UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1997
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.
2,904,363 SHARES OF COMMON STOCK, $1.00 PAR VALUE
PAGE 1 OF 18
<PAGE>
EXHIBIT INDEX ON PAGE 2
COMMUNITY CAPITAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - September 30, 1997
and December 31, 1996 ................................................ 3
Condensed Consolidated Statements of Income - Nine months ended
September 30, 1997 and 1996 and three months ended
September 30, 1997 and 1996........................................... 4
Condensed Consolidated Statement of Changes in Shareholders' Equity
for the nine months ended September 30, 1997.......................... 5
Condensed Consolidated Statements of Cash Flows - Nine months
ended September 30, 1997 and 1996..................................... 6
Notes to Condensed Consolidated Financial Statements............... 7-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 10-16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................. 17
(a) Exhibits ................................................. 17
(b) Reports on Form 8-K ...................................... 17
2
<PAGE>
COMMUNITY CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------- ------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents:
Cash and due from banks $ 6,393 $ 3,927
Federal funds sold 3,880 700
---------- ---------
Total cash and cash equivalents 10,273 4,627
Securities available-for-sale 68,017 23,280
Securities held-to-maturity (estimated
fair value of $700 at September 30, 1997) 700 -
--------- --------
Total investment securities 68,717 23,280
Loans receivable 131,836 80,546
Less allowance for loan losses (1,302) (837)
---------- ----------
Loans, net 130,534 79,709
Premises, furniture and equipment, net 8,328 3,523
Intangible assets 3,155 47
Accrued interest receivable 2,244 1,114
Other assets 4,790 3,659
-------------- --------
Total assets $ 228,041 115,959
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Deposits:
Noninterest-bearing $ 17,889 $ 12,226
Interest-bearing 155,552 77,636
---------- ----------
Total deposits 173,441 89,862
Federal funds purchased and securities
sold under agreements to repurchase 10,487 6,783
Advances from Federal Home Loan Bank 10,950 4,889
Accrued interest payable 1,101 462
Other liabilities 534 407
-------- -------
Total liabilities 196,513 102,403
---------- --------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, 10,000,000 shares
authorized, 2,901,447 and 1,219,109 shares
issued and outstanding at September 30, 1997 2,901 1,219
and December 31, 1996, respectively 2,901 27,441 12,004
Surplus
Unrealized gain on securities 260 35
available-for-sale, net of deferred taxes 926 298
------------- ---------
Retained earnings
Total shareholders' equity 31,528 13,556
------------ --------
Total liabilities and shareholders' equity $ 228,041 $ 115,959
============== ============
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
COMMUNITY CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in thousands except for per share data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months End
September 30, September 30,
----------------------- -------------------
1997 1996 1997 1996
---------------------- ------------------ --------------- ------------
Interest income:
<S> <C> <C> <C> <C>
Loans, including fees $ 7,367 $4,796 $2,915 $1,694
Securities, taxable 1,992 835 900 280
Securities, nontaxable 322 215 140 75
Other interest income 177 75 40 18
------------------ ---------------- --------------- ---------------
9,858 5,921 3,995 2,067
----------------- --------------- -------------- ----------------
Interest expense:
Deposits 4,312 2,508 1,808 856
FHLB advances 284 226 121 72
Other interest expense 217 166 94 76
----------------- ----------------- -------------- --------------
4,813 2,900 2,023 1,004
----------------- ----------------- -------------- --------------
Net interest income 5,045 3,021 1,972 1,063
Provision for loan losses 332 123 108 18
----------------- ----------------- -------------- -------------
Net interest income after
provision for loan losses 4,713 2,898 1,864 1,045
----------------- ----------------- ---------------- --------------
Other operating income:
Service charges 601 382 226 131
Residential mortgage
origination fees 179 184 71 51
Gain on sales of
securities -- 17 -- --
Other income 403 380 153 127
----------------- ----------------- --------------- ---------------
1,183 963 450 309
--------------- ----------------- ------------- --------------
Other operating expenses:
Salaries and benefits 2,376 1,443 770 526
Net occupancy expense 341 283 142 147
Furniture and equipment
expense 484 242 200 91
Other operating expenses 1,863 991 981 295
----------------- --------------- ---------------- --------------
5,064 2,959 2,093 1,059
----------------- ----------------- ---------------- ---------------
Income before taxes 832 902 221 295
Income tax provision 204 320 21 103
-------------- ------------------ ----------------- --------------
Net income $ 628 $ 582 $ 200 $ 192
------------- ---------------- ----------------- ---------------
Earnings per share
Primary and fully diluted $ .24 $ .44 $ .07 $ .15
WEIGHTED AVERAGE COMMON SHARES
AND EQUIVALENTS 2,678,874 1,341,708 2,941,207 1,389,164
</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, 1997
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Unrealized
Gain on
Securities
For Sale, Total
Common Stock Retained Shareholder's
Shares Amount Surplus Net Earnings Equity
-------------- --------- ----------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1996 1,219,109 $ 1,219 $ 12,004 $ 35 $ 29
Proceeds from stock
offering, net of
expenses 1,665,000 1,665 15,283 16,948
Proceeds from sales
of stock to ESOP 10,663 10 113 123
Proceeds from
exercise of
stock options 6,675 7 41 48
Change in fair
value for the
period 225 225
Net income
for the period 628 628
---------------- ------------- ---------------- ------------- ------------ ----------
Balance, September
30, 1997 2,901,447 $ 2,901 $ 27,441 $ 260 $ 926 $ 31,528
=============== ============== =============== ============= =========== ==========
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
COMMUNITY CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 628 $ 582
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 594 316
Provision for possible loan losses 332 123
Amortization of intangible assets 160 10
Amortization less accretion on investments 30 41
Amortization of deferred loan costs 132 97
Gain on sales of securities - (17)
Disbursements for mortgages held for sale (6,555) (7,612)
Proceeds of sales of residential mortgages 6,185 7,717
Increase in interest receivable (959) (37)
Increase in interest payable 181 255
(Increase) decrease in other assets (183) 166
Increase in other liabilities 53 129
---------------------- ---------------
Net cash provided by operating activities 598 1,740
-------------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans to customers (38,179) (13,036)
Purchases of securities available-for-sale (54,088) (9,406)
Sales of securities available-for-sale 1,998 4,012
Maturities of securities available-for-sale 7,660 3,944
Purchases of securities held-to-maturity (700) -
Purchases of nonmarketable equity securities (738) (896)
Purchases of premises and equipment (2,536) (1,615)
Acquisition of branches 35,761 -
------------------- -------------
Net cash used by investing activities (50,822) (16,997)
---------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of capital stock 16,948 -
Proceeds from exercise of stock options 48 69
Proceeds from stock sales to employee benefit plan 123 -
Stock dividend fractional shares paid in cash - (8)
Net increase in deposits accounts 28,986 12,140
Proceeds from FHLB borrowings 12,275 2,700
Repayments of FHLB borrowings (6,214) (3,820)
Proceeds from other borrowings - 1,350
Net increase in fed funds purchased and repos 3,704 2,434
----------------- --------------
Net cash provided by financing activities 55,870 14,865
---------------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,646 (392)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,627 5,279
----------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,273 $ 4,887
================= ================
</TABLE>
See notes to condensed consolidated financial statements
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 shareholders. The
financial statements as of September 30, 1997 and for the interim periods ended
September 30, 1997 and 1996 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,
1996 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 1996 Annual Report.
NOTE 2 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
(Dollars in thousands) 1997 1996
-------- -------
<S> <C> <C>
CASH PAID DURING THE YEAR FOR:
Income taxes $ 206 $ 219
Interest 4,632 2,675
NONCASH INVESTING AND FINANCING ACTIVITIES:
Foreclosure on loans 262 -
DETAILS OF ACQUISITIONS OF NEW BANKS:
Fixed assets acquired 856 -
Intangible assets 825 -
Organizational notes assumed (Note 5) (1,682) -
----------- ------------
Cash paid for acquisitions $ 0 $ -
========== ===========
DETAILS OF ACQUISITIONS OF NEW BRANCHES:
Loans, including accrued interest receivable 15,110 -
Allowance for loan losses from acquisition (255) -
Premises and equipment 2,007 -
Intangible core deposit premium 2,502 -
Deposits, including accrued interest payable (55,051) -
Other, net (74) -
------------ -------------
Cash received for net liabilities assumed $ (35,761) $ -
=========== =============
</TABLE>
NOTE 3 - LONG-TERM DEBT
Advances from the Federal Home Loan Bank were $10,950,000 as of September 30,
1997. Of this amount, the following have scheduled maturities greater than one
year:
Maturing on Interest Rate Principal
- ------------- ------------------- --------------
(Dollars in thousands)
5/23/2000 5.57% - variable
$ 800
9/25/2000 6.38% - fixed
600
9/24/2002 5.66% - fixed, callable 9/24/99
1,000
Total long-term debt $ 2,400
-----------------------
7
<PAGE>
COMMUNITY CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - SHAREHOLDERS' EQUITY
On February 14, 1997, the Company sold, through an underwritten public offering,
1,465,000 shares of its common stock at a public offering price of $11.00 per
share. On March 18, 1997, an additional 200,000 common shares were sold, also at
a public offering price of $11.00 per share, pursuant to an underwriters
over-allotment provision. Of the $16,948,000 net proceeds from the offering, the
Company used $7,200,000 to acquire all of the common stock of The Bank of
Barnwell County, $3,500,000 to acquire all of the common stock of The Bank of
Belton, and $3,300,000 to acquire all of the common stock of The Bank of
Newberry County (See Note 5).
On May 19, 1997, the Company granted 74,250 options pursuant to the terms of the
Company's Nonstatutory and Incentive Stock Option Plan. The options are
exercisable one year from the date of grant at a price of $12.50 per share and
expire May 19, 2002.
NOTE 5 - ACQUISITIONS OF NEW BANKS
On February 28, 1997, the Company used $7,200,000 of the proceeds from the stock
offering to acquire and capitalize The Bank of Barnwell County. On March 30,
1997, the Company used an additional $3,500,000 of the proceeds to acquire and
capitalize The Bank of Belton. On July 10, 1997, the Company used $3,300,000 of
the proceeds to acquire and capitalize The Bank of Newberry County. These
transactions were recorded using the purchase method of accounting. Accordingly,
the consolidated financial statements reflect the results of the operations and
the assets and liabilities of the acquired banks since the dates of the
acquisitions.
During the organizational stages, The Bank of Barnwell County, The Bank of
Belton and The Bank of Newberry County opened lines of credit with the Company's
banking subsidiaries which were guaranteed by the organizers of each organizing
bank. Upon the banks being approved for opening by the regulatory agencies and
upon the opening of the banks, the Company, per agreements with the organizers,
agreed to pay off the lines of credit.
The principle assets acquired and liabilities assumed in the purchase are
summarized below:
Barnwell Belton Newberry
Bank Bank Bank
--------- ------ ------------
(Dollars in thousands)
Premises, furniture and equipment $ 103 $ 514 $ 239
Intangible assets 365 181 280
Organizational notes (468) (695) (519)
The value of the intangible assets represents the organizational costs incurred
by the newly-acquired banks and the excess of the purchase price over the net
assets received. These costs are being amortized over five years using the
straight-line method.
8
<PAGE>
COMMUNITY CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - ACQUISITIONS OF NEW BANKS - Continued
The following unaudited proforma financial information for the Company gives
effect to the acquisitions as if they occurred on January 1, 1996. These
proforma results have been prepared for comparative purposes only and do not
purport to be indicative of the results of operations which actually would have
resulted had the acquisitions occurred on the date indicated, or which may
result in the future.
Nine months ended
September 30,
---------------------
(Dollars in thousand except per share amounts) 1997 1996
---------------------
Net income $ 388 $ 512
Net income per common share .14 .38
NOTE 6 - ACQUISITION OF BRANCHES
Effective April 7, 1997, The Bank of Barnwell County acquired certain assets and
assumed certain liabilities for five branch offices of Carolina First Bank
pursuant to the terms of a Purchase and Assumption Agreement dated January 21,
1997. The transaction was recorded using the purchase method of accounting.
Accordingly, the Company recorded the assets acquired and liabilities assumed
based on their fair market values at the date of acquisition. In recording the
loans and deposits, Carolina First Bank's book values were considered reasonable
estimates of fair value.
The principal assets acquired and liabilities assumed in the purchase are
summarized as follows:
(Dollars in thousands)
Loans, including accrued interest receivable $ 15,110
Allowance for loan losses from acquisition (255)
Premises and equipment 2,007
Intangible core deposit premiums 2,502
Deposits, including accrued interest payable (55,051)
Other, net (74)
-----------
Cash received for net liabilities assumed $ (35,761)
===========
The intangible core deposit premium was based on total deposits, excluding
certificates of deposit greater than or equal to $100,000, and are being
amortized over fifteen years using the straight-line method.
The Company has not presented proforma financial information because the
Carolina First Bank branches do not constitute a business, and income statement
information was either not available or incomplete.
9
<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, 1997 compared to December 31, 1996, and the results of operations
for the three and nine months ended September 30, 1997 compared to the three and
nine months ended September 30, 1996. These comments should be read in
conjunction with the Company's condensed consolidated financial statements and
accompanying footnotes appearing in this report.
On February 14, 1997, the Company sold, through an underwritten public stock
offering, 1,465,000 shares of its common stock at a public offering price of
$11.00 per share. On March 18, 1997, an additional 200,000 common shares were
sold, also at a public offering price of $11.00 per share, pursuant to an
underwriters over-allotment provision. Of the approximately $17,000,000 net
proceeds from the offering, the Company used $7,200,000 to acquire all of the
common stock of The Bank of Barnwell County (the "Barnwell Bank"), $3,500,000 to
acquire all of the common stock of The Bank of Belton (the "Belton Bank"), and
$3,300,000 to acquire all of the common stock of The Bank of Newberry County
(the "Newberry Bank"), all of which were formerly in organization. Effective
April 7, 1997, the Barnwell Bank acquired certain assets and assumed certain
liabilities of five branch offices of Carolina First Bank pursuant to the terms
of a Purchase and Assumption Agreement dated January 21, 1997 (the "Purchase of
the Branches").
The following comments include the results of the stock offering, the
acquisitions of the Barnwell Bank, the Belton Bank and the Newberry Bank, and
the Purchase of the Branches.
RESULTS OF OPERATIONS
- --------------------
NET INTEREST INCOME
- --------------------
For the nine months ended September 30, 1997, net interest income, the major
component of the Company's net income, was $5,045,000 compared to $3,021,000 for
the same period of 1996, an increase of $2,024,000. For the quarter ended
September 30, 1997, net interest income was $1,972,000 compared to $1,063,000
recorded during the quarter ended September 30, 1996. The improvement was
attributable to an increase in the volume of average earning assets during both
the three and nine-month periods, particularly loans and investment activities,
due to the approximately $17,000,000 net proceeds from the stock offering and
the Purchase of the Branches which added approximately $15,000,000 in loans and
investable proceeds of $35,761,000. Net interest income has also benefitted from
the continued strong loan demand in the Greenwood market and loan growth at the
Barnwell Bank and the Belton Bank. The Company has also used its network of
subsidiary banks and improved liquidity from the Purchase of the Branches to
lower its costs of funds. The average rates paid on interest-bearing liabilities
decreased to 4.83% from 4.89% for the nine-month periods ended September 30,
1997 and 1996, respectively.
The net interest spread and net interest margin were 3.52% and 4.28%,
respectively, for the nine-month period ended September 30, 1997, compared to
3.53% and 4.30% for the nine-month period ended September 30, 1996. The net
interest spread and net interest margin were 3.37% and 4.12%, respectively, for
the quarter ended September 30, 1997, compared to 3.53% and 4.30% for the
quarter ended September 30, 1996. The growth in the volume of average investment
securities, traditionally lower yielding assets than loans, as a percentage of
earning assets due to the investable proceeds from the stock offering and the
net cash received upon the Purchase of the Branches have negatively impacted the
net interest spread and net interest margin.
10
<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 and quarter ended September 30, 1997,
the provision was $332,000 and $108,000, respectively, as compared to $123,000
and $18,000 for the nine months and quarter ended September 30, 1996. 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. Upon the Purchase of the Branches, the
Company increased the allowance for loan losses by $255,000 for possible losses
in the loans acquired. Based on present information, management believes the
allowance for loan losses is adequate at September 30, 1997 to meet presently
known and inherent risks in the loan portfolio.
NONINTEREST INCOME
- ------------------
Total noninterest income for the nine months ended September 30, 1997 was
$1,183,000, an increase of $220,000, or 22.8% from the comparable period in
1996. Total noninterest income for the quarter ended September 30, 1997 was
$445,000, or $135,000 higher than the third quarter in 1996.
The increases are primarily due to an increase in service charges due to the
increase in the number of deposit accounts. Service charge income was $226,000
and $601,000 for the three and nine-month periods ended September 30, 1997
compared to $131,000 and $382,000 for the comparable periods of 1996.
NONINTEREST EXPENSE
- -------------------
Total noninterest expense for the first nine months of 1997 was $5,064,000, an
increase of $2,105,000, or 71.1%, when compared to the first nine months of
1996. For the quarter ended September 30, 1997, noninterest expense was
$2,093,000, an increase of $1,034,000 over the comparable period in 1996.
The primary component of noninterest expense is salaries and benefits which was
$2,376,000 and $1,443,000 for the nine months ended September 30, 1997 and 1996,
respectively. The $933,000 increase is primarily a result of the acquisition and
opening of the Barnwell Bank, the Belton Bank and the Newberry Bank, and the
hiring of new employees to meet the data processing and other needs of the
Company's network of banks. Furniture and equipment expense increased to
$484,000 from $242,000 largely due to an increase in depreciation charges on
technological upgrades during 1996 and the first quarter of 1997, and the new
furniture and equipment for the new banks. Other operating expenses also
increased due to the growth of the Company and the Purchase of the Branches and
the opening of the new banks.
INCOME TAXES
- -------------
For the nine months ended September 30, 1997 and 1996, the effective income tax
rate was 24.5% and 35.5%, respectively, and the income tax provision was
$204,000 and $321,000, respectively. For the quarter ended September 30, 1997,
the effective tax rate was 9.5% compared to 34.9% for the third quarter of 1996.
The decrease in the effective tax rate was due to an increase in tax-exempt
income and a change in the estimate of the annualized taxable income.
11
<PAGE>
COMMUNITY CAPITAL CORPORATION
NET INCOME
- -----------
The combination of the above factors resulted in net income of $628,000 for the
nine months ended September 30, 1997 compared to $582,000 for the comparable
period in 1996. For the quarter ended September 30, 1997, net income was
$200,000, an increase of $8,000 when compared to the third quarter of 1996.
The development and organization of the Barnwell Bank, the Belton Bank and the
Newberry Bank, including initial operating expenditures, negatively impacted
earnings for the first three quarters of 1997. However, continued profitability
at Greenwood Bank & Trust and Clemson Bank & Trust was more than enough to
offset negative earnings at the new banks.
ASSETS AND LIABILITIES
- ---------------------
During the first nine months of 1997, total assets grew $112,082,000 or 96.7%
when compared to December 31, 1996. Much of the growth was attributable to the
stock offering which resulted in net proceeds of approximately $17,000,000 and
the Purchase of the Branches by the Barnwell Bank. The principal assets acquired
and liabilities assumed in the purchase are summarized as follows:
(Dollars in thousands)
Loans, including accrued interest receivable $ 15,110
Allowance for loan losses from acquisition (255)
Premises and equipment 2,007
Intangible core deposit premiums 2,502
Deposits, including accrued interest payable (55,051)
Other, net (74)
-----------
Cash received for net liabilities assumed $ (35,761)
===========
The excess proceeds from the stock offering and cash received for net
liabilities assumed from the Purchase of the Branches were mainly used to
acquire investment securities.
The demand for quality loans in the Greenwood market remained strong and also
contributed to the growth of the asset base.
INVESTMENT SECURITIES
- ---------------------
Investment securities increased $45,437,000 during the nine-month period. The
increase is due to the investment of proceeds from the stock offering and cash
received for the net liabilities assumed upon the Purchase of the Branches in
U.S. Treasury, U.S. government agency securities and municipal securities.
12
<PAGE>
COMMUNITY CAPITAL CORPORATION
LOANS
- -----
Loans receivable increased $51,290,000 or 63.7% since December 31, 1996. This
increase was primarily due to the acquisition of $14,939,000 of loans from the
Purchase of the Branches and to the continued strong loan demand in the
Greenwood market and growth at the new banks. Balances within the major loan
receivable categories as of September 30, 1997 and December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
(Dollars in thousands)
<S> <C> <C>
Commercial and agricultural $ 27,725 $ 15,348
Real estate 69,371 49,639
Home equity 10,530 9,243
Consumer, installment 16,899 4,592
Consumer, credit card and checking 718 1,355
Residential mortgages held for sale
& other 6,593 369
-------------- --------
131,836 80,546
============== ========
</TABLE>
RISK ELEMENTS IN THE LOAN PORTFOLIO
- -----------------------------------
The following is a summary of risk elements in the loan portfolio:
<TABLE>
<CAPTION>
September 30,
------------------------------------
1997 1996
--------- ----------
(Dollars in thousands)
<S> <C> <C>
Loans:
Nonaccrual loans $ 149 $ 127
Accruing loans more than 90
days past due $ 172 $ 93
Loans identified by the internal review mechanism:
Criticized $ 2,512 $ 1,134
Classified $ 2,436 $ 2,390
</TABLE>
Activity in the Allowance for Loan Losses
is as follows:
<TABLE>
<CAPTION>
1997 1996
----------- ---------
(Dollars in thousands)
<S> <C> <C>
Balance, January 1, $ 837 $ 671
Provision for loan losses for the period 332 123
Chargeoffs (122) (14)
Recoveries - -
Reserves related to acquisitions 255 -
----------------- ----------------
Balance, end of period $ 1,302 $ 780
=============== ===========
Gross loans outstanding, end of period $ 131,836 $ 76,023
Allowance for Loan Losses to loans
outstanding 0.99% 1.03%
</TABLE>
13
<PAGE>
COMMUNITY CAPITAL CORPORATION
PREMISES AND EQUIPMENT
- ----------------------
The acquisitions of the Barnwell Bank, the Belton Bank and the Newberry Bank,
and the Purchase of the Branches were primary contributors to the $4,805,000
increase in premises and equipment. Additionally, the Company completed the
construction of the permanent facility for the Clemson Bank with total cost of
approximately $1,230,000.
DEPOSITS
- ---------
Total deposits increased $83,579,000 or 93.0% from December 31, 1996. Upon the
purchase of the Carolina First Bank branches, the Company assumed deposit
liabilities of $54,593,000 as follows:
(Dollars in thousands)
Certificates of deposit $100M and over $ 5,689
Other time deposits 24,551
Other deposits 24,353
-----------
Total deposits assumed $ 54,593
==========
Expressed in percentages, noninterest-bearing deposits increased 46.3% and
interest-bearing deposits increased slightly more than 100%.
Balances within the major deposit categories as of September 30, 1997 and
December 31, 1996 are as follows:
September 30, December 31,
1997 1996
------------ -----------
(Dollars in thousands)
Noninterest-bearing demand deposits $ 17,889 $ 12,226
Interest-bearing demand deposits 27,316 8,296
Money market accounts 20,291 14,035
Savings deposits 15,107 8,681
Certificates of deposit 92,838 46,624
------------ -------------
$ 173,441 $ 89,862
=========== ============
LONG-TERM DEBT
- -------------
Advances from the Federal Home Loan Bank increased to $10,950,000 as of
September 30, 1997 from $4,889,000 as of December 31, 1996. Of the total
borrowings as of September 30, 1997, the following advances have maturity dates
greater than one year:
Principal Maturity
Amount Interest Rate Date
- -------- -------------- -----------
(Dollars in thousands)
$ 1,000 5.66% September 24, 2002
600 6.38 %-fixed September 25, 2000
800 5.57 %-variable May 23, 2000
- -------
$ 2,400
14
<PAGE>
COMMUNITY CAPITAL CORPORATION
CAPITAL
Quantitative measures established by the federal banking agencies to ensure
capital adequacy require the Company and its banking subsidiaries to maintain
minimum ratios of Tier 1 and total capital as a percentage of assets and
off-balance-sheet exposures, adjusted for risk weights ranging from 0% to 100%.
Tier 1 capital consists of common shareholders' equity, excluding the unrealized
gain or loss on securities available for sale, minus certain intangible assets.
Tier 2 capital consists of the allowance for loan losses subject to certain
limitations. Total capital for purposes of computing the capital ratios consists
of the sum of Tier 1 and Tier 2 capital. The regulatory minimum requirements are
4% for Tier 1 and 8% for total risk-based capital.
The Company and its banking subsidiaries are also required to maintain capital
at a minimum level based on total average assets, which is known as the leverage
ratio. Only the strongest banks are allowed to maintain capital at the minimum
requirement of 3%. All others are subject to maintaining ratios 1% to 2% above
the minimum.
The following table summarizes the capital ratios of the Company and its banking
subsidiaries and the regulatory minimum requirements at September 30, 1997
<TABLE>
<CAPTION>
Tier 1 Total Tier 1
Risk Based Risk Based Leverage
------------- ----------- ----------
<S> <C> <C> <C>
Actual ratio:
Community Capital Corporation 18.86% 19.74% 13.59%
Greenwood Bank & Trust 11.13 12.10 7.95
Clemson Bank & Trust 23.47 24.56 15.45
The Bank of Barnwell County 13.74 14.41 8.39
The Bank of Belton 42.63 43.65 27.83
The Bank of Newberry County 53.54 54.07 34.42
Regulatory minimums:
For capital adequacy purposes 4.00 8.00 4.00
To be well-capitalized under
prompt action provisions 6.00 10.00 5.00
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------
Shareholders' equity was increased by the $17,000,000 net proceeds from the
offering, the $48,000 proceeds from the exercise of stock options, the $124,000
proceeds from sales of stock to the Employee Stock Ownership Plan, and net
income of $628,000. Due to changes in the market rates of interest, the fair
value of the Company's securities available for sale increased which had the
effect of increasing shareholders' equity by $225,000 net of the deferred tax
effects.
The Company used approximately $7,200,000 of the net proceeds from the stock
offering to purchase and capitalize the Barnwell Bank, used approximately
$3,500,000 to purchase and capitalize Belton Bank and used approximately
$3,300,000 to purchase and capitalize the Newberry Bank.
15
<PAGE>
COMMUNITY CAPITAL CORPORATION
LIQUIDITY AND CAPITAL RESOURCES - Continued
The Company's liquidity was improved by the stock offering and the Purchase of
the Branches, resulting in a decrease in the loans-to-deposits ratio to 76.0% as
of September 30, 1997 from 89.6% as of December 31, 1996. A significant portion
of the cash received was invested in securities of the U.S. Treasury, U.S.
government agencies and municipalities. For the near term, maturities and sales
of securities available for sale are expected to be a primary source of
liquidity as the Company and its subsidiary banks deploy these funds into loans
to achieve the desired mix of assets and liabilities. The Company also expects
to build its deposit base in its new markets. Short-term borrowings are not
expected to be a primary source of liquidity for the near term: however, the
Company has approximately $18,230,000 of unused lines of credit to purchase
federal funds.
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.
ACCOUNTING RULE CHANGES
During the first quarter of 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings Per Share", which addresses the computation,
presentation, and disclosure requirements for earnings per share by entities
with publicly held common stock. Statement No. 128 is effective for both interim
and annual periods ending after December 15, 1997. Earlier application is not
permitted.
16
<PAGE>
COMMUNITY CAPITAL CORPORATION
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(1) Exhibits
I. Earnings per share computations
(2) The Company filed a report on Form 8-K on July 17, 1997,
reporting the acquisition and initial capitalization of The Bank
of Newberry County, a South Carolina state bank (formerly in
organization) in Newberry, South Carolina on July 10, 1997. The
Company paid cash of $3,300,000 for all 330,000 shares of the
bank's common stock. The report on Form 8-K included, as an
exhibit, a copy of the press release announcing the acquisition
and opening of the bank. No financial statements were filed with
this report.
Items 1 through 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: /s/
----------------------------
William G. Stevens
President & Chief Executive Officer
Date: November 12, 1997 By:/s/
---------------------------------
James H. Stark
Chief Financial Officer
17
<PAGE>
<TABLE>
<CAPTION>
COMMUNITY CAPITAL CORPORATION
EARNINGS PER SHARE
EXHIBIT I
Nine Months Ended Three Months Ended
September 30, September 30,
Primary and Fully Diluted
Earnings Per Share 1997 1996 1997 1996
- ---------------------- --------- ----------- ------- -------
(Dollars in thousands except for per share data)
<S> <C> <C> <C> <C>
Net income $ 628 $ 582 $ 200 $ 192
Add: Interest revenue
fromm assumed purchased
of goverment securities,
net of tax - 14 - 10
-------- --------- ---------- ------
Adjusted net income for
fully diluted shares $ 628 $ 596 $ 200 $ 202
========= ========== ============ ==========
Weighted average number
of common shares
outstanding 2,596,830 1,217,669 2,899,204 1,218,378
Dilutive stock
equivalents 82,044 124,039 42,003 170,786
--------- ------------ ------------ -----------
2,678,874 1,341,708 2,941,207 1,389,164
--------- ------------ ------------ -----------
Earnings per share of
common and equivalent
shares $ .24 $ .44 $ .07 $ .15
============ ========== ============= ==========
</TABLE>
(1) Computed using the Treasury Stock Aggregate Method modified for the 20%
limitation.
18
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,393,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,880,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 68,017,000
<INVESTMENTS-CARRYING> 700,000
<INVESTMENTS-MARKET> 700,000
<LOANS> 131,836,000
<ALLOWANCE> 1,302,000
<TOTAL-ASSETS> 228,041,000
<DEPOSITS> 173,441,000
<SHORT-TERM> 19,037,000
<LIABILITIES-OTHER> 1,635,000
<LONG-TERM> 2,400,000
0
0
<COMMON> 2,901,000
<OTHER-SE> 28,627,000
<TOTAL-LIABILITIES-AND-EQUITY> 228,041,000
<INTEREST-LOAN> 7,367,000
<INTEREST-INVEST> 2,314,000
<INTEREST-OTHER> 177,000
<INTEREST-TOTAL> 9,858,000
<INTEREST-DEPOSIT> 4,312,000
<INTEREST-EXPENSE> 4,813,000
<INTEREST-INCOME-NET> 5,045,000
<LOAN-LOSSES> 332,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,064,000
<INCOME-PRETAX> 832,000
<INCOME-PRE-EXTRAORDINARY> 832,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 628,000
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
<YIELD-ACTUAL> 4.28
<LOANS-NON> 149,000
<LOANS-PAST> 172,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,512,000
<ALLOWANCE-OPEN> 837,000
<CHARGE-OFFS> 122,000
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,302,000
<ALLOWANCE-DOMESTIC> 1,302,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
