U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One) FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 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.
3,291,631 shares of common stock, $1.00 par value
PAGE 1 OF 22
EXHIBIT INDEX ON PAGE 2
<PAGE>
COMMUNITY CAPITAL CORPORATION
Index
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
-----------------------------
Item 1. Financial Statements (Unaudited)
<S> <C>
Condensed Consolidated Balance Sheets - September 30, 2000 and December 31, 1999.........................3
Condensed Consolidated Statements of Operations - Nine months ended
September 30, 2000 and 1999 and three months ended September 30, 2000 and 1999.........................4
Condensed Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income -
Nine months ended September 30, 2000...................................................................6
Condensed Consolidated Statements of Cash Flows - Nine months ended September 30, 2000 and 1999..........7
Notes to Condensed Consolidated Financial Statements..................................................8-12
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................13-19
PART II. OTHER INFORMATION
--------------------------
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>
<S> <C> <C>
(Dollars in thousands) September 30, December 31,
2000 1999
------------- -------------
(Unaudited)
Assets
Cash and cash equivalents:
Cash and due from banks $ 8,442 $ 8,224
Interest-bearing deposit accounts 508 488
Federal funds sold & repurchase agreements - 10
--------- ---------
Total cash and cash equivalents 8,950 8,722
--------- ---------
Securities:
Securities available-for-sale 99,340 103,371
Securities held-to-maturity (estimated fair value of $620
at September 30, 2000 and December 31, 1999) 620 620
Nonmarketable equity securities 5,500 4,935
--------- ---------
Total securities 105,460 108,926
--------- ---------
Loans receivable 273,681 219,054
Less allowance for loan losses (3,002) (2,557)
--------- ---------
Loans, net 270,679 216,497
--------- ---------
Premises and equipment, net 15,178 12,532
Intangible assets 6,951 5,020
Accrued interest receivable 3,415 2,800
Other assets 4,748 5,171
--------- ---------
Total assets $ 415,381 $ 359,668
--------- ---------
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 29,112 $ 27,422
Interest-bearing 299,460 229,825
--------- ---------
Total deposits 328,572 257,247
--------- ---------
Federal funds purchased and securities sold
under agreements to repurchase 10,879 46,493
Advances from the Federal Home Loan Bank 32,424 20,729
Long-term debt 5,825 1,575
Accrued interest payable 2,404 1,298
Other liabilities 1,925 1,108
--------- ---------
Total liabilities 382,029 328,450
--------- ---------
Shareholders' Equity
Common stock, $1 par value, 10,000,000 shares authorized,
3,291,631 and 3,122,811 shares issued and outstanding
at September 30, 2000 and December 31, 1999, respectively 3,292 3,123
Capital surplus 30,780 29,846
Retained earnings 1,650 1,336
Accumulated other comprehensive income (loss) (1,982) (2,802)
Treasury stock at cost; 43,580 and 30,405 shares at September 30,
2000 and December 31,1999 respectively (388) (285)
--------- ---------
Total shareholders' equity 33,352 31,218
--------- ---------
Total liabilities and shareholders' equity $ 415,381 $ 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) Nine Months Ended Three Months Ended
September 30, September 30,
--------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $16,982 $11,970 $ 6,397 $ 4,245
Investment securities:
Taxable 3,479 3,832 1,139 1,245
Tax-exempt 986 891 329 329
Other interest income 37 67 17 47
--------- --------- --------- ---------
Total 21,484 16,760 7,882 5,866
--------- --------- --------- ---------
Interest expense:
Deposits 8,572 7,292 3,483 2,398
Federal Home Loan Bank advances 1,422 476 510 186
Other interest expense 1,991 794 529 399
--------- --------- --------- ---------
Total 11,985 8,562 4,522 2,983
--------- --------- --------- ---------
Net interest income 9,499 8,198 3,360 2,883
Provision for loan losses 276 686 15 177
--------- --------- --------- ---------
Net interest income after
provision for loan losses 9,223 7,512 3,345 2,706
--------- --------- --------- ---------
Other operating income:
Service charges on deposit accounts 1,240 1,076 453 373
Residential mortgage origination fees 388 540 135 132
Commissions from sales of mutual funds 93 38 18 14
Fees for trust services 102 76 29 29
Gain on sales of securities - 175 - -
Gain on sale of Community
Trust Company 150 - - -
Other operating income 761 610 236 149
--------- --------- --------- ---------
Total 2,734 2,515 871 697
--------- --------- --------- ---------
Other operating expenses:
Salaries and employee benefits 5,083 4,245 1,825 1,385
Net occupancy expense 627 511 223 192
Amortization of intangible assets 440 402 170 136
Furniture and equipment expense 1,179 861 446 310
Other operating expenses 3,078 2,818 964 945
--------- --------- --------- ---------
Total 10,407 8,837 3,628 2,968
--------- --------- --------- ---------
Income before income taxes 1,550 1,190 588 435
Income tax provision 231 127 105 55
--------- --------- --------- ---------
Net income $ 1,319 $ 1,063 $ 483 $ 380
--------- --------- --------- ---------
Basic earnings per share $ 0.42 $ 0.34 $ 0.15 $ 0.12
Diluted earnings per share $ 0.42 $ 0.34 $ 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 nine months ended September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Common Stock Other
(Dollars in thousands) -------------------- 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 1,319 1,319
Other comprehensive
income, net of tax 820 820
---------
Comprehensive income 2,139
---------
Sales of stock to ESOP 12,683 13 75 88
5% stock dividend 156,137 156 859 (1,001) (14) -
Payment for fractional
shares (4) (4)
Purchase of treasury
stock (11,100 shares) (89) (89)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance,
September 30, 2000 3,291,631 $ 3,292 $ 30,780 $ 1,650 $ (1,982) $ (388) $ 33,352
========== ========== ========== ========== ========== ========== ==========
</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) Nine Months Ended
September 30,
------------------------
<S> <C> <C>
2000 1999
Cash flows from operating activities: -------- --------
Net income $ 1,319 $ 1,063
Adjustments to reconcile net income to net cash (used) provided by
operating activities:
Depreciation 1,046 865
Provision for possible loan losses 276 686
Amortization of intangible assets 440 402
Amortization less accretion on investments 114 142
Amortization of deferred loan costs 361 271
Loss (gain) on sales of securities available-for-sale - (175)
Gain on sale of Community Trust Company (branch) 150 1
Gain on sale of fixed assets (34) -
Disbursements for mortgages held for sale (12,774) (12,039)
Proceeds of sales of residential mortgages 12,662 9,093
(Increase) decrease in interest receivable (423) (276)
Increase (decrease) in interest payable 666 (278)
(Increase) decrease in other assets (149) (214)
Increase (decrease) in other liabilities 809 (373)
-------- --------
Net cash (used) provided by operating activities 4,463 (832)
-------- --------
Cash flows from investing activities:
Net increase in loans to customers (32,745) (28,610)
Purchases of securities available-for-sale - (44,057)
Proceeds from sales of securities available-for-sale - 37,650
Proceeds from maturities of securities available-for-sale 5,160 11,404
(Purchases) sales of non-marketable equity securities (565) (113)
Proceeds from sales of premises and equipment 344 (3,800)
Purchases of premises and equipment (2,961) 10
Proceeds from the acquisition of branches 13,568 -
-------- --------
Net cash used by investing activities (17,199) (27,516)
-------- --------
Cash flows from financing activities:
Proceeds form exercise of stock options - 22
Proceeds from stock sales to ESOP 88 204
Net increase (decrease) in deposits accounts 32,638 (4,583)
Net increase (decrease) in federal funds purchased and repos (35,614) 18,800
Proceeds from other borrowings 7,000 (7,480)
Proceeds from Federal Home Loan Bank borrowings 34,600 1,400
Repayments of other borrowings (2,750) (3,025)
Repayments of Federal Home Loan Bank borrowings (22,905) 19,336
Purchase of treasury stock (89) -
Payment for fractional shares of stock (4) -
-------- --------
Net cash provided by financing activities 12,964 24,674
-------- --------
Net increase (decrease) in cash and cash equivalents 228 (3,674)
Cash and cash equivalents, beginning of period 8,722 10,327
-------- --------
Cash and cash equivalents, end of period $ 8,950 $ 6,653
-------- --------
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
COMMUNITY CAPITAL CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
------------------------------
The accompanying consolidated financial statements have been prepared in
accordance with the requirements for interim financial statements and,
accordingly, they are condensed and omit disclosures, which would substantially
duplicate those contained in the most recent annual report to shareholders. The
financial statements as of September 30, 2000 and for the interim periods ended
September 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.
Notes 2-Supplemental Cash Flow Information
------------------------------------------
(Dollars in thousands)
2000 1999
------------ ------------
Cash paid during the period for:
Income taxes $ 289 $ 258
Interest 11,319 8,840
Deposits, including accrued interest payable 39,128 -
Details of the acquisition of the new branch:
Loans, including accrued interest receivable $ 22,470 $ -
Premises and equipment 563 -
Intangible core deposit premiums 2,250 -
Other, net (339) -
Deposits, including accrued interest payable (31,867) -
------------ ------------
Cash received for net liabilities assumed $ 6,923 $ -
------------ ------------
7
<PAGE>
COMMUNITY CAPITAL CORPORATION
Notes to Condensed Consolidated Financial Statements - continued
(Unaudited)
Note 3 - Advances from the Federal Home Loan Bank
-------------------------------------------------
Advances from the Federal Home Loan Bank of Atlanta to the banking subsidiaries
were $32,424,000 as of September 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> <C>
02/03/03 5.97% - fixed $ 74
03/17/03 6.41% - fixed, callable 03/17/01 10,000
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 850
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
--------
$ 28,424
========
</TABLE>
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
September 30, 2000. The Company can now borrow up to $8,000,000 under the terms
of the agreement. The Company borrowed an additional $4,000,000 of the credit
line during the quarter to use as a capital infusion for the Newberry Bank in
order to maintain minimum capital requirements due to an increase in the asset
base resulting from the purchase of two Carolina First Bank branches in Saluda
and Prosperity. 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 September 30, 2012. The principal balance is
$5,325,000 as of September 30, 2000, with scheduled principal reductions as
follows:
(Dollars in thousands) Amount
----------------
2003 $ 533
2004 532
After five years 4,260
------------
$ 5,325
------------
During 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.
8
<PAGE>
COMMUNITY CAPITAL CORPORATION
Notes to Condensed Consolidated Financial Statements - continued
(Unaudited)
Note 5 - Shareholders' Equity
-----------------------------
During the first nine 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 was paid 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 nine and three month periods ended September
30, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands, except per share) Nine Months Ended September 30, 2000
-------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
------------ ------------- ------------
<S> <C> <C> <C>
Basic earnings per share
Income available to common shareholders $ 1,319 3,140,369 $ 0.42
======
Effect of dilutive securities
Stock options - 6,970
------- ---------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions $ 1,319 3,147,339 $ 0.42
======= ========= ======
<CAPTION>
(Dollars in thousands, except per share) Nine Months Ended September 30, 1999
-------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
------------ ------------- ------------
<S> <C> <C> <C>
Basic earnings per share
Income available to common shareholders $ 1,063 3,106,750 $ 0.34
=======
Effect of dilutive securities
Stock options - 2,238
------- ---------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions $ 1,063 3,108,988 $ 0.34
======= ========= =======
</TABLE>
9
<PAGE>
COMMUNITY CAPITAL CORPORATION
Notes to Condensed Consolidated Financial Statements - continued
(Unaudited)
Note 6 - Earnings Per Share - continued
---------------------------
<TABLE>
<CAPTION>
(Dollars in thousands, except per share) Three Months Ended September 30, 2000
---------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Basic earnings per share
Income available to common shareholders $ 483 3,246,468 $ 0.15
------
Effect of dilutive securities
Stock options - 11,588
----- ---------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions $ 483 3,258,056 $ 0.15
===== ========= ======
<CAPTION>
(Dollars in thousands, except per share) Three Months Ended September 30, 1999
---------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Basic earnings per share
Income available to common shareholders $ 380 3,113,916 $ 0.12
------
Effect of dilutive securities
Stock options - -
----- ---------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions $ 380 3,113,916 $ 0.12
===== ========= ======
</TABLE>
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 nine and three
month periods ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
(Dollars in thousands) Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
------ ------- ------
<S> <C> <C> <C>
For the Nine Months Ended September 30, 2000:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period $ 1,243 $ (423) $ 820
Less: reclassification adjustment for gains realized
in net income - - -
------- ------- -----
Net unrealized gains (losses) on securities 1,243 (423) 820
------- ------- -----
Other comprehensive income $ 1,243 $ (423) $ 820
======= ======= =====
</TABLE>
10
<PAGE>
COMMUNITY CAPITAL CORPORATION
Notes to Condensed Consolidated Financial Statements - continued
(Unaudited)
Note 7 - Comprehensive Income - continued
-----------------------------
<TABLE>
<CAPTION>
(Dollars in thousands) Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
------ ------- ------
<S> <C> <C> <C>
For the Nine Months Ended September 30, 1999:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period $ (4,959) $ 1,686 $ (3,273)
Less: reclassification adjustment for gains realized
in net income (175) 60 (115)
--------- ----- -------
Net unrealized gains (losses) on securities (5,134) 1,746 (3,388)
--------- ----- -------
Other comprehensive income $ (5,134) $ 1,746 $ (3,388)
========= ===== =======
<CAPTION>
(Dollars in thousands) Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
------ ------- ------
<S> <C> <C> <C>
For the Three Months Ended September 30, 2000:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period $ 1,443 $ (491) $ 952
Less: reclassification adjustment for gains realized
in net income - - -
--------- ----- -------
Net unrealized gains (losses) on securities 1,443 (491) 952
--------- ----- -------
Other comprehensive income $ 1,443 $ (491) $ 952
========= ===== =======
<CAPTION>
(Dollars in thousands) Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
------ ------- ------
<S> <C> <C> <C>
For the Three Months Ended September 30, 1999:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period $ (1,014) $ 345 $ (669)
Less: reclassification adjustment for gains realized
in net income - - -
--------- ----- -------
Net unrealized gains (losses) on securities (1,014) 345 (669)
--------- ----- -------
Other comprehensive income $ (1,014) $ 345 $ (669)
========= ===== =======
</TABLE>
11
<PAGE>
COMMUNITY CAPITAL CORPORATION
Notes to Condensed Consolidated Financial Statements - continued
(Unaudited)
Note 8 - Acquisition of Branches
--------------------------------
On May 9, 2000, Mid State Bank entered into a Purchase and Assumption Agreement
to acquire certain assets and deposits associated with a branch office of Anchor
Bank. At the close of business on July 3, 2000, Mid State Bank acquired the
deposits of a branch located in Saluda County, South Carolina, which had
approximately $31,867,000 in deposits (unaudited).
At the closing, and subject to the terms of the Purchase and Assumption
Agreement, Mid State Bank paid Anchor Bank a premium of 8.00% on the assumed
Anchor 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 $ 22,470
Premises and equipment 563
Intangible core deposit premiums 2,250
Other, net (339)
Deposits, including accrued interest payable (31,867)
---------
Cash received for net liabilities assumed $ 6,923
=========
The Company has not presented pro forma financial information because the Anchor
Bank branch does not constitute a business, and income statement information was
either not available or incomplete.
12
<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
September 30, 2000 compared to December 31, 1999 and the results of operations
for the three and nine months ended September 30, 2000 compared to the three and
nine months ended September 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 nine months ended September 30, 2000, net interest income, the major
component of the Company's net income, was $9,499,000 compared to $8,198,000 for
the same period of 1999, an increase of $1,301,000. For the three months ended
September 30, 2000, net interest income was $3,360,000 compared to $2,883,000
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 8.13% from 7.73%, while the average rate
paid on interest-bearing liabilities increased to 4.94% from 4.31% for the nine
month periods ended September 30, 2000 and 1999, respectively.
The net interest spread and net interest margin were 3.19% and 3.59%,
respectively, for the nine month period ended September 30, 2000, compared to
3.40% and 3.80% for the nine month period ended September 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 nine months ended September 30, 2000 and 1999, the
provision was $276,000 and $686,000, respectively. For the three months ended
September 30, 2000 and 1999, the provision for loan losses was $15,000 and
$177,000, respectively. The Company's nonperforming loans totaled $583,000 at
September 30, 2000 compared to $1,506,000 at September 30, 1999. Criticized and
classified loans have decreased from $9,285,000 at September 30, 1999 to
$6,672,000 at September 30, 2000. The majority of the potential problem loans
continue to be at the Greenwood and Barnwell banks. Criticized and classified
loans were $2,854,000 and $1,593,000 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 September 30, 2000 to meet presently known and inherent
risks in the loan portfolio.
Noninterest Income
------------------
Total noninterest income for the nine months ended September 30, 2000 was
$2,734,000, an increase of $219,000 compared to $2,515,000 for the nine months
ended September 30, 1999. Total noninterest income for the quarter ended
September 30, 2000 was $871,000, or 24.96%, higher than the third quarter of
1999.
Service charges on deposit accounts increased $164,000 from the nine months
ended September 30, 1999 to the nine months ended September 30, 2000 and $80,000
from the three months ended September 30, 1999 to the three months September 30,
2000. Other operating income increased $151,000 and $87,000 from the nine and
three months ended September 30, 1999, respectively, to the nine and three
months ended September 30, 2000. The Company also realized a gain of $150,000 on
the sale of Community Trust Company during the nine months ended September 30,
2000. The Company realized gains of $175,000 from the sale of securities during
the nine months ended September 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 $540,000 to $388,000 for the nine months ended September 30,
1999, compared to the nine months ended September 30, 2000.
13
<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 nine months of 2000 was $10,407,000, an
increase of $1,570,000, or 17.77%, when compared to the first nine months of
1999. For the quarter ended September 30, 2000, noninterest expense was
$3,628,000, an increase of $660,000, or 22.24%, over the comparable period of
1999.
The primary component of noninterest expense is salaries and benefits, which
were $5,083,000 and $4,245,000 for the nine months ended September 30, 2000 and
1999, respectively and $1,825,000 and $1,385,000 for the three months ending
September 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 $1,179,000 for the nine month
period ending September 30, 2000, an increase of 36.93% over the related period
in 1999 due primarily to depreciation charges realized on additional equipment
operating throughout the Company. Other expenses also increased 9.23% to
$3,078,000 for the first nine months of 2000.
Income Taxes
------------
For the nine months ended September 30, 2000 and 1999, the effective income tax
rate was 14.90% and 10.67%, respectively, and the income tax provision was
$231,000 and $127,000, respectively. For the quarter ended September 30, 2000,
the effective tax rate was 17.86% compared to 12.64% for the third 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 $1,319,000 for
the nine months ended September 30, 2000 compared to $1,063,000 for the
comparable period in 1999. For the quarter ended September 30, 2000, net income
was $483,000, an increase of $103,000 when compared to the third quarter of
1999.
The Company reported profits at all five subsidiary banks for the nine months
ended September 30, 2000. The Trust Company experienced losses for the nine
months ended September 30, 2000.
Assets and Liabilities
----------------------
During the first nine months of 2000, total assets grew $55,713,000, or 15.49%,
when compared to December 31, 1999. The Company experienced growth of 24.94% in
the loan area during the first nine months of 2000, including $22,278,000 in
loans acquired by Mid State Bank in the Saluda branch acquisition. However, this
growth was partially offset by a decrease in securities. On the liability side,
total deposits increased $71,325,000, or 27.73%, to $328,572,000 at September
30, 2000. The increase in deposits includes approximately $38,687,000 deposits
acquired by Mid State Bank in the Prosperity and Saluda branch acquisitions.
Investment Securities
---------------------
Investment securities decreased $3,466,000 during the nine month period ended
September 30, 2000. The decrease was primarily due to a reduction of $4,031,000
in securities available-for-sale. Proceeds from the maturities of securities
were used to fund the loan growth.
14
<PAGE>
COMMUNITY CAPITAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations - continued
--------------
Loans
-----
Loans receivable increased $54,627,000, or 24.94%, 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 September 30, 2000 and December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
(Dollars in thousands) September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Commercial and agricultural $ 42,318 $ 29,740
Real estate 172,935 135,957
Home equity 20,201 17,218
Consumer, installment 32,547 30,084
Consumer, credit card and checking 1,524 2,172
Residential mortgages held for sale & other 4,156 3,883
----------- -----------
$ 273,681 $ 219,054
=========== ===========
</TABLE>
Risk Elements in the Loan Portfolio
-----------------------------------
The following is a summary of risk elements in the loan portfolio:
<TABLE>
<CAPTION>
(Dollars in thousands) September 30,
----------------------------
2000 1999
----------- -------------
Loans:
<S> <C> <C>
Nonaccrual loans $ 470 $ 1,392
Accruing loans more than 90 days past due $ 113 $ 114
Loans identified by the internal review mechanism, including nonaccrual
loans and accruing loans more than 90 days past due:
Criticized $ 3,569 $ 4,155
Classified $ 3,103 $ 5,130
</TABLE>
Activity in the Allowance for Loan Losses is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) September 30,
----------------------------
2000 1999
---------- -----------
<S> <C> <C>
Balance, January 1, $ 2,557 $ 2,399
Provision for loan losses for the period 276 686
Acquired from branch purchase 335 -
Chargeoffs (347) (613)
Recoveries 181 113
---------- -----------
Balance, end of period $ 3,002 2,585
-========= ===========
Gross loans outstanding, end of period $ 273,681 203,330
Allowance for loan losses to loans outstanding 1.10% 1.27%
</TABLE>
15
<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 nine months of 2000 totaled
$2,961,000 for all institutions. Of this amount, $884,000 of these purchases was
in the third quarter of 2000. An additional $1,041,000 in premises and equipment
was acquired with the Saluda and Prosperity branches.
Deposits
--------
Total deposits increased $71,325,000, or 27.73%, from December 31, 1999. The
increase includes approximately $38,687,000 deposits obtained in the Saluda and
Prosperity branch acquisitions. Expressed in percentages, noninterest-bearing
deposits increased 6.16%, while interest-bearing deposits increased by 30.30%.
Balances within the major deposit categories as of September 30, 2000 and
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Noninterest-bearing demand deposits $ 29,112 $ 27,422
Interest-bearing demand deposits 53,580 45,560
Money market accounts 58,949 38,419
Savings deposits 31,141 26,642
Certificates of deposit 155,790 119,204
--------- ---------
$ 328,572 $ 257,247
========= =========
</TABLE>
Advances from the Federal Home Loan Bank
----------------------------------------
Advances from the Federal Home Loan Bank of Atlanta to the banking subsidiaries
were $32,424,000 as of September 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>
02/03/03 5.97% - fixed $ 74
03/17/03 6.41% - fixed, callable 03/17/01 10,000
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 850
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
--------
$ 28,424
========
</TABLE>
16
<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
September 30, 2000. The Company can now borrow up to $8,000,000 under the terms
of the agreement. The Company borrowed an additional $4,000,000 of the credit
line during the quarter to use as a capital infusion for the Newberry Bank in
order to maintain minimum capital requirements due to an increase in the asset
base resulting from the purchase of the Anchor Bank branch in Saluda. 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
September 30, 2012. The principal balance is $5,325,000 as of September 30,
2000, with scheduled principal reductions as follows:
(Dollars in thousands) Amount
---------
2003 $ 533
2004 532
After five years 4,260
---------
$ 5,325
=========
During 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.
17
<PAGE>
COMMUNITY CAPITAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations - continued
-------------
Capital - continued
-------
The following table summarizes the capital ratios of the Company and its banking
subsidiaries and the regulatory minimum requirements at September 30, 2000:
<TABLE>
<CAPTION>
Tier 1 Total Tier 1
Risk-based Risk-based Leverage
---------- ---------- --------
<S> <C> <C> <C>
Actual ratio:
Community Capital Corporation 9.62% 10.63% 7.00%
Greenwood Bank & Trust 9.70% 10.50% 7.77%
Clemson Bank & Trust 14.12% 15.44% 8.66%
Community Bank & Trust 10.08% 11.37% 7.58%
TheBank 15.61% 16.70% 7.77%
Mid State Bank 9.61% 10.66% 7.52%
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 $88,000 proceeds from sales of stock
to the Employee Stock Ownership Plan and net income of $1,319,000. Due to
changes in the market rates of interest, the fair value of the Company's
securities available-for-sale increased, which had the effect of increasing
shareholders' equity by $820,000 net of the deferred taxes for the nine months
ended September 30, 2000 when compared to December 31, 1999. Shareholders'
equity was decreased by the purchase of $89,000 of treasury stock.
During the first nine months of 2000, the Company has received a net amount of
$11,695,000 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 nine months of 2000 and the purchases of the
Prosperity and Saluda branches. 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 $61,130,000 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.
18
<PAGE>
COMMUNITY CAPITAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations - continued
-------------
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 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.
27.1 Financial Data Schedule
(b) Reports on Form 8-K. The following reports were filed on Form 8-K
during the quarter ended September 30, 2000.
99.1 Press release dated July 6, 2000 to announce the completion of
Mid State Bank's purchase of 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 July 18,
2000.)
99.2 Press release dated September 6, 2000 to announce the
Company's new corporate structure. (Incorporated by reference
to Exhibit 99 of the Company Form 8-K filed with the SEC on
September 19, 2000.)
Items 1, 2, 3, 4, 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: November 9, 2000 By: /s/R. WESLEY BREWER
------------------------------------
R. Wesley Brewer
Chief Financial Officer
21
