U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
----- THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition Period from _________to_________
Commission File Number 0-18460
COMMUNITY CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
South Carolina 57-0866395
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1402C Highway 72 West
Greenwood, SC 29649
(Address of principal executive
offices, including zip code)
(864) 941-8200
(Registrant's telephone number, including area code)
------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the date of this filing.
3,248,688 shares of common stock, $1.00 par value
Page 1 of 28
EXHIBIT INDEX ON PAGE 2
<PAGE>
COMMUNITY CAPITAL CORPORATION
Index
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
-----------------------------
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -- June 30, 2000 and December 31, 1999.....................................3
Condensed Consolidated Statements of Operations --
Six months ended June 30, 2000 and 1999 and three months ended June 30, 2000 and 1999..........................4
Condensed Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income --
Six months ended June 30, 2000.................................................................................6
Condensed Consolidated Statements of Cash Flows -- Six months ended June 30, 2000 and 1999.......................7
Notes to Condensed Consolidated Financial Statements..........................................................8-11
Review by Independent Certified Public Accountants.......................................................................12
Report on Review by Independent Certified Public Accountants.............................................................13
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.........................14-19
PART II. OTHER INFORMATION
--------------------------
Item 2. Changes in Securities and Use of Proceeds........................................................................20
Item 4. Submission of Matters to a Vote of Security Holders..............................................................20
Item 6. Exhibits and Reports on Form 8-K.................................................................................20
(a) Exhibits....................................................................................................20
(b) Reports on Form 8-K.........................................................................................20
</TABLE>
2
<PAGE>
COMMUNITY CAPITAL CORPORATION
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Dollars in thousands) June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
Assets
Cash and cash equivalents:
<S> <C> <C>
Cash and due from banks $ 11,621 $ 8,224
Interest-bearing deposit accounts 659 488
Federal funds sold & repurchase agreements - 10
--------- ---------
Total cash and cash equivalents 12,280 8,722
--------- ---------
Securities:
Securities available-for-sale 101,119 103,371
Securities held-to-maturity (estimated fair value of $620 at June 30, 2000
and December 31, 1999) 620 620
Nonmarketable equity securities 4,249 4,935
--------- ---------
Total securities 105,988 108,926
--------- ---------
Loans receivable 245,068 219,054
Less allowance for loan losses (2,665) (2,557)
--------- ---------
Loans, net 242,403 216,497
--------- ---------
Premises and equipment, net 14,212 12,532
Intangible assets 4,819 5,020
Accrued interest receivable 3,116 2,800
Other assets 4,901 5,171
--------- ---------
Total assets $ 387,719 $ 359,668
========= =========
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 29,327 $ 27,422
Interest-bearing 253,619 229,825
--------- ---------
Total deposits 282,946 257,247
--------- ---------
Federal funds purchased and securities sold under agreements to repurchase 34,334 46,493
Advances from the Federal Home Loan Bank 33,064 20,729
Long-term debt 1,890 1,575
Accrued interest payable 1,574 1,298
Other liabilities 1,990 1,108
--------- ---------
Total liabilities 355,798 328,450
--------- ---------
Shareholders' Equity
Common stock, $1 par value, 10,000,000 shares authorized, 3,292,268 and 3,292 3,123
3,122,811 shares issued and outstanding at June 30, 2000 and December 31,
1999, respectively
Capital surplus 31,417 29,846
Retained earnings 539 1,336
Accumulated other comprehensive income (loss) (2,934) (2,802)
Treasury stock at cost; 43,580 and 30,405 shares at June 30, 2000 and (393) (285)
December 31,1999 respectively --------- ---------
Total shareholders' equity 31,921 31,218
--------- ---------
Total liabilities and shareholders' equity $ 387,719 $ 359,668
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COMMUNITY CAPITAL CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands) Six Months Ended June 30, Three Months Ended June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
-------- --------- --------- ----------
Interest income:
<S> <C> <C> <C> <C>
Loans, including fees $ 10,585 $ 7,725 $ 5,498 $ 3,920
Investment securities:
Taxable 2,340 2,587 1,161 1,245
Tax-exempt 657 562 329 304
Federal funds sold 20 20 8 14
-------- ------- ------- -------
Total 13,602 10,894 6,996 5,483
-------- ------- ------- -------
Interest expense:
Deposits 5,089 4,894 2,603 2,393
Federal Home Loan Bank advances 912 290 606 122
Other interest expense 1,462 395 682 242
-------- ------- ------- -------
Total 7,463 5,579 3,891 2,757
-------- ------- ------- -------
Net interest income 6,139 5,315 3,105 2,726
Provision for loan losses 261 509 84 235
-------- ------- ------- -------
Net interest income after
provision for loan losses 5,878 4,806 3,021 2,491
-------- ------- ------- -------
Other operating income:
Service charges on deposit accounts 787 703 401 366
Residential mortgage origination fees 253 408 128 227
Commissions from sales of mutual funds 75 24 31 17
Fees for trust services 73 47 30 3
Gain on sales of securities - 175 - 168
Gain on sale of Community Trust Company 150 - 150 -
Other operating income 525 461 248 200
-------- ------- ------- -------
Total 1,863 1,818 988 981
-------- ------- ------- -------
Other operating expenses:
Salaries and employee benefits 3,258 2,860 1,618 1,483
Net occupancy expense 404 319 205 159
Amortization of intangible assets 270 266 134 134
Furniture and equipment expense 733 551 370 276
Other operating expenses 2,114 1,873 1,127 1,009
-------- ------- ------- -------
Total 6,779 5,869 3,454 3,061
-------- ------- ------- -------
Income before income taxes 962 755 555 411
Income tax provision 126 72 91 47
-------- ------- ------- -------
Net income $ 836 $ 683 $ 464 $ 364
-------- ------- ------- -------
Basic earnings per share $ 0.27 $ 0.22 $ 0.15 $ 0.12
Diluted earnings per share $ 0.27 $ 0.22 $ 0.15 $ 0.12
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
COMMUNITY CAPITAL CORPORATION
Condensed Consolidated Statement of Changes in Shareholders' Equity and
Comprehensive Income for the six months ended June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
(Dollars in thousands) Common Stock Other
------------------- Capital Retained Comprehensive Treasury
Shares Amount Surplus Earnings Income Stock Total
-------- -------- ------- -------- -------------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1999 3,122,811 $ 3,123 $ 29,846 $ 1,336 $ (2,802) $ (285) $ 31,218
Net income 836 836
Other comprehensive
income, net of tax (132) (132)
--------
Comprehensive income 704
--------
Sales of stock to ESOP 12,683 13 75 88
5% stock dividend 156,774 156 1,496 (1,633) (19) -
Purchase of treasury
stock (11,100 shares) (89) (89)
--------- ------- -------- ----- --------- ------- --------
Balance,
June 30, 2000 3,292,268 $ 3,292 $ 31,417 $ 539 $ (2,934) $ (393) $ 31,921
========= ======= ======== ===== ========= ======= ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
COMMUNITY CAPITAL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands) Six Months Ended June 30,
--------------------------
2000 1999
--------- ----------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 836 $ 683
Adjustments to reconcile net income to net cash (used) provided by
operating activities:
Depreciation 671 453
Provision for possible loan losses 261 509
Amortization of intangible assets 270 266
Amortization less accretion on investments 277 108
Amortization of deferred loan costs 246 180
Loss (gain) on sales of securities available-for-sale - (175)
Loss (gain) on sale of premises and equipment (34) 1
Gain on sale of Community Trust Company (150) -
Disbursements for mortgages held for sale 8,446 (7,236)
Proceeds of sales of residential mortgages (8,311) 10,247
(Increase) decrease in interest receivable (316) 99
Increase (decrease) in interest payable 276 (197)
(Increase) decrease in other assets 501 306
Increase (decrease) in other liabilities 882 (623)
-------- --------
Net cash (used) provided by operating activities 3,855 4,621
-------- --------
Cash flows from investing activities:
Net increase in loans to customers (26,529) (17,398)
Purchases of securities available-for-sale (1,494) (33,237)
Proceeds from sales of securities available-for-sale - 26,993
Proceeds from maturities of securities available-for-sale 3,269 8,741
(Purchases) sales of non-marketable equity securities 686 124
Proceeds from sales of premises and equipment 264 (2,374)
Purchases of premises and equipment (2,077) 7
Acquisition of branches 6,655 -
-------- --------
Net cash used by investing activities (19,226) (17,144)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits accounts 18,439 (6,600)
Net increase (decrease) in federal funds purchased and repos (12,159) 13,429
Proceeds from exercise of stock options - 22
Proceeds from Federal Home Loan Bank borrowings 31,000 13,000
Proceeds from other borrowings 2,615 1,100
Proceeds from stock sales to ESOP 88 145
Purchase of treasury stock (89) -
Repayments of Federal Home Loan Bank borrowings (18,665) (6,440)
Repayments of other borrowings (2,300) (2,450)
-------- --------
Net cash provided by financing activities 18,929 12,206
-------- --------
Net increase (decrease) in cash and cash equivalents 3,558 (317)
Cash and cash equivalents, beginning of period 8,722 10,327
-------- --------
Cash and cash equivalents, end of period $ 12,280 $ 10,010
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
COMMUNITY CAPITAL CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
------------------------------
The accompanying consolidated financial statements have been prepared in
accordance with the requirements for interim financial statements and,
accordingly, they are condensed and omit disclosures, which would substantially
duplicate those contained in the most recent annual report to shareholders. The
financial statements as of June 30, 2000 and for the interim periods ended June
30, 2000 and 1999 are unaudited and, in the opinion of management, include all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation. The financial information as of December 31, 1999 has been
derived from the audited financial statements as of that date. For further
information, refer to the financial statements and the notes included in the
Company's 1999 Annual Report.
Community Capital Corporation (the Company) is a multi-bank holding company for
five subsidiary banks. The subsidiary banks include: Greenwood Bank & Trust
(Greenwood Bank), Clemson Bank & Trust (Clemson Bank), Community Bank & Trust,
formerly Bank of Barnwell County (Barnwell Bank), TheBank (Belton Bank), and Mid
State Bank, formerly The Bank of Newberry County (Newberry Bank). Capital Trust
Services Company (Trust Company) is the subsidiary that provides trust
functions.
Note 2 - Supplemental Cash Flow Information
-------------------------------------------
<TABLE>
<CAPTION>
(Dollars in thousands) Six Months Ended June 30,
-------------------------
2000 1999
------- -------
Cash paid during the period for:
<S> <C> <C>
Income taxes $ 165 $ 240
Interest 7,187 5,776
Details of the acquisition of the new branch:
Loans, including accrued interest receivable $ 19 $ -
Premises and equipment 388 -
Intangible core deposit premiums 185 -
Other, net 13 -
Deposits, including accrued interest payable (7,260) -
--------- --------
Cash received for net liabilities assumed $ (6,655) $ -
========= ========
</TABLE>
Note 3 - Advances from the Federal Home Loan Bank
-------------------------------------------------
Advances from the Federal Home Loan Bank of Atlanta to the banking subsidiaries
were $33,064,000 as of June 30, 2000. Of this amount, the following have
scheduled maturities greater than one year:
<TABLE>
<CAPTION>
Maturing on Interest Rate Principal
---------------------- -------------------------------- ---------
(Dollars in thousands)
<S> <C> <C>
02/03/00 5.97% - fixed $ 89
03/17/03 6.41% - fixed, callable 03/17/01 10,000
09/22/03 4.70% - fixed, callable 09/22/00 3,000
03/17/05 6.60% - fixed, callable 03/17/02 5,000
03/26/08 5.51% - fixed, callable 03/26/03 1,500
02/02/09 4.95% - fixed 875
03/17/10 5.92% - fixed, callable 03/17/01 5,000
03/30/10 6.02% - fixed, callable 03/30/01 2,000
03/30/10 6.02% - fixed, callable 03/30/01 4,000
--------
$ 31,464
========
</TABLE>
7
<PAGE>
COMMUNITY CAPITAL CORPORATION
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited)
Note 4 - Long-Term Debt
-----------------------
During 1998, the Company borrowed funds from an unrelated financial institution
to use for capital infusions into the Belton Bank in order to maintain minimum
capital requirements due to an increase in the asset base resulting from the
purchase of two branch offices of Carolina First Bank. This note was modified on
June 30, 2000. The Company can now borrow up to $8,000,000 under the terms of
the agreement. The promissory note is collateralized by the stock of the
subsidiary banks and bears interest at a simple rate per annum equal to the one
month London Interbank Offered Rate plus 200 basis points. Interest is payable
on a quarterly basis; principal payments are due in ten equal installments,
beginning on the third anniversary of the modification of the note, with the
final balance due on June 30, 2012. The principal balance is $1,390,000 as of
June 30, 2000, with scheduled principal reductions as follows:
(Dollars in thousands) Amount
--------
2003 $ 139
2004 139
After five years 1,112
--------
$ 1,390
========
During the first quarter of 1999, the parent company borrowed $500,000 from
another unrelated financial institution. This amount was renewed in the first
quarter of 2000. These funds will be used for various projects including the
construction of branch offices throughout the Company. Interest is payable
quarterly at a variable rate of 0.75% below the highest prime rate published in
the Wall Street Journal. The outstanding principal balance plus any accrued
interest is payable on February 10, 2001.
Note 5 - Shareholders' Equity
-----------------------------
During the first six months of 2000, there were 12,683 shares of stock sold to
the Employee Stock Ownership Plan at market prices in the amount of $88,000.
There were no options exercised by the employees and directors of the Company.
The Company purchased 11,100 shares of treasury stock during the first quarter
of 2000 for $89,000.
On May 24, 2000, the Board of Directors declared a 5% stock dividend to
shareholders of record as of June 30, 2000. Accordingly, amounts equal to the
fair market value of the additional shares issued have been charged to retained
earnings and credited to common stock and capital surplus. Earnings per share,
weighted average shares outstanding and outstanding stock options, have been
restated to reflect the 5% stock dividend. The dividend is payable on July 31,
2000.
Note 6 - Earnings Per Share
---------------------------
A reconciliation of the numerators and denominators used to calculate basic and
diluted earnings per share for the six and three month periods ended June 30,
2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000
------------------------------------------
(Dollars in thousands, except per share) Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic earnings per share
Income available to common shareholders $ 836 3,085,937 $ 0.27
Effect of dilutive securities ======
Stock options - 3,541
Diluted earnings per share ----- ---------
Income available to common shareholders
plus assumed conversions $ 836 3,089,478 $ 0.27
===== ========= ======
</TABLE>
8
<PAGE>
COMMUNITY CAPITAL CORPORATION
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited)
Note 6 - Earnings Per Share - Continued
---------------------------
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
------------------------------------------
(Dollars in thousands, except per share) Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
<S> <C> <C> <C>
Basic earnings per share
Income available to common shareholders $ 683 3,103,108 $ 0.22
======
Effect of dilutive securities
Stock options - 8,706
----- ---------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions $ 683 3,111,814 $ 0.22
===== ========= ======
<CAPTION>
Three Months Ended June 30, 2000
------------------------------------------
(Dollars in thousands, except per share) Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
<S> <C> <C> <C>
Basic earnings per share
Income available to common shareholders $ 464 3,092,733 $ 0.15
======
Effect of dilutive securities
Stock options - -
----- ---------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions $ 464 3,092,733 $ 0.15
===== ========= ======
<CAPTION>
Three Months Ended June 30, 1999
------------------------------------------
(Dollars in thousands, except per share) Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
<S> <C> <C> <C>
Basic earnings per share
Income available to common shareholders $ 364 3,107,024 $ 0.12
======
Effect of dilutive securities
Stock options - 11,202
----- ---------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions $ 364 3,118,226 $ 0.12
===== ========= ======
</TABLE>
9
<PAGE>
COMMUNITY CAPITAL CORPORATION
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited)
Note 7 - Comprehensive Income
-----------------------------
The following tables set forth the amounts of other comprehensive income
included in equity along with the related tax effects for the six and three
month periods ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
(Dollars in thousands) Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
-----------------------------------------
For the Six Months Ended June 30, 2000:
Unrealized gains (losses) on securities:
<S> <C> <C> <C>
Unrealized holding gains (losses) arising during the period $ (200) $ 68 $ (132)
Less: reclassification adjustment for gains realized in net income - - -
--------- ------- ---------
Net unrealized gains (losses) on securities (200) 68 (132)
--------- ------- ---------
Other comprehensive income $ (200) $ 68 $ (132)
========= ======= =========
<CAPTION>
(Dollars in thousands) Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
-----------------------------------------
For the Six Months Ended June 30, 1999:
Unrealized gains (losses) on securities:
<S> <C> <C> <C>
Unrealized holding gains (losses) arising during the period $ (3,946) $ 1,342 $ (2,604)
Less: reclassification adjustment for gains realized in
net income (175) 60 (115)
--------- ------- ---------
Net unrealized gains (losses) on securities (4,121) 1,402 (2,719)
--------- ------- ---------
Other comprehensive income $ (4,121) $ 1,402 $ (2,719)
========= ======= =========
<CAPTION>
(Dollars in thousands) Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
-----------------------------------------
For the Three Months Ended June 30, 2000:
Unrealized gains (losses) on securities:
<S> <C> <C> <C>
Unrealized holding gains (losses) arising during the period $ 496 $ (232) $ 264
Less: reclassification adjustment for gains realized in net income - - -
--------- ------- ---------
Net unrealized gains (losses) on securities 496 (232) 264
--------- ------- ---------
Other comprehensive income $ 496 $ (232) $ 264
========= ======= =========
<CAPTION>
(Dollars in thousands) Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
-----------------------------------------
For the Three Months Ended June 30, 1999:
Unrealized gains (losses) on securities:
<S> <C> <C> <C>
Unrealized holding gains (losses) arising during the period $ (2,789) $ 948 $ (1,841)
Less: reclassification adjustment for gains realized in net income (168) 58 (110)
--------- ------- ---------
Net unrealized gains (losses) on securities (2,957) 1,006 (1,951)
--------- ------- ---------
Other comprehensive income $ (2,957) $ 1,006 $ (1,951)
========= ======= =========
</TABLE>
10
<PAGE>
COMMUNITY CAPITAL CORPORATION
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited)
Note 8 - Acquisition of Branches
--------------------------------
On March 31, 2000, Mid State Bank entered into a Purchase and Assumption
Agreement to acquire certain assets and deposits associated with a branch office
of Carolina First Bank. At the close of business on June 25, 2000, Mid State
Bank acquired the deposits of a branch located in Newberry County, South
Carolina, which had approximately $7,260,433 in deposits (unaudited).
At the closing, and subject to the terms of the Purchase and Assumption
Agreement, Mid State Bank paid Carolina First a premium of 3.00% 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 were
recorded at fair value. The premium is being amortized over fifteen years on a
straight-line basis.
The principal assets acquired and liabilities assumed in the purchase are
summarized as follows:
(Dollars in thousands)
Loans, including accrued interest receivable $ 18,714
Premises and equipment 387,820
Intangible core deposit premiums 185,154
Other, net 13,559
Deposits, including accrued interest payable (7,260,433)
-------------
Cash received for net liabilities assumed $ (6,655,186)
=============
The Company has not presented pro forma financial information because the
Carolina First Bank branch does not constitute a business, and income statement
information was either not available or incomplete.
Note 9 - Sale of Subsidiary
---------------------------
Community Capital Corporation sold Community Trust Company to one individual
investor. The transaction was completed during the second quarter of 2000 and
consisted of the sale of all assets and liabilities at their respective book
values.
The $150,000 gain from the sale of Community Trust Company is included in the
statements of operations.
As a result of the sale of Community Trust Company, a new subsidiary, Capital
Trust Services Company was formed to provide trust services to the subsidiary
banks. The new entity was capitalized by the parent company at $100,000.
11
<PAGE>
COMMUNITY CAPITAL CORPORATION
Review by Independent Certified Public Accountants
--------------------------------------------------
Tourville, Simpson and Caskey, L.L.P., the Company's independent certified
public accountants, have made a limited review of the financial data as of June
30, 2000, and for the three and six month periods ended June 30, 2000 and 1999
presented in this document, in accordance with standards established by the
American Institute of Certified Public Accountants.
Their report furnished pursuant to Article 10 of Regulation S-X is included
herein.
12
<PAGE>
COMMUNITY CAPITAL CORPORATION
Report on Review by Independent Certified Public Accountants
------------------------------------------------------------
The Board of Directors
Community Capital Corporation
Greenwood, South Carolina
We have reviewed the accompanying condensed consolidated balance sheet of
Community Capital Corporation and subsidiaries (the Company) as of June 30,
2000, the related condensed consolidated statements of income for the three and
six month periods ended June 30, 2000 and 1999, the related condensed
consolidated statement of changes in shareholders' equity and comprehensive
income for the six month period ended June 30, 2000, and the related condensed
consolidated statements of cash flows for the six month periods ended June 30,
2000 and 1999. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of income, changes in shareholders' equity and
comprehensive income, and cash flows for the year then ended (not presented
herein); and, in our report dated February 10, 2000, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1999, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
TOURVILLE, SIMPSON AND CASKEY, L.L.P.
Columbia, South Carolina
August 9, 2000
13
<PAGE>
COMMUNITY CAPITAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations
-------------
The following is a discussion of the Company's financial condition as of June
30, 2000 compared to December 31, 1999 and the results of operations for the
three and six months ended June 30, 2000 compared to the three and six months
ended June 30, 1999. These comments should be read in conjunction with the
Company's condensed consolidated financial statements and accompanying footnotes
appearing in this report.
Results of Operations
---------------------
Net Interest Income
For the six months ended June 30, 2000, net interest income, the major component
of the Company's net income, was $6,139,000 compared to $5,315,000 for the same
period of 1999, an increase of $824,000. For the three months ended June 30,
2000, net interest income was $3,105,000 compared to $2,726,000 for the
comparable period of 1999. The improvements in the 2000 periods were primarily
attributable to the increase in the volume of loans and the increase in net
interest margin to a lesser extent. The average rate realized on
interest-earning assets increased to 8.16% from 7.57%, while the average rate
paid on interest-bearing liabilities increased to 4.82% from 4.32% for the six
month periods ended June 30, 2000 and 1999, respectively.
The net interest spread and net interest margin were 3.34% and 3.68%,
respectively, for the six month period ended June 30, 2000, compared to 3.25%
and 3.69% for the six month period ended June 30, 1999.
Provision and Allowance for Loan Losses
The provision for loan losses is the charge to operating earnings that
management feels is necessary to maintain the allowance for possible loan losses
at an adequate level. For the six months ended June 30, 2000 and 1999, the
provision was $260,000 and $509,000, respectively. For the three months ended
June 30, 2000 and 1999, the provision for loan losses was $84,000 and $235,000,
respectively. The Company's nonperforming loans totaled $560,000 at June 30,
2000 compared to $1,522,000 at June 30, 1999. Criticized and classified loans
have decreased from $11,788,000 at June 30, 1999 to $6,368,000 at June 30, 2000.
The majority of the potential problem loans continue to be at the Greenwood and
Barnwell banks. Criticized and classified loans were $3,206,000 and $1,847,000
at the Greenwood and Barnwell banks, respectively. The Company has continued to
decrease its provision for loan losses as a result of the decrease in
criticized, classified, and nonperforming loans. Based on present information,
management believes the allowance for loan losses is adequate at June 30, 2000
to meet presently known and inherent risks in the loan portfolio.
Noninterest Income
Total noninterest income for the six months ended June 30, 2000 was $1,863,000;
an increase of $45,000 compared to $1,818,000 for the six months ended June 30,
1999. Total noninterest income for the quarter ended June 30, 2000 was $988,000,
or 0.71%, higher than the second quarter of 1999.
Service charge income increased $84,000 from the six months ended June 30, 1999
to the six months ended June 30, 2000 and $35,000 from the three months ended
June 30, 1999 to the three months June 30, 2000. Other operating income
increased $64,000 and $48,000 from the six and three months ended June 30, 1999,
respectively, to the six and three months ended June 30, 2000. The Company also
realized a gain of $150,000 on the sale of Community Trust Company during the
three months ended June 30, 2000. The Company realized gains of $175,000 and
$168,000 from the sale of securities during the six and three months ended June
30, 1999. The Company also experienced a decrease in residential mortgage
origination fees as rising residential mortgage rates discouraged home
refinancing. Residential mortgage origination fees decreased from $408,000 to
$253,000 for the six months ended June 30, 1999, compared to the six months
ended June 30, 2000 and decreased from $227,000 to $128,000 for the three months
ended June 30, 1999, compared to the six months ended June 30, 2000.
14
<PAGE>
COMMUNITY CAPITAL CORPORATION
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
-------------------------------------------------------------------------------
Of Operations - Continued
-------------
Noninterest Expense
Total noninterest expense for the first six months of 2000 was $6,779,000, an
increase of $910,000, or 15.51%, when compared to the first six months of 1999.
For the quarter ended June 30, 2000, noninterest expense was $3,454,000, an
increase of $393,000, or 12.84%, over the comparable period of 1999.
The primary component of noninterest expense is salaries and benefits, which
were $3,258,000 and $2,860,000 for the six months ended June 30, 2000 and 1999,
respectively and $1,618,000 and $1,483,000 for the three months ending June 30,
2000 and 1999, respectively. These increases are the result of the additional
staff to assist with the growth of the Company and normal pay raises. Furniture
and equipment expense increased to $733,000 for the six month period ending June
30, 2000, a gain of 33.03% over the related period in 1999 due primarily to
depreciation charges realized on additional equipment operating throughout the
Company. Other expenses also increased 12.87% to $2,114,000 for the first six
months of 2000.
Income Taxes
For the six months ended June 30, 2000 and 1999, the effective income tax rate
was 13.10% and 9.54%, respectively, and the income tax provision was $126,000
and $72,000, respectively. For the quarter ended June 30, 2000, the effective
tax rate was 16.40% compared to 11.44% for the second quarter of 1999. The
increases in the effective tax rate were due to an increase in the amount of
loan interest income that was proportionately much larger than the increase in
the amount of nontaxable income from securities.
Net Income
The combination of the above factors resulted in net income of $836,000 for the
six months ended June 30, 2000 compared to $683,000 for the comparable period in
1999. For the quarter ended June 30, 2000, net income was $464,000, an increase
of $100,000 when compared to the second quarter of 1999.
The Company reported profits at the Greenwood Bank, the Clemson Bank, the Belton
Bank, and the Barnwell Bank for the six months ended June 30, 2000. The Newberry
Bank experienced losses for the six months ended June 30, 2000.
Assets and Liabilities
During the first six months of 2000, total assets grew $28,051,000, or 7.8%,
when compared to December 31, 1999. The Company experienced growth of 11.88% in
the loan area during the first six months of 2000. However, this growth was
partially offset by a decrease in securities. On the liability side, total
deposits increased $25,699,000, or 9.99%, to $282,946,000 at June 30, 2000. The
increase in deposits includes approximately $7,200,000 deposits acquired by Mid
State Bank in the Prosperity branch acquisition.
Investment Securities
Investment securities decreased $2,938,000 during the six month period. The
decrease was primarily due to a reduction of $2,252,000 in securities
available-for-sale. Proceeds from the maturities of securities were used to fund
the loan growth.
15
<PAGE>
COMMUNITY CAPITAL CORPORATION
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
-------------------------------------------------------------------------------
Of Operations - Continued
-------------
Loans
Loans receivable increased $26,014,000, or 11.88%, since December 31, 1999. This
increase was due to loan growth at all of the Company's subsidiary banks,
especially the Barnwell Bank and Newberry Bank. Balances within the major loan
receivable categories as of June 30, 2000 and December 31, 1999 are as follows:
(Dollars in thousands) June 30, December 31,
2000 1999
-------- -----------
Commercial and agricultural $ 35,092 $ 29,740
Real estate 156,969 135,957
Home equity 17,921 17,218
Consumer, installment 29,786 30,084
Consumer, credit card and checking 1,266 2,172
Residential mortgages held for sale & other 4,034 3,883
-------- ---------
$ 245,068 $ 219,054
======== =========
Risk Elements in the Loan Portfolio
The following is a summary of risk elements in the loan portfolio:
<TABLE>
<CAPTION>
(Dollars in thousands) June 30,
-------------------------
2000 1999
---------- ---------
Loans:
<S> <C> <C>
Nonaccrual loans $ 475 $ 1,469
Accruing loans more than 90 days past due $ 85 $ 53
Loans identified by the internal review mechanism, including nonaccrual
loans and accruing loans more than 90 days past due:
Criticized $ 4,289 $ 7,033
Classified $ 2,079 $ 4,755
</TABLE>
Activity in the Allowance for Loan Losses is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) June 30,
-------------------------
2000 1999
---------- ---------
<S> <C> <C>
Balance, January 1, $ 2,557 $ 2,399
Provision for loan losses for the period 261 509
Chargeoffs (278) (510)
Recoveries 125 88
---------- ---------
Balance, end of period $ 2,665 $ 2,486
========== =========
Gross loans outstanding, end of period $ 245,068 $ 186,330
Allowance for loan losses to loans outstanding 1.09% 1.33%
</TABLE>
16
<PAGE>
COMMUNITY CAPITAL CORPORATION
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
-------------------------------------------------------------------------------
Of Operations - Continued
-------------
Premises and Equipment
Purchases of fixed assets during the first six months of 2000 totaled $2,277,000
for all institutions. Of this amount, $1,721,000 of these purchases was in the
second quarter of 2000. These totals include the promises and equipment of the
Prosperity branch acquired from Carolina First, which totaled $387,820.
Deposits
Total deposits increased $25,699,000, or 9.99%, from December 31, 1999. The
increase includes approximately $7,200,000 deposits obtained in the Prosperity
branch acquisition. Expressed in percentages, noninterest-bearing deposits
increased 6.95%, while interest-bearing deposits increased by 10.35%.
Balances within the major deposit categories as of June 30, 2000 and December
31, 1999 are as follows:
(Dollars in thousands) June 30, December 31,
2000 1999
--------- ------------
Noninterest-bearing demand deposits $ 29,327 $ 27,422
Interest-bearing demand deposits 50,193 45,560
Money market accounts 51,453 38,419
Savings deposits 27,790 26,642
Certificates of deposit 124,183 119,204
---------- ---------
$ 282,946 $ 257,247
========== =========
Advances from the Federal Home Loan Bank
Advances from the Federal Home Loan Bank of Atlanta to the banking subsidiaries
were $33,064,000 as of June 30, 2000. Of this amount, the following have
scheduled maturities greater than one year:
<TABLE>
<CAPTION>
Maturing on Interest Rate Principal
---------------------- -------------------------------- ---------
(Dollars in thousands)
<S> <C> <C>
02/03/00 5.97% - fixed $ 89
03/17/03 6.41% - fixed, callable 03/17/01 10,000
09/22/03 4.70% - fixed, callable 09/22/00 3,000
03/17/05 6.60% - fixed, callable 03/17/02 5,000
03/26/08 5.51% - fixed, callable 03/26/03 1,500
02/02/09 4.95% - fixed 875
03/17/10 5.92% - fixed, callable 03/17/01 5,000
03/30/10 6.02% - fixed, callable 03/30/01 2,000
03/30/10 6.02% - fixed, callable 03/30/01 4,000
---------
$ 31,464
=========
</TABLE>
17
<PAGE>
COMMUNITY CAPITAL CORPORATION
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
-------------------------------------------------------------------------------
Of Operations - Continued
-------------
Long-Term Debt
During 1998, the Company borrowed funds from an unrelated financial institution
to use for capital infusions into the Belton Bank in order to maintain minimum
capital requirements due to an increase in the asset base resulting from the
purchase of two branch offices of Carolina First Bank. This note was modified on
June 30, 2000. The Company can now borrow up to $8,000,000 under the terms of
the agreement. The promissory note is collateralized by the stock of the
subsidiary banks and bears interest at a simple rate per annum equal to the one
month London Interbank Offered Rate plus 200 basis points. Interest is payable
on a quarterly basis; principal payments are due in ten equal installments,
beginning on the third anniversary of the modification of the note, with the
final balance due on June 30, 2012. The principal balance is $1,390,000 as of
June 30, 2000, with scheduled principal reductions as follows:
(Dollars in thousands) Amount
--------
2003 $ 139
2004 139
After five years 1,112
--------
$ 1,390
========
During the first quarter of 1999, the parent company borrowed $500,000 from
another unrelated financial institution. This amount was renewed in the first
quarter of 2000. These funds will be used for various projects including the
construction of branch offices throughout the Company. Interest is payable
quarterly at a variable rate of 0.75% below the highest prime rate published in
the Wall Street Journal. The outstanding principal balance plus any accrued
interest is payable on February 10, 2001.
Capital
Quantitative measures established by the federal banking agencies to ensure
capital adequacy require the Company and its banking subsidiaries to maintain
minimum ratios of Tier 1 and total capital as a percentage of assets and
off-balance-sheet exposures, adjusted for risk weights ranging from 0% to 100%.
Tier 1 capital consists of common shareholders' equity, excluding the unrealized
gain or loss on securities available-for-sale, minus certain intangible assets.
Tier 2 capital consists of the allowance for loan losses subject to certain
limitations. Total capital for purposes of computing the capital ratios consists
of the sum of Tier 1 and Tier 2 capital. The regulatory minimum requirements are
4% for Tier 1 and 8% for total risk-based capital.
The Company and its banking subsidiaries are also required to maintain capital
at a minimum level based on total average assets, which is known as the leverage
ratio. Only the strongest banks are allowed to maintain capital at the minimum
requirement of 3%. All others are subject to maintaining ratios at least 1% to
2% above the minimum.
The following table summarizes the capital ratios of the Company and its banking
subsidiaries and the regulatory minimum requirements at June 30, 2000:
<TABLE>
<CAPTION>
Tier 1 Total Tier 1
Risk-based Risk-based Leverage
---------- ---------- --------
Actual ratio:
<S> <C> <C> <C>
Community Capital Corporation 11.08% 12.07% 8.03%
Greenwood Bank & Trust 9.57% 10.36% 7.72%
Clemson Bank & Trust 10.90% 11.91% 8.83%
Community Bank & Trust 11.42% 12.72% 8.30%
TheBank 14.84% 15.91% 7.81%
Mid State Bank 12.19% 13.14% 9.02%
Regulatory minimums:
For capital adequacy purposes 4.00% 8.00% 4.00%
To be well-capitalized under prompt action provisions 6.00% 10.00% 5.00%
</TABLE>
18
<PAGE>
COMMUNITY CAPITAL CORPORATION
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
-------------------------------------------------------------------------------
Of Operations - Continued
-------------
Liquidity and Capital Resources
Shareholders' equity was increased by the $88,000 proceeds from sales of stock
to the Employee Stock Ownership Plan and net income of $836,000. Due to changes
in the market rates of interest, the fair value of the Company's securities
available-for-sale decreased, which had the effect of decreasing shareholders'
equity by $132,000 net of the deferred taxes for the six months ended June 30,
2000 when compared to December 31, 1999. Shareholders' equity was also decreased
by the purchase of $89,000 of treasury stock.
During the first six months of 2000, the Company has received a net amount of
$12,335,000 in advances from the Federal Home Loan Bank. These funds have been
used to support the substantial loan growth throughout all five of the Company's
subsidiary banks during the first six months of 2000. For the near term,
maturities and sales of securities available-for-sale are expected to be a
primary source of liquidity as the Company and its subsidiary banks deploy these
funds into loans to achieve the desired mix of assets and liabilities. The
Company also expects to build its deposit base in its new markets. Advances from
the Federal Home Loan Bank and the Bankers Bank will also continue to serve as a
funding source, at least for the near future. Short-term borrowings by the banks
are not expected to be a primary source of liquidity for the near term; however,
the Company has approximately $58,750,000 of unused lines of credit to purchase
federal funds.
Regulatory Matters
The management of the Company is not aware of any current recommendations by
regulatory authorities, which, if they were to be implemented, would have a
material effect on liquidity, capital resources, or operations.
Advisory Note Regarding Forward-Looking Statements
Certain of the statements contained in this report on Form 10-Q 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 report 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 Company's recently acquired branches; the ability
of the Company to effectively integrate and staff the operations of the branches
as well as the operations allocated to the base of deposits acquired in
connection with the 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 increasing 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.
19
<PAGE>
COMMUNITY CAPITAL CORPORATION
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
-------------------------------------------------
Recent Sales of Unregistered Securities
During the quarter ended June 30, 2000, the Company sold an aggregate of 9,033
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 amount of such sales:
Date Shares Proceeds
------------- ------ --------
June 22, 2000 6,032 $40,152
June 25, 2000 3,001 $19,882
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
information with respect to the Company and possessed requisite financial
sophistication. The Company did not sell any other equity securities during the
quarter ended June 30, 2000, which were not registered under the 1933 Act.
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
On May 24, 2000, the Company held its Annual Meeting of Shareholders for the
purpose of (a) electing members to the board of directors, and (b) ratifying the
appointment of Tourville, Simpson & Caskey, L.L.P. as the Company's independent
auditors for the fiscal year ending December 31, 2000. Seven members were up for
election for three-year terms, one member for a two-year term, and one member
for a one-year term. Each of the nominees for director received the number of
affirmative votes of shareholders required for such nominee's election in
accordance with the Bylaws of the Company, and Tourville, Simpson & Caskey,
L.L.P. received the requisite number of affirmative votes required for approval
pursuant to the Bylaws of the Company. Of the 3,126,462 outstanding shares of
the Company, 2,592,534 shares were either voted in person or by proxy for the
two matters presented for shareholders' approval.
Item 6. Exhibits And Reports on Form 8-K
----------------------------------------
(a) Exhibits
10.19 Employment Agreement dated June 30, 2000 between Community
Capital Corporation and Ralph Wesley Brewer.
21.1 Subsidiaries of the Registrant
27.1 Financial Data Schedule
(b) Reports on Form 8-K. The following reports were filed on Form 8-K
during the quarter ended June 30, 2000.
99 Press release dated April 5, 2000 to announce that Mid State
Bank signed a letter of intent to purchase a branch of Anchor
Bank in Saluda, South Carolina. (Incorporated by reference to
Exhibit 99 of the Company's Form 8-K filed with the SEC on
April 7, 2000.)
99 Press release dated April 7, 2000 to announce that Mid State
Bank signed a letter of intent to purchase a branch of
Carolina First Bank in Prosperity, South Carolina.
(Incorporated by reference to Exhibit 99 of the Company's Form
8-K filed with the SEC on April 10, 2000.)
Items 1, 3, and 5 are not applicable.
20
<PAGE>
COMMUNITY CAPITAL CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
By: /s/ WILLIAM G. STEVENS
-----------------------------------
William G. Stevens
President & Chief Executive Officer
Date: August 14, 2000 By: /s/ R. WESLEY BREWER
-----------------------------------
R. Wesley Brewer
Chief Financial Officer
21
