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, 1996
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 O-18460
COMMUNITY CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
South Carolina 57-0866395
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
109 MONTAGUE AVENUE
GREENWOOD, SC 29646
(Address of principal executive
offices, including zip code)
(864) 941-8200
(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.
1,219,109 SHARES OF COMMON STOCK, $1.00 PAR VALUE
PAGE 1 OF 16
EXHIBIT INDEX ON PAGE 2
<PAGE>
COMMUNITY CAPITAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - September 30, 1996 and
December 31, 1995............................................ 3
Condensed Consolidated Statements of Income - Nine months ended
September 30, 1996 and 1995 and Three months ended September
30, 1996 and 1995............................................ 4
Condensed Consolidated Statement of Stockholders' Equity for
the Nine months ended September 30, 1996..................... 5
Condensed Consolidated Statements of Cash Flows - Nine months
ended September 30, 1996 and 1995. .......................... 6
Notes to Condensed Consolidated Financial Statements......... 7-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. .............................. 9-14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. ....................... 15
(a) Reports on Form 8-K. ................................ 15
(b) Exhibits. ........................................... 16
2
<PAGE>
COMMUNITY CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
---------------------- ----------------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS:
CASH AND DUE FROM BANKS $ 2,929,711 $ 2,836,229
INTEREST BEARING BALANCES DUE FROM BANKS 57,876 113,060
FEDERAL FUNDS SOLD 1,900,000 2,330,000
------------------ ------------------
4,887,587 5,279,289
SECURITIES AVAILABLE-FOR-SALE 23,374,411 22,445,925
LOANS RECEIVABLE 76,022,960 63,203,789
LESS ALLOWANCE FOR LOAN LOSSES (779,812) (671,338)
------------------ ------------------
LOANS, NET 75,243,148 62,532,451
PREMISES, FURNITURE & EQUIPMENT, NET 3,829,310 2,530,820
OTHER ASSETS 4,248,803 3,311,492
------------------ ------------------
TOTAL ASSETS $ 111,583,259 $ 96,099,977
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
DEPOSITS:
NON-INTEREST BEARING $ 11,448,381 $ 9,447,005
INTEREST BEARING 73,829,574 63,690,569
------------------ ------------------
85,277,955 73,137,574
FEDERAL FUNDS PURCHASED AND SECURITIES
SOLD UNDER AGREEMENTS TO REPURCHASE 5,468,000 3,034,000
ADVANCES FROM THE FEDERAL HOME LOAN BANK 5,123,665 6,243,561
NOTE PAYABLE 1,350,000
ACCRUED INTEREST AND OTHER LIABILITIES 1,106,266 753,272
------------------ ------------------
TOTAL LIABILITIES 98,325,886 83,168,407
------------------ ------------------
SHAREHOLDERS' EQUITY:
COMMON STOCK, $1 PAR VALUE, 10,000,000 SHARES
AUTHORIZED, 1,219,109 AND 1,153,060 SHARES
ISSUED AND OUTSTANDING AT SEPTEMBER 30, 1996 AND
DECEMBER 31, 1995, RESPECTIVELY 1,219,109 1,153,060
SURPLUS 12,004,282 11,254,039
UNREALIZED GAIN (LOSS) ON SECURITIES
AVAILABLE-FOR-SALE, NET OF DEFERRED TAXES (139,534) 177,297
RETAINED EARNINGS 173,516 347,174
------------------ ------------------
TOTAL SHAREHOLDERS' EQUITY 13,257,373 12,931,570
------------------ ------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 111,583,259 $ 96,099,977
=================== ===================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
COMMUNITY CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------- -----------------------------------
1996 1995 1996 1995
---------------------------------------- ------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
LOANS, INCLUDING FEES $ 4,795,484 $ 3,707,009 $ 1,693,857 $ 1,302,134
SECURITIES 1,049,558 539,954 354,540 310,915
OTHER INTEREST INCOME 75,354 90,787 18,006 51,769
------------------ ------------------ ------------------ ------------------
5,920,396 4,337,750 2,066,403 1,664,818
------------------ ------------------ ------------------ ------------------
INTEREST EXPENSE:
DEPOSIT ACCOUNTS 2,507,847 1,688,178 856,527 685,819
FHLB ADVANCES 225,638 290,639 71,548 102,400
OTHER INTEREST EXPENSE 166,220 72,243 76,164 20,459
------------------ ------------------ ------------------ ------------------
2,899,705 2,051,060 1,004,239 808,678
------------------ ------------------ ------------------ ------------------
NET INTEREST INCOME 3,020,691 2,286,690 1,062,164 856,140
PROVISION FOR LOAN LOSSES 123,000 55,881 18,000 33,508
------------------ ------------------ ------------------ ------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,897,691 2,230,809 1,044,164 822,632
--------- --------- --------- -------
OTHER OPERATING INCOME:
SERVICE CHARGES 382,275 290,123 131,563 93,946
RESIDENTIAL MORTGAGE
ORIGINATION FEES 184,256 88,770 51,607 45,249
GAIN (LOSS) ON SALES
OF SECURITIES 17,033 (21,683)
OTHER INCOME 379,908 336,798 126,740 50,753
------------------ ------------------ ------------------ ------------------
963,472 694,008 309,910 189,948
------------------ ------------------ ------------------ ------------------
OTHER OPERATING EXPENSES:
SALARIES AND BENEFITS 1,442,845 1,116,025 525,936 407,536
NET OCCUPANCY EXPENSE 525,474 339,299 238,499 106,969
OTHER OPERATING EXPENSES 990,411 907,212 294,435 339,768
------------------ ------------------ ------------------ ------------------
2,958,730 2,362,536 1,058,870 854,273
------------------ ------------------ ------------------ ------------------
INCOME BEFORE TAXES 902,433 562,281 295,204 158,307
INCOME TAX PROVISION 320,578 207,738 103,435 60,693
------------------ ------------------ ------------------ ------------------
NET INCOME $ 581,855 $ 354,543 $ 191,769 $ 97,614
=================== =================== =================== ===================
EARNINGS PER SHARE:
PRIMARY .44 .38 .15 .08
------------------ ------------------ ------------------ ------------------
FULLY DILUTED .44 .38 .15 .08
------------------ ------------------ ------------------ ------------------
WEIGHTED AVERAGE COMMON SHARES
AND EQUIVALENTS
PRIMARY 1,341,708 989,149 1,389,164 1,275,855
------------------ ------------------ ------------------ ------------------
FULLY DILUTED 1,341,708 989,149 1,389,164 1,275,855
------------------ ------------------ ------------------ ------------------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
COMMUNITY CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ON SECURI-
COMMON STOCK TIES FOR RETAINED TOTAL
SHARES AMOUNT SURPLUS SALE, NET EARNINGS EQUITY
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1995 1,153,060 $ 1,153,060 $ 11,254,039 $ 177,297 $ 347,174 $ 12,931,570
PROCEEDS FROM
EXERCISE OF
STOCK OPTIONS 8,558 8,558 60,351 68,909
5% STOCK DIVIDEND 57,491 57,491 689,892 (755,513) (8,130)
CHANGE IN FAIR
VALUE FOR THE
PERIOD (316,831) (316,831)
NET INCOME
FOR THE PERIOD 581,855 581,855
-------------- -------------- -------------- -------------- -------------- ---------------
BALANCE, SEPTEMBER
30, 1996 1,219,109 $ 1,219,109 $ 12,004,282 $ (139,534) $173,516 $13,257,373
============== =============== =============== =============== ======== ===========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
COMMUNITY CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
------------------ ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 581,855 $ 354,543
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION 316,142 225,111
PROVISION FOR POSSIBLE LOAN LOSSES 123,000 55,881
AMORTIZATION OF ORGANIZATIONAL COSTS 10,256 29,405
AMORTIZATION LESS ACCRETION ON INVESTMENTS 41,190 35,308
AMORTIZATION OF DEFERRED LOAN COSTS 97,148 60,946
(GAIN) LOSS ON SALE OF SECURITIES (17,033) 21,683
DISBURSEMENTS FOR MORTGAGES HELD FOR SALE (7,611,860) (1,868,590)
PROCEEDS OF SALES OF RESIDENTIAL MORTGAGES 7,717,260 1,947,890
INCREASE IN INTEREST RECEIVABLE (37,294) (357,446)
INCREASE IN INTEREST PAYABLE 225,026 252,457
DECREASE IN OTHER ASSETS 165,997 292,828
INCREASE (DECREASE) IN OTHER LIABILITIES 127,968 (69,379)
------------------ ------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,739,655 980,637
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
NET INCREASE IN LOANS TO CUSTOMERS (13,036,245) (7,282,021)
PURCHASES OF SECURITIES AVAILABLE-FOR-SALE (9,406,105) (13,271,187)
SALES OF SECURITIES AVAILABLE-FOR-SALE 4,012,383 986,467
MATURITIES OF SECURITIES AVAILABLE-FOR-SALE 3,944,345 1,000,000
PURCHASES OF INVESTMENTS HELD-TO-MATURITY (2,323,395)
MATURITIES OF INVESTMENTS HELD-TO-MATURITY 100,000
PURCHASES OF NONMARKETABLE EQUITY SECURITIES (896,367)
PURCHASES OF PREMISES AND EQUIPMENT (1,614,632) (954,665)
------------------ ------------------
NET CASH USED BY INVESTING ACTIVITIES (16,996,621) (21,744,801)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
SALE OF CAPITAL STOCK 6,187,063
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 68,909
STOCK DIVIDEND FRACTIONAL SHARES PAID IN CASH (8,130) (4,194)
REPAYMENT OF ORGANIZATIONAL NOTES (457,189)
NET INCREASE IN DEPOSITS ACCOUNTS 12,140,381 18,107,377
PROCEEDS FROM FHLB BORROWINGS 2,700,000 5,050,000
REPAYMENTS OF FHLB BORROWINGS (3,819,896) (4,497,340)
PROCEEDS FROM OTHER BORROWINGS 1,350,000
NET INCREASE (DECREASE) FED FUNDS PURCHASED AND REPOS 2,434,000 (1,174,000)
--------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 14,865,264 23,211,717
------------------ ------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (391,702) 2,447,553
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,279,289 3,038,958
------------------ ------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,887,587 $ 5,486,511
------------------- ===================
CASH PAID DURING THE PERIOD FOR:
INCOME TAXES $ 219,100 $ 185,641
INTEREST $ 2,674,679 $ 1,798,603
</TABLE>
6
<PAGE>
COMMUNITY CAPITAL CORPORATION
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 STOCKHOLDERS. THE
FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1996 AND FOR THE INTERIM PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 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,
1995 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
THE COMPANY'S 1995 ANNUAL REPORT.
NOTE 2 - ADOPTION OF ACCOUNTING PRINCIPLE
IN OCTOBER 1995, THE FINANCIAL ACCOUNTING STANDARDS BOARD ISSUED FASB STATEMENT
NO. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION," EFFECTIVE FOR TRANSACTIONS
ENTERED INTO IN FISCAL YEARS THAT BEGIN AFTER DECEMBER 15, 1995. FASB 123
RECOMMENDS THAT COMPANIES ACCOUNT FOR STOCK COMPENSATION ON A FAIR VALUE BASED
METHOD WHICH REQUIRES COMPENSATION COST TO BE MEASURED AT THE GRANT DATE BASED
ON THE VALUE OF THE AWARD AND TO BE RECOGNIZED OVER THE SERVICE PERIOD. AS AN
ALTERNATIVE, COMPANIES MAY CONTINUE TO RECORD COMPENSATION COST BASED ON THE
EXCESS, IF ANY, OF THE QUOTED MARKET PRICE OF THE STOCK AT THE GRANT DATE (OR
OTHER MEASUREMENT DATE) OVER THE AMOUNT AN EMPLOYEE MUST PAY TO ACQUIRE THE
STOCK (APB OPINION NO. 25). HOWEVER, IF A COMPANY ELECTS THIS METHOD, IT MUST
INCLUDE IN THE FINANCIAL STATEMENTS CERTAIN DISCLOSURES WHICH REFLECT PRO FORMA
AMOUNTS AS IF THE FAIR VALUE METHOD HAD BEEN USED.
MANAGEMENT HAS ELECTED TO CONTINUE ACCOUNTING FOR GRANTS UNDER THE COMPANY'S
STOCK OPTION PLANS BASED ON THE PROVISIONS OF APB OPINION NO. 25 WITH PRO FORMA
DISCLOSURES IN THE FINANCIAL STATEMENTS AS IF THE FAIR VALUE METHOD HAD BEEN
USED. AS PERMITTED BY FASB 123, THE COMPANY WILL NOT APPLY THE DISCLOSURE
REQUIREMENTS TO COMPLETE INTERIM FINANCIAL STATEMENTS.
NOTE 3- NOTE PAYABLE
THE COMPANY HAS A $5,000,000 UNSECURED LINE OF CREDIT FROM AN UNRELATED
FINANCIAL INSTITUTION WITH AN OUTSTANDING BALANCE OF $1,350,000 AS OF SEPTEMBER
30, 1996. MANAGEMENT WILL CONTINUE TO USE THIS LINE AS A SOURCE OF FUNDS BUT
EXPECTS TO PAY OFF THE NOTE DURING THE NEXT SIX MONTHS.
7
<PAGE>
COMMUNITY CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - SHAREHOLDERS' EQUITY
ON APRIL 15, 1996 THE BOARD OF DIRECTORS DECLARED A 5% STOCK DIVIDEND.
ACCORDINGLY, AMOUNTS EQUAL TO THE FAIR MARKET VALUE OF THE ADDITIONAL SHARES
ISSUED HAVE BEEN CHARGED TO RETAINED EARNINGS AND CREDITED TO COMMON STOCK AND
CAPITAL SURPLUS. EARNINGS PER SHARE AND WEIGHTED AVERAGE SHARES OUTSTANDING HAVE
BEEN RESTATED TO REFLECT THE 5% STOCK DIVIDEND. CASH WAS PAID FOR FRACTIONAL
SHARES.
THE COMPANY HAS ANNOUNCED PLANS TO WORK WITH GROUPS OF ORGANIZERS IN THE
CAPITALIZATION OF COMMUNITY BANKS IN BELTON, NEWBERRY AND BARNWELL, SOUTH
CAROLINA. MANAGEMENT EXPECTS THE OPENING OF THESE BANKS TO NEGATIVELY IMPACT
EARNINGS DUE TO THE PRE-OPENING EXPENSES AND STARTUP COSTS.
8
<PAGE>
COMMUNITY CAPITAL CORPORATION
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, 1996 COMPARED TO DECEMBER 31, 1995, AND THE RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 1995. THESE RESULTS REFLECT THE NET RESULTS OF
THE CLEMSON BANK WHICH COMMENCED BUSINESS ON JUNE 22, 1995. 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, 1996, NET INTEREST INCOME INCREASED
$734,001, OR 32.09% OVER THE NINE MONTHS ENDED SEPTEMBER 30, 1995. FOR THE
QUARTER ENDED SEPTEMBER 30, 1996, NET INTEREST INCOME INCREASED $206,024, OR
24.06% OVER THE THIRD QUARTER OF 1995.
THE IMPROVEMENT IN BOTH THE NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30,
1996 IS RELATED TO AN INCREASE IN THE VOLUME OF INTEREST EARNING ASSETS,
PARTICULARLY LOANS. THE INCREASE IN THE VOLUME OF BOTH ASSETS AND LIABILITIES
WAS ATTRIBUTABLE TO GROWTH IN THE BRANCH OPENED DURING FEBRUARY OF 1995, THE
OPENING OF THE CLEMSON BANK IN JUNE 1995, MANAGEMENT'S ABILITY TO STRENGTHEN ITS
INFLUENCE IN THE GREENWOOD MARKET, AND STRATEGIES IMPLEMENTED BY MANAGEMENT
DURING 1995 TO DECREASE THE LOANS-TO-FUNDS AND LOANS-TO-ASSETS RATIOS.
INTEREST EXPENSE ON LIABILITY ACCOUNTS INCREASED 41.38% AND 24.18% FOR THE NINE
MONTHS AND FOR THE QUARTER ENDED SEPTEMBER 30, 1996, RESPECTIVELY, DUE MAINLY TO
AN INCREASE IN THE VOLUME OF INTEREST BEARING DEPOSITS WHICH WERE USED TO FUND
THE GROWTH IN LOANS. THE COMPANY HAS ALSO INCREASED THE USE OF ITS LINES OF
CREDIT TO PURCHASE FEDERAL FUNDS AND REPURCHASE AGREEMENTS, WHICH ARE GENERALLY
LESS EXPENSIVE SOURCES OF FUNDS THAN CERTIFICATES OF DEPOSIT.
THE INFLUENCE OF THE FACTORS ABOVE HAD THE EFFECT OF INCREASING THE INTEREST
RATE SPREAD APPROXIMATELY 13 BASIS POINTS TO 3.53% AND DECREASING THE NET YIELD
ON EARNING ASSETS 1 BASIS POINT TO 4.30% FOR THE NINE MONTHS PERIOD ENDED
SEPTEMBER 30, 1996. FOR THE QUARTER ENDED SEPTEMBER 30, 1996, THE INFLUENCE OF
THE FACTORS ABOVE HAD THE EFFECT OF INCREASING THE INTEREST RATE SPREAD
APPROXIMATELY 42 BASIS POINTS TO 3.61% AND INCREASING THE NET YIELD ON EARNING
ASSETS 2 BASIS POINTS TO 4.36%.
9
<PAGE>
COMMUNITY CAPITAL CORPORATION
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, 1996 AND 1995, THE
PROVISION WAS $123,000 AND $55,881, RESPECTIVELY, AN INCREASE OF $67,119. THE
INCREASE DOES NOT REFLECT A NEGATIVE TREND IN NONPERFORMING OR CLASSIFIED ASSETS
BUT IS INDICATIVE OF MANAGEMENT'S DECISION TO MAINTAIN THE TARGET RATIO OF THE
ALLOWANCE FOR LOAN LOSSES TO TOTAL LOANS. THE PROVISION FOR LOAN LOSSES WAS
$18,000 AND $33,508 FOR THE QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995. THE
AMOUNT FOR THE QUARTER ENDING SEPTEMBER 30, 1995 IS DUE TO THE ESTABLISHMENT OF
AN ADEQUATE ALLOWANCE FOR LOAN LOSSES AT THE CLEMSON BANK WHICH OPENED JUNE 22,
1995. BASED ON PRESENT INFORMATION AND AN ONGOING EVALUATION, MANAGEMENT
BELIEVES THE ALLOWANCE FOR LOAN LOSSES IS ADEQUATE AT SEPTEMBER 30, 1996 TO MEET
PRESENTLY KNOWN AND INHERENT RISKS IN THE LOAN PORTFOLIO, BUT EXPECTS TO
CONTINUE INCREASING THE ALLOWANCE FOR LOAN LOSSES DUE TO GROWTH IN THE LOAN
PORTFOLIO.
NON-INTEREST INCOME
TOTAL NON-INTEREST INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 WAS
$963,472, AN INCREASE OF $269,464 OR 38.83%, FROM THE COMPARABLE PERIOD IN 1995.
TOTAL NON- INTEREST INCOME FOR THE QUARTER ENDED SEPTEMBER 30, 1996, WAS
$309,910, AN INCREASE OF $119,962 OR 63.16%, FROM THE COMPARABLE PERIOD IN 1995.
THE IMPROVEMENT IN BOTH THE NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30,
1996, IS PRIMARILY DUE TO THE INCREASE IN FEES FROM THE SALE OF RESIDENTIAL
MORTGAGES AND FROM THE SALE OF MUTUAL FUNDS IN ADDITION TO AN INCREASE IN ALL
OTHER CATEGORIES OF OTHER INCOME DUE TO OVERALL GROWTH IN THE COMPANY.
NON-INTEREST EXPENSE
TOTAL NON-INTEREST EXPENSE FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 WAS
$2,958,730, AN INCREASE OF $596,194 OR 25.24% HIGHER THAN THE NON-INTEREST
EXPENSE OF $2,362,536 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995. FOR THE
QUARTER ENDED SEPTEMBER 30, 1996, NON-INTEREST EXPENSE WAS $1,058,870, AN
INCREASE OF $204,597 OR 23.95% HIGHER THAN THE NON-INTEREST EXPENSE OF $854,273
FOR THE QUARTER ENDED SEPTEMBER 30, 1995.
THE PRIMARY COMPONENT OF NON-INTEREST EXPENSE IS SALARIES AND BENEFITS, WHICH,
FOR THE NINE MONTHS AND QUARTER ENDED SEPTEMBER 30, 1996, INCREASED BY $326,820
AND $118,400, AN INCREASE OF 29.28% AND 29.05%, RESPECTIVELY, OVER THE
COMPARABLE 1995 PERIODS.
THE INCREASE FOR BOTH PERIODS IS ATTRIBUTABLE TO FULL-YEAR SALARIES FOR
EMPLOYEES HIRED IN 1995 FOR THE CLEMSON BANK, THE NINETY SIX BRANCH AND THE
TRUST AND MUTUAL FUNDS DEPARTMENTS. THE COMPANY HAS ALSO HIRED AN ORGANIZER OF
THE BELTON BANK TO ASSIST IN THE FORMATION OF THE BANK AS WELL AS OTHER DUTIES
AND IS PAYING A PRO RATA SHARE OF HIS SALARY.
NET OCCUPANCY EXPENSE FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 WAS $525,474,
AN INCREASE OF $186,175 OVER THE COMPARABLE PERIOD OF 1995. FOR THE QUARTERS
ENDED SEPTEMBER 30, 1996 AND 1995, NET OCCUPANCY EXPENSE WAS $238,499 AND
$106,969, RESPECTIVELY. THE INCREASE FOR BOTH THE NINE AND THREE MONTH PERIODS
IS ATTRIBUTABLE TO INCREASED DEPRECIATION CHARGES DUE TO THE PURCHASE OF A NEW
OPERATIONS CENTER DURING THE FIRST QUARTER OF 1996 AND THE UPGRADE AND
ACQUISITION OF COMPUTER EQUIPMENT DURING 1995 AND 1996. THESE ADDITIONS HAVE
POSITIONED THE COMPANY FOR FUTURE GROWTH.
10
<PAGE>
COMMUNITY CAPITAL CORPORATION
INCOME TAXES
FOR ALL PERIODS PRESENTED THE EFFECTIVE INCOME TAX RATE WAS APPROXIMATELY 35% TO
38%. THE INCOME TAX PROVISION FOR THE NINE MONTHS AND THE QUARTER ENDED
SEPTEMBER 30, 1996 WAS $320,578 AND $103,435, COMPARED TO $207,738 AND $60,693
FOR THE COMPARABLE 1995 PERIODS, RESPECTIVELY. THE INCREASES ARE DUE TO HIGHER
PRETAX EARNINGS.
NET INCOME
THE COMBINATION OF THE ABOVE FACTORS RESULTED IN NET INCOME FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1996 OF $581,855, OR $.44 PER SHARE, AS COMPARED TO
$354,543, OR $.38 PER SHARE, FOR THE COMPARABLE PERIOD IN 1995, AN INCREASE OF
$227,312, OR 64.11%. FOR THE QUARTER ENDED SEPTEMBER 30, 1996, NET INCOME WAS
$191,769, OR $.15 PER SHARE, AS COMPARED TO $97,614, OR $.08 PER SHARE, FOR THE
COMPARABLE PERIOD IN 1995, AN INCREASE OF $94,155 OR 96.46%.
THE DEVELOPMENT AND ORGANIZATION OF THE CLEMSON BANK, INCLUDING INITIAL
OPERATING EXPENDITURES, AND THE COMPANY'S EXPANSION STRATEGIES NEGATIVELY
IMPACTED EARNINGS FOR 1995. DURING 1996, THE COMPANY'S EARNINGS HAVE BENEFITED
FROM THE GROWTH, PARTICULARLY IN NET INTEREST INCOME, OF THE CLEMSON BANK AND
THE GROWTH IN THE LOAN PORTFOLIO.
THE COMPANY HAS ANNOUNCED PLANS TO WORK WITH GROUPS OF ORGANIZERS IN THE
CAPITALIZATION OF COMMUNITY BANKS IN BELTON, NEWBERRY AND BARNWELL, SOUTH
CAROLINA. MANAGEMENT EXPECTS THE OPENING OF THESE BANKS TO NEGATIVELY IMPACT
EARNINGS DUE TO THE PRE-OPENING EXPENSES.
ASSETS AND LIABILITIES
DURING THE FIRST NINE MONTHS OF 1996, TOTAL ASSETS GREW $15,483,282, OR 16.11%
WHEN COMPARED TO DECEMBER 31, 1995. MOST OF THE GROWTH WAS ATTRIBUTABLE TO THE
CONTINUED DEMAND FOR LOANS FUNDED BY THE $12,140,381 INCREASE IN DEPOSITS
RESULTING FROM AGGRESSIVE PRICING STRATEGIES BY MANAGEMENT, CUSTOMER
DISSATISFACTION WITH LARGER REGIONAL BANKS, AND THE IMPLEMENTATION OF AN
EMPLOYEE AWARD PLAN.
INVESTMENT SECURITIES
INVESTMENT SECURITIES INCREASED $928,486 DURING THE PERIOD IN ORDER TO MAINTAIN
THE PERCENTAGE OF INVESTMENT SECURITIES TO TOTAL ASSETS.
LOANS
DEMAND FOR QUALITY LOANS, PARTICULARLY LOANS SECURED BY REAL ESTATE, REMAINED
STRONG IN THE GREENWOOD MARKETPLACE AND IMPROVED IN THE CLEMSON MARKET. NET
LOANS INCREASED $12,710,697 OR 20.33% DURING THE PERIOD.
11
<PAGE>
COMMUNITY CAPITAL CORPORATION
LOANS - CONTINUED
BALANCES WITHIN THE MAJOR LOAN RECEIVABLE CATEGORIES AS OF SEPTEMBER 30, 1996
AND DECEMBER 31, 1995 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ---------
<S> <C> <C>
COMMERCIAL AND AGRICULTURAL $ 13,055,482 $ 13,349,226
REAL ESTATE 48,415,488 38,295,636
HOME EQUITY 8,681,612 6,593,037
CONSUMER, INSTALLMENT 4,368,210 3,721,774
CONSUMER, CREDIT CARD AND CHECKING 998,882 868,736
RESIDENTIAL MORTGAGES HELD FOR SALE 193,600 299,000
OTHER, NET 309,686 76,380
-------------------- --------------------
$ 76,022,960 $ 63,203,789
==================== ====================
</TABLE>
RISK ELEMENTS IN THE LOAN PORTFOLIO
THE FOLLOWING IS A SUMMARY OF RISK ELEMENTS IN THE LOAN PORTFOLIO:
<TABLE>
<CAPTION>
September 30,
---------------------------------------------
1996 1995
------------- --------------
<S> <C> <C>
LOANS:
NONACCRUAL LOANS $ 126,981 $ 8,881
ACCRUING LOANS MORE THAN 90
DAYS PAST DUE $ 93,000 $ 22,000
LOANS IDENTIFIED BY THE INTERNAL
REVIEW MECHANISM:
CRITICIZED $ 1,134,015 $ 1,047,980
CLASSIFIED $ 2,389,691 $ 1,932,211
</TABLE>
ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
IS AS FOLLOWS:
<TABLE>
<CAPTION>
1996 1995
------------ ---------
<S> <C> <C>
BALANCE, JANUARY 1, $ 671,338 $ 580,528
PROVISION FOR LOAN LOSSES FOR THE PERIOD 123,000 55,881
NET LOANS (CHARGED OFF) RECOVERED FOR
THE PERIOD (14,526) (20,580)
-------------------- ---------------------
BALANCE, END OF PERIOD $ 779,812 $ 615,829
==================== ====================
GROSS LOANS OUTSTANDING, END OF PERIOD $ 76,022,960 $ 57,686,278
ALLOWANCE FOR LOAN LOSSES TO LOANS OUTSTANDING 1.03% 1.07%
</TABLE>
12
<PAGE>
COMMUNITY CAPITAL CORPORATION
PREMISES AND EQUIPMENT
THE ACQUISITION OF A NEW OPERATIONS CENTER FOR APPROXIMATELY $500,000 AND
RENOVATIONS TO THE NEW FACILITY, THE INVESTMENT IN IMAGING EQUIPMENT, AND
CONSTRUCTION IN PROGRESS ON THE PERMANENT FACILITY AT THE CLEMSON BANK WERE THE
PRINCIPAL CONTRIBUTORS TO THE $1,298,490 INCREASE IN PREMISES AND EQUIPMENT NET
OF ACCUMULATED DEPRECIATION.
DEPOSITS
TOTAL DEPOSITS INCREASED $12,140,381 OR 16.60% FROM DECEMBER 31, 1995. EXPRESSED
IN PERCENTAGES, NON-INTEREST BEARING DEPOSITS INCREASED 21.19% AND INTEREST
BEARING DEPOSITS INCREASED 15.92%.
BALANCES WITHIN THE MAJOR DEPOSIT CATEGORIES AS OF SEPTEMBER 30, 1996 AND
DECEMBER 31, 1995 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------------- ----------------------
<S> <C> <C>
NON-INTEREST BEARING DEMAND DEPOSITS $ 11,448,381 $ 9,447,005
INTEREST BEARING DEMAND DEPOSITS 8,079,950 8,028,202
SAVINGS DEPOSITS 23,192,583 17,419,236
CERTIFICATES OF DEPOSIT 42,557,041 38,243,131
-------------------- --------------------
$ 85,277,955 $ 73,137,574
==================== ====================
</TABLE>
LIQUIDITY
DURING 1995, MANAGEMENT IMPLEMENTED STRATEGIES TO DECREASE THE LOANS-TO-ASSETS
AND LOANS-TO-FUNDS RATIOS. THE COMPANY CONTINUES TO OPERATE WITHIN THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS WITH A LOANS-TO-ASSETS RATIO OF 67.4%
AND A LOANS-TO-FUNDS RATIO OF 77.4% AS OF SEPTEMBER 30, 1996. ALTHOUGH THE
AMOUNT OF ADVANCES FROM THE FHLB HAS DECREASED $1,119,896 FROM THE DECEMBER 31,
1995 BALANCE OF $6,243,561, MANAGEMENT EXPECTS TO CONTINUE USING THESE ADVANCES
AS A SOURCE OF FUNDING. ADDITIONALLY, THE COMPANY HAS APPROXIMATELY $10,750,000
OF UNUSED LINES OF CREDIT FOR FEDERAL FUNDS PURCHASES AND $3,650,000 OF AN
UNSECURED LINE OF CREDIT AVAILABLE TO IT. THE COMPANY ALSO HAS $23,374,411 OF
SECURITIES AVAILABLE FOR SALE AS A SOURCE OF LIQUIDITY.
CAPITAL RESOURCES
STOCKHOLDERS' EQUITY WAS INCREASED BY NET INCOME OF $581,855 FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1996. ALSO, 8,558 STOCK OPTIONS WERE EXERCISED UNDER THE
COMPANY'S EMPLOYEE INCENTIVE STOCK OPTION PLAN RESULTING IN AN INCREASE TO
EQUITY OF $68,909. DUE TO CHANGES IN THE MARKET RATES OF INTEREST, THE FAIR
VALUE OF THE COMPANY'S SECURITIES AVAILABLE FOR SALE DECREASED, WHICH HAD THE
EFFECT OF DECREASING STOCKHOLDERS' EQUITY BY $316,831 NET OF THE DEFERRED TAX
EFFECTS.
THE COMPANY HAS A CONTRACT FOR THE CONSTRUCTION OF THE PERMANENT FACILITY FOR
THE CLEMSON BANK. DURING THE QUARTER ENDED SEPTEMBER 30, 1996, THE COMPANY
INCURRED COSTS OF APPROXIMATELY $230,000 WITH AN ESTIMATED COST TO COMPLETE OF
$1,100,000 TO $1,300,000.
13
<PAGE>
COMMUNITY CAPITAL CORPORATION
CAPITAL RESOURCES - CONTINUED
BANK HOLDING COMPANIES, SUCH AS THE COMPANY, AND THEIR BANK SUBSIDIARIES ARE
REQUIRED BY BANKING REGULATORS TO MEET CERTAIN MINIMUM LEVELS OF CAPITAL
ADEQUACY. THESE ARE EXPRESSED IN THE FORM OF CERTAIN RATIOS. CAPITAL IS
SEPARATED INTO TIER I CAPITAL (ESSENTIALLY COMMON STOCKHOLDERS' 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,
1996:
RISK BASED CAPITAL RATIOS
TIER I 16.0%
TOTAL CAPITAL 17.0%
LEVERAGE RATIO 12.4%
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.
THE OPENING OF THE ORGANIZING BANKS IN BELTON, NEWBERRY, AND BARNWELL AND THE
PURCHASE OF THE BANKS BY THE PARENT COMPANY ARE SUBJECT TO VARIOUS REGULATORY
APPROVALS.
14
<PAGE>
COMMUNITY CAPITAL CORPORATION
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
I. EARNINGS PER SHARE COMPUTATIONS
(B) REPORTS ON FORM 8-K
DURING THE QUARTER ENDED SEPTEMBER 30, 1996 THE COMPANY DID
NOT FILE ANY REPORTS ON FORM 8-K.
ITEMS 1, 2, 4 AND 5 ARE NOT APPLICABLE.
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
COMMUNITY CAPITAL CORPORATION
BY:
WILLIAM G. STEVENS
PRESIDENT & CHIEF EXECUTIVE OFFICER
DATE: NOVEMBER 7, 1996 BY:
JAMES H. STARK
CHIEF FINANCIAL OFFICER
15
<PAGE>
EXHIBIT I
COMMUNITY CAPITAL CORPORATION
EARNINGS PER SHARE
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
PRIMARY AND FULLY DILUTED SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- ------------------------------
EARNINGS PER SHARE 1996 1995 1996 1995
- -------------------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
NET INCOME $ 581,855 $ 354,543 $ 191,769 $ 97,614
ADD: INTEREST REVENUE
FROM ASSUMED PURCHASE
OF GOVERNMENT SECURITIES,
NET OF TAX 13,757 25,941 10,261 1,040
-------------- -------------- -------------- --------------
ADJUSTED NET INCOME FOR
FULLY DILUTED SHARES $ 595,612 $ 380,484 $ 202,030 $ 98,654
============== ============== ============== ==============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 1,217,669 841,801 1,218,378 1,200,185
DILUTIVE STOCK
EQUIVALENTS 124,039 147,348 170,786 75,670
-------------- -------------- -------------- --------------
TOTAL STOCK AND
EQUIVALENTS 1,341,708 989,149 1,389,164 1,275,855
========= ============== ========= ==============
EARNINGS PER SHARE OF
COMMON AND EQUIVALENT
SHARE $ .44 $ .38 $ .15 $ .08
============== ============== ============== ==============
</TABLE>
(1) RESTATED FOR THE EFFECT OF THE 5% STOCK DIVIDEND IN MAY OF 1996.
(2) COMPUTED USING THE TREASURY STOCK AGGREGATE METHOD MODIFIED FOR THE 20%
LIMITATION.
16
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,929,711
<INT-BEARING-DEPOSITS> 57,876
<FED-FUNDS-SOLD> 1,900,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,374,411
<INVESTMENTS-CARRYING> 23,374,411
<INVESTMENTS-MARKET> 23,374,411
<LOANS> 76,022,960
<ALLOWANCE> 779,812
<TOTAL-ASSETS> 111,583,259
<DEPOSITS> 85,277,955
<SHORT-TERM> 11,941,665
<LIABILITIES-OTHER> 1,106,266
<LONG-TERM> 0
0
0
<COMMON> 1,219,109
<OTHER-SE> 12,038,264
<TOTAL-LIABILITIES-AND-EQUITY> 111,583,259
<INTEREST-LOAN> 4,795,484
<INTEREST-INVEST> 1,049,558
<INTEREST-OTHER> 75,354
<INTEREST-TOTAL> 5,920,396
<INTEREST-DEPOSIT> 2,507,847
<INTEREST-EXPENSE> 2,899,705
<INTEREST-INCOME-NET> 3,020,691
<LOAN-LOSSES> 123,000
<SECURITIES-GAINS> 17,033
<EXPENSE-OTHER> 2,958,730
<INCOME-PRETAX> 902,433
<INCOME-PRE-EXTRAORDINARY> 902,433
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 581,855
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
<YIELD-ACTUAL> 4.30
<LOANS-NON> 126,981
<LOANS-PAST> 93,000
<LOANS-TROUBLED> 1,134,015
<LOANS-PROBLEM> 2,389,691
<ALLOWANCE-OPEN> 671,338
<CHARGE-OFFS> 14,526
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 779,812
<ALLOWANCE-DOMESTIC> 779,812
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
