758
Classified $ 708,598 $ 700,796
</TABLE>
12
<PAGE>
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,
-----------------------------
1999 1998
------------ ------------
Balance, January 1, $ 929,482 $ 743,260
Provision for loan losses for the period 250,000 170,000
Net loans (charged off) recovered for
the period (160,135) (76,706)
------------ ------------
Balance, end of period $ 1,019,347 $ 836,554
============ ============
Gross loans outstanding, end of period $ 57,685,035 $ 48,185,800
Allowance for Loan Losses to
loans outstanding 1.77% 1.74%
DEPOSITS
- --------
At September 30, 1999, total deposits increased by $6,807,354 or 8.47% from
December 31, 1998. Expressed in percentages, non-interest bearing deposits
increased 24.49% and interest bearing deposits increased 6.57%.
Balances within the major deposit categories as of September 30, 1999 and
December 31, 1998 are as follows:
September 30, December 31,
1999 1998
---------------- ---------------
Non-interest bearing demand deposits $ 10,622,611 $ 8,532,818
Interest bearing demand deposits 17,637,985 19,872,854
Savings deposits 17,977,062 13,731,101
Certificates of deposit 40,918,465 38,211,996
---------------- ---------------
$ 87,156,123 $ 80,348,769
================ ===============
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 66.01% at September 30, 1999 and
64.24% at December 31, 1998.
Securities available-for-sale which totaled $18,608,976 at September 30, 1999,
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, 1999, unused lines of credit totaled
$2,500,000.
13
<PAGE>
COMMUNITYCORP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -- continued
------------------------------------
CAPITAL RESOURCES
- -----------------
Total shareholders' equity increased from $8,169,578 at December 31, 1998 to
$8,517,635 at September 30, 1999. The increase of $348,057 is primarily
attributable to earnings for the period of $1,001,842 with dividends paid out of
$119,383. A decrease of $309,402 in the fair value of securities
available-for-sale partially offset the increase from net income to total
equity. The purchase of $225,000 of treasury stock further decreased 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,
1999:
Shareholders' equity $ 8,787,417
Less: intangibles 10,655
---------------
Tier I capital 8,776,762
Plus: allowance for loan losses (1) 806,348
---------------
Total capital $ 9,583,110
===============
Risk-weighted assets $ 64,507,852
===============
Risk based capital ratios
Tier I 13.61%
Total capital 14.86%
Leverage ratio 9.45%
(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
<PAGE>
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. Testing for this new system
was completed as of March 31, 1999. All phases of the testing were considered to
be successful. The Bank has incurred approximately $15,000 in expenses to
upgrade its computer systems to become Year 2000 compliant. Any other costs
associated with upgrading are not expected to be material.
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. The Bank has completed an evaluation of all its
internal systems and software and the network connections it maintains, and it
may incur only minor 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 completed testing all ancillary
systems, such as telephone systems and security devices, as of March 31, 1999.
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
27. Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter ended September 30, 1999.
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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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,829,330
<INT-BEARING-DEPOSITS> 0
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0
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