SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1997
Commission file number: 0-18460
COMMUNITY CAPITAL CORPORATION
(Exact name of Registrant as specified in its charter)
South Carolina 57-0866395
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
109 Montague Avenue
Greenwood, South Carolina 29646
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(Address of principal
executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 941-8200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class On Which Reported
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Common Stock, par value $1.00 per share American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant on March 23, 1998 was approximately $46,829,278 based upon the last
sale price reported for such date on the American Stock Exchange. On that date,
the number of shares outstanding of the Registrant's common stock, $1.00 par
value, was 2,924,034.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement in connection with its 1998 Annual
Meeting of Stockholders (Part III).
<PAGE>
PART I
Item 1. Business.
General
Community Capital Corporation (the "Company") is a multi-bank
holding company headquartered in Greenwood, South Carolina. The Company was
incorporated under the laws of the State of South Carolina on April 8, 1988 as a
holding company for Greenwood Bank & Trust (the "Greenwood Bank") which opened
in 1989.
The Company was formed principally in response to perceived
opportunities resulting from takeovers of several South Carolina-based banks by
large southeastern regional bank holding companies. In many cases, when these
consolidations occur, local boards of directors are dissolved and local
management is relocated or terminated. The Company believes this situation
creates favorable opportunities for new community banks with local management
and local directors. Management believes that such banks can be successful in
attracting individuals and small to medium-sized businesses as customers who
wish to conduct business with a locally owned and managed institution that
demonstrates an active interest in their business and personal financial
affairs.
In 1994, the Company made the strategic decision to expand beyond
the Greenwood County area by creating an organization of independently managed
community banks that serve their respective local markets but which share a
common vision and benefit from the strength, resources and economies of a larger
institution. In 1995, the Company opened Clemson Bank & Trust (the "Clemson
Bank") in Clemson, South Carolina. In 1997, the Company opened the Bank of
Barnwell County (the "Barnwell Bank"), The Bank of Belton (the "Belton Bank")
and The Bank of Newberry County (the "Newberry Bank," and collectively with the
Barnwell Bank and the Belton Bank, the "New Banks"). Each of these five
community banks (collectively, the "Banks") operates as a wholly-owned
subsidiary of the Company and engages in a general commercial banking business,
emphasizing the banking needs of individuals and small to medium-sized
businesses in each Bank's primary service area. The Belton Bank, the Greenwood
Bank and the Newberry Bank are state chartered Federal Reserve member banks,
while the Barnwell Bank and the Clemson Bank are state chartered nonmember
banks.
The Company formed Community Trust Services Company in the fourth
quarter of 1997 as a wholly-owned subsidiary to perform trust services for the
Banks.
Formation of New Banks in 1997
On February 28, 1997, the Barnwell Bank was formed in Barnwell,
South Carolina through the Company's acquisition of all of the common stock of
the Barnwell Bank using $7.5 million of the proceeds from the Company's February
11, 1997 public offering of common stock (the "Offering").
On March 25, 1997, the Belton Bank was formed in Belton, South
Carolina through the Company's acquisition of all of the common stock of the
Belton Bank using $3.5 million of the proceeds from the Offering.
On July 10, 1997, the Newberry Bank was formed in Newberry, South
Carolina through the Company's acquisition of all of the common stock of the
Newberry Bank using $3.3 million of the proceeds from the Offering.
Branch Acquisitions
On April 7, 1997, the Barnwell Bank acquired certain assets and
assumed certain deposits and other liabilities associated with five bank
branches formerly owned by Carolina First Bank ("Carolina First") and located in
the communities of Barnwell, Blackville, Salley, Springfield and Williston,
South Carolina. Included in the assets acquired were certain loans associated
with the Carolina First branches, as well as the real property owned or leased
by Carolina First for the operation of such branches, and related furniture,
equipment and other fixed operating assets.
On February 25, 1998, the Belton Bank and the Clemson Bank each
entered into Purchase and Assumption Agreements to acquire certain assets and
deposits associated with three branch offices of Carolina First. The Clemson
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Bank will acquire a branch located in Abbeville County, South Carolina which has
approximately $5,000,000 in deposits and $600,000 in loans (unaudited). The
Belton Bank will acquire two branches in Anderson County, South Carolina which
have approximately $39,000,000 in deposits and $1,500,000 in loans (unaudited).
Market Areas
The Greenwood Bank has three banking locations, two of which are
located in Greenwood, South Carolina and the other is located in Ninety Six,
South Carolina. The Greenwood Bank has entered into an agreement with The
Palmetto Bank for the sale of substantially all of the assets associated with
the Ninety Six branch. This sale is expected to close in the second quarter of
1998. See "Managements's Discussion and Analysis of Financial Position and
Results of Operations - Liquidity Management and Capital Resources."
The Clemson Bank has one banking location in Clemson, South
Carolina; the Barnwell Bank has six banking locations in Aiken, Barnwell and
Orangeburg Counties, South Carolina; the Belton Bank has one banking location in
Belton, South Carolina; and the Newberry Bank has one banking location in
Newberry, South Carolina.
The following table sets forth certain information concerning the
Banks at December 31, 1997:
<TABLE>
<CAPTION>
Number of Total Total Total
Bank Locations Assets Loans Deposits
- ---- --------- ------ ----- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Barnwell Bank................. 6 $77,546 $39,065 $59,832
Belton Bank................... 1 16,472 11,015 12,946
Clemson Bank.................. 1 28,259 16,773 20,654
Greenwood Bank................ 3 109,702 77,964 81,459
Newberry Bank................. 1 16,241 5,120 12,946
</TABLE>
Each Bank offers a full range of commercial banking services,
including checking and savings accounts, NOW accounts, IRA accounts, and other
savings and time deposits of various types ranging from money markets to
long-term certificates of deposit. The Banks also offer a full range of consumer
credit and short-term and intermediate-term commercial and personal loans. Each
Bank conducts residential mortgage loan origination activities pursuant to which
mortgage loans are sold to investors in the secondary markets. Servicing of such
loans is not retained by the Banks.
The Banks also offer trust and related fiduciary services which are
administered by the Company's wholly-owned subsidiary, Community Trust Services
Company. Discount securities brokerage services are available through a
third-party brokerage service which has contracted with Community Financial
Services, Inc., a wholly-owned subsidiary of the Greenwood Bank.
The Company performs data processing functions for the Banks upon
terms that the managements of the Banks believe is competitive with those
offered by unaffiliated third-party service bureaus. The Company also
administers certain operating functions for the Banks where cost savings can be
achieved. Included in such operations are regulatory compliance, personnel, and
internal audit functions. The Company's costs associated with the performance of
such services are allocated between the Banks based on each Bank's total assets.
Lending Activities
General. Through the Banks, the Company offers a range of lending
services, including real estate, consumer, and commercial loans, to individuals
and small business and other organizations that are located in or conduct a
substantial portion of their business in the Banks' market areas. The Company's
total loans at December 31, 1997, were $149 million, or 65.6% of total earning
assets. The interest rates charged on loans vary with the degree of risk,
maturity, and amount of the loan, and are further subject to competitive
pressures, availability of funds, and government regulations. The Company has no
foreign loans or loans for highly leveraged transactions.
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The Company's primary focus has been on commercial and installment
lending to individuals and small to medium-sized businesses in its market areas,
as well as residential mortgage loans. These loans totaled approximately
$77 million, and constituted approximately 51.7% of the Company's loan
portfolio, at December 31, 1997.
The following table sets forth the composition of the Company's loan
portfolio for each of the five years in the period ended December 31, 1997.
Loan Composition
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural 23.94% 24.19% 21.12% 19.05% 24.19%
Real estate:
Construction ...................... 25.89 11.68 13.42 12.37 8.61
Mortgage:
Residential .................... 25.22 29.62 35.62 39.13 27.48
Commercial(1) .................. 16.81 26.57 22.45 21.87 21.81
Consumer and other ................... 8.14 7.94 7.39 7.58 17.91
----------- ----------- ----------- ----------- -----------
Total loans ................. 100.00% 100.00% 100.00% 100.00% 100.00%
=========== =========== =========== =========== ===========
Total loans (dollars) ....... $ 44,634 $ 50,565 $ 63,204 $ 80,546 $ 149,127
=========== =========== =========== =========== ===========
</TABLE>
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(1) The majority of these loans are made to operating businesses where real
property has been taken as additional collateral.
Loan Approval. Certain credit risks are inherent in the loan making
process. These include prepayment risks, risks resulting from uncertainties in
the future value of collateral, risks resulting from changes in economic and
industry conditions, and risks inherent in dealing with individual borrowers. In
particular, longer maturities increase the risk that economic conditions will
change and adversely affect collectibility. The Company attempts to minimize
loan losses through various means and uses standardized underwriting criteria.
These means include the use of policies and procedures including officer and
customer lending limits, and loans in excess of certain limits must be approved
by the Board of Directors of the relevant Banks.
Loan Review. The Company has a continuous loan review process
designed to promote early identification of credit quality problems. All loan
officers are charged with the responsibility of reviewing all past due loans in
their respective portfolios. Each of the Banks establishes watch lists of
potential problem loans.
Deposits
The principal sources of funds for the Banks are core deposits,
consisting of demand deposits, interest-bearing transaction accounts, money
market accounts, saving deposits, and certificates of deposit. Transaction
accounts include checking and negotiable order of withdrawal (NOW) accounts
which customers use for cash management and which provide the Banks with a
source of fee income and cross-marketing opportunities, as well as a low-cost
source of funds. Time and savings accounts also provide a relatively stable
source of funding. The largest source of funds for the Banks is certificates of
deposit. Certificates of deposit in excess of $100,000 are held primarily by
customers in the Banks' market areas. Deposit rates are set weekly by senior
management of each of the Banks, subject to approval by management of the
Company. Management believes that the rates the Banks offer are competitive with
other institutions in the Banks' market areas.
Competition
Banks generally compete with other financial institutions through
the selection of banking products and services offered, the pricing of services,
the level of service provided, the convenience and availability of services, and
the degree of expertise and the personal manner in which services are offered.
South Carolina law permits
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statewide branching by banks and savings institutions, and many financial
institutions in the state have branch networks. Consequently, commercial banking
in South Carolina is highly competitive. South Carolina law also permits
regional interstate banking whereby bank holding companies in certain
southeastern states are allowed to acquire depository institutions within South
Carolina. Many large banking organizations currently operate in the respective
market areas of the Banks, several of which are controlled by out-of-state
ownership. In addition, competition between commercial banks and thrift
institutions (savings institutions and credit unions) has been intensified
significantly by the elimination of many previous distinctions between the
various types of financial institutions and the expanded powers and increased
activity of thrift institutions in areas of banking which previously had been
the sole domain of commercial banks. Recent legislation, together with other
regulatory changes by the primary regulators of the various financial
institutions, has resulted in the almost total elimination of practical
distinctions between a commercial bank and a thrift institution. Consequently,
competition among financial institutions of all types is largely unlimited with
respect to legal ability and authority to provide most financial services.
Furthermore, as a consequence of legislation recently enacted by the United
States Congress, out-of-state banks not previously allowed to operate in South
Carolina will be allowed to commence operations and compete in the Banks'
primary service areas if the South Carolina legislature does not elect to limit
the reach of such federal legislation within South Carolina. See "Government
Supervision and Regulation -- Interstate Banking."
Each of the Banks faces increased competition from both
federally-chartered and state-chartered financial and thrift institutions, as
well as credit unions, consumer finance companies, insurance companies and other
institutions in the Banks' respective market areas. Some of these competitors
are not subject to the same degree of regulation and restriction imposed upon
the Banks. Many of these competitors also have broader geographic markets and
substantially greater resources and lending limits than the Banks and offer
certain services that the Banks do not currently provide. In addition, many of
these competitors have numerous branch offices located throughout the extended
market areas of the Banks that the Company believes may provide these
competitors with an advantage in geographic convenience that the Banks do not
have at present. Such competitors may also be in a position to make more
effective use of media advertising, support services, and electronic technology
than can the Banks.
Currently there are two other commercial banks, one savings
institution and one credit union operating in the Barnwell Bank's primary
service areas; three other commercial banks, one savings institution and no
credit unions operating in the Belton Bank's primary service area; three other
commercial banks, one savings institution, and one credit union operating in the
Clemson Bank's primary service area; five other commercial banks, two savings
institutions, and seven credit unions operating in the Greenwood Bank's primary
service area; and six other commercial banks, one savings institution, and one
credit union operating in the Newberry Bank's primary service area.
Employees
The Company currently has twenty-three full-time employees and three
part-time employees, the Barnwell Bank has thirty-four full-time employees and
four part-time employees, the Belton Bank has six full-time employees and one
part-time employee, the Clemson Bank has eight full-time employees and one
part-time employee, the Greenwood Bank has thirty-nine full-time employees and
two part-time employees, and the Newberry Bank has eight full-time employees and
one part-time employee. Community Trust Services Company has two full-time
employees.
Government Supervision and Regulation
General
The Company and the Banks are subject to an extensive collection of
state and federal banking laws and regulations which impose specific
requirements and restrictions on, and provide for general regulatory oversight
with respect to, virtually all aspects of the Company's and the Banks'
operations. The Company and the Banks are also affected by government monetary
policy and by regulatory measures affecting the banking industry in general. The
actions of the Federal Reserve System affect the money supply and, in general,
the Banks' lending abilities in increasing or decreasing the cost and
availability of funds to the Banks. Additionally, the Federal Reserve System
regulates the availability of bank credit in order to combat recession and curb
inflationary pressures in the economy by open market operations in United States
government securities, changes in the discount rate on member bank borrowings,
changes in the reserve requirements against bank deposits and limitations on
interest rates which banks may pay on time and savings deposits.
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<PAGE>
The Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA") and the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") have significantly changed the commercial banking industry
through, among other things, revising and limiting the types and amounts of
investment authority, significantly increasing minimum regulatory capital
requirements, and broadening the scope and power of federal bank and thrift
regulators over financial institutions and affiliated persons in order to
protect the deposit insurance funds and depositors. These laws, and the
resulting implementing regulations, have subjected the Banks and the Company to
extensive regulation, supervision and examination by the Federal Reserve System
and the FDIC. This change has resulted in increased administrative, professional
and compensation expenses in complying with a substantially increased number of
new regulations and policies. The regulatory structure created by these laws
gives the regulatory authorities extensive authority in connection with their
supervisory and enforcement activities and examination policies.
The following is a brief summary of certain statutes, rules and
regulations affecting the Company and the Banks. This summary is qualified in
its entirety by reference to the particular statutory and regulatory provisions
referred to below and is not intended to be an exhaustive description of the
statutes or regulations applicable to the business of the Company and the Banks.
Any change in applicable laws or regulations may have a material adverse effect
on the business and prospects of the Company and the Banks.
The Company
The Company is a bank holding company within the meaning of the
Federal Bank Holding Company Act of 1956, as amended (the "BHCA"), and the South
Carolina Banking and Branching Efficiency Act of 1996, as amended (the "South
Carolina Act"). The Company is registered with both the Federal Reserve System
and the South Carolina State Board of Financial Institutions (the "State
Board"). The Company is required to file with both of these agencies annual
reports and other information regarding its business operations and those of its
subsidiaries. It is also subject to the supervision of, and to regular
examinations by, these agencies. The BHCA requires every bank holding company to
obtain the prior approval of the Federal Reserve Board before (i) it or any of
its subsidiaries (other than a bank) acquires substantially all of the assets of
any bank, (ii) it acquires ownership or control of any voting shares of any bank
if after such acquisition it would own or control, directly or indirectly, more
than 5% of the voting shares of such bank, or (iii) it merges or consolidates
with any other bank holding company. Under the South Carolina Act, it is
unlawful without the prior approval of the State Board for any South Carolina
bank holding company (i) to acquire direct or indirect ownership or control of
more than 5% of the voting shares of any bank or any other bank holding company,
(ii) to acquire all or substantially all of the assets of a bank or any other
bank holding company, or (iii) to merge or consolidate with any other bank
holding company.
The BHCA and the Federal Change in Bank Control Act, together with
regulations promulgated by the Federal Reserve Board, require that, depending on
the particular circumstances, either the Federal Reserve Board's approval must
be obtained or notice must be furnished to the Federal Reserve Board and not
disapproved prior to any person or company acquiring control of a bank holding
company, such as the Company, subject to certain exemptions for certain
transactions.
Under the BHCA, a bank holding company is generally prohibited from
engaging in, or acquiring direct or indirect control of more than 5% of the
voting shares of any company engaged in, nonbanking activities, unless the
Federal Reserve Board, by order or regulation, has found those activities to be
so closely related to banking or managing or controlling banks as to be a proper
incident thereto. Some of the activities that the Federal Reserve Board has
determined by regulation to be proper incidents to the business of a bank
holding company include making or servicing loans and certain types of leases,
engaging in certain insurance and discount brokerage activities, performing
certain data processing services, acting in certain circumstances as a fiduciary
or investment or financial adviser, owning savings associations and making
investments in certain corporations or projects designed primarily to promote
community welfare. The Company is also restricted in its activities by the
provisions of the Glass-Steagall Act of 1933, which prohibits the Company from
owning subsidiaries that are engaged principally in the issue, flotation,
underwriting, public sale or distribution of securities. The regulatory
requirements to which the Company is subject also set forth various conditions
regarding the eligibility and qualifications of its directors and officers.
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The Banks
The operations of the Belton Bank, the Greenwood Bank and the
Newberry Bank are subject to various statutory requirements and rules and
regulations promulgated and enforced primarily by the State Board, the Federal
Reserve System, and the FDIC. As South Carolina-chartered banking corporations
with FDIC deposit insurance, the Clemson Bank and the Barnwell Bank are also
subject to various statutory requirements and rules and regulations promulgated
and enforced primarily by the State Board and the FDIC. The State Board and the
FDIC regulate or monitor all areas of the Banks' respective operations,
including security devices and procedures, adequacy of capitalization and loss
reserves, loans, investments, borrowings, deposits, mergers, issuances of
securities, payment of dividends, interest rates payable on deposits, interest
rates or fees chargeable on loans, establishment of branches, corporate
reorganizations, maintenance of books and records, and adequacy of staff
training to carry on safe lending and deposit gathering practices.
The Federal Reserve System and the FDIC also require the Banks to
maintain certain capital ratios (see "Federal Capital Regulations"), and the
provisions of the Federal Reserve Act require the Belton Bank, the Greenwood
Bank and the Newberry Bank to observe certain restrictions on any extensions of
credit to the Company, or with certain exceptions, other affiliates, on
investments in the stock or other securities of other banks, and on the taking
of such stock or securities as collateral on loans to any borrower. In addition,
the Banks are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, or the providing of any property or
service. The regulatory requirements to which the Banks are subject also set
forth various conditions regarding the eligibility and qualification of their
directors and officers.
Dividends
Although the Company is not presently subject to any direct legal or
regulatory restrictions on dividends (other than the South Carolina state
business corporation law requirements that dividends may be paid only if such
payment would not render the Company insolvent or unable to meet its obligations
as they come due), the Company's ability to pay cash dividends will depend
primarily upon the amount of dividends paid by each of the Banks and any other
subsequently acquired entities. The Banks are subject to regulatory restrictions
on the payment of dividends, including the prohibition of payment of dividends
from each Bank's capital. All dividends of the Banks must be paid out of the
respective undivided profits then on hand, after deducting expenses, including
losses and bad debts. In addition, as a member of the Federal Reserve System,
each of the Belton Bank, the Greenwood Bank and the Newberry Bank is prohibited
from declaring a dividend on its shares of common stock until its surplus equals
its stated capital, unless there has been transferred to surplus no less than
one-tenth of such bank's net profits of the preceding two consecutive half-year
periods (in the case of an annual dividend) and the approval of the Federal
Reserve Board is required if the total of all dividends declared by any of the
Belton Bank, the Greenwood Bank or the Newberry Bank in any calendar year
exceeds the total of its net profits for that year combined with that Bank's
retained net profits for the preceding two years, less any required transfers to
surplus. The Banks are subject to various other federal and state regulatory
restrictions on the payment of dividends, including receipt of the approval of
the South Carolina Commissioner of Banking prior to paying dividends to the
Company.
FIRREA
FIRREA has had a significant impact on the operations of all
financial institutions, including the Banks. FIRREA, among other things,
abolished the Federal Savings and Loan Insurance Corporation and established two
new insurance funds under the jurisdiction of the FDIC: the Savings Association
Fund and the Bank Insurance Fund (see "FDIC Regulations"). FIRREA also imposed,
with certain exceptions, a "cross guaranty" on the part of commonly controlled
depository institutions such as the Banks. Under this provision, if one
depository institution subsidiary of a multi-bank holding company fails or
requires FDIC assistance, the FDIC may assess a commonly controlled depository
institution for the estimated losses suffered by the FDIC. Consequently, each of
the Banks is subject to assessment by the FDIC related to any loss suffered by
the FDIC arising out of the operations of the other Banks. The FDIC's claim is
junior to the claims of nonaffiliated depositors, holders of secured
liabilities, general creditors and subordinated creditors but is superior to the
claims of shareholders.
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FDIC Regulations
The FDIC establishes rates for the payment of premiums by federally
insured banks and thrifts for deposit insurance. Deposits in the Banks are
insured by the FDIC up to a maximum amount (generally $100,000 per depositor,
subject to aggregation rules), and the FDIC maintains an insurance fund for
commercial banks with insurance premiums from the industry used to offset losses
from insurance payouts when banks fail. The Banks pay premiums to the FDIC on
their deposits. In 1993, the FDIC adopted a rule which establishes a risk-based
deposit insurance premium system for all insured depository institutions,
including the Banks. Under the 1993 rule, a depository institution pays to the
FDIC a premium of from $0.00 to $0.31 per $100 of insured deposits depending on
its capital levels and risk profile, as determined by its primary federal
regulator on a semi-annual basis. During 1997, each Bank's assessment rate was
$500 per quarter for insured deposits.
Federal Capital Regulations
In an effort to achieve a measure of capital adequacy that is more
sensitive to the individual risk profiles of financial institutions, pursuant to
the provisions of the FDICIA, the Federal Reserve Board, the FDIC, and other
federal banking agencies have adopted risk-based capital adequacy guidelines for
banking organizations insured by the FDIC, including each of the Banks. These
guidelines redefine traditional capital ratios to take into account assessments
of risks related to each balance sheet category, as well as off-balance sheet
financing activities. The guidelines define a two-tier capital framework. Tier 1
capital consists of common and qualifying preferred shareholders' equity,
excluding the unrealized gain (loss) on available-for-sale securities, less
goodwill and other adjustments. Tier 2 capital consists of mandatory
convertible, subordinated and other qualifying term debt, preferred stock not
qualifying for Tier 1, and the allowance for credit losses up to 1.25% of
risk-weighted assets. Under the guidelines, institutions must maintain a
specified minimum ratio of "qualifying" capital to risk-weighted assets. At
least 50% of an institution's qualifying capital must be "core" or "Tier 1"
capital, and the balance may be "supplementary" or "Tier 2" capital. The
guidelines imposed on the Company and the Banks include a minimum leverage ratio
standard of capital adequacy. The leverage standard requires top-rated
institutions to maintain a minimum Tier 1 capital to assets ratio of 3%, with
institutions receiving less than the highest rating required to maintain a
minimum ratio of 4% or greater, based upon their particular circumstances and
risk profiles. As of December 31, 1997, the guidelines required achievement of a
minimum ratio of total capital to risk-weighted assets of 8% and a minimum ratio
of Tier 1 capital to risk-weighted assets of 4%.
Each of the Company's and Bank's leverage and risk-based capital
ratios at December 31, 1997, exceeded their respective fully phased-in minimum
requirements.
Other Regulations
Interest and certain other charges collected or contracted for by
the Banks are subject to state usury laws and certain federal laws concerning
interest rates. The Banks' loan operations are also subject to certain federal
laws applicable to credit transactions, such as the federal Truth-In-Lending Act
governing disclosures of credit terms to consumer borrowers, the Community
Reinvestment Act of 1977 requiring financial institutions to meet their
obligations to provide for the total credit needs of the communities they serve,
including investing their assets in loans to low- and moderate-income borrowers,
the Home Mortgage Disclosure Act of 1975 requiring financial institutions to
provide information to enable public officials to determine whether a financial
institution is fulfilling its obligations to help meet the housing needs of the
community it serves, the Equal Credit Opportunity Act prohibiting discrimination
on the basis of race, creed or other prohibited factors in extending credit, the
Fair Credit Reporting Act governing the manner in which consumer debts may be
collected by collection agencies, and the rules and regulations of the various
federal agencies charged with the responsibility of implementing such federal
laws. The deposit operations of the Banks also are subject to the Right to
Financial Privacy Act, which imposes a duty to maintain confidentiality of
consumer financial records and prescribes procedures for complying with
administrative subpoenas of financial records, and the Electronic Funds Transfer
Act and Regulation E issued by the Federal Reserve Board to implement that Act,
which govern automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of automated teller
machines and other electronic banking services.
Interstate Banking
On September 29, 1994, the federal government enacted the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "1994
Act"). The provisions of the 1994 Act became effective on September 29, 1995,
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at which time eligible bank holding companies in any state were permitted, with
Federal Reserve Board approval, to acquire banking organizations in any other
state. As such, all existing regional compacts and substantially all existing
regional limitations on interstate acquisitions of banking organizations have
been eliminated.
The 1994 Act also removed substantially all of the existing
prohibitions on interstate branching by banks. Since June 1, 1997, a bank
operating in any state has been entitled to establish one or more branches
within any other state without, as formerly required, the establishment of a
separate banking structure within the other state. Interstate branching was
allowed earlier than the automatic phase-in date of June 1, 1997, as long as the
legislatures of both states involved had adopted statutes expressly permitting
such branching to take place at an earlier date.
On May 7, 1996, South Carolina adopted the South Carolina Act which
became effective on July 1, 1996. The South Carolina Act permits the acquisition
of South Carolina banks and bank holding companies by, and mergers with,
out-of-state banks and bank holding companies with the prior approval of the
State Board. The South Carolina Act also permits South Carolina state banks,
with prior approval of the State Board, to operate branches outside the State of
South Carolina. Although the 1994 Act has the potential to increase the number
of competitors in the marketplace of each of the Banks, the Company cannot
predict the actual impact of such legislation on the competitive position of the
Banks.
Advisory Note Regarding Forward-Looking Statements
Certain of the statements contained in this PART I, Item 1
(Business) and in PART II, Item 7 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) that are not historical facts are
forward-looking statements subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. The Company cautions readers of this
Annual Report on Form 10-K that such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from those expressed or implied by such forward-looking statements. Although the
Company's management believes that their expectations of future performance are
based on reasonable assumptions within the bounds of their knowledge of their
business and operations, there can be no assurance that actual results will not
differ materially from their expectations.
Factors which could cause actual results to differ from expectations
include, among other things, the challenges, costs and complications associated
with the continued development of the New Banks as start-up operations with no
history of operating profits; the ability of the Company to effectively
integrate and staff the operations of the New Banks as well as the operations
allocated to the base of deposits acquired in connection with branch
acquisitions; the ability of the Company to retain and deploy in a timely manner
the cash associated with branch acquisitions into assets with satisfactory
yields and credit risk profiles; the potential that loan charge-offs may exceed
the allowance for loan losses or that such allowance will be increased as a
result of factors beyond the control of the Company; the Company's dependence on
senior management; competition from existing financial institutions operating in
the Company's market areas as well as the entry into such areas of new
competitors with greater resources, broader branch networks and more
comprehensive services; the potential adverse impact on net income of rapidly
declining interest rates; adverse changes in the general economic conditions in
the geographic markets served by the Company; the challenges and uncertainties
in the implementation of the Company's expansion and development strategies; the
potential negative effects of future legislation affecting financial
institutions; and other factors described in this report and in other reports
filed by the Company with the Securities and Exchange Commission.
Item 2. Properties.
The Company and the Greenwood Bank own approximately two acres of
land comprised of several parcels in Greenwood, South Carolina. The Company's
executive offices are located at 302A Montague Street, Greenwood, South Carolina
on land owned by the Company. The Greenwood Bank's executive offices and primary
banking location are in an approximately 8,200 square foot building located at
109 Montague Street in Greenwood on land owned by the Greenwood Bank. The
Greenwood Bank also operates a branch location of approximately 2,400 square
feet on Greenwood's Highway 72 by-pass. The land and building housing this
branch are leased by the Greenwood Bank from Robert C. Coleman, a director of
the Company and the Greenwood Bank. The Greenwood Bank's branch in Ninety Six is
located on approximately two-thirds of an acre of land in Ninety-Six, South
Carolina which the Company leases from John W. Drummond, a director of the
Company and the Greenwood Bank. The Greenwood
8
<PAGE>
Bank owns an approximately 715 square foot building located on such leased land.
As noted in "Item 1. Business," substantially all of the assets of the Ninety
Six branch, including the Company's leasehold interest, are expected to be sold
or otherwise transferred to The Palmetto Bank in the second quarter of 1998.
The Barnwell Bank operates out of an approximately 2,900 square foot
building located on a quarter acre parcel at 1810 Main Street in Barnwell, South
Carolina. The land and building are owned by the Barnwell Bank. The Barnwell
Bank also operates five branches located in Aiken, Barnwell and Orangeburg
Counties in South Carolina. Of the six banking locations of the Barnwell Bank,
one is leased from a third party and five are owned by the Barnwell Bank.
The Belton Bank operates out of an approximately 1600 square foot
building located on approximately five areas of land at 711 Anderson Street in
Belton, South Carolina. The land is owned by the Belton Bank and the building is
leased by the Belton Bank from the Company.
The Clemson Bank operates out of an approximately 9,100 square foot
building located on approximately one and one-half acres of land at 528 Old
Greenville Highway in Clemson, South Carolina. The land and building are owned
by the Clemson Bank.
The Newberry Bank operates out of an approximately 2,000 square foot
building located on approximately two acres of land on Johnston Street in
Newberry, South Carolina. The land is owned by the Newberry Bank and the
building is leased from an unrelated third party.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.
The common stock of the Company (the "Common Stock") commenced
trading on the American Stock Exchange on February 11, 1997 under the symbol
"CYL". Although prior to such listing the Common Stock was quoted on the OTC
Bulletin Board, trading and quotations of the Common Stock were limited and
sporadic. Management is not aware of the prices at which all shares of Common
Stock traded prior to its listing on the American Stock Exchange. The range of
prices known to management prior to February 11, 1997 were $11.00 to $15.00 in
1997 and $10.00 to $13.00 in 1996. The table below reflects the high and low
sales price per share for the Common Stock reported on the American Stock
Exchange for the periods indicated.
Year Quarter High Low
1997 Fourth ......................... $15.00 $13.75
Third ......................... 14.75 12.00
Second ......................... 12.88 11.12
First (from February 11, 1997).. 12.25 11.00
As of March 23, 1998, there were 2,924,034 shares of Common Stock
outstanding held by approximately 1,357 shareholders of record.
The Company has not declared or distributed any cash dividends to
its shareholders since its organization in 1988, and it is not likely that any
cash dividends will be declared in the near term. The Board of Directors of the
Company intends to follow a policy of retaining any earnings to provide funds to
operate and expand the business of the Company and the Banks for the foreseeable
future. The future dividend policy of the Company is subject to the
9
<PAGE>
discretion of the Board of Directors and will depend upon a number of factors,
including future earnings, financial condition, cash requirements, and general
business conditions. The Company's ability to distribute cash dividends will
depend entirely upon the Banks' abilities to distribute dividends to the
Company. As state banks, the Banks are subject to legal limitations on the
amount of dividends each is permitted to pay. In particular, the Banks must
receive the approval of the State Board prior to paying dividends to the
Company. Furthermore, neither the Banks nor the Company may declare or pay a
cash dividend on any of their capital stock if they are insolvent or if the
payment of the dividend would render them insolvent or unable to pay their
obligations as they become due in the ordinary course of business. See
"Government Supervision and Regulation -- Dividends."
During the fiscal year ended December 31, 1997, the Company sold an
aggregate of 14,519 shares of Common Stock to its employee stock ownership plan
without registration under the Securities Act of 1933, as amended (the "1933
Act"). The following sets forth the dates and amounts of such sales:
Date Shares Proceeds
---- ------ --------
March 1, 1997 3,924 $43,164.00
April 1, 1997 793 9,020.38
May 1, 1997 2,090 24,035.00
June 1, 1997 706 8,825.00
July 1, 1997 1,792 21,616.00
August 1, 1997 478 6,692.00
September 1, 1997 880 11,660.00
October 1, 1997 1,388 20,473.00
November 1, 1997 1,528 21,201.00
December 1, 1997 940 13,512.50
In each case, all of the shares were sold at the quoted market price at the time
of sale and were issued pursuant to the exemption from registration contained in
Section 4(2) of the 1933 Act as a transaction, not involving a general
solicitation, in which the purchaser was purchasing for investment. The Company
believes that the purchaser was given and had access to detailed financial and
other information with respect to the Company and possessed requisite financial
sophistication . The Company did not sell any other equity securities during the
fiscal year ended December 31, 1997 which were not registered under the 1933
Act.
10
<PAGE>
Item 6. Selected Financial Data
The following selected consolidated financial data for the five
years ended December 31, 1997 are derived from the consolidated financial
statements and other data of the Company. The consolidated financial statements
for the years ended December 31, 1993 through 1997, were audited by Tourville,
Simpson & Henderson, independent auditors. The selected consolidated financial
data should be read in conjunction with the consolidated financial statements of
the Company, including the accompanying notes, included elsewhere herein.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Year Ended December 31, (Dollars in thousands) 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income $ 14,443 $ 8,201 $ 6,217 $ 4,403 $ 3,834
Interest expense 7,172 4,006 2,948 1,693 1,600
--------- --------- --------- --------- ---------
Net interest income 7,271 4,195 3,269 2,710 2,234
Provision for loan losses 608 187 112 14 80
--------- --------- --------- --------- ---------
Net interest income after provision for
loan losses 6,663 4,008 3,157 2,696 2,154
Net securities gains (losses) (1) 17 (22) (79) 22
Noninterest income 1,572 1,122 729 530 714
Noninterest expense 7,248 4,141 3,069 2,261 2,121
--------- --------- --------- --------- ---------
Income before income taxes and
accounting change 986 1,006 795 886 769
Applicable income taxes 220 300 261 301 256
--------- --------- --------- --------- ---------
Income before accounting change 766 706 534 585 513
Accounting change -- -- -- -- 47
--------- --------- --------- --------- ---------
Net income $ 766 $ 706 $ 534 $ 585 $ 560
========= ========= ========= ========= =========
Balance Sheet Data:
Assets $ 248,861 $ 115,959 $ 96,100 $ 65,071 $ 58,970
Earning assets 227,372 106,770 89,233 59,269 54,978
Securities (1) 77,480 25,479 23,699 8,704 9,036
Loans (2) 149,127 80,546 63,204 50,565 44,634
Allowance for loan losses 1,531 837 671 581 567
Deposits 186,861 89,862 73,138 49,146 45,992
Federal Home Loan Bank advances 16,350 4,889 6,244 5,925 6,756
Shareholders' equity 31,928 13,556 12,932 6,079 5,420
Per Share Data (3):
Basic earnings per share (3) $ 0.29 $ 0.58 $ 0.58 $ 0.94 $ 0.83
Diluted earnings per share (3) 0.28 0.55 0.53 0.90 0.83
Book value (period end) (4) 10.99 11.12 10.68 9.62 8.80
Tangible book value (period end) (4) 9.92 11.08 10.64 9.58 8.71
Performance Ratios:
Return on average assets 0.40% 0.67% 0.68% 0.97% 1.03%
Return on average equity 2.68 5.41 5.69 10.17 10.94
Net interest margin (5) 4.16 4.29 4.49 4.78 4.39
Efficiency (6) 81.96 77.28 76.78 69.81 71.95
Asset Quality Ratios:
Allowance for loan losses to period
end loans 1.03% 1.04% 1.06% 1.15% 1.27%
Net charge-offs to average loans 0.15 0.03 0.03 -- 0.03
Nonperforming assets to period end loans and
foreclosed property (2) (7) 0.63 0.23 0.02 0.04 0.40
Capital and Liquidity Ratios:
Average equity to average assets 14.92% 12.37% 11.99% 9.46% 9.39%
Leverage (4.00% required minimum) 12.08 11.62 13.21 9.42 9.10
Risk-based capital
Tier I 17.65 15.58 18.46 11.04 10.89
Total 18.61 16.54 19.41 12.09 12.04
Average loans to average deposits 76.78 88.06 93.03 98.21 90.52
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
1) Securities held to maturity are stated at amortized cost, and securities
available for sale are stated at fair value.
2) Loans are stated net of unearned income, before allowance for loan losses.
3) All share and per share data have been adjusted to reflect the 5% Common
Stock dividends in September 1993, April 1994, August 1995, and May 1996.
Basic earnings per share and diluted earnings per share have been restated
for the adoption of Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" as of December 31, 1997.
4) Excludes the effect of any outstanding stock options.
5) Net interest income dividend by average earning assets.
6) Noninterest expense divided by the sum of net interest income and
noninterest income, net of gains and losses on sales of assets.
7) Nonperforming loans and nonperforming assets do not include loans past due
90 days or more that are still accruing interest.
Quarterly Operating Results
<TABLE>
<CAPTION>
1997 Quarter ended 1996 Quarter ended
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands except per share) Dec. 31 Sept. 30 June 30 March 31 Dec. 31 Sept. 30 June 30 March 31
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 2,127 $ 2,005 $ 1,875 $ 1,264 $ 1,112 $ 1,083 $ 1,044 $ 956
Provision for loan losses 276 108 136 88 64 18 55 50
Noninterest income 487 417 404 263 239 289 316 295
Noninterest expense 2,184 2,093 1,773 1,198 1,183 1,059 993 906
Net income 138 200 269 159 124 192 204 186
Basic earnings per share 0.05 0.07 0.09 0.08 0.10 0.16 0.17 0.15
Diluted earnings per share 0.05 0.07 0.09 0.08 0.10 0.15 0.16 0.14
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the
preceding "Selected Financial Data" and the Company's Financial Statements and
the Notes thereto and the other financial data included elsewhere in this Annual
Report. The financial information provided below has been rounded in order to
simplify its presentation. However, the ratios and percentages provided below
are calculated using the detailed financial information contained in the
Financial Statements, the Notes thereto and the other financial data included
elsewhere in this Annual Report.
General
As a one-bank holding company for the Greenwood Bank, the Company
grew from approximately $21.5 million in assets, $11.7 million in loans, $16.6
million in deposits, and $4.6 million in shareholders' equity at December 31,
1989, to approximately $65.1 million in assets, $50.6 million in loans, $49.1
million in deposits, and $6.1 million in shareholders' equity at December 31,
1994. The opening of the Clemson Bank in June 1995 resulted in a year-over-year
decrease of the Company's earnings per share for the year ended December 31,
1995. The Clemson Bank became profitable in September 1996, and at December 31,
1996, the Company had approximately $116.0 million in assets, $80.5 million in
loans, $89.9 million in deposits, and $13.6 million in shareholders' equity. Due
to the acquisitions of the New Banks and the Carolina First Branches and net
proceeds from the Offering, the Company has grown to $248.9 million in assets,
$149.1 million in loans, $186.9 million in deposits, and $31.9 million in
shareholders' equity at December 31, 1997. The start-up expenditures associated
with the New Banks, including the time and expense required to attract
customers, deposits, and earning assets, and an increase in the number of
outstanding shares of common stock from the Offering, have resulted in a
year-over-year decrease in the Company's earnings per share.
Management has emphasized maintaining strong asset quality through a
credit underwriting and review system which includes both bank level and
centralized controls. Over the five-year period ended December 31, 1997, the
Company had an average net charge-off ratio of 0.07%. At December 31, 1997,
nonperforming assets as a percentage of total loans was 0.63%.
During 1996, the Company made the decision to acquire and capitalize
the three New Banks. To capitalize the New Banks, the Company sold 1,665,000
shares of its common stock in the Offering, resulting in net proceeds of $16.9
million. Of the net proceeds, the Company used $7.2 million to capitalize the
Barnwell Bank, $3.5 million to capitalize the Belton Bank, and $3.3 million to
capitalize the Newberry Bank. In accordance with the agreements with the
organizers of the New Banks and subject to the New Banks being opened, the
Company agreed to include organizational and preopening costs in the initial
capitalization of the New Banks. The goodwill associated with the acquisitions
totaled $826,000 and is being amortized over a five-year period on a
straight-line basis.
12
<PAGE>
On April 7, 1997, the Barnwell Bank acquired net loans (including
accrued interest receivable) of approximately $14.9 and premises and equipment
of approximately $2.0 million and assumed deposits (including accrued interest
payable) of approximately $55.1 million of five branches located in Aiken,
Barnwell and Orangeburg Counties, South Carolina from Carolina First Bank (the
"Carolina First Branches"). In connection with the purchase of the Carolina
First Branches, the Barnwell Bank paid a premium of $2.5 million which is being
amortized over a fifteen-year period on a straight-line basis.
During 1997, the Company experienced dilution of its return on
equity and earnings per share due to the increased number of shares of common
stock from the Offering, expenses incurred in connection with the acquisition
and opening of the New Banks, and losses incurred by the Belton Bank and the
Newberry Bank. Tangible book value per share was also negatively affected by the
intangibles associated with the acquisition of the Carolina First Branches and
the New Banks. The Company believes that the dilution of earnings per share,
return on equity, and tangible book value per share will be outweighed by the
long-term benefits and shareholder value the Company expects to derive from the
purchase of the New Banks and the acquisition of the Carolina First Branches.
However, there can be no assurance that the Company will be able to achieve
these goals.
On February 25, 1998, the Clemson Bank and the Belton Bank entered
into Purchase and Assumption Agreements with Carolina First Bank whereby the
Belton Bank will acquire certain assets and assume deposits of two branch
offices of Carolina First Bank in Anderson County, South Carolina and the
Clemson Bank will acquire certain assets and assume deposits of a branch office
in Calhoun Falls, South Carolina. The Belton Bank and the Clemson Bank will each
pay a premium to Carolina First Bank equal to 6.5% of the deposits other than
certificates of deposit greater than or equal to $100,000 assumed on the date of
closing. The Company anticipates that the total deposits will be approximately
$40 million and the loans will be approximately $5 million based on the
unaudited balances at December 31, 1997.
Results of Operations
Year ended December 31, 1997, compared with year ended December 31,
1996
Net interest income increased $3.1 million, or 73.3%, to $7.3
million in 1997 from $4.2 million in 1996. The increase in net interest income
was due primarily to an increase in average earning assets. Average earning
assets increased $77.1 million, or 78.9%, due to investable proceeds from the
Offering, the acquisition and opening of the New Banks, and the acquisition of
the Carolina First Branches.
The Company's net interest spread and net interest margin were 3.35%
and 4.16%, respectively, in 1997 compared to 3.44% and 4.29% in 1996. The
decreases in the net interest spread and net interest margin were primarily the
result of the growth in the volume of investment securities, traditionally lower
yielding assets than loans, as a percentage of average earning assets. Proceeds
from the Offering and net cash received from the acquisition of the Carolina
First Branches were invested in debt securities until the Company is able to
shift the funds to loans to achieve the Company's targeted loan-to-deposit ratio
and maximize earnings.
The provision for loan losses was $608,000 in 1997 compared to
$187,000 in 1996. The increase in the provision was primarily the result of the
growth in the loan portfolio from the acquisition and opening of the New Banks
and the Banks' efforts to maintain their respective allowances for loan losses
at levels sufficient to cover known and inherent losses in their loan
portfolios.
Noninterest income increased $432,000, or 37.9%, to $1.6 million in
1997 from $1.1 million in 1996, primarily attributable to increased service
charges on deposit accounts and increased fees from mortgage loan originations.
The increase in service charges on deposit accounts was attributable to the
increase in the number of deposit accounts from acquisitions during the year and
the growth of the New Banks. Due to the continued low mortgage lending rates,
the Company was able to originate mortgage loans for qualified borrowers and
sell them to investors under pre-existing commitments or originate loans which
the Company did not fund. Income from the origination of mortgage loans was
$271,000 in 1997 compared to $207,000 in 1996.
Noninterest expense increased $3.1 million, or 75.0%, to $7.2
million in 1997 from $4.1 million in 1996. The primary component of noninterest
expense is salaries and benefits, which increased $1.4 million, or 69.8%, to
$3.3 million in 1997 from $2.0 million in 1996. The increase is attributable to
an increase in the number of employees due to the acquisitions of the New Banks
and the creation during 1997 of Community Trust Services Company which provides
trust services for the Banks. Other categories of expenses increased due to the
acquisitions of the New Banks and the Carolina First Branches. Net occupancy
expense was $479,000 in 1997 compared to $287,000 in 1996, and furniture and
equipment expense was $771,000 in 1997 compared to $305,000 in 1996. The Company
recorded amortization of intangible assets related to the acquisitions of
$246,000 in 1997 compared to only $14,000 in 1996. The Company's efficiency
ratio was 81.96% in 1997 compared to 77.28% in 1996.
13
<PAGE>
Net income increased $60,000, or 8.5%, to $766,000 in 1997 from
$706,000 in 1996. The increase in net income was due primarily to increases in
net interest income due to asset growth from acquisitions. Return on average
assets during 1997 was 0.40% compared to 0.67% during 1996, and return on
average equity was 2.68% during 1997 compared to 5.41% during 1996.
Year ended December 31, 1996, compared with year ended December 31,
1995
Net interest income increased $926,000, or 28.3%, to $4.2 million in
1996 from $3.3 million in 1995. The increase in net interest income was due
primarily to an increase in average earning assets. Average earning assets
increased $24.9 million, or 34.2%, primarily as a result of the opening of the
Clemson Bank in June 1995, the opening of a new Greenwood Bank branch in
February 1995, and the continuing growth of the Greenwood Bank.
The Company's net interest spread and net interest margin were 3.44%
and 4.29%, respectively, in 1996 as compared to 3.62% and 4.49% in 1995. The
decrease in the net interest spread and the net interest margin was primarily
the result of the growth in the volume of investment securities as a percentage
of average earning assets in order to improve liquidity and lower the
loans-to-assets ratio.
The provision for loan losses was $187,000 in 1996 compared to
$112,000 in 1995. The increase in the provision was primarily the result of
general growth in the Company's loan portfolio. The Company experienced net
charge-offs of $21,000 in 1996, resulting in a ratio of net charge-offs to
average loans of 0.03%.
Noninterest income increased $432,000, or 61.1%, to $1.1 million in
1996 from $707,000 in 1995, primarily attributable to increased service charges
on deposit accounts, increased fees from mortgage loan originations, and
increased commissions on sales of mutual funds. In 1996, the Company's mortgage
loan origination fees increased due to the decrease in mortgage lending rates.
Noninterest expense increased $1.1 million, or 34.9%, to $4.1
million in 1996 from $3.1 million in 1995. The primary component of noninterest
expense is salaries and benefits, which increased $549,000, or 38.9%, to $2.0
million in 1996 from $1.4 million in 1995. The increase is primarily
attributable to an increase in the number of employees due to the opening in
1995 of the Clemson Bank and the Greenwood Bank's trust and mutual funds
departments. The Company also hired additional employees in anticipation of
opening the New Banks. Net occupancy expense for 1996 was $287,000, an increase
of $105,000 compared to $182,000 in 1995, and furniture and equipment expense
increased $65,000 to $305,000 in 1996 from $240,000 in 1995. The Company's
efficiency ratio in 1996 was 77.28% compared to 76.78% in 1995.
Net income increased $172,000, or 32.2%, to $706,000 in 1996 from
$534,000 in 1995. The increase in net income was due primarily to increases in
net interest income and noninterest income. Return on average assets during 1996
was 0.67% compared to 0.68% during 1995, and return on average equity was 5.41%
during 1996 compared to 5.69% during 1995.
14
<PAGE>
Net Interest Income
General. The largest component of the Company's net income is its
net interest income, which is the difference between the income earned on assets
and interest paid on deposits and borrowings used to support such assets. Net
interest income is determined by the yields earned on the Company's
interest-earning assets and the rates paid on its interest-bearing liabilities,
the relative amounts of interest-earning assets and interest-bearing liabilities
and the degree of mismatch and the maturity and repricing characteristics of its
interest-earning assets and interest-bearing liabilities. Net interest income
divided by average interest-earning assets represents the Company's net interest
margin.
Average Balances, Income Expenses and Rates. The following tables
set forth, for the periods indicated, certain information related to the
Company's average balance sheet and its average yields on assets and average
costs of liabilities. Such yields are derived by dividing income or expense by
the average balance of the corresponding assets or liabilities. Average balances
have been derived from the daily balances throughout the periods indicated.
Average Balances, Income and Expenses and Rates
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate Balance Expense Rate Balance Expense Rate
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Earning Assets
Loans (1) $ 113,080 $ 10,604 9.38% $ 71,298 $ 6,622 9.29% $ 55,018 $ 5,146 9.35%
Securities, taxable (2) 45,871 3,026 6.60 17,195 1,112 6.47 10,953 723 6.60
Securities, nontaxable 9,056 441 4.87 5,993 290 4.84 3,466 171 4.93
Nonmarketable equity
securities 2,751 133 4.83 1,724 87 5.05 1,630 70 4.29
Funds sold and other 4,074 239 5.87 1,538 90 5.85 1,777 107 6.02
--------- --------- --------- --------- --------- ---------
Total earning assets 174,832 14,443 8.26 97,748 8,201 8.39 72,844 6,217 8.53
--------- --------- --------- --------- --------- ---------
Cash and due from banks 5,231 3,080 2,758
Premises and equipment 6,883 3,408 2,288
Other assets 5,818 2,052 1,016
Allowance for loan losses (1,134) (746) (601)
--------- --------- ---------
Total assets $ 191,630 $ 105,542 $ 78,305
========= ========= =========
Liabilities:
Interest-Bearing Liabilities
Interest-bearing transaction
accounts $ 22,482 547 2.43 $ 7,719 151 1.96 $ 6,136 113 1.84
Savings deposits 30,659 1,335 4.35 21,175 928 4.38 14,693 590 4.02
Time deposits 78,572 4,443 5.65 41,476 2,346 5.66 30,053 1,719 5.72
Other short-term borrowings 5,326 318 5.97 5,070 283 5.58 2,479 145 5.85
Federal Home Loan Bank
advances 8,968 529 5.90 5,436 298 5.48 6,655 381 5.73
--------- --------- --------- --------- --------- ---------
Total interest-bearing
liabilities 146,007 7,172 4.91 80,876 4,006 4.95 60,016 2,948 4.91
--------- --------- --------- --------- --------- ---------
Demand deposits 15,567 10,591 8,258
Accrued interest and other
liabilities 1,471 1,015 643
Shareholders' equity 28,585 13,060 9,388
--------- --------- ---------
Total liabilities and
shareholders' equity $ 191,630 $ 105,542 $ 78,305
========= ========= =========
Net interest spread 3.35% 3.44% 3.62%
Net interest income $ 7,271 $ 4,195 $ 3,269
========= ========= =========
Net interest margin 4.16% 4.29% 4.49%
</TABLE>
15
<PAGE>
(1) The effect of loans in nonaccrual status and fees collected is not
significant to the computations. All loans and deposits are domestic.
(2) Average investment securities exclude the valuation allowance on securities
available for sale.
Analysis of Changes in Net Interest Income. The following tables set
forth the effect which the varying levels of earning assets and interest-bearing
liabilities and the applicable rates have had on changes in net interest income
from 1996 to 1997 and 1995 to 1996.
<TABLE>
<CAPTION>
Analysis of Changes in Net Interest Income
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997 Compared With 1996 1996 Compared With 1995
- -----------------------------------------------------------------------------------------------------------------------------
Variance Due to Variance Due to
(Dollars in thousands) Volume (1) Rate (1) Total Volume (1) Rate (1) Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Loans $ 3,917 $ 65 $ 3,982 $ 1,512 $ (36) $ 1,476
Securities, taxable 1,892 22 1,914 404 (15 389
Securities, nontaxable 149 2 151 122 (3) 119
Nonmarketable equity securities 50 (4) 46 4 13) 17
Funds sold and other 149 -- 149 (14) (3) (17)
---------- ---------- ---------- ---------- ---------- ----------
Total interest income 6,157 85 6,242 2,028 (44) 1,984
---------- ---------- ---------- ---------- ---------- ----------
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts 351 45 396 31 7 38
Savings and market rate investments 413 (6) 407 280 58 338
Certificates and other time deposits 2,098 (1) 2,097 646 (19) 627
---------- ---------- ---------- ---------- ---------- ----------
Total interest-bearing deposits 2,862 38 2,900 957 46 1,003
Other short-term borrowings 14 21 35 145 (7) 138
Federal Home Loan Bank advances 207 24 231 (68) (15) (83)
---------- ---------- ---------- ---------- ---------- ----------
Total interest expense 3,083 83 3,166 1,034 24 1,058
---------- ---------- ---------- ---------- ---------- ----------
Net interest income $ 3,074 $ 2 $ 3,076 $ 994 $ (68) $ 926
========== ========== ========== ========== ========== ==========
</TABLE>
(1) Volume-rate changes have been allocated to each category based on the
percentage of the total change.
Interest Sensitivity. The Company monitors and manages the pricing and
maturity of its assets and liabilities in order to diminish the potential
adverse impact that changes in interest rates could have on its net interest
income. The principal monitoring technique employed by the Company is the
measurement of the Company's interest sensitivity "gap," which is the positive
or negative dollar difference between assets and liabilities that are subject to
interest rate repricing within a given period of time. Interest rate sensitivity
can be managed by repricing assets or liabilities, selling securities available
for sale, replacing an asset or liability at maturity, or adjusting the interest
rate during the life of an asset or liability. Managing the amount of assets and
liabilities repricing in this same time interval helps to hedge the risk and
minimize the impact on net interest income of rising or falling interest rates.
16
<PAGE>
The following table sets forth the Company's interest rate sensitivity at
December 31, 1997.
<TABLE>
<CAPTION>
Interest Sensitivity Analysis
- ---------------------------------------------------------------------------------------------------------------------------------
After One After Three Greater Than
Within Through Through One Year
One Three Twelve Within or Non-
December 31, 1997 (Dollars in thousands) Month Months Months One Year sensitive Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning Assets
Loans (1) $ 59,399 $ 11,524 $ 23,229 $ 94,152 $ 54,297 $148,449
Securities 300 581 3,141 4,022 73,458 77,480
Funds sold and other 765 -- -- 765 -- 765
-------- -------- -------- --------- -------- --------
Total earning assets 60,464 12,105 26,370 98,939 127,755 226,694
-------- -------- -------- --------- -------- --------
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Demand deposits 30,562 -- -- 30,562 -- 30,562
Savings deposits 35,939 -- -- 35,939 -- 35,939
Time deposits 9,043 22,514 60,455 92,012 8,888 100,900
-------- -------- -------- --------- -------- --------
Total interest-bearing deposits 75,544 22,514 60,455 158,513 8,888 167,401
Other short-term borrowings 11,943 -- -- 11,943 -- 11,943
Federal Home Loan Bank advances 6,900 650 6,400 13,950 2,400 16,350
-------- -------- -------- --------- -------- --------
Total interest-bearing liabilities 94,387 23,164 66,855 184,406 11,288 195,694
-------- -------- -------- --------- -------- --------
Period gap $(33,923) $(11,059) $(40,485) $ (85,467) $116,467
======== ======== ======== ========= ========
Cumulative gap $(33,923) $(44,982) $(85,467) $ (85,467) $ 31,000
======== ======== ======== ========= ========
Ratio of cumulative gap to total earning assets (14.96)% (19.84)% 37.70% 37.70% 13.67%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes nonaccrual loans.
The above table reflects the balances of interest-earning assets and
interest-bearing liabilities at the earlier of their repricing or maturity
dates. Overnight federal funds are reflected at the earliest pricing interval
due to the immediately available nature of the instruments. Debt securities are
reflected at each instrument's ultimate maturity date. Scheduled payment amounts
of fixed rate amortizing loans are reflected at each scheduled payment date.
Scheduled payment amounts of variable rate amortizing loans are reflected at
each scheduled payment date until the loan may be repriced contractually; the
unamortized balance is reflected at that point. Interest-bearing liabilities
with no contractual maturity, such as savings deposits and interest-bearing
transaction accounts, are reflected in the earliest repricing period due to
contractual arrangements which give the Company the opportunity to vary the
rates paid on those deposits within a thirty-day or shorter period. Fixed rate
time deposits, principally certificates of deposit, are reflected at their
contractual maturity date.
The Company generally would benefit from increasing market rates of
interest when it has an asset-sensitive gap position and generally would benefit
from decreasing market rates of interest when it is liability-sensitive. The
Company is liability sensitive over the one month, three month, and one year
time frames. However, the Company's gap analysis is not a precise indicator of
its interest sensitivity position. The analysis presents only a static view of
the timing of maturities and repricing opportunities, without taking into
consideration that changes in interest rates do not affect all assets and
liabilities equally. For example, rates paid on a substantial portion of core
deposits may change contractually within a relatively short time frame, but
those rates are viewed by management as significantly less interest-sensitive
than market-based rates such as those paid on non-core deposits. Accordingly,
management believes a liability-sensitive gap position is not as indicative of
the Company's true interest sensitivity as it would be for an organization which
depends to a greater extent on purchased funds to support earning assets. Net
interest income may be impacted by other significant factors in a given interest
rate environment, including changes in the volume and mix of earning assets and
interest-bearing liabilities.
17
<PAGE>
Provision and Allowance for Loan Losses
General. The Company has developed policies and procedures for evaluating
the overall quality of its credit portfolio and the timely identification of
potential problem credits. On a quarterly basis, each Bank's Board of Directors
reviews and approves the appropriate level for that Bank's allowance for loan
losses based upon management's recommendations, the results of the internal
monitoring and reporting system, analysis of economic conditions in its markets,
and a review of historical statistical data for both the Company and other
financial institutions.
Additions to the allowance for loan losses, which are expensed as the
provision for loan losses on the Company's income statement, are made
periodically to maintain the allowance at an appropriate level based on
management's analysis of the potential risk in the loan portfolio. Loan losses
and recoveries are charged or credited directly to the allowance. The amount of
the provision is a function of the level of loans outstanding, the level of
nonperforming loans, historical loan loss experience, the amount of loan losses
actually charged against the reserve during a given period, and current and
anticipated economic conditions.
The Company's allowance for loan losses is based upon judgements and
assumptions of risk elements in the portfolio, future economic conditions and
other factors affecting borrowers. The process includes identification and
analysis of loss potential in various portfolio segments utilizing a credit risk
grading process and specific reviews and evaluations of significant problem
credits. In addition, management monitors the overall portfolio quality through
observable trends in delinquency, charge-offs, and general and economic
conditions in the service area. The adequacy of the allowance for loan losses
and the effectiveness of the Company's monitoring and analysis system are also
reviewed periodically by the banking regulators and the Company's independent
auditors.
Based on present information and an ongoing evaluation, management
considers the allowance for loan losses to be adequate to meet presently known
and inherent risks in the loan portfolio. Management's judgment as to the
adequacy of the allowance is based upon a number of assumptions about future
events which it believes to be reasonable but which may or may not be valid.
Thus, there can be no assurance that charge-offs in future periods will not
exceed the allowance for loan losses or that additional increases in the
allowance for loan losses will not be required. The Company does not allocate
the allowance for loan losses to specific categories of loans but evaluates the
adequacy on an overall portfolio basis utilizing a risk grading system.
The following table sets forth certain information with respect to the
Company's allowance for loan losses and the composition of charge-offs and
recoveries for each of the last five years.
<TABLE>
<CAPTION>
Allowance for Loan Losses
- -----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, (Dollars in thousands) 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total loans outstanding at end of period, net of unearned
income $149,127 $80,546 $63,204 $50,565 $44,634
======== ======= ======= ======= =======
Average loans outstanding, net of unearned income $113,080 $71,298 $55,018 $46,305 $39,641
======== ======= ======= ======= =======
Balance of allowance for loan losses at beginning of period $ 837 $ 671 $ 581 $ 567 $ 500
Allowance for loan losses from acquisitions 255 -- -- -- --
Loan losses:
Commercial, financial and agricultural 92 -- 17 -- 5
Real estate - mortgage 9 -- -- -- --
Consumer 68 21 4 4 12
-------- ------- ------- ------- -------
Total loan losses 169 21 21 4 17
-------- ------- ------- ------- -------
Recoveries of previous loan losses:
Commercial, financial and agricultural -- -- -- -- --
Real estate - mortgage -- -- -- -- --
Consumer -- -- -- 4 4
-------- ------- ------- ------- -------
Total recoveries -- -- -- 4 4
-------- ------- ------- ------- -------
Net loan losses 169 21 21 -- 13
Provision for loan losses 608 187 112 14 80
-------- ------- ------- ------- -------
Balance of allowance for loan losses at end of period $ 1,531 $ 837 $ 671 $ 581 $ 567
======== ======= ======= ======= =======
Allowance for loan losses to period end loans 1.03% 1.04% 1.06% 1.15% 1.27%
Net charge-offs to average loans 0.15 0.03 0.03 -- 0.03
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
Nonperforming Assets. The following table sets forth the Company's
nonperforming assets for the dates indicated.
<TABLE>
<CAPTION>
Nonperforming Assets
- ------------------------------------------------------------------------------------------------------------------------------
December 31, (Dollars in thousands) 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 678 $ 186 $ 13 $ 3 $ 179
Restructured or impaired loans - - - - -
------------ ----------- ----------- ------------ ----------
Total nonperforming loans 678 186 13 3 179
Other real estate owned 262 - - 19 -
------------ ----------- ----------- ------------ ----------
Total nonperforming assets $ 940 $ 186 $ 13 $ 22 $ 179
============ =========== =========== ============ ==========
Loans 90 days or more past due and still accruing interest $ 84 $ 54 $ 60 $ 39 $ -
Nonperforming assets to period end loans and
foreclosed property 0.63% 0.23% 0.02% 0.04% 0.40%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Accrual of interest is discontinued on a loan when management believes,
after considering economic and business conditions and collection efforts, that
the borrower's financial condition is such that the collection of interest is
doubtful. A delinquent loan is generally placed in nonaccrual status when it
becomes 90 days or more past due. When a loan is placed in nonaccrual status,
all interest which has been accrued on the loan but remains unpaid is reversed
and deducted from current earnings as a reduction of reported interest income.
No additional interest is accrued on the loan balance until the collection of
both principal and interest becomes reasonably certain. When a problem loan is
finally resolved, there may ultimately be an actual writedown or charge-off of
the principal balance of the loan which would necessitate additional charges to
earnings. For all periods presented, the additional interest income, which would
have been recognized into earnings if the Company's nonaccrual loans had been
current in accordance with their original terms, is immaterial.
Total nonperforming assets increased $754,000 to $940,000 at December 31,
1997, from $186,000 at December 31, 1996. This increase was primarily due to the
foreclosure on a piece of other real estate valued at $262,000 and one customer
owing $450,000 who was placed in nonaccrual status in December 1997.
Nonperforming assets were 0.63% of total loans and foreclosed property at
December 31, 1997. The allowance for loan losses to period end nonperforming
assets was 162.87% at December 31, 1997.
Potential Problem Loans. At December 31, 1997, through their internal
review mechanisms, the Banks had identified $2.2 million of criticized loans and
$2.9 million of classified loans. The results of this internal review process
are the primary determining factor in management's assessment of the adequacy of
the allowance for loan losses.
Noninterest Income and Expense
Noninterest Income. The largest component of noninterest income is service
charges on deposit accounts, which totaled $842,000 in 1997, a 63.5% increase
over the 1996 level of $515,000. The increase in service charges and other
noninterest income was primarily attributable to an increase in the customer
base due to the acquisitions of the New Banks and the Carolina First Branches.
Salaries and employee benefits increased $1.3 million, or 69.8%, to $3.3
million in 1997 from $2.0 million in 1996, primarily as a result of an increase
in the number of employees in order to staff the New Banks and the trust
services company. The acquisitions of the New Banks and the Carolina First
Branches also resulted in increases in all other categories of noninterest
expense. The Company is amortizing the intangible assets associated with the
acquisitions over periods ranging from five to fifteen years. During 1997, the
Company recorded amortization expense of $246,000 compared to $14,000 in 1996.
The factors above resulted in increases in net occupancy expense, furniture and
equipment expense, and other operating expenses. The Company's efficiency ratio,
which is noninterest expense as a percentage of the total of net interest income
plus noninterest income, net of gains and losses on the sale of assets, was
81.96% in 1997 compared to 77.28% in 1996 and 76.78% in 1995.
19
<PAGE>
The following table sets forth, for the periods indicated, the
principal components of noninterest income:
Noninterest Income
- -----------------------------------------------------------------------------
Year Ended December 31, (Dollars in thousands) 1997 1996 1995
- -----------------------------------------------------------------------------
Service charges on deposit accounts $ 842 $ 515 $ 393
Residential mortgage origination fees 271 207 115
Securities gains (losses) (1) 17 (22)
Fees from sales of mutual funds 54 132 49
Other 405 355 242
------- ------ -----
Total noninterest income $ 1,571 $1,226 $ 777
======= ====== =====
- -----------------------------------------------------------------------------
Noninterest Expense. The following table sets forth, for the periods
indicated, the primary components of noninterest expense:
Noninterest Expense
- ------------------------------------------------------------------------------
Year Ended December 31, (Dollars in thousands) 1997 1996 1995
- ------------------------------------------------------------------------------
Salaries and employee benefits $3,329 $1,960 $1,411
Net occupancy expense 479 287 182
Furniture and equipment expense 771 305 240
Director and committee fees 124 114 72
Amortization of intangibles and other assets 246 14 33
Data processing and supplies 151 176 110
Mortgage loan department expense 94 80 44
Banking assessments 44 3 59
Professional fees 205 132 116
Postage and freight and carriers 200 117 90
Supplies 451 228 186
Credit card expenses 120 94 65
Telephone expenses 214 74 51
Other 820 557 410
------ ------ ------
Total noninterest expense $7,248 $4,141 $3,069
====== ====== ======
Efficiency ratio 81.96% 77.28% 76.78%
- ------------------------------------------------------------------------------
Earning Assets
Loans. Loans are the largest category of earning assets and typically
provide higher yields than the other types of earning assets. Associated with
the higher loan yields are the inherent credit and liquidity risks which
management attempts to control and counterbalance. Loans averaged $113.1 million
in 1997 compared to $71.3 million in 1996, an increase of $41.8 million, or
58.6%. At December 31, 1997, total loans were $149.1 million compared to $80.5
million at December 31, 1996.
The increase in loans during 1997 was primarily due to the new markets
created by the acquisition of the New Banks and the purchase of approximately
$15.0 million in loans from the acquisition of the Carolina First Branches by
the Barnwell Bank. The Banks have also actively sought opportunities to
participate in loans originated by other financial institutions. The following
table sets forth the composition of the loan portfolio by category at the dates
indicated and highlights the Company's general emphasis on mortgage lending.
20
<PAGE>
<TABLE>
<CAPTION>
Composition of Loan Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
December 31, 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
Percent Percent Percent Percent Percent
(Dollars in thousands) Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $ 36,079 24.19% $15,348 19.05% $13,349 21.12% $12,231 24.19% $10,684 23.94%
Real estate
Construction 12,838 8.61 9,962 12.37 8,483 13.42 5,906 11.68 11,556 25.89
Mortgage-residential 40,977 27.48 31,519 39.13 22,515 35.62 14,978 29.62 11,258 25.22
Mortgage-nonresidential 32,518 21.81 17,616 21.87 14,190 22.45 13,436 26.57 7,504 16.81
Consumer 25,747 17.27 5,947 7.38 4,591 7.27 3,953 7.82 3,585 8.03
Other 968 0.64 154 0.20 76 0.12 61 0.12 47 0.11
-------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total loans 149,127 100.00% 80,546 100.00% 63,204 100.00% 50,565 100.00% 44,634 100.00%
====== ====== ====== ====== ======
Allowance for loan losses (1,531) (837) (671) (581) (567)
-------- ------- ------- ------- -------
Net loans $147,596 $79,709 $62,533 $49,984 $44,067
======== ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The principal component of the Company's loan portfolio is real estate
mortgage loans. At December 31, 1997, this category totaled $73.5 million and
represented 49.3% of the total loan portfolio, compared to $49.1 million, or
61.0%, at December 31, 1996.
In the context of this discussion, a "real estate mortgage loan" is
defined as any loan, other than loans for construction purposes, secured by real
estate, regardless of the purpose of the loan. It is common practice for
financial institutions in the Company's market areas to obtain a security
interest in real estate, whenever possible, in addition to any other available
collateral. This collateral is taken to reinforce the likelihood of the ultimate
repayment of the loan and tends to increase the magnitude of the real estate
loan portfolio component.
Residential mortgage loans, which is the largest category of the Company's
loans, increased $9.5 million, or 30.0%, to $41.0 million at December 31, 1997,
from $31.5 million at December 31, 1996. Residential real estate loans consist
of first and second mortgages on single or multi-family residential dwellings.
Nonresidential mortgage loans, which include commercial loans and other loans
secured by multi-family properties and farmland, increased $14.9 million, or
84.6%, to $32.5 million at December 31, 1997, from $17.6 million at December 31,
1996. This increase in real estate lending was attributable to the new markets
in the local communities of the New Banks, the continued demand for residential
and commercial real estate loans in the Greenwood market, and loan growth at the
Clemson Bank. The Banks have been able to compete favorably for residential
mortgage loans with other financial institutions by offering fixed rate products
having three and five year call provisions.
Commercial, financial and agricultural loans increased $20.7 million, or
135.1%, to $36.1 million at December 31, 1997, from $15.3 million at December
31, 1996. This increase was primarily attributable to the Company, particularly
the New Banks, actively seeking participation loans from unrelated financial
institutions. Management believes that these participation loans do not have
more credit risk than other loans and provide a greater return than investment
securities.
Consumer loans increased $19.8 million, or 332.9%, to $25.7 million at
December 31, 1997, from $5.9 million at December 31, 1996. The growth in
consumer loans is primarily attributable to overall growth in the Company's loan
portfolio due to new markets created by the acquisitions. The Barnwell Bank and
the Belton Bank are in more rural areas, which typically have more consumer
loans as a percentage of the loan portfolio.
The Company's loan portfolio reflects the diversity of its markets. The
home office and branch offices of the Greenwood Bank are located in Greenwood
County, South Carolina. The economy of Greenwood contains elements of medium and
light manufacturing, higher education, regional healthcare, and distribution
facilities. The Clemson Bank moved into its permanent facility in Clemson, South
Carolina during 1997. Due to its proximity to a major interstate highway and
Clemson University, a state-supported university, management expects the area to
remain stable with continued growth. The Belton Bank and the Barnwell Bank are
in more rural areas and will have a higher concentration of consumer loans with
fewer opportunities for commercial lending. The Newberry Bank is located in
Newberry County, South Carolina and is in close proximity to an interstate
highway. The diversity of the economy creates opportunities for all types of
lending. The Company does not engage in foreign lending.
21
<PAGE>
The repayment of loans in the loan portfolio as they mature is also a
source of liquidity for the Company. The following table sets forth the
Company's loans maturing within specified intervals at December 31, 1997.
<TABLE>
<CAPTION>
Loan Maturity Schedule and Sensitivity to Changes in Interest Rates
- -------------------------------------------------------------------------------------------------
Over One Year
One Year Through Over Five
December 31, 1997 (Dollars in thousands) or Less Five Years Years Total
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 19,181 $ 15,778 $ 1,120 $ 36,079
Real estate 35,582 34,925 15,826 86,333
Consumer and other 7,345 16,594 2,776 26,715
Loans maturing after one year with:
Fixed interest rates $ 58,671
Floating interest rates 28,348
---------
$ 87,019
=========
</TABLE>
The information presented in the above table is based on the contractual
maturities of the individual loans, including loans which may be subject to
renewal at their contractual maturity. Renewal of such loans is subject to
review and credit approval as well as modification of terms upon their maturity.
Consequently, management believes this treatment presents fairly the maturity
and repricing structure of the loan portfolio shown on the above table.
Investment Securities. The investment securities portfolio is a
significant component of the Company's total earning assets. Total securities
averaged $57.7 million in 1997, compared to $24.9 million in 1996 and $16.05
million in 1995. At December 31, 1997, the total securities portfolio was $77.5
million. Securities designated as available for sale totaled $73.6 million and
were recorded at estimated fair market value, and securities designated as held
to maturity totaled $675,000 and were recorded at amortized cost. The securities
portfolio also includes nonmarketable equity securities totaling $3.2 million
which are carried at cost because they are not readily marketable or have no
quoted market value. These include investment in Federal Reserve Bank stock and
Federal Home Loan Bank stock and the stock of four unrelated financial
institutions.. The increase in the portfolio during 1997 was primarily due to
the investment of proceeds from the Offering and from the acquisition of the
Carolina First Branches in debt securities.
The following table sets forth the book value of the securities held by
the Company at the dates indicated.
Book Value of Securities
- -----------------------------------------------------------------------
December 31, (Dollars in thousands) 1997 1996 1995
- -----------------------------------------------------------------------
U.S. Treasury $13,467 $ 6,420 $ 5,952
U.S. government agencies 46,236 11,150 11,546
State, county and municipal securities 13,573 5,367 4,550
Mortgage-backed securities 273 343 398
Nonmarketable equity securities 3,224 2,199 1,252
------- ------- -------
Total securities $76,773 $25,479 $23,698
======= ======= =======
- -----------------------------------------------------------------------
22
<PAGE>
The following table sets forth the scheduled maturities and average yields
of securities held at December 31, 1997.
Investment Securities Maturity Distribution and Yields
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
After One But After Five But
Within One Within Five Within Ten
December 31, 1997 (Dollars in thousands) Year Years Years After Ten Years
- --------------------------------------------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $2,841 6.06% $10,746 6.27% $ -- $ -- %
U.S. government agencies 699 5.77 22,051 6.83 23,464 7.19 300 10.35
State and political subdivisions (2) 482 6.76 2,301 6.85 1,453 7.52 9,641 8.26
------- ------- ------- ------
Total (1) $4,022 6.09% $35,098 6.66% $24,917 7.21% $9,941 8.32%
======= ======= ======= ======
</TABLE>
(1) Excludes mortgage-backed securities totaling $278,000 with a yield of 6.813%
and nonmarketable equity securities.
(2) The yield on state and political subdivisions is presented on a tax
equivalent basis using a federal income tax rate of 34%.
Other attributes of the securities portfolio, including yields and
maturities, are discussed above in "---Net Interest Income--- Interest
Sensitivity."
23
<PAGE>
Short-Term Investments. Short-term investments, which consist primarily of
federal funds sold and interest-bearing deposits with other banks, averaged $4.1
million in 1997, compared to $1.5 million in 1996 and $1.8 million in 1995. At
December 31, 1996, short-term investments totaled $765,000. These funds are a
source of the Banks' liquidity. Federal funds are generally invested in an
earning capacity on an overnight basis.
Deposits and Other Interest-Bearing Liabilities
Average interest-bearing liabilities increased $65.1 million, or 80.5%, to
$146.0 million in 1997, from $80.9 million in 1996. Average interest-bearing
deposits increased $61.3 million, or 87.1%, to $131.7 million in 1997, from
$70.4 million in 1996. These increases resulted from increases in most
categories of interest-bearing liabilities, primarily as a result of the
acquisition of the New Banks and the approximately $55 million of deposits
transferred upon the acquisition of the Carolina First Branches.
Deposits. Average total deposits increased $66.3 million, or 81.9%, to
$147.3 million during 1997, from $81.0 million during 1996. At December 31,
1997, total deposits were $186.9 million compared to $89.9 million a year
earlier, an increase of 107.9%.
The following table sets forth the deposits of the Company by category at
the dates indicated.
<TABLE>
<CAPTION>
Deposits
- -----------------------------------------------------------------------------------------------------------------------------------
December 31 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
Percent Percent Percent Percent Percent
(Dollars in thousands) Amount of Deposits Amount of Deposits Amount of Deposits Amount of Deposits Amount of Deposits
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand deposit
accounts $ 19,460 10.41% $12,226 13.61% $ 9,447 12.92% $ 6,968 14.18% $4,974 10.81%
NOW accounts 30,562 16.36 8,296 9.23 8,028 10.98 7,158 14.56 5,050 10.98
Money market
accounts 20,812 11.14 14,035 15.62 9,498 12.98 4,815 9.80 5,679 12.35
Savings accounts 15,127 8.09 8,681 9.66 7,922 10.83 6,818 13.87 6,360 13.83
Time deposits less
than $100,000 73,827 39.51 34,745 38.66 26,161 35.77 15,893 32.34 15,503 33.71
Time deposits of
$100,000 or over 27,073 14.49 11,879 13.22 12,082 16.52 7,494 15.25 8,426 18.32
-------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total deposits $186,861 100.00% $89,862 100.00% $73,138 100.00% $49,146 100.00% $45,992 100.00%
======== ====== ======= ====== ======= ====== ======= ====== ======= ======
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Core deposits, which exclude certificates of deposit of $100,000 or more,
provide a relatively stable funding source for the Company's loan portfolio and
other earning assets. The Company's core deposits increased $81.8 million in
1997 due to the acquisitions by the Company.
Deposits, and particularly core deposits, have historically been the
Company's primary source of funding and have enabled the Company to meet
successfully both its short-term and long-term liquidity needs. Management
anticipates that such deposits will continue to be the Company's primary source
of funding in the future. The Company's loan-to-deposit ratio was 79.8% at
December 31, 1997, and 89.6% at the end of 1996, and the ratio averaged 76.7%
during 1997. The maturity distribution of the Company's time deposits over
$100,000 at December 31, 1997, is set forth in the following table.
24
<PAGE>
<TABLE>
<CAPTION>
Maturities of Certificates of Deposit of $100,000 or More
- ----------------------------------------------------------------------------------------------------------
After Three After Six
Within Through Through After
Three Six Twelve Twelve
Months Months Months Months Total
----------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Certificates of deposit of $100,000 or more $11,930 $6,312 $7,668 $1,163 $27,073
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Approximately 44.1% of the Company's time deposits over $100,000 had
scheduled maturities within three months and 67.4% had maturities within six
months. Large certificate of deposit customers tend to be extremely sensitive to
interest rate levels, making these deposits less reliable sources of funding for
liquidity planning purposes than core deposits. Some financial institutions
partially fund their balance sheets using large certificates of deposit obtained
through brokers. These brokered deposits are generally expensive and are
unreliable as long-term funding sources. Accordingly, the Company does not
solicit brokered deposits.
Borrowed Funds. Borrowed funds consist primarily of short-term borrowings
in the form of federal funds purchased from correspondent banks, securities sold
under agreements to repurchase, and advances from the Federal Home Loan Bank.
Average short-term borrowings were $5.3 million in 1997, an increase of
$200,000 from 1996. Average Federal Home Loan Bank advances during 1997 were
$9.0 million compared to $5.4 million during 1996, an increase of $3.6 million.
Advances from the Federal Home Loan Bank are collateralized by $1.6 million of
debt securities of U.S. Government agencies, one-to-four family residential
mortgage loans, and the Company's investment in Federal Home Loan Bank stock. At
December 31, 1997, borrowings from the Federal Home Loan Bank were $16.4 million
compared to $4.9 million a year earlier. Although management expects to continue
using short-term borrowing and Federal Home Loan Bank advances as secondary
funding sources, core deposits will continue to be the Company's primary funding
source.
Long-term Debt. Of the $16.4 million advances from the Federal Home Loan
Bank outstanding at December 31, 1997, $2.4 million will mature after one year.
Capital
The Federal Reserve Board and bank regulatory agencies require bank
holding companies and financial institutions to maintain capital at adequate
levels based on a percentage of assets and off-balance sheet exposures, adjusted
for risk weights ranging from 0% to 100%. Under the risk-based standard, capital
is classified into two tiers. The Federal Reserve guidelines contain an
exemption from the capital requirements for bank holding companies with less
than $150 million in consolidated assets. Prior to the Offering, the Company had
less than $150 million in assets and, consequently, was not subject to these
rules. Following the Offering and the acquisition of the Carolina First
Branches, however, the Company had assets in excess of $150 million, and the
Federal Reserve's requirements applied to the Company. Tier I capital of the
Company consists of common shareholders' equity, excluding the unrealized
gain(loss) on available-for-sale securities, minus intangible assets. The
Company's Tier 2 capital consists of general reserve for loan losses subject to
certain limitations. A bank holding company's qualifying capital base for
purposes of its risk-based capital ratio consists of the sum of its Tier I and
Tier 2 capital. The regulatory minimum requirements are 4% for Tier I and 8% for
total risk-based capital.
The holding company and banking subsidiaries are also required to maintain
capital at a minimum level based on average total assets (as defined), which is
known as the leverage ratio. Only the strongest bank holding companies and banks
are allowed to maintain capital at the minimum requirement. All others are
subject to maintaining ratios 100 to 200 basis points above the minimum.
25
<PAGE>
The Company exceeded the Federal Reserve's fully phased-in regulatory capital
ratios at December 31, 1997, 1996 and 1995, as set forth in the following table.
<TABLE>
<CAPTION>
Analysis of Capital
- -------------------------------------------------------------------------------------------------------------------
December 31, (Dollars in thousands) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier I capital $ 28,341 $ 13,474 $ 12,693
Tier 2 capital 1,531 837 671
------------- -------------- -------------
Total qualifying capital $ 29,872 $ 14,311 $ 13,364
============= ============== =============
Risk-adjusted total assets (including off-balance sheet exposures) $ 160,538 $ 86,512 $ 68,743
============= ============== =============
Tier 1 risk-based capital ratio 17.65% 15.58% 18.46%
Total risk-based capital ratio 18.61 16.54 19.41
Tier 1 leverage ratio 12.08 11.62 13.21
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Each of the Banks is required to maintain risk-based and leverage ratios
similar to those required for the Company. Each of the Banks exceeded these
regulatory capital ratios at December 31, 1997, as set forth in the following
table.
Bank Capital Ratios
- ------------------------------------------------------------------------
Tier 1 Total
Risk- Risk- Tier 1
December 31, 1997 Based Based Leverage
- ------------------------------------------------------------------------
The Greenwood Bank 10.76% 11.71% 8.16%
The Clemson Bank 18.53 19.72 12.22
The Barnwell Bank 13.03 13.85 8.19
The Belton Bank 34.77 35.97 22.00
The Newberry Bank 37.76 38.68 18.90
- ------------------------------------------------------------------------
The Banks are expected to maintain capital ratios that exceed their
regulatory minimum requirements. The Company has verbally committed to the state
Commissioner of Banking to maintain the percentage of Tier 1 capital (as defined
by the commissioner) to total assets at the New Banks at a minimum of 8.00%
The Clemson Bank and the Belton Bank have entered into agreements with
Carolina First Bank to acquire three of its branch offices. The purchase of the
branches and the intangible assets resulting from the purchase will lower the
capital ratios of the two banks. The Company will be required to infuse
additional capital into the Belton Bank. See "Liquidity Management and Capital
Resources" for additional information.
Liquidity Management and Capital Resources
Liquidity management involves monitoring the Company's sources and uses of
funds in order to meet its day-to-day cash flow requirements while maximizing
profits. Liquidity represents the ability of a company to convert assets into
cash or cash equivalents without significant loss and to raise additional funds
by increasing liabilities. Without proper liquidity management, the Company
would not be able to perform the primary function of a financial intermediary
and would, therefore, not be able to meet the needs of the communities it
serves.
Liquidity management is made more complex because different balance sheet
components are subject to varying degrees of management control. For example,
the timing of maturities of the investment portfolio is very predictable and
subject to a high degree of control at the time investment decisions are made.
However, net deposit inflows and outflows are far less predictable and are not
subject to nearly the same degree of control.
26
<PAGE>
Net proceeds from the Offering and cash received upon the acquisition of
the Carolina First Branches improved the overall liquidity of the Company. The
funds were primarily invested in securities which the Company has designated as
available for sale. As a result, the Company's loans-to-assets ratio and
loans-to-funds ratio decreased. The loans-to-assets ratio at December 31, 1997
was 59.9% compared to 69.5% at December 31, 1996, and the loans-to-funds ratio
at December 31, 1997 was 69.3% compared to 79.3% at December 31, 1996. The
amount of advances from the Federal Home Loan Bank increased approximately $11.5
million from the December 31, 1996 balance of approximately $4.9 million.
Management expects to continue using these advances as a source of funding.
Additionally, the Company has approximately $11.9 million of unused lines of
credit for federal funds purchases. The Company also has approximately $73.6
million of securities available for sale as a source of liquidity.
The Company depends on dividends from the Banks as its primary source of
liquidity. The ability of the Banks to pay dividends is subject to general
regulatory restrictions which may, but are not expected to, have a material
impact on the liquidity available to the Company. Generally, banks are not
allowed to pay dividends unless the retained earnings are in a positive
position. Accordingly, management does not expect the New Banks to be able to
pay cash in the form of dividends to its parent company in the near future. The
Company does not plan to pay cash dividends for the near term. The Company has
paid stock dividends in September 1993, April 1994, August 1995, and May 1996
and may do so in the future.
The net proceeds of the Offering were adequate for the initial
capitalization of each New Bank and for capital injections at the Barnwell Bank
and the Greenwood Bank to comply with capital requirements of the State Board
resulting from the growth of the banks. The State Board could require the
Company to increase the capitalization of any of the Banks. In such event, the
Company would likely fund the increased capitalization through the proceeds
remaining from the Offering, from dividends from the Banks (to the extent
available), through loans from the Company's banking subsidiaries (subject to
regulatory limits and regulatory approval) or through loans from third parties
(subject to obtaining regulatory approval).
The Greenwood Bank has entered into a Purchase and Assumption Agreement
dated November 20, 1997 with The Palmetto Bank to sell certain assets,
specifically overdraft protection loans, and assign and transfer the deposits of
its branch in Ninety Six, South Carolina. The Company anticipates that the sale
of the branch will occur during the second quarter of 1998. In order to pay The
Palmetto Bank for the net liabilities assumed, the Greenwood Bank will sell
investments from its portfolio of securities available for sale. As of December
31, 1997, the overdraft protection loans of the Ninety Six branch were $158,000
and the deposits were $4.3 million. The volume of loans and deposits at December
31, 1997 may change considerably prior to the closing date.
On February 25, 1998, the Clemson Bank and the Belton Bank each entered
into Purchase and Assumption Agreements to acquire certain assets and assume
deposits of three branch offices of Carolina First Bank. The Clemson Bank will
assume approximately $5.0 million (based on December 31, 1997 levels, unaudited)
of deposits of the Calhoun Falls, South Carolina branch. The Belton Bank will
assume approximately $40.0 million (based on December 31, 1997 levels,
unaudited) of deposits of two branches located in Anderson County, South
Carolina. The Clemson Bank's current capital structure will support the
acquisition with no capital infusion by the Company. In contrast, the Company
will have to inject capital in the Belton Bank in order for the Belton Bank to
remain well-capitalized and to meet the minimum capital requirements of the
State Board. Although the amount of additional capital needed for the Belton
Bank can not be determined until the closing date, the Company expects the
amount to range from $4.0 to $4.5 million. The Company expects to fund the
additional capitalization through a combination of liquid assets of the parent,
cash dividends from the Greenwood Bank, borrowings from the banking
subsidiaries, and loans from a third party. The amount of each funding source
has not yet been determined.
Accounting Rule Changes
Earnings Per Share. In February 1997, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") 128,
"Earnings Per Share," effective for years ending after December 15, 1997. SFAS
128 simplifies the standards for computing earnings per share and makes them
comparable to international earning per share standards. It also requires the
dual presentation of basic and diluted earnings per share on the face of the
income statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic earnings per share
computation to the numerator and denominator of the diluted earnings per share
computation.
Basic earnings per share is computed by dividing net income by the
weighted-average number of shares outstanding for the period excluding the
effects of any dilutive potential common shares. Diluted earnings per share is
similar to the computation of basic earnings per share except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares had been
issued. The dilutive effect of options outstanding under the Company's stock
option plan is reflected in diluted earnings per share by the application of the
treasury stock method.
27
<PAGE>
SFAS 128 became effective for the Company as of December 31, 1997. As
required by SFAS 128, all prior period earnings per share data presented has
been restated to conform with the provisions of the statement.
Comprehensive Income. In June 1997, the FASB released SFAS 130, "Reporting
Comprehensive Income." SFAS 130 requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income is the change in equity of a
business during a period from transactions and other events and circumstances
from nonowner sources and excludes investments by owners and distributions to
owners. Comprehensive income consists of two components, net income and other
comprehensive income. Other comprehensive income includes, among other things,
the change in the unrealized gain or loss on securities available for sale.
This statement is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier periods provided for
comparative purposes is required.
Impact of Inflation
Unlike most industrial companies, the assets and liabilities of financial
institutions such as the Company and its subsidiaries are primarily monetary in
nature. Therefore, interest rates have a more significant effect on the
Company's performance than do the effects of changes in the general rate of
inflation and change in prices. In addition, interest rates do not necessarily
move in the same direction or in the same magnitude as the prices of goods and
services. As discussed previously, management seeks to manage the relationships
between interest sensitive assets and liabilities in order to protect against
wide interest rate fluctuations, including those resulting from inflation.
Industry Developments
In February, 1998, the Supreme Court ruled that federal credit unions must
limit its membership to employees of the company that sponsors it. Banking
leaders throughout the country have argued that credit unions have an unfair
competitive advantage because they do not pay income taxes and are not subject
to the same level of regulatory oversight. The Supreme Court ruling applies only
to federal credit unions. State-chartered credit unions were not directly
affected by the ruling. The lower courts will determine whether current members
who are not employed by the credit union sponsor will be forced to close their
accounts. Management does not expect the ruling to have an immediate affect on
the financial position or results of operations of the Company. The effects on
future periods has not yet been determined.
The Year 2000
During 1997, the Company commenced a year 2000 date conversion project to
address all necessary code changes, testing and implementation. Failure to
address the issue could result in computer applications which fail or create
erroneous results by or at the year 2000. Bank regulators have established
minimum guidelines for banks in addressing the Year 2000 issue. The regulators
are monitoring the progress of banks in complying with these guidelines and have
the option of taking regulatory action for banks which have not made
satisfactory progress in addressing the year 2000 issue.
The Company is utilizing both internal and external resources to identify,
correct, and test the systems for the year 2000 compliance. The Company has
contacted its primary processing vendors, and the vendors have developed plans
to address processing of transactions in the year 2000. Management has not yet
assessed the year 2000 compliance expense but does not expect it to have a
material effect on the Company's earnings. Maintenance or modification costs
will be expensed as incurred, while the costs of new software will be
capitalized over the software's useful life.
28
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable, as the Company qualifies as a "small business
issuer" under Regulation S-B promulgated by the Securities and Exchange
Commission.
Item 8. Financial Statements and Supplementary Data.
The financial statements identified in Item 14 of this Report on
Form 10-K are included herein on pages F-1 through F-30.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Information called for by PART III (Items 10, 11, 12 and 13) of this
Report on Form 10-K has been omitted as the Company intends to file with the
Securities and Exchange Commission not later than 120 days after the close of
its fiscal year ended December 31, 1997 a definitive Proxy Statement pursuant to
Regulation 14A promulgated under the Securities Exchange Act of 1934. Such
information will be set forth in such Proxy Statement.
Item 10. Directors and Executive Officers of the Company.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Item 13. Certain Relationships and Related Transactions.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1)-(2) Financial Statements and Schedules:
The consolidated financial statements and schedules of the Company
identified in the accompanying Index to Financial Statements at page F-1 herein
are filed as part of this Report on Form 10-K.
(3) Exhibits:
The accompanying Exhibit Index on page E-1 sets forth the exhibits
that are filed as part of this Report on Form 10-K.
(b) Reports on Form 8-K:
None.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant, Community Capital Corporation,
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
COMMUNITY CAPITAL CORPORATION
Dated: March 27, 1998 By: /s/ WILLIAM G. STEVENS
----------------------------------
William G. Stevens
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant, Greenwood National Bancorporation, and in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
/s/ WILLIAM G. STEVENS President (Principal March 27, 1998
- ------------------------ Executive Officer) and
William G. Stevens Director
/s/ JAMES H. STARK Chief Financial March 27, 1998
- ------------------------ Officer (Principal
James H. Stark Financial and
Accounting Officer) and
Secretary
* Assistant Secretary and March 27, 1998
- ------------------------ Director
Patricia C. Edmonds
* Director March 27, 1998
- ------------------------
David P. Allred, M.D.
* Director March 27, 1998
- ------------------------
Earl H. Bergen
* Director March 27, 1998
- ------------------------
Robert C. Coleman
* Director March 27, 1998
- ------------------------
John W. Drummond
* Director March 27, 1998
- ------------------------
James M. Horton
* Director March 27, 1998
- ------------------------
Wayne Q. Justesen, Jr.
30
<PAGE>
* Director March 27, 1998
- ------------------------
Clinton C. Lemon, Jr.
* Director March 27, 1998
- ------------------------
James A. Lollis
* Director March 27, 1998
- ------------------------
Thomas C. Lynch, Jr.
* Director March 27, 1998
- ------------------------
Marshall L. Martin, Jr.
* Director March 27, 1998
- ------------------------
H. Edward Munnerlyn
* Director March 27, 1998
- ------------------------
George B. Park
* Director March 27, 1998
- ------------------------
Joseph H. Patrick, Jr.
* Director March 27, 1998
- ------------------------
Donna W. Robinson
* Director March 27, 1998
- ------------------------
George D. Rodgers
* Director March 27, 1998
- ------------------------
Charles J. Rogers
- ------------------------ Director March 27, 1998
Thomas F. Skelton
* Director March 27, 1998
- ------------------------
William F. Steadman
* Director March 27, 1998
- ------------------------
Lex D. Walters
*By: /s/ WILLIAM G. STEVENS March 27, 1998
------------------------------
(William G. Stevens) (As
Attorney-in-Fact for each
of the persons indicated)
31
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
3.1* Articles of Incorporation of Registrant.
3.2* Articles of Amendment to Articles of Incorporation of Registrant
(re: Change of Name).
3.3* Bylaws of Registrant.
4.1** Form of Common Stock Certificate. (The rights of security holders of
the Registrant are set forth in the Registrant's Articles of
Incorporation and Bylaws included as Exhibits 3.1 and 3.3,
respectively.)
10.1* Registrant's Stock Option Plan for employees (1988).
10.2 Registrant's Incentive Stock Option and Nonstatutory Stock Option
Plan (1993) as Amended and Restated through April 15, 1996.
(Incorporated by reference to Registrant's Definitive Proxy
Statement for Annual Meeting of Shareholders held on May 20, 1996.)
10.3* Registrant's Executive Supplemental Income Plan (Summary) and form
of Executive Supplemental Income Agreement.
10.4* Registrant's Management Incentive Compensation Plans (Summary).
10.5* Lease Agreement dated July 8, 1994 between John W. Drummond and the
Registrant.
10.6** Lease Agreement With Options dated June 11, 1996 between Robert C.
Coleman and the Registrant.
10.7** Bank Development Agreement dated May 15, 1996 between the Registrant
and the organizers of The Bank of Belton.
10.8** Bank Development Agreement dated September 9, 1996 between the
Registrant and the organizers of The Bank of Newberry County (In
Organization).
10.9** Bank Development Agreement dated November 18, 1996 between the
Registrant and the organizers of The Bank of Barnwell County (In
Organization).
10.10** Line of Credit dated June 5, 1996 between Greenwood Bank & Trust and
the Belton Bank Group, a partnership of the organizers of The Bank
of Belton (In Organization).
10.11** Line of Credit dated September 4, 1996 between Greenwood Bank &
Trust and the Newberry Bank Group, a partnership of the organizers
of The Bank of Newberry County (In Organization).
10.12** Line of Credit dated October 21, 1996 between Greenwood Bank & Trust
and the Barnwell Bank Group, a partnership of the organizers of The
Bank of Barnwell County (In Organization).
10.13*** Employment Contract dated November 19, 1987 between Greenwood
National Bank and William G. Stevens. (Incorporated by reference to
Exhibit 10.7 to Registrant's Form 10-K for the fiscal year ended
December 31, 1995.)
10.14*** Employment and Option Agreement dated November 21, 1994 between
Donna W. Robinson and the Registrant. (Incorporated by reference to
Exhibit 10.8 to Registrant's Form 10-K for the fiscal year ended
December 31, 1995.)
10.15** Employment and Option Agreement dated December 5, 1996 between James
A. Lollis and the Registrant.
10.16** Employment and Option Agreement dated December 5, 1996 between
William F. Steadman and the Registrant.
10.17** Employment and Option Agreement dated December 5, 1996 between
Marshall L. Martin, Jr. and the Registrant.
21.1 Subsidiaries of the Registrant.
24.1 Directors' Powers of Attorney.
27.1 Financial Data Schedule.
- ----------
* Incorporated by reference to the Exhibit of the same number filed in
connection with the Registrant's Form 10-K for the fiscal year ended
December 31, 1995.
** Incorporated by reference to the Exhibit of the same number filed in
connection with the Registrant's Registration Statement on Form S-2
initially filed on December 20, 1996 (File No. 333-18457).
E-1
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY CAPITAL CORPORATION
Report of Independent Accountants............................................F-2
Consolidated Balance Sheets at December 31, 1996 and 1997....................F-3
Consolidated Statements of Operations for the Years Ended December 31,
1995, 1996 and 1997.........................................................F-4
Consolidated Statements of Changes in Shareholders' Equity for the Years
ended December 31, 1995, 1996 and 1997.......................................F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1996 and 1997..........................................................F-6
Notes to Consolidated Financial Statements...................................F-7
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Community Capital Corporation
Greenwood, South Carolina
We have audited the accompanying consolidated balance sheets of Community
Capital Corporation and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Community Capital
Corporation and Subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
TOURVILLE, SIMPSON & HENDERSON
Tourville, Simpson & Henderson
Columbia, South Carolina
February 4, 1998
(except for Note 25, as to which
the date is February 25, 1998)
F-2
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS December 31,
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks....................................................... $ 7,347 $ 3,882
Interest-bearing deposit accounts ............................................ 415 45
Federal funds sold............................................................ 350 700
----------- -----------
Total cash and cash equivalents......................................... 8,112 4,627
----------- -----------
Securities
Available for sale............................................................ 73,581 23,280
Held to maturity (market value at December 31, 1997 was $ 675)................ 675 -
Nonmarketable equity securities............................................... 3,224 2,199
----------- -----------
Total securities........................................................ 77,480 25,479
----------- -----------
Loans receivable................................................................ 149,127 80,546
Less allowance for loan losses................................................ (1,531) (837)
----------- -----------
Loans, net.................................................................. 147,596 79,709
----------- -----------
Premises and equipment, net..................................................... 8,293 3,523
Accrued interest receivable..................................................... 2,381 1,114
Intangible assets............................................................... 3,119 47
Other assets.................................................................... 1,880 1,460
----------- -----------
Total assets............................................................ $ 248,861 $ 115,959
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing.......................................................... $ 19,460 $ 12,226
Interest bearing.............................................................. 167,401 77,636
----------- -----------
Total deposits.......................................................... 186,861 89,862
Federal funds purchased and securities sold under agreements to repurchase...... 11,943 6,783
Advances from the Federal Home Loan Bank........................................ 16,350 4,889
Accrued interest payable........................................................ 1,351 462
Other liabilities............................................................... 428 407
----------- -----------
Total liabilities....................................................... 216,933 102,403
----------- -----------
Shareholders' equity:
Common stock, $1 par value; 10,000,000 shares authorized; 2,905,303 and
1,219,109 shares issued and outstanding at
December 31, 1997 and 1996, respectively...................................... 2,905 1,219
Capital surplus................................................................. 27,492 12,004
Unrealized gain on securities available for sale, net........................... 467 35
Retained earnings .............................................................. 1,064 298
----------- -----------
Total shareholders' equity.............................................. 31,928 13,556
----------- -----------
Total liabilities and shareholders' equity.............................. $ 248,861 $ 115,959
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except for per share data)
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Interest income:
Loans, including fees ............................... $ 10,604 $ 6,622 $ 5,146
Securities, taxable ................................. 3,026 1,112 723
Securities, nontaxable .............................. 441 290 171
Dividends ........................................... 133 87 70
Federal funds sold and other ........................ 239 90 107
-------- -------- --------
Total interest income ......................... 14,443 8,201 6,217
-------- -------- --------
Interest expense:
Deposits ............................................ 6,325 3,425 2,422
Advances from the Federal Home Loan Bank ............ 529 298 381
Federal funds purchased and securities sold under
agreements to repurchase .......................... 318 283 145
-------- -------- --------
Total interest expense ....................... 7,172 4,006 2,948
-------- -------- --------
Net interest income ................................... 7,271 4,195 3,269
Loan loss provision ................................... 608 187 112
-------- -------- --------
Net interest income after loan loss provision ......... 6,663 4,008 3,157
-------- -------- --------
Other income:
Service charges on deposit accounts ................. 842 515 393
Gain (loss) on sales of securities available for sale (1) 17 (22)
Residential mortgage origination fees ............... 271 207 115
Commissions from sales of mutual funds .............. 54 132 49
Other income ........................................ 405 268 172
-------- -------- --------
Total other income ............................ 1,571 1,139 707
-------- -------- --------
Other expense:
Salaries and employee benefits ...................... 3,329 1,960 1,411
Net occupancy expense ............................... 479 287 182
Amortization of intangible assets ................... 246 14 33
Furniture and equipment expense ..................... 771 305 240
Other operating expense ............................. 2,423 1,575 1,203
-------- -------- --------
Total other expense ........................... 7,248 4,141 3,069
-------- -------- --------
Income before income taxes ............................ 986 1,006 795
Income tax provision .................................. 220 300 261
-------- -------- --------
Net income ............................................ $ 766 $ 706 $ 534
======== ======== ========
Basic earnings per share .............................. $ 0.29 $ 0.58 $ 0.58
Diluted earnings per share ............................ 0.28 0.55 0.53
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Unrealized
Gain (loss) on
Common Stock Securities
--------------------- Capital Available Retained
Shares Amount Surplus for Sale, net Earnings Total
--------- --------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1994 ..... 573,002 $ 573 $ 5,111 $ (77) $ 472 $ 6,079
Net proceeds of stock
offering ............ 520,422 520 5,490 -- -- 6,010
Sales of stock to ESOP 4,741 5 51 -- -- 56
Stock options exercised 300 -- 2 -- -- 2
5% stock dividend ..... 54,595 55 600 -- (659) (4)
Change in fair value
for the period ...... -- -- -- 255 -- 255
Net income ............ -- -- -- -- 534 534
--------- --------- --------- --------- --------- ---------
December 31, 1995 ..... 1,153,060 1,153 11,254 178 347 12,932
Stock options exercised 8,558 9 60 -- -- 69
5% stock dividend ..... 57,491 57 690 -- (755) (8)
Change in fair value
for the period ...... -- -- -- (143) -- (143)
Net income ............ -- -- -- -- 706 706
--------- --------- --------- --------- --------- ---------
December 31, 1996 ..... 1,219,109 1,219 12,004 35 298 13,556
Net proceeds of stock
offering ........... 1,665,000 1,665 15,281 -- -- 16,946
Sales of stock to ESOP 14,519 14 166 -- -- 180
Stock options exercised 6,675 7 41 -- -- 48
Change in fair value
for the period ...... -- -- -- 432 -- 432
Net income ............ -- -- -- -- 766 766
--------- --------- --------- --------- --------- ---------
December 31, 1997 ..... 2,905,303 $ 2,905 $ 27,492 $ 467 $ 1,064 $ 31,928
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .............................................. $ 766 $ 706 $ 534
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ......................... 1,092 460 324
Provision for loan losses ............................. 608 187 112
Deferred income tax benefit ........................... (93) (56) (43)
Amortization less accretion on securities ............. 31 51 46
Amortization of deferred loan fees and costs, net ..... 216 134 84
(Gain) loss on sale of securities available for sale .. 1 (17) 22
Proceeds from sales of residential mortgages .......... 9,810 8,768 4,651
Disbursements for residential mortgages held for sale . (10,022) (8,684) (4,814)
Increase in interest receivable ....................... (1,096) (172) (426)
Increase in interest payable .......................... 431 9 180
(Gain)loss on disposal of premises and equipment ...... (6) 32 --
Increase in other assets .............................. (87) (333) (267)
Increase in other liabilities ......................... 18 105 38
-------- -------- --------
Net cash provided by operating activities ............ 1,669 1,190 441
-------- -------- --------
Cash flows from investing activities:
Net increase in loans made to customers ................. (55,759) (17,581) (12,582)
Proceeds from sales of securities available for sale .... 3,996 4,512 1,975
Proceeds from maturities of securities available for sale 10,588 3,603 1,527
Purchases of securities available for sale .............. (64,267) (9,205) (15,209)
Proceeds from maturities of securities held to maturity . -- -- 100
Purchases of securities held to maturity ................ (675) -- (2,891)
Purchases of nonmarketable equity securities ............ (1,025) (947) (166)
Proceeds from sale of other real estate owned ........... -- -- 20
Purchases of premises and equipment ..................... (3,030) (1,713) (997)
Proceeds from disposals of premises and equipment ....... 26 309 --
Acquisition of branches ................................. 35,761 -- --
-------- -------- --------
Net cash used by investing activities ................ (74,385) (21,022) (28,223)
-------- -------- --------
Cash flows from financing activities:
Net increase in demand and savings deposits ............. 18,372 8,343 9,136
Net increase in certificates of deposit ................. 24,034 8,381 14,856
Proceeds from advances from the Federal Home Loan Bank .. 18,100 700 1,900
Repayments of advances from the Federal Home Loan Bank .. (6,639) (2,054) (1,582)
Proceeds from issuance of common stock .................. 16,946 -- 6,010
Proceeds from exercise of stock options ................. 48 69 2
Proceeds from stock sales to employee benefit plan ...... 180 -- 56
Net increase (decrease) in federal funds purchased and
securities sold under repurchase agreements .......... 5,160 3,749 (352)
Cash paid in lieu of fractional shares .................. -- (8) (4)
-------- -------- --------
Net cash provided by financing activities ............ 76,201 19,180 30,022
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ...... 3,485 (652) 2,240
Cash and cash equivalents, beginning of year .............. 4,627 5,279 3,039
-------- -------- --------
Cash and cash equivalents, end of year .................... $ 8,112 $ 4,627 $ 5,279
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation - The accompanying consolidated financial
statements include the accounts of Community Capital Corporation (the
"Company"), and its wholly-owned subsidiaries, Greenwood Bank & Trust (the
"Greenwood Bank"), Clemson Bank & Trust (the "Clemson Bank"), The Bank of
Barnwell County (the "Barnwell Bank"), The Bank of Belton (the "Belton Bank"),
and The Bank of Newberry County (the "Newberry Bank"), collectively referred to
as the "Banks", and Community Trust Services Company, formed in 1997. The
Barnwell Bank, the Belton Bank, and the Newberry Bank (the "New Banks") were
acquired and opened as subsidiaries by the Company in February, March, and July
1997, respectively (see Note 2). The Clemson Bank commenced operations in June
1995. These acquisitions were accounted for as purchases and are reflected in
the Company's financial position and results of operations from the dates of
acquisition.
The Company and its subsidiaries provide a full range of financial
services in their respective communities and geographic markets in South
Carolina including accepting deposits, IRA plans, selling mutual funds, trust
services, origination of home mortgage loans, and secured and unsecured loans
for small businesses and individuals.
The accounting and reporting policies of the Company reflect
industry practices and conform to generally accepted accounting principles in
all material respects. All significant intercompany accounts and transactions
have been eliminated.
Use of Estimates - In preparing the financial statements, management
is required to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the balance sheet date and revenues and expenses
for the period. Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for loan losses, including
valuation allowances for impaired loans, the carrying amount of real estate
acquired in connection with foreclosures or in satisfaction of loans, and the
assumptions used in computing the fair value of stock options granted and the
pro forma disclosures required by Statement of Financial Accounting Standards
No. 123. Management must also make estimates in determining the estimated useful
lives and methods for depreciating premises and equipment.
While management uses available information to recognize losses on
loans and foreclosed real estate, future additions to the allowance may be
necessary based on changes in local economic conditions. In addition, regulatory
agencies, as an integral part of their examination process, periodically review
the Banks' allowances for losses on loans and foreclosed real estate. Such
agencies may require the Banks to recognize additions to the allowances based on
their judgements about information available to them at the time of their
examination. Because of these factors, it is reasonably possible that the
allowances for losses on loans and foreclosed real estate may change materially
in the near term.
Securities Available for Sale - Securities available for sale by the
Company are carried at amortized cost and adjusted to estimated market value by
recording the aggregate unrealized gain or loss in a valuation account.
Management does not actively trade securities classified as available for sale.
Reductions in market value considered by management to be other than temporary
are reported as a realized loss and a reduction in the cost basis in the
security. Generally, amortization of premiums and accretion of discounts are
charged or credited to earnings on a straight-line basis over the life of the
securities. The adjusted cost basis of securities available for sale is
determined by specific identification and is used in computing the gain or loss
from a sales transaction.
Securities Held to Maturity - Securities held to maturity are those
securities which management has the intent and the Company has the ability to
hold until maturity. Securities held to maturity are carried at cost and
adjusted for amortization of premiums and accretion of discounts, both computed
by the straight-line method. Reductions in market value considered by management
to be other than temporary are reported as a realized loss and a reduction in
the cost basis of the security.
F-7
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Nonmarketable Equity Securities - Nonmarketable equity securities
include the costs of the Banks' investments in the stock of the Federal Reserve
Bank and the Federal Home Loan Bank. The stocks have no quoted market value and
no ready market exists. Investment in Federal Reserve Bank stock is required for
state-chartered member banks. Investment in Federal Home Loan Bank stock is a
condition of borrowing from the Federal Home Loan Bank, and the stock is pledged
to secure the borrowings. At December 31, 1997 and 1996, the investment in
Federal Reserve Bank stock was $349,500 and $150,000, respectively. At December
31, 1997 and 1996, the investment in Federal Home Loan Bank stock was $1,544,200
and $822,000, respectively.
The Company has invested in the stock of four unrelated financial
institutions. The Company owns less than five percent of the outstanding shares
of each institution, and the stocks either have no quoted market value or are
not readily marketable. At December 31, 1997 and 1996, the investments in the
stock of the unrelated financial institutions, at cost, were $1,330,025 and
$1,227,000, respectively.
Loans - Loans are recorded at their unpaid principal balance. Direct
loan origination costs and loan origination fees are deferred and amortized over
the lives of the loans as an adjustment to yield. Unamortized net deferred loans
costs included in loans at December 31, 1997 and 1996 were $265,000 and
$106,000, respectively.
Statement of Financial Accounting Standards ("SFAS") No. 114,
"Accounting by Creditors for Impairment of a Loan", requires loans to be
measured for impairment when it is probable that all amounts, including
principal and interest, will not be collected in accordance with the contractual
terms of the loan agreement. It generally requires impairment to be measured on
the basis of discounted expected cash flows. The Company defines impaired loans
as nonaccrual loans.
Interest income is computed using the simple interest method and is
recorded in the period earned. When serious doubt exists as to the
collectibility of a loan or a loan is 90 days past due, the accrual of interest
income is generally discontinued unless the estimated net realizable value of
the collateral is sufficient to assure collection of the principal balance and
accrued interest. When interest accruals are discontinued, unpaid accrued
interest is reversed and charged against current year income.
Allowance for Loan Losses - Management provides for losses on loans
through specific and general charges to operations and credits such charges to
the allowance for loan losses. Specific provision for losses is determined for
identified loans based upon estimates of the excess of the loan's carrying value
over the net realizable value of the underlying collateral. General provision
for loan losses is estimated by management based upon factors including industry
loss experience for similar lending categories, actual loss experience,
delinquency trends as well as prevailing and anticipated economic conditions.
While management uses the best information available to make evaluations, future
adjustment to the allowance may be necessary if economic conditions differ
substantially from the assumptions used in making the evaluation. Delinquent
loans are charged against the allowance at the time they are determined to be
uncollectible. Recoveries are added to the allowance.
Residential Mortgages Held For Sale - The Banks' mortgage activities
are comprised of accepting residential mortgage loan applications, qualifying
borrowers to standards established by investors, funding residential mortgages
and selling mortgages to investors under pre-existing commitments. Funded
residential mortgages held temporarily for sale to investors are recorded at
cost which approximates the market value (See Note 5). Application and
origination fees collected by the Banks are recognized as income upon sale to
the investor.
Premises and Equipment - Premises and equipment are stated at cost,
less accumulated depreciation. Gain or loss on retirement of premises and
equipment is recognized in the statements of operations when incurred.
Expenditures for maintenance and repairs are charged to expense; betterments and
improvements are capitalized. Depreciation charges are computed principally on
the straight-line method over the estimated useful lives as follows:
Building and improvements............................... 7-40 years
Furniture, fixtures and equipment....................... 3-10 years
F-8
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Other Real Estate Owned - Other real estate owned includes real
estate acquired through foreclosure and loans accounted for as in-substance
foreclosures. Collateral is considered foreclosed in-substance when the borrower
has little or no equity in the fair value of the collateral, proceeds for
repayment of the debt can be expected to come only from the sale of the
collateral and it is doubtful that the borrower can rebuild equity or otherwise
repay the loan in the foreseeable future. Other real estate owned is carried at
the lower of cost (fair value at the date of foreclosure) or fair value minus
estimated costs to sell. Any write-downs at the date of acquisition are charged
to the allowance for possible loan losses. Expenses to maintain such assets,
subsequent changes in the valuation allowance, and gains and losses on disposal
are included in other expenses.
Intangible Assets - Intangible assets consist of goodwill and core
deposit premiums resulting from the acquisition of the New Banks and branch
acquisitions by the Barnwell Bank. The core deposit intangibles are being
amortized over fifteen years using the straight-line method, and goodwill is
being amortized over five years using the straight-line method.
Stock-Based Compensation - SFAS 123, "Accounting for Stock-Based
Compensation", issued in October 1995, allows a company to either adopt the fair
value method or continue using the intrinsic valuation method presented under
Accounting Principles Board ("APB") Opinion 25 to account for stock-based
compensation. The fair value method recommended in SFAS 123 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. The intrinsic value method
measures compensation cost based on the excess, if any, of the quoted market
price of the stock at the grant date over the amount an employee must pay to
acquire the stock. The Company has elected to continue using APB Opinion 25 to
account for stock options granted and has disclosed in the footnotes pro forma
net income and earnings per share information as if the fair value method had
been used.
Income taxes - The income tax provision is the sum of amounts
currently payable to taxing authorities and the net changes in income taxes
payable or refundable in future years. Income taxes deferred to future years are
determined utilizing a liability approach. This method gives consideration to
the future tax consequences associated with differences between the financial
accounting and tax bases of certain assets and liabilities, principally the
allowance for loan losses and depreciable premises and equipment.
Cash Flow Information - For purposes of reporting cash flows, the
Company considers certain highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. Cash equivalents
include amounts due from depository institutions and federal funds sold.
Generally, federal funds are sold for one-day periods.
The following summarizes supplemental cash flow information for
1997, 1996, and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Cash paid for interest ...................................... $ 6,775 $ 4,007 $ 2,768
Cash paid for income taxes .................................. 341 290 331
Supplemental noncash investing and financing activities:
Foreclosures on loans ..................................... 262 -- --
Transfer from retained earnings to common stock and capital
surplus to record stock dividends ....................... -- 747 655
Change in unrealized gain or loss on securities available
for sale, net of tax .................................... 432 (143) 255
</TABLE>
Off-Balance-Sheet Financial Instruments - In the ordinary course of
business, the Banks have entered into off-balance-sheet financial instruments
consisting of commitments to extend credit, commitments under credit card
arrangements and letters of credit. These financial instruments are recorded in
the financial statements when they become payable by the customer.
F-9
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Concentrations of Credit Risk - Financial instruments which
potentially subject the Company to concentrations of credit risk consist
principally of loans receivable, securities, federal funds sold and amounts due
from banks. Management is not aware of any concentrations of loans to classes of
borrowers or industries that would be similarly affected by economic conditions.
Although the Company's loan portfolio is diversified, a substantial portion of
its borrowers' ability to honor the terms of their loans is dependent on
business and economic conditions in each Bank's local community. Management does
not believe credit risk is associated with obligations of the United States, its
agencies or its corporations. The Company places its deposits and correspondent
accounts with and sells its federal funds to high credit quality institutions.
By policy, time deposits are limited to amounts insured by the FDIC. Management
believes credit risk associated with correspondent accounts is not significant.
Per-Share Data - SFAS 128, "Earnings Per Share", issued in February
1997, simplifies the standards for computing earnings per share and makes them
comparable to international earnings per share standards. It also requires the
dual presentation of basic and diluted earnings per share on the face of the
income statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic earnings per share
computation to the numerator and denominator of the diluted earnings per share
computation.
Basic earnings per share is computed by dividing net income by the
weighted-average number of shares outstanding for the period excluding the
effects of any dilutive potential common shares. Diluted earnings per share is
similar to the computation of basic earnings per share except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares had been
issued. The dilutive effect of options outstanding under the Company's stock
option plan is reflected in diluted earnings per share by the application of the
treasury stock method.
SFAS 128 became effective as of December 31, 1997. As required by
SFAS 128, all prior period earnings per share data presented has been restated
to conform with the provisions of the statement. Early application was not
permitted.
Share and per-share data have been restated to reflect the 5% stock
dividends issued in May 1996 and August 1995.
Common Stock Owned by the Employee Stock Ownership Plan (ESOP) -
ESOP purchases and redemptions of the Company's common stock are at estimated
fair value. Dividends on ESOP shares are charged to retained earnings. All
shares held by the ESOP are treated as outstanding for purposes of computing
earnings per share.
Reclassifications - Nonmarketable equity securities were previously
included in other assets, and dividends received on these securities were
included in other income. The Company reclassified the amounts presented for
1996 and 1995 to conform with the 1997 presentation. Certain other captions and
amounts in the 1996 and 1995 consolidated financial statements were reclassified
to conform with the 1997 presentation.
Accounting for Transfers and Servicing of Financial Assets - SFAS
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which became effective on a prospective basis
beginning January 1, 1997, establishes criteria based on legal control to
determine whether a transfer of a financial asset is a sale or a secured
borrowing. A sale is recognized when the Company relinquishes control over a
financial asset and is compensated for such asset. The difference between the
net proceeds received and the carrying amount of the financial asset being sold
or securitized is recognized as a gain or loss on sale.
In general, transactions which were recorded as sales under prior
accounting standards will continue to receive sales treatment under SFAS 125.
F-10
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - ACQUISITIONS:
On February 28, 1997, the Company used $7,200,000 of the proceeds
from the stock offering (see Note 10) to acquire and capitalize the Barnwell
Bank. On March 30, 1997, the Company used an additional $3,500,000 of the
proceeds to acquire and capitalize the Belton Bank. On July 10, 1997, the
Company used $3,300,000 of the proceeds to acquire and capitalize the Newberry
Bank. 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 New Banks opened lines of
credit with the Company's banking subsidiaries which were guaranteed by the
organizers of each organizing bank. Upon the New Banks being approved for
opening by the regulatory agencies and upon the opening of the New 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
Goodwill 365 181 280
Organizational notes (468) (695) (519)
Goodwill is being amortized over five years using the straight-line method.
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 dates indicated, or which may
result in the future.
1997 1996
-------- --------
(Dollars in thousand except per share amounts)
Net income ................................... $ 537 $ 574
Basic earnings per share ..................... 0.20 0.47
Diluted earnings per share ................... 0.19 0.44
Effective April 7, 1997, the Barnwell Bank 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 premium ............................ 2,502
Deposits, including accrued interest payable ............... (55,051)
Other, net ................................................. (74)
--------
Cash received for net liabilities assumed ...... $(35,761)
========
F-11
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - ACQUISITIONS: (continued)
The intangible core deposit premium was based on total deposits,
excluding certificates of deposit greater than or equal to $100,000, and is
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.
NOTE 3 - RESTRICTIONS ON CASH AND DUE FROM BANKS:
The Banks are required to maintain average reserve balances computed
as a percentage of deposits. At December 31, 1997, the required cash reserves
were satisfied by vault cash on hand and amounts due from correspondent banks.
NOTE 4 - INVESTMENT SECURITIES:
Securities available for sale at December 31, 1997 and 1996 consist
of the following:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 ........................ (Dollars in thousands)
U.S. Treasury securities ................. $ 13,467 $ 121 $ 1 $ 13,587
Securities of other U.S. Government
agencies and corporations .............. 46,236 290 12 46,514
Obligations of states and local government 12,898 315 11 13,202
Mortgage-backed securities ............... 273 5 -- 278
---------- ---------- ---------- ----------
Total securities available for sale $ 72,874 $ 731 $ 24 $ 73,581
========== ========== ========== ==========
December 31, 1996
U.S. Treasury securities ................. $ 6,395 $ 25 $ -- $ 6,420
Securities of other U.S. Government
agencies and corporations .............. 11,170 27 47 11,150
Obligations of states and local government 5,321 73 27 5,367
Mortgage-backed securities ............... 337 6 -- 343
---------- ---------- ---------- ----------
Total securities available for sale $ 23,223 $ 131 $ 74 $ 23,280
========== ========== ========== ==========
</TABLE>
Securities held to maturity as of December 31, 1997 consist of the
following. There were no securities designated as held to maturity at December
31, 1996.
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
December 31, 1997 (Dollars in thousands)
Obligations of states and local governments $ 675 $ -- $ -- $ 675
========== =========== =========== ======
</TABLE>
F-12
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INVESTMENT SECURITIES: (continued)
The following table summarizes the maturities of securities
available for sale and held to maturity as of December 31, 1997, based on the
contractual maturities. Actual maturities may differ from the contractual
maturities because borrowers may have the right to call or prepay obligations
with or without penalty.
<TABLE>
<CAPTION>
Securities Securities
Available for Sale Held to Maturity
--------------------------- ---------------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
------------ ------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Due in one year or less ................. $ 4,012 $ 4,022 $ -- $ --
Due after one year but within five years 34,799 35,098 -- --
Due after five years but within ten years 24,760 24,917 -- --
Due after ten years ..................... 9,030 9,266 675 675
Mortgage-backed securities .............. 273 278 -- --
------------ ------------ ------------ ------------
Total ............................ $ 72,874 $ 73,581 $ 675 $ 675
============ ============ ============ ============
</TABLE>
Proceeds from sales of securities available for sale during 1997,
1996 and 1995 were $3,996,000, $4,512,000 and $1,975,000, respectively,
resulting in gross realized gains of $0, $18,000 and $0 along with gross
realized losses of $1,000, $1,000 and $22,000, respectively. There were no sales
of securities held to maturity in 1997, 1996 or 1995.
At December 31, 1997 and 1996, securities having an amortized cost
of approximately $34,878,000 and $18,310,000, respectively, and an estimated
market value of $34,613,000 and $18,392,000, respectively, were pledged as
collateral for short-term borrowings and advances from the Federal Home Loan
Bank (see Note 9), to secure public and trust deposits, and for other purposes
as required and permitted by law.
NOTE 5 - LOANS RECEIVABLE:
Loans receivable at December 31, 1997 and 1996, are summarized as
follows:
1997 1996
-------- --------
(Dollars in thousands)
Commercial and agricultural ................. $ 33,479 $ 15,348
Real estate ................................. 71,950 49,639
Home equity ................................. 14,383 9,243
Consumer - installment ...................... 24,318 4,592
Consumer - credit card and checking ......... 1,429 1,355
Loans to financial institutions ............. 2,600 --
Residential mortgages held for sale and other 968 369
-------- --------
Total loans .......................... $149,127 $ 80,546
======== ========
At December 31, 1997, 1996 and 1995, the Banks had sold
participations in loans aggregating $9,528,000, $2,879,000, and $5,595,000,
respectively, to other financial institutions on a nonrecourse basis.
Collections on loan participations and remittances to participating institutions
conform to customary banking practices.
The Banks accept residential mortgage loan applications and fund
loans of qualified borrowers (see Note 1). Funded loans are sold without
recourse to investors at face value under the terms of pre-existing commitments.
The Banks do not sell residential mortgages having market or interest rate risk.
The Banks do not service residential mortgage loans for the benefit of others.
At December 31, 1997 and 1996, the Banks had pledged approximately
$3,983,000 and $6,294,000, respectively, of loans on residential real estate as
collateral for advances from the Federal Home Loan Bank (see Note 9).
F-13
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - LOANS RECEIVABLE: (continued)
Loans are defined as impaired when "based on current information and
events, it is probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement." All loans are subject
to this criteria except for: "smaller-balance homogeneous loans that are
collectively evaluated for impairment" and loans "measured at fair value or at
the lower of cost or fair value." The Company considers its consumer installment
portfolio, credit cards and home equity lines as meeting this criteria.
Therefore, the real estate and commercial loan portfolios are primarily subject
to possible impairment.
The Company identifies impaired loans through its normal internal
loan review process. Loans on the Company's problem loan watch list are
considered potentially impaired loans. These loans are evaluated in determining
whether all outstanding principal and interest are expected to be collected.
Loans are not considered impaired if a minimal delay occurs and all amounts due
including accrued interest at the contractual interest rate for the period of
delay are expected to be collected. At December 31, 1997 and 1996, management
reviewed its problem loan watch list and determined that no impairment on loans
existed that would have a material effect on the Company's consolidated
financial statements. At December 31, 1997 and 1996, the Company had nonaccrual
loans of approximately $678,000 and $186,000, respectively, for which impairment
had not been recognized.
An analysis of the allowance for loan losses for the years ended
December 31, 1997, 1996 and 1995, is as follows:
1997 1996 1995
------- ------- -------
(Dollars in thousands)
Balance, beginning of year ..... $ 837 $ 671 $ 580
Provision for loan losses ...... 608 187 112
Loans charged off .............. (169) (21) (21)
Recoveries ..................... -- -- --
Reserves related to acquisitions 255 -- --
------- ------- -------
Balance, end of year ........... $ 1,531 $ 837 $ 671
======= ======= =======
In the normal course of business, the Company is a party to
financial instruments with off-balance-sheet risk. These financial instruments
are commitments to extend credit and letters of credit and have elements of risk
in excess of the amount recognized in the balance sheet. Commitments to extend
credit are agreements to lend to a customer as long as there is no violation of
any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
A commitment involves, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the consolidated balance sheets. The
Company's exposure to credit loss in the event of non-performance by the other
party to the instrument is represented by the contractual notional amount of the
instrument. Since certain commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. Letters of credit are conditional commitments issued to guarantee
a customer's performance to a third party and have essentially the same credit
risk as other lending facilities. The Company uses the same credit policies in
making commitments to extend credit as it does for on-balance-sheet instruments.
At December 31, 1997 and 1996, the Company had unfunded commitments,
including standby letters of credit, of $26,528,000 and $16,334,000, of which
$9,085,000 and $3,692,000, respectively, were unsecured. At December 31, 1997,
the Company was not committed to lend additional funds to borrowers owing
nonaccrual loans.
F-14
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - PREMISES AND EQUIPMENT:
Premises and equipment at December 31, 1997 and 1996, consists of
the following:
1997 1996
------- -------
(Dollars in thousands)
Land ................................ $ 1,287 $ 501
Buildings and lease hold improvements 5,340 1,963
Furniture and equipment ............. 3,657 1,916
Construction in progress ............ -- 443
------- -------
Total ......................... 10,284 4,823
Less, accumulated depreciation ...... 1,991 1,300
------- -------
Net premises and equipment .... $ 8,293 $ 3,523
======= =======
During 1997 and 1996, the Company capitalized approximately $34,000
and $10,000, respectively, of interest on the construction of a building.
NOTE 7 - INTANGIBLE ASSETS:
Intangible assets, net of accumulated amortization, at December 31,
1997 and 1996 are summarized as follows:
1997 1996
-------- --------
(Dollars in thousands)
Core deposit premium .............. $ 2,429 $ --
Goodwill .......................... 690 47
-------- --------
$ 3,119 $ 47
======== ========
NOTE 8 - DEPOSITS:
The following is a summary of deposit accounts as of December 31,
1997 and 1996:
1997 1996
-------- --------
(Dollars in thousands)
Non-interest bearing demand deposits ............... $ 19,460 $ 12,226
Interest bearing demand deposits ................... 30,562 8,296
Money market accounts .............................. 20,812 14,035
Savings accounts ................................... 15,127 8,681
Certificates of deposit and other time deposits .... 100,900 46,624
-------- --------
Total deposits .............................. $186,861 $ 89,862
======== ========
At December 31, 1997 and 1996, certificates of deposit of $100,000
or more totaled approximately $27,073,000 and $11,879,000, respectively.
Interest expense on these deposits was approximately $1,093,000, $665,000 and
$471,000 in 1997, 1996 and 1995, respectively.
As of December 31, 1997 and 1996, brokered deposits totaled
approximately $292,000 and $1,380,000, respectively. Brokered deposits are not
expected to be a long-term source of funds for the Company.
F-15
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - DEPOSITS: (continued)
Scheduled maturities of certificates of deposit and other time
deposits as of December 31, 1997 were as follows:
Maturing in Amount
----------- ------
(Dollars in thousands)
1998 $ 95,100
1999 3,226
2000 2,304
2001 115
2002 155
--------
Total $100,900
========
NOTE 9 - ADVANCES FROM THE FEDERAL HOME LOAN BANK:
Advances from the Federal Home Loan Bank consisted of the following
at December 31, 1997:
Interest
Description Rate Balance
-------- -----------
(Dollars in thousands)
Adjustable rate advances maturing:
January 29, 1998 ................ 5.89% $ 500
October 2, 1998 ................. 5.68% 6,000
May 23, 2000 .................... 5.72% 800
Fixed rate advances maturing:
January 22, 1998 ................ 6.00% 400
March 24, 1998 .................. 7.37% 150
March 25, 1998 .................. 6.15% 500
July 22, 1998 ................... 6.31% 400
July 29, 1998 ................... 6.26% 1,000
August 17, 1998 ................. 5.85% 5,000
September 25, 2000 .............. 6.38% 600
Convertible advances maturing:
September 24, 2002 ............. 5.66% 1,000
----------
Total ..................... $ 16,350
==========
Scheduled principal reductions of Federal Home Loan Bank advances
are as follows:
(Dollars in thousands)
1998 $ 13,950
1999 --
2000 1,400
2001 --
2002 1,000
----------
Total $ 16,350
==========
As collateral, the Company has pledged first mortgage loans on one to four
family residential loans aggregating $3,983,000 (see Note 5) and debt securities
aggregating $14,610,000 (see Note 4) at December 31, 1997. In addition, the
Company's Federal Home Loan Bank stock is pledged to secure the borrowings.
Certain advances are subject to prepayment penalties.
F-16
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - 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. The Company temporarily invested the
$16,946,000 net proceeds from the offering in debt securities issued by the U.S.
Treasury and U.S. Government agencies and corporations and subsequently used
$7,200,000 to acquire and capitalize the Barnwell Bank, $3,500,000 to acquire
and capitalize the Belton Bank, and $3,300,000 to acquire and capitalize the
Newberry Bank. The Company has also used the net proceeds for general corporate
purposes and additional capital for the Banks, as needed.
The Company also sold 14,519 shares of its common stock to its
employee stock ownership plan throughout 1997 based on the quoted market price
at the time of sale.
During 1995, the Company completed a public offering of 520,422
shares of its common stock, resulting in net proceeds of $6,010,000. The Company
used $4,500,000 of the net proceeds to acquire all of the common stock of the
Clemson Bank.
The Company declared 5% stock dividends for shareholders of record
on May 1, 1996 and August 1, 1995. Amounts equal to the estimated fair market
value of the additional shares issued have been charged to retained earnings and
credited to common stock and capital surplus. Dividends representing fractional
shares were paid in cash.
The Company has authorized 2,000,000 shares of a special class of
stock, par value $1.00 per share, the rights and preferences of which are to be
designated as the Board of Directors may determine. At December 31, 1997, no
shares of the undesignated stock had been issued or were outstanding.
NOTE 11 - LEASES:
The Company conducts branch banking activities from two locations
which are leased from two directors under long-term leases. Land used as the
site for a branch banking location is leased from a director under a five-year
operating lease ending July 31, 1999. The Company can purchase the land at any
time during the term of the lease for $90,000.
During 1996, the Company began leasing part of a building and land
as a branch banking location from a director. The operating lease has an initial
ten-year term which expires July 31, 2006 and is renewable, at the Company's
option, for four five-year terms at an increased monthly rental. The lease
requires monthly payment of $3,500 with an increase to $3,850 per month during
the last five years of the initial lease term.
Rent expense under these operating lease agreements was $50,000,
$24,000, and $5,300 for the years ended December 31, 1997, 1996, and 1995,
respectively. Future obligations over the primary terms of these long-term
leases as of December 31, 1997 are as follows:
(Dollars in thousands)
1998 ........................... $ 52
1999 ........................... 48
2000 ........................... 42
2001 ........................... 44
2002 ........................... 46
After five years ............... 165
-------------------
Total .......................... $ 397
===================
F-17
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - CAPITAL REQUIREMENTS AND REGULATORY MATTERS:
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company and the Banks must meet specific capital guidelines that involve
quantitative measures of the Company's and the Banks' assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Company's and the Banks' capital amounts and classifications are
also subject to qualitative judgements by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Banks to maintain minimum ratios (set forth
in the table below) 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 of the Company and the Banks 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 Company and the Banks are also required to maintain capital at a
minimum level based on average assets (as defined), which is known as the
leverage ratio. Only the strongest institutions are allowed to maintain capital
at the minimum requirement. All others are subject to maintaining ratios 1% to
2% above the minimum.
As of the most recent regulatory examination, the Banks were deemed
well-capitalized under the regulatory framework for prompt corrective action. To
be categorized well capitalized, the Banks must maintain total risk-based, Tier
1 risk-based, and Tier 1 leverage ratios as set forth in the table below. There
are no conditions or events that management believes have changed the Banks'
categories.
F-18
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - CAPITAL REQUIREMENTS AND REGULATORY MATTERS: (continued)
The following table summarizes the capital ratios and the regulatory
minimum requirements of the Banks at December 31, 1997 and 1996 and of the
Company at December 31, 1997. The Company's ratios and minimum requirements for
1996 are not presented because the Federal Reserve Board guidelines contain an
exemption for bank holding companies with less than $150,000,000 in consolidated
assets.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
(Dollars in thousands) Actual Adequacy Purposes Action Provisions
--------------- ----------------- -----------------
December 31, 1997 Amount Ratio Amount Ratio Amount Ratio
------- ----- ------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
The Company
Total capital (to risk weighted assets) $29,872 18.61% $12,843 8.00% $ N/A --%
Tier 1 capital (to risk weighted assets) 28,341 17.65 6,422 4.00 N/A --
Tier 1 capital (to average assets) 28,341 12.08 9,387 4.00 N/A --
The Greenwood Bank
Total capital (to risk weighted assets) 9,389 11.71 6,417 8.00 8,021 10.00
Tier 1 capital (to risk weighted assets) 8,631 10.76 3,208 4.00 4,813 6.00
Tier 1 capital (to average assets) 8,631 8.16 4,230 4.00 5,288 5.00
The Clemson Bank
Total capital (to risk weighted assets) 3,684 19.72 1,495 8.00 1,868 10.00
Tier 1 capital (to risk weighted assets) 3,463 18.53 747 4.00 1,121 6.00
Tier 1 capital (to average assets) 3,463 12.22 1,133 4.00 1,417 5.00
The Barnwell Bank
Total capital (to risk weighted assets) 6,349 13.85 3,666 8.00 4,583 10.00
Tier 1 capital (to risk weighted assets) 5,971 13.03 1,833 4.00 2,750 6.00
Tier 1 capital (to average assets) 5,971 8.19 2,917 4.00 3,646 5.00
The Belton Bank
Total capital (to risk weighted assets) 3,318 35.97 738 8.00 922 10.00
Tier 1 capital (to risk weighted assets) 3,207 34.77 369 4.00 553 6.00
Tier 1 capital (to average assets) 3,207 22.00 583 4.00 729 5.00
The Newberry Bank
Total capital (to risk weighted assets) 2,982 38.68 618 8.00 773 10.00
Tier 1 capital (to risk weighted assets) 2,918 37.76 309 4.00 464 6.00
Tier 1 capital (to average assets) 2,918 18.90 618 4.00 772 5.00
December 31, 1996
The Greenwood Bank
Total capital (to risk weighted assets) $ 7,769 10.91% $ 5,695 8.00% $7,119 10.00%
Tier 1 capital (to risk weighted assets) 7,099 9.97 2,848 4.00 4,272 6.00
Tier 1 capital (to average assets) 7,099 7.34 3,869 4.00 4,836 5.00
The Clemson Bank
Total capital (to risk weighted assets) 4,273 32.01 1,068 8.00 1,335 10.00
Tier 1 capital (to risk weighted assets) 4,106 30.76 534 4.00 801 6.00
Tier 1 capital (to average assets) 4,106 23.60 704 4.00 880 5.00
</TABLE>
F-19
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - STOCK COMPENSATION PLANS:
The Company has two stock option plans, an Employee Incentive Stock
Option Plan (the "1988 Plan") and an Incentive and Nonstatutory Stock Option
Plan (the "Stock Plan"), which are described below. As discussed in Note 1, the
Company will continue to apply APB Opinion 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for either the 1988 Plan or the Stock Plan. Had compensation cost for the
Company's stock option plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the method of FASB
Statement 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
1997 1996 1995
------- ------- -------
(Dollars in thousands, except for per share data)
Net Income:
As reported .............. $ 766 $ 706 $ 534
Pro forma ................ 187 418 460
Basic earnings per share:
As reported .............. $ 0.29 $ 0.58 $ 0.58
Pro forma ................ 0.07 0.34 0.50
Diluted earnings per share:
As reported .............. $ 0.28 $ 0.55 $ 0.53
Pro forma ................ 0.07 0.32 0.46
In calculating the pro forma disclosures, the fair value of options
granted is estimated as of the date granted using the Black-Scholes option
pricing model with the following weighted-average assumptions used for grants in
1997, 1996 and 1995, respectively (there were no options granted under the 1988
Plan during 1997 or 1996): dividend yield of 0 percent for all years; expected
volatility of 22, 28, and 24 percent; risk-free interest rates of 6.9 percent in
1995 for the 1988 Plan options and 6.55, 6.71 and 7.33 percent for the Stock
Plan options; and expected lives of 4 years in 1995 for the 1988 Plan options
and 5.0, 5.6 and 8.5 years for the Stock Plan options.
Employee Incentive Stock Option Plan - Adopted in 1988, this plan
provides for the granting of options to purchase up to 47,648 shares, adjusted
for stock dividends of the Company's common stock, to officers and other
eligible employees of the Company and the Greenwood Bank. The per-share exercise
price of the options may not be less than the fair market value of a share of
common stock on the date the option is granted. Options become exercisable one
year after the date of grant and can be exercised within five years from the
date of grant. Any options that expire unexercised or are canceled become
available for issuance.
Incentive and Nonstatutory Stock Option Plan - During 1993 the
Company approved the terms of the Company's Incentive Stock Option and
Nonstatutory Stock Option Plan which received shareholders approval on May 16,
1994. The Stock Plan provides for the granting of statutory incentive stock
options within the meaning of Section 422 of the Internal Revenue Code as well
as nonstatutory stock options and stock appreciation rights. Stock options and
stock appreciation rights are issuable only to employees and directors of the
Company and its subsidiaries. The per-share exercise price of incentive stock
options granted under the Stock Plan may not be less than the fair market value
of a share on the date of grant, nor can the exercise date of any option granted
be less than one year from the date of grant. Any options that expire
unexercised or are canceled become available for issuance. Options granted
generally become exercisable after one year and expire five to ten years from
the date of grant. On May 20, 1996, the shareholders approved an amendment to
the Stock Plan increasing the number of options that may be granted to 525,000,
adjusted for the effects of the stock dividend in 1996.
F-20
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - STOCK COMPENSATION PLANS: (continued)
A summary of the status of the Company's stock option plans as of
December 31, 1997, 1996 and 1995 and changes during the years ending on those
dates is presented below: (all amounts have been restated to reflect stock
dividends paid in 1996 and 1995)
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------- -------------------------- --------------------------
Weighted-Average Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------- ---------------- ------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 455,748 $ 9.72 330,681 $ 8.75 305,369 $ 8.57
Granted .......... 74,250 12.50 139,900 11.94 31,698 10.78
Exercised ........ (6,675) 7.10 (8,733) 7.89 (315) 8.64
Canceled ......... (2,822) 10.70 (6,100) 10.69 (6,071) 10.19
------- ------- --------
Outstanding at end
of year .......... 520,501 10.15 455,748 9.72 330,681 8.75
======= ======= ========
</TABLE>
Options exercisable at December 31, 1997, 1996 and 1995 were
447,251, 318,398 and 300,309, respectively.
The weighted-average fair value of options, calculated using the
Black-Scholes option pricing model, granted during 1997, 1996 and 1995 is $4.25,
$4.66, and $4.60, respectively.
The following table summarizes information about the stock options
outstanding under the Company's two plans at December 31, 1997:
Options Outstanding Options Exercisable
------------------------------------ ------------------------
Weighted-
average Weighted- Weighted-
Contractual average average
Range of Number Remaining Exercise Number Exercise
Exercise Prices Outstanding life Price Exercisable Price
--------------- ----------- ----------- --------- ----------- ---------
$ 7.92 to $ 8.64 282,646 5.7 years $ 8.61 282,646 $ 8.61
10.66 to 11.00 73,155 7.5 10.92 73,155 10.92
12.38 to 12.50 164,700 3.9 12.43 91,450 12.38
--------- ---------
520,501 5.4 10.15 447,251 9.76
========= =========
NOTE 14 - RELATED PARTY TRANSACTIONS:
Certain parties (primarily directors, executive officers, principal
shareholders and their associates) were loan customers and had other
transactions in the normal course of business with the Company. Related party
loans are made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
unrelated persons and generally do not involve more than normal risk of
collectibility. Total loans and commitments outstanding to related parties at
December 31, 1997 and 1996, were $12,848,000 and $4,012,000, respectively.
During 1997, $9,973,000 of new loans were made to related parties and repayments
totaled $1,137,000.
During 1997, 1996, and 1995, the Company paid $50,000, $24,000, and
$5,300, respectively, to two directors under operating leases. (see Note 11).
During 1997, the Company paid a director $200,000 for real estate on
which it plans to open a branch location. The Company paid $39,000 in premiums
to a directors' insurance agencies.
F-21
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - COMMITMENTS AND CONTINGENCIES:
The Greenwood Bank has entered into a Purchase and Assumption
Agreement dated November 20, 1997 (the "Agreement") with The Palmetto Bank to
sell certain assets and assign and transfer certain liabilities of the branch in
Ninety Six, South Carolina. The assets to be sold are the overdraft protection
loans and the liabilities to be transferred are the deposits. The Company
anticipates that the sale of the branch will close during the second quarter of
1998. At the closing and subject to the terms of the Agreement, The Palmetto
Bank will pay the Greenwood Bank a premium of 6% based on the deposits
transferred on the date of closing. As of December 31, 1997, overdraft
protection loans at the Ninety Six branch were $158,000, and deposits were
$4,365,000.
In the ordinary course of business, the Company or its subsidiaries
may, from time to time, become a party to legal claims and disputes. At December
31, 1997, management is not aware of any pending or threatened litigation, or
unasserted claims that could result in losses, if any, that would be material to
the consolidated financial statements.
NOTE 16 - RESTRICTION ON SUBSIDIARY DIVIDENDS:
The ability of the Company to pay cash dividends to shareholders is
dependent upon receiving cash in the form of dividends from its subsidiaries.
However, certain restrictions exist regarding the ability of the Banks to
transfer funds in the form of cash dividends, loans or advances to the Company.
The prior approval of the Commissioner of Banking is required, and dividends are
payable only from the retained earnings of the Banks. Generally, the
Commissioner of Banking does not allow dividends to be paid by new banks until
earnings have been sufficient to recoup start up losses or if retained earnings
have a deficit balance. Accordingly, the New Banks can not pay dividends in the
near future.
NOTE 17 - EARNINGS PER SHARE:
As discussed in Note 1, the Financial Accounting Standards Board
issued SFAS 128, "Earnings Per Share", in February 1997. SFAS 128 replaces the
presentation of primary earnings per share with a presentation of basic earnings
per share. It requires the presentation of basic and diluted earnings per share
on the face of the income statement for all entities with a complex capital
structure. Basic earnings per share excludes dilution and is computed by
dividing income available to common shareholders by the weighted-average number
of shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
F-22
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - EARNINGS PER SHARE: (continued)
A reconciliation of the numerators and denominators used to
calculate basic and diluted earnings per share are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands, except per share) For the Year Ended December 31, 1997
------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------ ------------ ------------
<S> <C> <C> <C>
Basic earnings per share
Income available to common shareholders ........................ $ 766 2,674,193 $ 0.29
============
Effect of dilutive securities
Stock options .................................................. -- 105,295
------------ ------------
Diluted earnings per share
Income available to common shareholders plus assumed conversions $ 766 2,779,488 $ 0.28
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
(Dollars in thousands, except per share) For the Year Ended December 31, 1996
------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------ ------------ ------------
<S> <C> <C> <C>
Basic earnings per share
Income available to common shareholders ........................ $ 706 1,218,031 $ 0.58
============
Effect of dilutive securities
Stock options .................................................. -- 76,320
------------ ------------
Diluted earnings per share
Income available to common shareholders plus assumed conversions $ 706 1,294,351 $ 0.55
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
(Dollars in thousands, except per share) For the Year Ended December 31, 1997
------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------ ------------ ------------
<S> <C> <C> <C>
Income available to common shareholders ........................ $ 534 927,975 $ 0.58
============
Effect of dilutive securities
Stock options .................................................. -- 78,334
------------ ------------
Diluted earnings per share
Income available to common shareholders plus assumed conversions $ 534 1,006,309 $ 0.53
============ ============ ============
</TABLE>
Options to purchase 92,350 shares of common stock at $12.38 per
share were outstanding as of December 31, 1996 but were not included in the
computation of diluted earnings per share for 1996 because the options' exercise
price was greater than the average market price of the common shares. The
weighted average of these options during 1996 was 57,718.
All outstanding options during 1997 and 1995 were included in the
computation of diluted earnings per share for the respective periods.
F-23
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - INCOME TAXES:
Income tax expense for the years ended December 31, 1997, 1996 and
1995 consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Currently payable: ................................................... (Dollars in thousands)
Federal ............................................................ $ 279 $ 305 $ 269
State .............................................................. 34 51 35
------ ------ ------
313 356 304
------ ------ ------
Change in deferred income taxes:
Federal ............................................................ 123 (104) 101
State .............................................................. 2 (33) --
------ ------ ------
125 (137) 101
------ ------ ------
Income tax expense ............................................. $ 438 $ 219 $ 405
====== ====== ======
Income tax expense is allocated as follows:
To continuing operations ........................................... $ 220 $ 300 $ 261
To shareholders' equity ............................................ 218 (81) 144
------ ------ ------
$ 438 $ 219 $ 405
====== ====== ======
</TABLE>
The Company's deferred tax accounts as of December 31, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
(Dollars in thousands)
Deferred tax assets .................................................. $ 528 $ 348
Deferred tax liabilities ............................................. $ 408 $ 103
Valuation allowance .................................................. $ 0 $ 0
</TABLE>
The principal sources of temporary differences in 1997, 1996 and 1995, and the
related deferred tax effects are as follows:
<TABLE>
<CAPTION>
1996 1996 1995
------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
Provision for bad debts ............................................... $ (154) $ (45) $ (39)
Tax depreciation in excess of book depreciation ....................... 9 6 8
Net operating losses .................................................. (12) (21) (9)
Deferred loan costs ................................................... 61 13 9
Other, net ............................................................ 3 (9) (12)
------ ------ ------
Temporary differences attributable to continuing operations ....... (93) (56) (43)
Change in valuation allowance ......................................... -- -- --
------ ------ ------
Deferred tax expense (benefit) attributable to continuing operations .. (93) (56) (43)
Deferred tax expense (benefit) attributable to shareholders' equity ... 218 (81) 144
------ ------ ------
Change in deferred income taxes ................................... $ 125 $ (137) $ 101
====== ====== ======
</TABLE>
A reconciliation of the income tax provision and the amount computed
by applying the Federal statutory rate of 34% to income before income taxes
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
Income tax at the statutory rate ..................................... $ 335 $ 342 $ 270
State income tax, net of federal benefit ............................. 11 10 10
Tax exempt interest income ........................................... (158) (84) (46)
Disallowed interest expense .......................................... 30 17 6
Officers' life insurance ............................................. (8) 12 (1)
Other, net ........................................................... 10 3 22
------ ------ ------
Income tax provision ............................................. $ 220 $ 300 $ 261
====== ====== ======
</TABLE>
F-24
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 - OTHER OPERATING EXPENSES:
Other operating expenses for the years ended December 31, 1997, 1996
and 1995 are summarized below:
1997 1996 1995
------ ------ ------
(Dollars in thousands)
Banking and ATM supplies ........................ $ 451 $ 228 $ 186
Directors' fees ................................. 124 114 72
Mortgage loan department expenses ............... 94 80 44
Data processing and supplies .................... 151 176 110
Postage and freight ............................. 200 117 90
Professional fees ............................... 205 132 116
Credit card expenses ............................ 120 94 65
Telephone expenses .............................. 214 74 51
Other ........................................... 864 560 469
------ ------ ------
Total .................................... $2,423 $1,575 $1,203
====== ====== ======
NOTE 20 - RETIREMENT AND BENEFIT PLANS:
The Company sponsors a voluntary nonleveraged employee stock
ownership plan (ESOP) as part of a 401(k) savings plan covering substantially
all full-time employees. The Company matches 75 cents per dollar, up to a
maximum of 6% of employee compensation. Company contributions to the savings
plan were $103,000, $33,000 and $23,000 in 1997, 1996 and 1995, respectively.
The Company's policy is to fund amounts accrued. At December 31, 1997, the
savings plan owned 36,562 shares of the Company's common stock purchased at an
average cost of $13.00 per share adjusted for the effects of stock dividends.
The estimated value of shares held at December 31, 1997 was $548,000.
The Company has a Directors' Incentive Compensation Plan and an
Officers' Incentive Compensation Plan which provide that portions of directors'
fees and certain officers' cash awards, respectively, will be determined based
upon various performance measures of the Greenwood Bank. For the years ended
December 31, 1997, 1996 and 1995, awards under the directors' plan were $52,000,
$56,000 and $27,000, respectively, and awards under the officers' plan were
$126,000, $123,000 and $58,000, respectively.
The Company has an Executive Supplemental Compensation Plan which
provides certain officers with salary continuation benefits upon retirement. The
plan also provides for benefits in the event of early retirement, death or
substantial change of control of the Company. For the years ended December 31,
1997, 1996 and 1995, salary continuation expense included in salaries and
employee benefits was $30,000, $24,000 and $20,000, respectively. In connection
with the Executive Supplemental Compensation Plan, life insurance contracts were
purchased on the officers. Insurance premiums of $192,000 were paid in each of
the three years ended December 31, 1997. The cash surrender value of the
insurance contracts is included in other assets.
NOTE 21 - UNUSED LINES OF CREDIT:
As of December 31, 1997, the Banks had unused lines of credit to
purchase federal funds from unrelated banks totaling $11,915,000. These lines of
credit are available on a one to fourteen day basis for general corporate
purposes. The lenders have reserved the right not to renew their respective
lines.
NOTE 22 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
The fair value of a financial instrument is the amount at which an
asset or obligation could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. Fair value estimates are
made at a specific point in time based on relevant market information and
information about the financial instruments. Because no market value exists for
a significant portion of the financial instruments, fair value estimates are
based on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and other
factors.
F-25
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22 - FAIR VALUE OF FINANCIAL INSTRUMENTS: (continued)
The following methods and assumptions were used to estimate the fair
value of significant financial instruments:
Cash and Due from Banks - The carrying amount is a reasonable
estimate of fair value.
Federal Funds Sold - Federal funds sold are for a term of one day,
and the carrying amount approximates the fair value.
Investment Securities - The fair values of securities held to
maturity are based on quoted market prices or dealer quotes. For securities
available for sale, fair value equals the carrying amount which is the quoted
market price. If quoted market prices are not available, fair values are based
on quoted market prices of comparable securities.
Cost is a reasonable estimate of fair value for nonmarketable equity
securities because no quoted market prices are available and the securities are
not readily marketable. The carrying amount is adjusted for any permanent
declines in value.
Loans - For certain categories of loans, such as variable rate loans
which are repriced frequently and have no significant change in credit risk and
credit card receivables, fair values are based on the carrying amounts. The fair
value of other types of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to the borrowers
with similar credit ratings and for the same remaining maturities.
Deposits - The fair value of demand deposits, savings, and money
market accounts is the amount payable on demand at the reporting date. The fair
values of certificates of deposit are estimated using a discounted cash flow
calculation that applies current interest rates to a schedule of aggregated
expected maturities.
Federal Funds Purchased and Securities Sold Under Agreements to
Repurchase - The carrying amount is a reasonable estimate of fair value because
these instruments typically have terms of one day.
Advances from the Federal Home Loan Bank - The carrying amounts of
variable rate borrowings are reasonable estimates of fair value because they can
be repriced frequently. The fair values of fixed rate borrowings are estimated
using a discounted cash flow calculation that applies the Company's current
borrowing rate from the FHLB.
Off-Balance Sheet Financial Instruments - The contractual amount is
a reasonable estimate of fair value for the instruments because commitments to
extend credit and standby letters of credit are issued on a short-term or
floating rate basis.
F-26
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22 - FAIR VALUE OF FINANCIAL INSTRUMENTS: (continued)
The carrying values and estimated fair values of the Company's
financial instruments as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------------- ----------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
--------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial Assets: (Dollars in thousands)
Cash and due from banks ....................... $ 7,762 $ 7,762 $ 3,927 $ 3,927
Federal funds sold ............................ 350 350 700 700
Securities available for sale ................. 73,581 73,581 23,280 23,280
Securities held to maturity ................... 675 675 -- --
Nonmarketable equity securities ............... 3,224 3,224 2,199 2,199
Loans ......................................... 149,127 148,913 80,546 80,478
Allowance for loan losses ..................... (1,531) (1,531) (837) (837)
Financial Liabilities:
Demand deposit, interest-bearing transaction,
and savings accounts ........................ $ 85,961 $ 85,961 $ 43,238 $ 43,238
Certificates of deposit and other time deposits 100,900 101,123 46,624 46,729
Federal funds purchased and securities
sold under agreements to repurchase ......... 11,943 11,943 6,783 6,783
Advances from Federal Home Loan Bank .......... 16,350 16,353 4,889 4,880
<CAPTION>
Notional Estimated Notional Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Off-Balance Sheet Financial Instruments: (Dollars in thousands)
Commitments to extend credit .................. $ 25,831 $ 25,831 $ 15,658 $ 15,658
Standby letters of credit ..................... 697 697 676 676
</TABLE>
NOTE 23 - COMMUNITY CAPITAL CORPORATION (PARENT COMPANY ONLY):
Condensed financial statements for Community Capital Corporation
(Parent Company Only) for the years ended December 31, 1997 and 1996 follow:
BALANCE SHEETS
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Assets (Dollars in thousands)
Cash and cash equivalents ........................... $ 460 $ 104
Investment in subsidiaries .......................... 28,739 11,288
Securities available for sale ....................... 505 --
Nonmarketable equity securities ..................... 1,152 1,127
Premises and equipment, net ......................... 1,604 1,300
Other assets ........................................ 465 652
------- -------
Total assets ................................... $32,925 $14,471
======= =======
Liabilities and Shareholders' Equity
Notes payable to subsidiaries ....................... $ 811 $ 867
Other liabilities ................................... 186 48
------- -------
Total liabilities .............................. 997 915
------- -------
Common stock ........................................ 2,905 1,219
Capital surplus ..................................... 27,492 12,004
Unrealized gain on securities available for sale, net 467 35
Retained earnings ................................... 1,064 298
------- -------
Total shareholders' equity ..................... 31,928 13,556
------- -------
Total liabilities and shareholders' equity ..... $32,925 $14,471
======= =======
</TABLE>
F-27
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23 - COMMUNITY CAPITAL CORPORATION (PARENT COMPANY ONLY): (continued)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------
1997 1996 1995
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Income:
Interest income on securities available for sale ......... $ 75 $ 5 $ 27
Dividend income from equity securities ................... 26 19 6
Data processing and other fees from subsidiaries ......... 1,949 953 --
Other income ............................................. 145 143 87
------- ------- -------
Total income ........................................ 2,195 1,120 120
------- ------- -------
Expenses:
Salaries ................................................. 805 668 20
Net occupancy expense .................................... 95 117 67
Furniture and equipment expense .......................... 407 196 --
Interest expense ......................................... 87 47 8
Other operating expenses ................................. 814 473 89
------- ------- -------
Total expenses ...................................... 2,208 1,501 184
------- ------- -------
Loss before income taxes and equity in
undistributed earnings of subsidiaries ................... (13) (381) (64)
Income tax benefit ......................................... 5 125 26
------- ------- -------
Loss before equity in undistributed earnings of subsidiaries (8) (256) (38)
Equity in undistributed earnings of subsidiaries ........... 774 962 572
------- ------- -------
Net income ................................................. $ 766 $ 706 $ 534
======= ======= =======
</TABLE>
F-28
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23 - COMMUNITY CAPITAL CORPORATION (PARENT COMPANY ONLY): (continued)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Operating activities: ......................................... (Dollars in thousands)
Net income .................................................. $ 766 $ 706 $ 534
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Equity in undistributed earnings of subsidiaries ........ (774) (962) (572)
Depreciation and amortization ........................... 267 256 52
Deferred taxes .......................................... 4 31 (10)
Net accretion on securities ............................. (47) -- --
Increase in other liabilities ........................... 138 48 --
(Increase) decrease in other assets ..................... 182 (676) (58)
-------- -------- --------
Net cash provided (used) by operating activities 536 (597) (54)
-------- -------- --------
Investing activities:
Purchases of premises and equipment, net .................... (571) (603) (437)
Purchases of securities available for sale .................. (7,252) -- (1,000)
Proceeds from sales of securities available for sale ........ -- 1,000 --
Proceeds from maturities of securities available for sale ... 6,800 -- --
Net investment in subsidiaries .............................. (16,250) -- (4,385)
Purchase of equity securities ............................... (25) (824) --
-------- -------- --------
Net cash used by investing activities ........... (17,298) (427) (5,822)
-------- -------- --------
Financing activities:
Proceeds from the exercise of stock options ................. 48 69 2
Proceeds from sales of stock to retirement plan ............. 180 -- 56
Cash paid in lieu of fractional shares ...................... -- (8) (4)
Proceeds from issuance of common stock ...................... 16,946 -- 6,010
Proceeds of borrowings from subsidiaries .................... -- 870 --
Repayments on borrowings from subsidiaries .................. (56) (3) --
-------- -------- --------
Net cash provided by financing activities ....... 17,118 928 6,064
-------- -------- --------
Net increase (decrease) in cash and cash equivalents .......... 356 (96) 188
Cash and cash equivalents, beginning of year .................. 104 200 12
-------- -------- --------
Cash and cash equivalents, end of year ........................ $ 460 $ 104 $ 200
======== ======== ========
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
In 1996 and 1995, the Company declared 5% stock dividends and
transferred $747,000 and $655,000, respectively, from retained earnings to
common stock and capital surplus in the amounts of $57,000 and $55,000,
respectively, and $690,000 and $600,000, respectively.
NOTE 24 - RECENTLY ISSUED ACCOUNTING STANDARDS:
In June 1997, the FASB released SFAS 130, "Reporting Comprehensive
Income." SFAS 130 requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be reported in
a financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income is the change in equity of a business
during a period from transactions and other events and circumstances from
nonowner sources and excludes investments by owners and distributions to owners.
Comprehensive income consists of two components, net income and other
comprehensive income. Other comprehensive income includes, among other things,
the change in the unrealized gain or loss on securities available for sale.
F-29
<PAGE>
This statement is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required.
NOTE 25 - SUBSEQUENT EVENTS
On February 25, 1998, the Belton Bank and the Clemson Bank each
entered into Purchase and Assumption Agreements to acquire certain assets and
deposits associated with three branch offices of Carolina First Bank. The
Clemson Bank will acquire a branch located in Calhoun Falls, South Carolina
which has approximately $5,000,000 in deposits and $600,000 in loans
(unaudited). The Belton Bank will acquire two branches in Anderson County, South
Carolina which have approximately $39,000,000 in deposits and $1,500,000 in
loans (unaudited).
At the closing, and subject to the terms of the Purchase and
Assumption Agreements, the Belton Bank and the Clemson Bank will pay Carolina
First Bank a premium of 6.50% on the assumed Carolina First Bank's deposits
other than certificates of deposit greater than or equal to $100,000. The assets
acquired and the liabilities assumed will be recorded at fair value. The premium
will be amortized over fifteen years on a straight-line basis.
In order to maintain the minimum capital requirements of the Belton
Bank, the Company will have to inject additional capital. To fund this
capitalization, the Company anticipates a combination of dividends from its
subsidiaries, loans from the Banks, loans from a third party, and utilization of
liquid assets of the parent. The Clemson Bank's current capital structure will
support the acquisition with no capital infusion by the Company.
F-30
EXHIBIT 11.1
COMMUNITY CAPITAL CORPORATION
Statement of Computation of Per Share Earnings
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
Primary and Fully Diluted Earnings Per Share 1994 1995 1996
- -------------------------------------------- -------- ---------- ----------
<S> <C> <C> <C>
Net income ............................................. $584,856 $ 533,868 $ 705,820
Add: Interest income from assumed purchase of government
securities, net of tax .............................. 55,866 52,666 27,629
-------- ---------- ----------
Adjusted net income for fully diluted shares ........... $640,722 $ 586,534 $ 733,449
======== ========== ==========
Weighted average number of common shares outstanding(2) 624,087 929,561 1,218,031
Dilutive stock equivalents (1) (2) ..................... 180,735 140,574 138,595
-------- ---------- ----------
Total common stock and equivalents .............. 804,822 1,070,135 1,356,626
======== ========== ==========
Primary and fully diluted net income per share ......... 0.80 0.55 0.54
</TABLE>
- ----------
(1) Computed using the treasury stock method.
(2) Restated for the effects of the 5% stock dividend in May 1996.
EXHIBIT 21.1
SUBSIDIARIES OF COMMUNITY CAPITAL CORPORATION
Other Names
Subsidiary State of Incorporation Doing Business Under
---------- ---------------------- --------------------
The Bank of Barnwell County .... South Carolina None
The Bank of Belton ............. South Carolina None
Clemson Bank & Trust ........... South Carolina None
Greenwood Bank & Trust ......... South Carolina None
The Bank of Newberry County .... South Carolina None
Community Trust Services Company South Carolina None
SUBSIDIARY OF GREENWOOD BANK & TRUST
Community Financial Services, Inc. South Carolina None
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ PATRICIA C. EDMONDS
-----------------------
Print Name: Patricia C. Edmonds
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ DAVID P. ALLRED, M.D.
-------------------------
Print Name: David P. Allred, M.D.
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ EARL H. BERGEN
------------------
Print Name: Earl H. Bergen
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ ROBERT C. COLEMAN
---------------------
Print Name: Robert C. Coleman
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ JOHN W. DRUMMOND
--------------------
Print Name: John W. Drummond
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ JAMES M. HORTON
----------------------
Print Name: James M. Horton, M.D.
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ WAYNE Q. JUSTESEN, JR.
--------------------------
Print Name: Wayne Q. Justesen, Jr.
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ CLINTON C. LEMON, JR.
-------------------------
Print Name: Clinton C. Lemon, Jr.
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ JAMES A. LOLLIS
-------------------
Print Name: James A. Lollis
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ THOMAS C. LYNCH, JR.
------------------------
Print Name: Thomas C. Lynch, Jr.
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ MARSHALL L. MARTIN, JR.
---------------------------
Print Name: Marshall L. Martin, Jr.
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ H. EDWARD MUNNERLYN
-----------------------
Print Name: H. Edward Munnerlyn
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ GEORGE B. PARK
------------------
Print Name: George B. Park
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ JOSEPH H. PATRICK, JR.
--------------------------
Print Name: Joseph H. Patrick, Jr.
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ DONNA W. ROBINSON
---------------------
Print Name: Donna W. Robinson
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ GEORGE D. RODGERS
---------------------
Print Name: George D. Rodgers
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ CHARLES J. ROGERS
---------------------
Print Name: Charles J. Rogers
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ WILLLIAM F. STEADMAN
------------------------
Print Name: William F. Steadman
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of COMMUNITY CAPITAL CORPORATION, a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
William G. Stevens, with full power of substitution, his true and lawful
attorney and agent, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the filing under the Act of the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1997, including all
amendments thereto (the "Form 10-K"), and including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the Company to the Form 10-K filed with the Commission and to any
instrument or document filed as a part of, as an exhibit to, or in connection
with said Form 10-K; and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
this 24th day of March, 1998.
Signature: /S/ LEX D. WALTERS
------------------
Print Name: Lex D. Walters
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets of Community Capital Corporation and Subsidiaries as
of December 31, 1997, and the related statements of operations, shareholders'
equity and cash flows, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,347,000
<INT-BEARING-DEPOSITS> 415,000
<FED-FUNDS-SOLD> 350,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 73,581,000
<INVESTMENTS-CARRYING> 675,000
<INVESTMENTS-MARKET> 675,000
<LOANS> 149,127,000
<ALLOWANCE> 1,531,000
<TOTAL-ASSETS> 248,861,000
<DEPOSITS> 186,861,000
<SHORT-TERM> 25,893,000
<LIABILITIES-OTHER> 1,779,000
<LONG-TERM> 2,400,000
0
0
<COMMON> 2,905,000
<OTHER-SE> 29,023,000
<TOTAL-LIABILITIES-AND-EQUITY> 248,861,000
<INTEREST-LOAN> 10,604,000
<INTEREST-INVEST> 3,600,000
<INTEREST-OTHER> 239,000
<INTEREST-TOTAL> 14,443,000
<INTEREST-DEPOSIT> 6,325,000
<INTEREST-EXPENSE> 7,172,000
<INTEREST-INCOME-NET> 7,271,000
<LOAN-LOSSES> 608,000
<SECURITIES-GAINS> (1,000)
<EXPENSE-OTHER> 7,248,000
<INCOME-PRETAX> 986,000
<INCOME-PRE-EXTRAORDINARY> 986,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 766,000
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.28
<YIELD-ACTUAL> 4.16
<LOANS-NON> 678,000
<LOANS-PAST> 84,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,900,000
<ALLOWANCE-OPEN> 837,000
<CHARGE-OFFS> 169,000
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,531,000
<ALLOWANCE-DOMESTIC> 1,531,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
