UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
----
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
----
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________TO_________
Commission File Number O-18460
COMMUNITY CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
South Carolina 57-0866395
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
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.
3,084,956 SHARES OF COMMON STOCK, $1.00 PAR VALUE
<PAGE>
COMMUNITY CAPITAL CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
- ------------------------------
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - March 31, 2000
and December 31, 1999.......................................................................... 3
Condensed Consolidated Statements of Income - Three months
ended March 31, 2000 and 1999.................................................................. 4
Condensed Consolidated Statement of Changes in Shareholders'
Equity and Comprehensive Income for the three months
ended March 31, 2000........................................................................... 5
Condensed Consolidated Statements of Cash Flows - Three
months ended March 31, 2000 and 1999........................................................... 6
Notes to Condensed Consolidated Financial Statements..............................................7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................................................10-16
Item 3. Quantitative and Qualitative Disclosures
About Market Risk.............................................................................. 16
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds................................................................ 17
Item 6. Exhibits and Reports on Form 8-K.......................................................................... 17
(a) Exhibits..................................................................................... 19
(b) Reports on Form 8-K.......................................................................... 17
</TABLE>
2
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
Mar.31, 2000 Dec.31, 1999
------------------ ------------------
ASSETS: (Unaudited)
<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks $ 9,920 $ 8,224
Interest-bearing deposit accounts 425 488
Federal funds sold - 10
------------------ ------------------
Total cash and cash equivalents 10,345 8,722
------------------ ------------------
Securities:
Securities available-for-sale 100,809 103,371
Securities held-to-maturity (estimated fair value
of $620 at March 31, 2000 and December 31, 1999) 620 620
Nonmarketable equity securities 5,516 4,935
------------------ ------------------
Total securities 106,945 108,926
------------------ ------------------
Loans receivable 234,902 219,054
Less allowance for loan losses (2,628) (2,557)
------------------ ------------------
Loans, net 232,274 216,497
------------------ ------------------
Premises, furniture, and equipment, net 12,512 12,532
Intangible assets 4,883 5,020
Accrued interest receivable 3,076 2,800
Other assets 5,231 5,171
------------------ ------------------
Total assets $ 375,266 $ 359,668
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Deposits:
Noninterest-bearing $ 29,686 $ 27,422
Interest-bearing 236,186 229,825
------------------ ------------------
Total deposits 265,872 257,247
Federal funds purchased and securities
sold under agreements to repurchase 32,831 46,493
Advances from the Federal Home Loan Bank 40,889 20,729
Long-term debt 1,565 1,575
Accrued interest payable 1,501 1,298
Other liabilities 1,476 1,108
------------------ ------------------
Total liabilities 344,134 328,450
------------------ ------------------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, 10,000,000 shares authorized; 3,126,461 and
3,122,811 shares issued and outstanding at March 31, 2000
and December 31, 1999, respectively 3,126 3,123
Capital surplus 29,871 29,846
Accumulated other comprehensive income(loss) (3,198) (2,802)
Retained earnings 1,708 1,336
Treasury stock at cost; 41,505 and 30,405 shares
at March 31, 2000 and December 31, 1999, respectively (375) (285)
------------------ ------------------
Total shareholders' equity 31,132 31,218
------------------ ------------------
Total liabilities and shareholders' equity $ 375,266 $ 359,668
================== ==================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COMMUNITY CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in thousands except for per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
2000 1999
------------------ ------------------
<S> <C> <C>
Interest income:
Loans, including fees $ 5,087 $ 3,805
Securities, taxable 1,179 1,342
Securities, nontaxable 328 258
Other interest income 12 6
------------------ ------------------
6,606 5,411
------------------ ------------------
Interest expense:
Deposits 2,486 2,501
FHLB advances 306 168
Other interest expense 780 153
------------------ ------------------
3,572 2,822
------------------ ------------------
Net interest income 3,034 2,589
Provision for loan losses 177 274
------------------ ------------------
Net interest income after
provision for loan losses 2,857 2,315
------------------ ------------------
Other operating income:
Service charges on deposit accounts 386 337
Residential mortgage origination fees 125 181
Commissions from sales of mutual funds 44 7
Fees for trust services 43 44
Gain on sales of securities - 7
Other income 277 261
------------------ ------------------
875 837
------------------ ------------------
Other operating expenses:
Salaries and benefits 1,640 1,377
Net occupancy expense 199 160
Amortization of intangible assets 136 132
Furniture and equipment expense 363 275
Other operating expenses 987 864
------------------ ------------------
3,325 2,808
------------------ ------------------
Income before taxes 407 344
Income tax provision 35 25
------------------ ------------------
Net income $ 372 $ 319
================== ==================
Basic net income per share $ 0.12 $ 0.10
Diluted net income per share $ 0.12 $ 0.10
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
COMMUNITY CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Common Stock Other
------------------------------ Capital Comprehensive Retained Treasury
Shares Amount Surplus Income Earnings Stock Total
-------------- ------------- ------------- ------------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1999 3,122,811 $ 3,123 $ 29,846 $ (2,802) $ 1,336 $ (285) $ 31,218
Net income - - - - 372 - 372
Other comprehensive
income, net of tax - - - (396) - - (396)
---------
Comprehensive income - - - - - - (24)
Sales of stock to ESOP 3,650 3 25 - - - 28
Purchase of
treasury stock
(11,100 shares) - - - - - (90) (90)
------------- ------------- ------------- ------------- -------------- ------------- ----------
BALANCE,
MARCH 31, 2000 3,126,461 $ 3,126 $ 29,871 $ (3,198) $ 1,708 $ (375) $ 31,132
============= ============= ============= ============= ============== ============= =========
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
COMMUNITY CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
2000 1999
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 372 $ 319
Adjustments to reconcile net income to
net cash (used) provided by operating activities:
Depreciation 327 224
Provision for possible loan losses 177 274
Amortization of intangible assets 137 132
Amortization less accretion on investments 39 46
Amortization of deferred loan costs 119 89
Gain on sale of securities available for sale - (7)
Disbursements for mortgages held for sale (4,409) (9,309)
Proceeds of sales of residential mortgages 4,925 6,566
Increase in interest receivable (276) (141)
Increase (decrease) in interest payable 203 (133)
(Gain) loss on disposal of premises and equipment (33) 1
Increase in other assets 240 478
(Increase) decrease in other liabilities 368 (871)
------------------ ------------------
Net cash (used) provided by operating activities 2,189 (2,332)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans to customers (16,589) (1,504)
Purchases of securities available-for-sale - (9,825)
Sales of securities available-for-sale - 5,005
Maturities of securities available-for-sale 1,827 6,405
Purchases of nonmarketable equity securities (581) (147)
Purchases of premises and equipment (556) (1,056)
Proceeds from sales of premises and equipment 282 7
------------------ ------------------
Net cash used by investing activities (15,617) (1,115)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options - 22
Proceeds from stock sales to employee benefit plan 28 72
Net increase (decrease) in deposits accounts 8,625 (1,720)
Proceeds from FHLB advances 26,000 6,000
Repayments of FHLB advances (5,840) (1,415)
Proceeds from other borrowings 715 650
Repayments of other borrowings (725) (2,100)
Net decrease in fed funds purchased and repos (13,662) (1,201)
Purchase of treasury stock (90) -
------------------ ------------------
Net cash provided by financing activities 15,051 308
------------------ ------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,623 (3,139)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,722 10,327
------------------ ------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,345 $ 7,188
================== ==================
</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 March 31, 2000 and for the interim periods ended
March 31, 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 and a trust company. 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). Community Trust Company (Trust Company) is the subsidiary that
provides trust functions.
NOTE 2 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------------------------
(Dollars in thousands) 2000 1999
------------------ ------------------
<S> <C> <C>
CASH PAID DURING THE PERIOD FOR:
Income taxes $ 24 $ 83
Interest 3,369 2,960
</TABLE>
NOTE 3 - ADVANCES FROM THE FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank were $40,889,000 as of March 31, 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> <C>
2/03/2003 5.97% - fixed 89,000
3/17/2003 6.41% - fixed, callable 3/17/01 10,000,000
9/22/2003 4.70% - fixed, callable 9/22/00 3,000,000
3/17/2005 6.60% - fixed, callable 3/17/02 5,000,000
3/26/2008 5.51% - fixed, callable 3/26/03 1,500,000
2/02/2009 4.95% - fixed 900,000
3/17/2010 5.92% - fixed, callable 3/17/01 5,000,000
3/30/2010 6.02% - fixed, callable 3/30/01 2,000,000
3/30/2010 6.02% - fixed, callable 3/30/01 4,000,000
------------------
Total long-term advances $ 31,489,000
==================
</TABLE>
7
<PAGE>
COMMUNITY CAPITAL CORPORATION
NOTE 4 - LONG-TERM DEBT
During 1998, the Company borrowed funds from an unrelated financial institution
to use for capital infusions into TheBank 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. The Company can borrow up to
$5,000,000 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
note, with the final balance due on December 21, 2010. Early reductions have
reduced the principal balance at March 31, 2000 to $1,065,000, with scheduled
principal reductions as follows:
Amount
------------------
(Dollars in thousands)
2001 $ 107
2002 107
2003 107
2004 107
After five years 637
------------------
$ 1,065
==================
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 quarter of 2000, there were 3,650 shares of stock sold to the
Employee Stock Ownership Plan at market prices in the amount of $28,000. 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 $90,000.
NOTE 6 - EARNINGS PER SHARE
A reconciliation of the numerators and denominators used to calculate basic and
diluted earnings per share are as follows:
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 2000
-----------------------------------------------------------------
Income Shares Per-Share
(Dollars in thousands, except per share) (Numerator) (Denominator) Amount
------------------ ------------------ ---------------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income available to common shareholders $ 372 3,086,223 $ 0.12
=====================
EFFECT OF DILUTIVE SECURITIES
Stock options - -
------------------ ------------------
DILUTED EARNINGS PER SHARE
Income available to common shareholders
plus assumed conversions $ 372 3,086,223 $ 0.12
================== ================== =====================
</TABLE>
8
<PAGE>
COMMUNITY CAPITAL CORPORATION
NOTE 6 - EARNINGS PER SHARE - Continued
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1999
-----------------------------------------------------------------
Income Shares Per-Share
(Dollars in thousands, except per share) (Numerator) (Denominator) Amount
------------------ ------------------ ---------------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income available to common shareholders $ 319 3,099,149 $ 0.10
=====================
EFFECT OF DILUTIVE SECURITIES
Stock options - 6,751
------------------ ------------------
DILUTED EARNINGS PER SHARE
Income available to common shareholders
plus assumed conversions $ 319 3,105,900 $ 0.10
================== ================== =====================
</TABLE>
NOTE 7 - COMPREHENSIVE INCOME
The following table sets forth the amounts of other comprehensive income
included in equity along with the related tax effect for the three months ended
March 31, 2000 and 1999:
<TABLE>
<CAPTION>
For the Quarter Ended March 31, 2000
---------------------------------------------------------------
Pre-tax (Expense) Net of tax
Amount Benefit Amount
------------------ ------------------ ------------------
(Dollars in thousands)
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during the period $ (696) $ 300 $ (396)
Less: reclassification adjustment for
gains realized in net income - - -
------------------ ------------------ ------------------
Net unrealized gains (losses) on securities (696) 300 (396)
------------------ ------------------ ------------------
Other comprehensive income $ (696) $ 300 $ (396)
================== ================== ==================
For the Quarter Ended March 31, 1999
--------------------------------------------------------------
Pre-tax (Expense) Net of tax
Amount Benefit Amount
------------------ ------------------ ------------------
(Dollars in thousands)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during the period $ (1,157) $ 394 $ (763)
Less: reclassification adjustment for
gains realized in net income (7) 2 (5)
------------------ ------------------ ------------------
Net unrealized gains (losses) on securities (1,164) 396 (768)
------------------ ------------------ ------------------
Other comprehensive income $ (1,164) $ 396 $ (768)
================== ================== ==================
</TABLE>
9
<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 March
31, 2000 compared to December 31, 1999, and the results of operations for the
three months ended March 31, 2000 compared to the three months ended March 31,
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 three months ended March 31, 2000, net interest income, the major
component of the Company's net income, was $3,034,000 compared to $2,589,000 for
the same period of 1999, an increase of $445,000. The improvement was mostly
attributable to an increase in the volume of average earning assets during the
period, particularly loans. Also contributing to the increase in net interest
income was a 19 basis-point increase in the interest rate spread. The average
rates paid on interest-bearing liabilities increased to 4.70% from 4.41% for the
three-month periods ended March 31, 2000 and 1999, respectively.
The net interest spread and net interest margin were 3.36% and 3.70%,
respectively, for the three-month period ended March 31, 2000, compared to 3.17%
and 3.63% for the three-month period ended March 31, 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 three months ended March 31, 2000 and 1999, the
provision was $177,000 and $274,000, respectively. Criticized and classified
loans have decreased from $12,469,000 at March 31, 1999 to $7,925,000 at March
31, 2000. The majority of potential problem loans continue to be at the
Greenwood and Barnwell banks. Criticized loans were $1,993,000 and $2,089,000 at
Greenwood and Barnwell, respectively. Classified loans were $1,576,000 and
$717,000 at Greenwood and Barnwell, respectively. The Company's nonperforming
loans totaled $679,000 at March 31, 2000 compared to $1,506,000 at March 31,
1999. As a result of the decrease in criticized, classified, and nonperforming
loans, the Company has been able to reduce its provision for loan losses
significantly. Based on present information, management believes the allowance
for loan losses is adequate at March 31, 2000 to meet presently known and
inherent risks in the loan portfolio.
NONINTEREST INCOME
Total noninterest income for the three months ended March 31, 2000 was $875,000,
an increase of $38,000, or 4.5% from the comparable period in 1999.
The increase was primarily due to an increase in service charges on deposit
accounts and commissions from the sales of mutual funds. Service charge income
was $386,000 for the three-month period ended March 31, 2000 compared to
$337,000 for the comparable period in 1999. Commissions from the sales of mutual
funds were $44,000 compared to $7,000 in 1999.
10
<PAGE>
COMMUNITY CAPITAL CORPORATION
NONINTEREST EXPENSE
Total noninterest expense for the first three months of 2000 was $3,325,000, an
increase of $517,000, or 18.4%, when compared to the first three months of 1999.
The primary component of noninterest expense is salaries and benefits which was
$1,640,000 and $1,377,000 for the three months ended March 31, 2000 and 1999,
respectively. The $263,000 increase is the result of additional staff for the
growth of the Company and normal pay raises. Furniture and equipment expense
increased to $363,000 as of March 31, 2000 from $275,000 for the quarter ended
March 31, 1999. Other operating expenses also increased $123,000, or 14.2%, over
the comparable 1999 period.
INCOME TAXES
For the three months ended March 31, 2000 and 1999, the effective income tax
rate was 8.60% and 7.27%, respectively, and the income tax provision was $35,000
and $25,000, respectively. The low effective tax rates are attributable to
significant amounts of nontaxaxble income from securities which offset the
majority of income before taxes.
NET INCOME
The combination of the above factors resulted in net income of $372,000 for the
three months ended March 31, 2000 compared to $319,000 for the comparable period
in 1999.
The profitability of the Greenwood bank was supplemented by profits from the
Clemson, Belton and Barnwell banks for the three months ended March 31, 2000.
The Newberry Bank experienced a net loss for the quarter while Community Trust
Company broke even.
ASSETS AND LIABILITIES
During the first three months of 2000, total assets increased $15,598,000, or
4.34%, when compared to December 31, 1999. The Company experienced growth in the
loan area of $15,848,000 or 7.23% during the first three months of 2000.
However, this growth was offset slightly by a decrease in securities
available-for-sale of $2,562,000 or 2.48%. On the liability side, total deposits
increased $8,625,000 or 3.35% to $265,872,000 at March 31, 2000. Although
deposits increased slightly, the increase was not enough to fund the growth in
loans. The Company increased its advances from the Federal Home Loan Bank to
serve as a funding source. Advances from the Federal Home Loan Bank were
$40,889,000, an increase of $20,160,000 from the December 31, 1999 amount of
$20,729,000. Federal funds purchased and securities sold under agreements to
repurchase decreased from $46,493,000 at December 31, 1999 to $32,831,000 at
March 31, 2000.
INVESTMENT SECURITIES
Investment securities decreased $1,981,000 to $106,945,000 at March 31, 2000.
The decrease is primarily due to the reduction of $2,562,000 in securities
available for sale. As securities matured, funds were reinvested in higher
yielding loans. There were no purchases or sales of securities
available-for-sale during the quarter ended March 31, 2000.
11
<PAGE>
COMMUNITY CAPITAL CORPORATION
LOANS
Loans receivable increased $15,848,000, or 7.23%, since December 31, 1999. This
increase was primarily due to the continued strong loan demand in the Greenwood
market and steady growth at all of the other subsidiary banks. Balances within
the major loan receivable categories as of March 31, 2000 and December 31, 1999
are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
-------------------- --------------------
(Dollars in thousands)
<S> <C> <C>
Commercial and agricultural $ 31,601 $ 29,740
Real estate 149,206 135,957
Home equity 18,326 17,218
Consumer, installment 29,664 30,084
Consumer, credit card and checking 1,672 2,172
Residential mortgages held for sale and other 4,433 3,883
-------------------- --------------------
$ 234,902 $ 219,054
==================== ====================
</TABLE>
RISK ELEMENTS IN THE LOAN PORTFOLIO
The following is a summary of risk elements in the loan portfolio:
<TABLE>
<CAPTION>
March 31,
--------------------------------------------
2000 1999
-------------------- --------------------
Loans: (Dollars in thousands)
<S> <C> <C>
Nonaccrual loans $ 654 $ 1,416
Accruing loans more than 90
days past due $ 25 $ 90
Loans identified by the internal review
mechanism, including nonaccrual loans
and accruing loans more than 90 days past due:
Criticized $ 5,327 $ 7,127
Classified $ 2,598 $ 5,342
</TABLE>
Activity in the Allowance for Loan Losses
is as follows:
<TABLE>
<CAPTION>
2000 1999
-------------------- --------------------
(Dollars in thousands)
<S> <C> <C>
Balance, January 1, $ 2,557 $ 2,399
Provision for loan losses for the period 177 274
Chargeoffs (171) (266)
Recoveries 65 61
-------------------- --------------------
Balance, end of period $ 2,628 $ 2,468
==================== ====================
Gross loans outstanding, end of period $ 234,902 $ 176,498
Allowance for loan losses to loans
outstanding 1.12% 1.40%
</TABLE>
12
<PAGE>
COMMUNITY CAPITAL CORPORATION
PREMISES AND EQUIPMENT
Premises and equipment, net totaled $12,512,000 at March 31, 2000 as compared to
$12,532,000 at December 31, 1999. Premises and equipment purchased during the
first quarter of 2000 totaled approximately $556,000 for all institutions. A
significant amount of the total purchases related to items purchased for the new
Newberry headquarters.
DEPOSITS
Total deposits increased $8,625,000, or 3.35%, from December 31, 1999. The
largest increase in the deposit area was in money market accounts which
increased $5,407,000 or 14.07% to $43,826,000 at March 31, 2000. Expressed in
percentages, noninterest-bearing deposits increased 8.26% and interest-bearing
deposits increased by 2.77%.
Balances within the major deposit categories as of March 31, 2000 and December
31, 1999 are as follows:
March 31, December 31,
2000 1999
---------- ----------
(Dollars in thousands)
Noninterest-bearing demand deposits $ 29,686 $ 27,422
Interest-bearing demand deposits 46,335 45,560
Money market accounts 43,826 38,419
Savings deposits 27,352 26,642
Certificates of deposit 118,673 119,204
---------- ----------
$ 265,872 $ 257,247
========== ==========
ADVANCES FROM THE FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank were $40,889,000 as of March 31, 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> <C>
2/03/2003 5.97% - fixed 89,000
3/17/2003 6.41% - fixed, callable 3/17/01 10,000,000
9/22/2003 4.70% - fixed, callable 9/22/00 3,000,000
3/17/2005 6.60% - fixed, callable 3/17/02 5,000,000
3/26/2008 5.51% - fixed, callable 3/26/03 1,500,000
2/02/2009 4.95% - fixed 900,000
3/17/2010 5.92% - fixed, callable 3/17/01 5,000,000
3/30/2010 6.02% - fixed, callable 3/30/01 2,000,000
3/30/2010 6.02% - fixed, callable 3/30/01 4,000,000
------------------
Total long-term advances $ 31,489,000
==================
</TABLE>
13
<PAGE>
COMMUNITY CAPITAL CORPORATION
LONG-TERM DEBT
During 1998, the Company borrowed funds from an unrelated financial institution
to use for capital infusions into TheBank 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. The Company can borrow up to
$5,000,000 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
note, with the final balance due on December 21, 2010. Early reductions have
reduced the principal balance at March 31, 2000 to $1,065,000, with scheduled
principal reductions as follows:
Amount
--------------------
Dollars in thousands)
2001 $ 107
2002 107
2003 107
2004 107
After five years 637
--------------------
$ 1,065
====================
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. 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 1% to 2% above
the minimum.
14
<PAGE>
COMMUNITY CAPITAL CORPORATION
CAPITAL - Continued
The following table summarizes the capital ratios of the Company and its banking
subsidiaries and the regulatory minimum requirements at March 31, 2000:
<TABLE>
<CAPTION>
<S> <C>
Tier 1 Total Tier 1
Risk Based Risk Based Leverage
---------- ---------- --------
Actual ratio:
Community Capital Corporation 11.35% 12.37% 8.16%
Greenwood Bank & Trust 9.07 9.84 7.81
Clemson Bank & Trust 11.35 12.39 8.80
Community Bank & Trust 12.87 13.98 8.28
TheBank 14.96 16.04 7.91
Midstate Bank 12.48 13.47 9.01
Regulatory minimums:
For capital adequacy purposes 4.00 8.00 4.00
To be well-capitalized under
prompt action provisions 6.00 10.00 5.00
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Shareholders' equity was increased by the $28,000 proceeds from sales of stock
to the Employee Stock Ownership Plan and net income of $372,000. 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 $396,000 net of the deferred tax effects for the three months ended
March 31, 2000 when compared to December 31, 1999. Shareholders' equity was
further decreased by $90,000 paid for the purchase of 11,100 shares of treasury
stock.
During the first quarter of 2000, the Company received a net amount of
$20,160,000 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 quarter 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 market
areas. Advances from the Federal Home Loan 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 $49,469,000 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.
15
<PAGE>
COMMUNITY CAPITAL CORPORATION
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 community bank
subsidiaries (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 3. 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.
16
<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 March 31, 2000, the Company sold an aggregate of 3,650
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
---- ------ --------
January 20, 2000 1,574 $ 12,789
January 31, 2000 373 3,023
March 8, 2000 1,703 12,134
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 March 31, 2000 which were not registered under the 1933 Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(1) Exhibits
27. Financial Data Schedule
Items 1, 3, 4, and 5 are not applicable.
17
<PAGE>
COMMUNITY CAPITAL CORPORATION
PART II - OTHER INFORMATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY CAPITAL CORPORATION
By: /s/ William G. Stevens
---------------------------
William G. Stevens
President & Chief Executive
Officer
Date: May 10, 2000 By: /s/ James H. Stark
---------------------------
James H. Stark
Chief Financial Officer
18
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,920
<INT-BEARING-DEPOSITS> 425
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 100,809
<INVESTMENTS-CARRYING> 620
<INVESTMENTS-MARKET> 620
<LOANS> 234,902
<ALLOWANCE> 2,628
<TOTAL-ASSETS> 375,266
<DEPOSITS> 265,872
<SHORT-TERM> 42,231
<LIABILITIES-OTHER> 2,977
<LONG-TERM> 33,054
0
0
<COMMON> 3,126
<OTHER-SE> 28,006
<TOTAL-LIABILITIES-AND-EQUITY> 375,266
<INTEREST-LOAN> 5,087
<INTEREST-INVEST> 1,507
<INTEREST-OTHER> 12
<INTEREST-TOTAL> 6,606
<INTEREST-DEPOSIT> 2,486
<INTEREST-EXPENSE> 3,572
<INTEREST-INCOME-NET> 3,034
<LOAN-LOSSES> 177
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,325
<INCOME-PRETAX> 407
<INCOME-PRE-EXTRAORDINARY> 407
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 372
<EPS-BASIC> 0.12
<EPS-DILUTED> 0.12
<YIELD-ACTUAL> 3.70
<LOANS-NON> 654
<LOANS-PAST> 25
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,598
<ALLOWANCE-OPEN> 2,557
<CHARGE-OFFS> 171
<RECOVERIES> 65
<ALLOWANCE-CLOSE> 2,628
<ALLOWANCE-DOMESTIC> 2,628
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
