Communitycorp 10-Q 2009 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly report under section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2009

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 33-76644

COMMUNITYCORP

(Exact name of registrant as specified in its charter)

South Carolina	57-1019001
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

1100 N. Jefferies Boulevard

Walterboro, SC 29488

(Address of principal executive offices, including zip code)

(843) 549-2265

(Issurer’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 by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  ¨    NO  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

234,368 shares of common stock, $5.00 par value, as of July 31, 2009

COMMUNITYCORP

Index

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets - June 30, 2009 and December 31, 2008 (audited)	3
	Condensed Consolidated Statements of Income - Six months ended June 30, 2009 and 2008 and three months ended June 30, 2009 and 2008	4
	Condensed Consolidated Statements of Shareholders’ Equity and Comprehensive Income (Loss)- Six months ended June 30, 2009 and 2008	5
	Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2009 and 2008	6
	Notes to Condensed Consolidated Financial Statements	7-15
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16-23
Item 3	Quantitative and Qualitative Disclosure About Market Risk	23
Item 4	Controls and Procedures	23
PART II. - OTHER INFORMATION
Item 1	Legal Proceedings	24
Item 1A	Risk Factors	24
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3	Defaults Under Senior Securities	24
Item 4	Submission of Matters to a Vote of Security Holders	24
Item 5	Other Information	24
Item 6	Exhibits	24
Signatures		25

COMMUNITYCORP

PART I. – Financial Information

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

	June 30, 2009			December 31, 2008
	(Unaudited)			(Audited)
Assets:
Cash and cash equivalents:
Cash and due from banks	$	10,886,732		$	3,468,965
Federal funds sold		3,475,000			13,146,000
Total cash and cash equivalents		14,361,732			16,614,965
Time deposits with other banks		1,500,000			1,500,000
Investment securities:
Available-for-sale		27,557,448			27,815,275
Held-to-maturity (estimated market value of $569,092 and $1,335,226 at June 30, 2009 and December 31, 2008, respectively)		564,750			1,319,596
Nonmarketable equity securities		302,300			508,435
Total investment securities		28,424,498			29,643,306
Loans receivable		114,848,357			113,704,520
Less allowance for loan losses		(2,064,138	)		(1,981,637	)
Loans, net		112,784,219			111,722,883
Premises, furniture & equipment, net		2,995,765			3,028,604
Accrued interest receivable		1,176,334			1,125,714
Other real estate owned		75,000			75,000
Other assets		944,500			874,815
Total assets	$	162,262,048		$	164,585,287
Liabilities and Shareholders’ Equity:
Liabilities:
Deposits:
Noninterest-bearing	$	12,677,023		$	15,652,393
Interest-bearing		130,721,384			130,061,592
		143,398,407			145,713,985
Accrued interest payable		971,490			953,278
Other liabilities		316,510			224,606
Total liabilities		144,686,406			146,891,869
Shareholders’ Equity:
Preferred stock, $5 par value, 3,000,000 shares authorized and unissued		—			—
Common stock, $5 par value, 3,000,000 shares authorized, 300,000 shares issued and outstanding		1,500,000			1,500,000
Capital surplus		1,728,487			1,728,328
Accumulated other comprehensive income		127,740			75,701
Retained earnings		18,423,519			18,392,614
Treasury stock (65,632 shares in 2009 and 63,123 shares in 2008)		(4,204,104	)		(4,003,225	)
Total shareholders’ equity		17,575,642			17,693,418
Total liabilities and shareholders’ equity	$	162,262,048		$	164,585,287

See notes to condensed consolidated financial statements

3

COMMUNITYCORP

Condensed Consolidated Statements of Income

(Unaudited)

	Six Months Ended June 30,				Three Months Ended June 30,
	2009		2008		2009		2008
Interest income:
Loans, including fees	$	3,931,837	$	4,186,819	$	1,945,666	$	2,039,699
Securities		526,862		766,209		254,191		365,586
Other interest income		36,829		126,841		20,449		73,217
Total		4,495,528		5,079,869		2,220,306		2,478,502
Interest expense:
Deposit accounts		1,800,483		2,295,690		877,955		1,100,516
Other interest expense		7		4,232				499
Total		1,800,490		2,299,922		877,955		1,101,015
Net interest income		2,695,038		2,779,947		1,342,351		1,377,487
Provision for loan losses		180,000		100,000		90,000		25,000
Net interest income after provision for loan losses		2,515,038		2,679,947		1,252,351		1,352,487
Noninterest income:
Service charges		245,464		274,124		116,461		149,580
Other income		78,856		82,609		35,900		38,237
Total		324,320		356,733		152,361		187,817
Noninterest expenses:
Salaries and benefits		997,725		1,008,809		487,234		512,728
Net occupancy and equipment expense		308,395		286,213		152,061		149,872
Other operating expenses		1,129,005		583,559		403,302		292,035
Total		2,435,125		1,878,581		1,042,598		954,635
Income before taxes		404,233		1,158,099		362,114		585,669
Income tax provision		120,638		359,518		59,638		182,218
Net income	$	283,595	$	798,581	$	302,476	$	403,451
Earnings per share:
Weighted average common shares outstanding		235,326		240,339		234,487		240,224
Net income per common share	$	1.21	$	3.32	$	1.29	$	1.68

See notes to condensed consolidated financial statements

4

COMMUNITYCORP

Condensed Consolidated Statement of Shareholders’ Equity and Comprehensive Income (Loss)

for the six months ended June 30, 2009 and 2008

(Unaudited)

						Accumulated
						Other
	Common stock			Capital		Comprehensive			Retained			Treasury
	Shares	Amount		Surplus		Income (loss)			Earnings			Stock			Total
Balance, December 31, 2007	300,000	$	1,500,000	$	1,723,196	$	70,928		$	17,153,490		$	(3,711,213	)	$	16,736,401
Cash dividends declared ($1.00 per share)										(252,537	)					(252,537	)
Net income for the period										798,581						798,581
Other comprehensive loss, net of tax benefit of $126,175							(245,624	)								(245,642	)
Comprehensive income																552,939
Sale of treasury stock					2,645								9,355			12,000
Purchase of treasury stock													(36,000	)		(36,000	)
Balance, June 30, 2008	300,000	$	1,500,000	$	1,725,841	$	(174,714	)	$	17,699,534		$	(3,737,858	)	$	17,012,803
Balance, December 31, 2008	300,000	$	1,500,000	$	1,728,328	$	75,701		$	18,392,614		$	(4,003,225	)	$	17,693,418
Cash dividends declared ($1.07 per share)										(252,690	)					(252,690	)
Net income for the period										283,595						283,595
Other comprehensive income, net of tax expense of $27,410							52,039									52,039
Comprehensive income																335,634
Sale of treasury stock					159								641			800
Purchase of treasury stock													(201,520	)		(201,520	)
Balance, June 30, 2009	300,000	$	1,500,000	$	1,728,487	$	127,740		$	18,423,519		$	(4,204,104	)	$	17,575,642

See notes to condensed consolidated financial statements

5

COMMUNITYCORP

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
	2009			2008
Cash flows from operating activities:
Net income	$	283,595		$	798,581
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		128.710			109,362
Provision for possible loan losses		180,000			100,000
Net amortization (accretion) on investments		38,329			(2,900	)
Net amortization (accretion) of deferred loan costs and fees		(7,713	)		13,752
Other than temporary impairment of securities available-for-sale		250,000
Other than temporary impairment of nonmarketable equity securities		211,935
(Increase) decrease in interest receivable		(50,620	)		129,577
Increase (decrease) in interest payable		18,212			(560,292	)
Increase in other assets		(69,685	)		(116,991	)
Increase (decrease) in other liabilities		64,494			(1,269	)
Net cash provided by operating activities		1,047,257			469,820
Cash flows from investing activities:
Net (increase) decrease in loans to customers		(1,233,623	)		4,623,444
Purchases of securities available-for-sale		(12,089,361	)		(16,033,605	)
Maturities of securities available-for-sale		12,137,154			15,589,708
Proceeds from maturities of securities held-to-maturity		756,000			500,000
Purchase of time deposits with other banks		—			(200,000	)
Purchase of nonmarketable equity securities		(5,800	)		(161,178	)
Purchases of premises and equipment		(95,871	)		(117,294	)
Net cash provided (used) by investing activities		(531,501	)		4,201,075
Cash flows from financing activities:
Net increase (decrease) in demand deposits, interest-bearing transactions accounts and savings accounts		(1,177,891	)		1,725,237
Net increase (decrease) in time deposits		(1,137,688	)		7,506,992
Decrease in short-term borrowings		—			(2,968,000	)
Dividends paid		(252,690	)		(252,537	)
Sale of treasury stock		800			12,000
Purchase of treasury stock		(201,520	)		(36,000	)
Net cash provided (used) by financing activities		(2,768,989	)		5,987,692
Net increase (decrease) in cash and cash equivalents		(2,253,233	)		10,658,587
Cash and cash equivalents, beginning of period		16,614,965			6,920,768
Cash and cash equivalents, end of period	$	14,361,732		$	17,579,355
Cash paid during the period for:
Income taxes	$	556,700		$	427,000
Interest	$	1,782,278		$	2,860,214
Supplemental noncash activities
Changes in unrealized gains (losses) on securities available-for-sale	$	52,039		$	(245,642	)

See notes to condensed consolidated financial statements

6

COMMUNITYCORP

Notes to Condensed Consolidated Financial statements

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, 2009 and for the interim periods ended June 30, 2009 and 2008 are unaudited and, in our opinion, include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation. The results of operations for the six months ended June 30, 2009 are not necessarily indicative of the results, which may be expected for the entire calendar year. The financial information as of December 31, 2008 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 Communitycorp’s 2008 Annual Report.

NOTE 2 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

The following is a summary of recent authoritative pronouncements:

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 168, “TheFASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162,” (“SFAS 168”). SFAS 168 establishes theFASB Accounting Standards Codification^TM(“Codification”) as the source of authoritative generally accepted accounting principles (“GAAP”) for nongovernmental entities. The Codification does not change GAAP. Instead, it takes the thousands of individual pronouncements that currently comprise GAAP and reorganizes them into approximately 90 accounting Topics, and displays all Topics using a consistent structure. Contents in each Topic are further organized first by Subtopic, then Section and finally Paragraph. The Paragraph level is the only level that contains substantive content. Citing particular content in the Codification involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure. FASB suggests that all citations begin with “FASB ASC,” where ASC stands forAccounting Standards Codification. SFAS 168, (FASB ASC 105-10-05, 10, 15, 65, 70) is effective for interim and annual periods ending after September 15, 2009 and will not have an impact on the Company’s financial position but will change the referencing system for accounting standards. The following pronouncements provide citations to the applicable Codification by Topic, Subtopic and Section in addition to the original standard type and number.

In December 2008 the FASB issued FASB Staff Position (“FSP”) SFAS 132(R)-1 (FASB ASC 715-20-65), “Employers’ Disclosures about Postretirement Benefit Plan Assets,” (“FSP SFAS 132(R)-1”). This FSP provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The objective of the FSP is to provide the users of financial statements with an understanding of: (a) how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies; (b) the major categories of plan assets; (c) the inputs and valuation techniques used to measure the fair value of plan assets; (d) the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period; and (e) significant concentrations of risk within plan assets. The FSP also requires a nonpublic entity, as defined in Statement of Financial Accounting Standard (“SFAS”) 132, to disclose net periodic benefit cost for each period for which a statement of income is presented. FSP SFAS 132(R)-1 is effective for fiscal years ending after December 15, 2009. The Staff Position will require the Company to provide additional disclosures related to its benefit plans.

FSP EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20,” (FASB ASC 325-40-65) (“FSP EITF 99-20-1”) was issued in January 2009. Prior to the FSP, other-than-temporary impairment was determined by using either Emerging Issues Task Force (“EITF”) Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests that Continue to be Held by a Transferor in Securitized Financial Assets,” (“EITF 99-20”) or SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” (“SFAS 115”) depending on the type of security. EITF 99-20 required the use of market participant assumptions regarding future cash flows regarding the probability of collecting all cash flows previously projected. SFAS 115 determined impairment to be other than temporary if it was probable that the holder would be unable to collect all amounts due according to the contractual terms. To achieve a more consistent determination of other-than-temporary impairment, the FSP amends EITF 99-20 to determine any other-than-temporary impairment based on the guidance in SFAS 115, allowing management to use more judgment in determining any other-than-temporary impairment. The FSP was effective for reporting periods ending after December 15, 2008. Management has reviewed the Company’s security portfolio and evaluated the portfolio for any other-than-temporary impairments.

7

COMMUNITYCORP

Notes to Condensed Consolidated Financial statements

NOTE 2 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT –(continued)

On April 9, 2009, the FASB issued three staff positions related to fair value, which are discussed below.

FSP SFAS 115-2 and SFAS 124-2 (FASB ASC 320-10-65), “Recognition and Presentation of Other-Than-Temporary Impairments,” (“FSP SFAS 115-2 and SFAS 124-2”) categorizes losses on debt securities available-for-sale or held-to-maturity determined by management to be other-than-temporarily impaired into losses due to credit issues and losses related to all other factors. Other-than-temporary impairment (OTTI) exists when it is more likely than not that the security will mature or be sold before its amortized cost basis can be recovered. An OTTI related to credit losses should be recognized through earnings. An OTTI related to other factors should be recognized in other comprehensive income. The FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. Annual disclosures required in SFAS 115 and FSP SFAS 115-1 and SFAS 124-1 are also required for interim periods (including the aging of securities with unrealized losses).

FSP SFAS 157-4 (FASB ASC 820-10-65), “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That are Not Orderly” recognizes that quoted prices may not be determinative of fair value when the volume and level of trading activity has significantly decreased. The evaluation of certain factors may necessitate that fair value be determined using a different valuation technique. Fair value should be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction, not a forced liquidation or distressed sale. If a transaction is considered to not be orderly, little, if any, weight should be placed on the transaction price. If there is not sufficient information to conclude as to whether or not the transaction is orderly, the transaction price should be considered when estimating fair value. An entity’s intention to hold an asset or liability is not relevant in determining fair value. Quoted prices provided by pricing services may still be used when estimating fair value in accordance with SFAS 157; however, the entity should evaluate whether the quoted prices are based on current information and orderly transactions. Inputs and valuation techniques are required to be disclosed in addition to any changes in valuation techniques.

FSP SFAS 107-1 and APB 28-1 (FASB ASC 825-10-65), “Interim Disclosures about Fair Value of Financial Instruments” requires disclosures about the fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements and also requires those disclosures in summarized financial information at interim reporting periods A publicly traded company includes any company whose securities trade in a public market on either a stock exchange or in the over-the-counter market, or any company that is a conduit bond obligor. Additionally, when a company makes a filing with a regulatory agency in preparation for sale of its securities in a public market it is considered a publicly traded company for this purpose.

The three staff positions are effective for periods ending after June 15, 2009, with early adoption of all three permitted for periods ending after March 15, 2009. The Company adopted the staff positions for its second quarter 10-Q. The staff positions had no material impact on the financial statements. Additional disclosures have been provided where applicable.

Also on April 1, 2009, the FASB issued FSP SFAS 141(R)-1 (FASB ASC 805-20-25, 30, 35, 50), “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies.” The FSP requires that assets acquired and liabilities assumed in a business combination that arise from a contingency be recognized at fair value. If fair value cannot be determined during the measurement period as determined in SFAS 141 (R), the asset or liability can still be recognized if it can be determined that it is probable that the asset existed or the liability had been incurred as of the measurement date and if the amount of the asset or liability can be reasonably estimated. If it is not determined to be probable that the asset/liability existed/was incurred or no reasonable amount can be determined, no asset or liability is recognized. The entity should determine a rational basis for subsequently measuring the acquired assets and assumed liabilities. Contingent consideration agreements should be recognized initially at fair value and subsequently reevaluated in accordance with guidance found in paragraph 65 of SFAS 141 (R). The FSP is effective for business combinations with an acquisition date on or after the beginning of the Company’s first annual reporting period beginning on or after December 15, 2008. The Company will assess the impact of the FSP if and when a future acquisition occurs.

8

COMMUNITYCORP

Notes to Condensed Consolidated Financial statements

NOTE 2 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT –(continued)

The Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 111 (FASB ASC 320-10-S99-1) on April 9, 2009 to amend Topic 5.M., “Other Than Temporary Impairment of Certain Investments in Debt and Equity Securities” and to supplement FSP SFAS 115-2 and SFAS 124-2. SAB 111 maintains the staff’s previous views related to equity securities; however debt securities are excluded from its scope. The SAB provides that “other-than-temporary” impairment is not necessarily the same as “permanent” impairment and unless evidence exists to support a value equal to or greater than the carrying value of the equity security investment, a write-down to fair value should be recorded and accounted for as a realized loss. The SAB was effective upon issuance and had no impact on the Company’s financial position.

SFAS 165 (FASB ASC 855-10-05, 15, 25, 45, 50, 55), “Subsequent Events,” (“SFAS 165”) was issued in May 2009 and provides guidance on when a subsequent event should be recognized in the financial statements. Subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet should be recognized at the balance sheet date. Subsequent events that provide evidence about conditions that arose after the balance sheet date but before financial statements are issued, or are available to be issued, are not required to be recognized. The date through which subsequent events have been evaluated must be disclosed as well as whether it is the date the financial statements were issued or the date the financial statements were available to be issued. For nonrecognized subsequent events, which should be disclosed to keep the financial statements from being misleading, the nature of the event and an estimate of its financial effect, or a statement that such an estimate cannot be made, should be disclosed. The standard is effective for interim or annual periods ending after June 15, 2009. See Note 7 for Management’s evaluation of subsequent events.

The FASB issued SFAS 166 (not yet reflected in FASB ASC), “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140,” (“SFAS 166”) in June 2009. SFAS 166 limits the circumstances in which a financial asset should be derecognized when the transferor has not transferred the entire financial asset by taking into consideration the transferor’s continuing involvement. The standard requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. The concept of a qualifying special-purpose entity is removed from SFAS 140 along with the exception from applying FIN 46(R). The standard is effective for the first annual reporting period that begins after November 15, 2009, for interim periods within the first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. The Company does not expect the standard to have any impact on the Company’s financial position.

SFAS 167 (not yet reflected in FASB ASC), “Amendments to FASB Interpretation No. 46(R),” (“SFAS 167”) was also issued in June 2009. The standard amends FIN 46(R) to require a company to analyze whether its interest in a variable interest entity (“VIE”) gives it a controlling financial interest. A company must assess whether it has an implicit financial responsibility to ensure that the VIE operates as designed when determining whether it has the power to direct the activities of the VIE that significantly impact its economic performance. Ongoing reassessments of whether a company is the primary beneficiary is also required by the standard. SFAS 167 amends the criteria to qualify as a primary beneficiary as well as how to determine the existence of a VIE. The standard also eliminates certain exceptions that were available under FIN 46(R). SFAS 167 is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. Comparative disclosures will be required for periods after the effective date. The Company does not expect the standard to have any impact on the Company’s financial position.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

9

COMMUNITYCORP

Notes to Condensed Consolidated Financial statements

NOTE 3 – COMPREHENSIVE INCOME

The components of other comprehensive income and related tax effects are as follows:

	Pre-tax Amount			Tax Expense (Benefits)			Net-of-tax Amount
For the Six Months Ended June 30, 2009:
Unrealized gains on securities available-for-sale	$	79,449		$	(27,410	)	$	52,039
Reclassification adjustment for gains (losses) realized in net income		—			—			—
Other comprehensive income (loss)	$	79,449		$	(27,410	)	$	52,039
For the Six Months Ended June 30, 2008:
Unrealized losses on securities available-for-sale	$	(371,817	)	$	126,175		$	(245,642	)
Reclassification adjustment for gains (losses) realized in net income		—			—			—
Other comprehensive income (loss)	$	(371,817	)	$	126,175		$	(245,642	)
For the Three Months Ended June 30, 2009:
Unrealized losses on securities available-for-sale	$	(67,172	)	$	23,174		$	43,998	)
Reclassification adjustment for gains (losses) realized in net income		—			—			—
Other comprehensive income (loss)	$	(67,172	)	$	23,174		$	(43,998	)
For the Three Months Ended June 30, 2008:
Unrealized losses on securities available-for-sale	$	(560,478	)	$	193,399		$	(367,079	)
Reclassification adjustment for gains (losses) realized in net income		—			—			—
Other comprehensive income (loss)	$	(560,478	)	$	193,399		$	(367,079	)

Accumulated other comprehensive income consists solely of net unrealized gains and losses on securities available for sale, net of the deferred tax effects.

10

COMMUNITYCORP

Notes to Condensed Consolidated Financial statements

NOTE 4 – INVESTMENT SECURITIES

Securities Available-for-Sale

The amortized cost and estimated fair values of securities available-for-sale were:

	Amortized		Gross Unrealized
	Cost		Gains		Losses		Fair Value
June 30, 2009
Government-sponsored enterprises	$	14,517,728	$	205,685	$	30,978	$	14,692,435
Obligations of state and local governments		12,644,697		109,277		88,961		12,665,013
Other		200,000		—				200,000
Total	$	27,362,425	$	314,962	$	119,939	$	27,557,448
December 31, 2008
Government-sponsored enterprises	$	18,786,403	$	260,935	$	8,883	$	19,038,455
Obligations of state and local governments		8,463,297		50,340		183,173		8,330,464
Other		450,000		—		3,644		446,356
Total	$	27,699,700	$	311,275	$	195,700	$	27,815,275

The following table shows gross unrealized losses and fair value, aggregated by investment category, and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2009 and December 31, 2008.

	June 30, 2009				December 31, 2008
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Less Than 12 Months
Government-sponsored enterprises	$	3,111,501	$	30,975	$	505,611	$	8,883
Obligations of state and local governments		4,674,540		80,947		3,742,860		148,416
Other		—		—		196,356		3,644
		7,786,041		111,922		4,444,827		160,943
12 Months or More
Government-sponsored enterprises		2,201		3		—		—
Obligations of state and local governments		231,986		8,014		205,243		34,757
Other		—		—		—		—
		234,187		8,017		205,243		34,757
Total	$	8,020,228	$	119,939	$	4,650,070	$	195,700

There were a total twenty-eight available-for-sale securities that were in a loss position at June 30, 2009. Of these securities, two were in a loss position of twelve months or more, which consisted of one obligation of a state and local government, and one mortgage-backed security, which is included in the government-sponsored enterprises. The mortgage-backed security is protected by mortgage insurance as well as the direct credit to the related agencies. The Company believes that the deterioration in value is attributable to changes in market interest rates and not in credit quality and considers these losses to be temporary. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities before recovery of their amortized costs.

11

COMMUNITYCORP

Notes to Condensed Consolidated Financial statements

NOTE 4 – INVESTMENT SECURITIES –(continued)

Securities Held-To-Maturity

The amortized cost and estimated fair values of securities held-to-maturity were:

	Amortized		Gross Unrealized
	Cost		Gains		Losses		Fair Value
June 30, 2009 -
Obligations of state and local governments	$	564,750	$	4,342	$	—	$	569,092
December 31, 2008 -
Obligations of state and local governments	$	1,319,596	$	15,630	$	—	$	1,335,226

NOTE 5 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial instrument is the amount at which the asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. Because no market value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. Certain items are specifically excluded in accordance with SFAS No. 107, including premise and equipment, accrued interest receivable, other assets, accrued interest payable and other liabilities. The following methods and assumptions were used to estimate the fair value of significant financial instruments:

Cash and Due from Banks – The carrying amount is a reasonable estimate of fair value.

Federal Funds Sold – Federal funds sold are typically for a term of one day, and the carrying amount approximates the fair value.

Time Deposits with Other Banks– The carrying value of these instruments is a reasonable estimate of fair value.

Investment Securities – The fair values of marketable securities held-to-maturity are based on quoted market prices or dealer quotes. For securities available-for-sale, fair value equals the carrying amount, which is the quoted market price. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities. The carrying amount of nonmarketable securities is a reasonable estimate of fair value since no ready market exists for these securities.

Loans Receivable – For certain categories of loans receivable, such as variable rate loans which are repriced frequently and have no significant change in credit risk and credit card receivables, fair values are based on the carrying amounts. The fair value of other types of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to the borrowers with similar credit ratings and for the same remaining maturities.

Demand Deposits – The fair value of demand deposits, interest–bearing transaction, savings, and money market accounts is the amount payable on demand at the reporting date. The fair values of time deposits are estimated using a discounted cash flow calculation that applies current interest rates to a schedule of aggregated expected maturities.

Short-term Borrowings – The carrying value of securities sold under agreements to repurchase is a reasonable estimate of fair value because these instruments typically have terms of one to seven days.

Off-Balance-Sheet Financial Instruments – The notional amount represents the amounts of loan commitments and letters of credit, which are off-balance-sheet financial instruments. The fair value of these instruments is not material.

12

COMMUNITYCORP

Notes to Condensed Consolidated Financial statements

NOTE 5 – FAIR VALUE OF FINANCIAL INSTRUMENTS –(continued)

The carrying values and estimated fair values of the Company’s financial instruments were as follows:

	June 30				December 31
	2009				2008
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and due from banks	$	10,886,732	$	10,886,732	$	3,468,965	$	3,468,965
Federal funds sold		3,475,000		3,475,000		13,146,000		13,146,000
Time deposits with other banks		1,500,000		1,500,000		1,500,000		1,500,000
Securities available-for-sale		27,557,448		27,557,448		27,815,275		27,815,275
Securities held-to-maturity		564,750		569,092		1,319,596		1,335,226
Nonmarketable equity securities		302,300		302,300		508,435		508,435
Loans receivable, gross		114,848,357		114,176,879		113,704,520		115,087,126
Financial Liabilities:
Demand deposit, interest-bearing transaction, money market, and savings accounts	$	51,982,381	$	51,982,381		53,160,272	$	53,160,272
Time deposits		91,416,026		92,592,856		92,553,713		93,215,467

NOTE 6 – FAIR VALUE MEASUREMENTS

On January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157,Fair Value Measurements(“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1	Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2	Valuation is based upon quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.
Level 3	Valuation is generated from model-based techniques that use at least one significant assumption based on unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

13

COMMUNITYCORP

Notes to Condensed Consolidated Financial statements

NOTE 6 – ASSETS AND LIABILITIES MEASURED AT FAIR VALUE –(Continued)

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Securities Available-for-Sale – Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Loans – The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with SFAS 114,Accounting by Creditors for Impairment of a Loan, (SFAS 114). The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At June 30, 2009, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. In accordance with SFAS 157, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, The Company records the impaired loan as nonrecurring Level 3.

Other Real Estate Owned –Other real estate owned (“OREO”) is adjusted to fair value upon transfer of the loans to OREO. Subsequently, OREO is carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the OREO as nonrecurring Level 3.

Assets Measured at Fair Value on a Recurring Basis

The table below presents the Company’s assets measured at fair value on a recurring basis as of June 30, 2009, and December 31, 2008, aggregated by the level in the fair value hierarchy within which those measurements fall.

	Total		Level 1		Level 2		Level 3
June 30, 2009
Available for sale securities	$	27,557,448	$	—	$	27,557,448	$	—
December 31, 2008
Available for sale securities	$	27,815,275	$	—	$	27,815,275	$	—

There were no liabilities carried at fair value at June 30, 2009 or December 31, 2008.

14

COMMUNITYCORP

Notes to Condensed Consolidated Financial statements

NOTE 6 – ASSETS AND LIABILITIES MEASURED AT FAIR VALUE –(Continued)

Assets Measured at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. as of June 30, 2009, and December 31, 2008, aggregated by the level in the fair value hierarchy within which those measurements fall.

	Total		Level 1		Level 2		Level 3
June 30, 2009
Loans	$	1,322,150	$	—	$	—	$	1,322,150
Other real estate owned		75,000						75,000
Total assets at fair value	$	1,397,150	$	—	$	—	$	1,397,150
December 31, 2008
Loans	$	696,243	$	—	$	—	$	696,243
Other real estate owned		75,000						75,000
Total assets at fair value	$	771,243	$	—	$	—	$	771,243

There were no liabilities carried at fair value at June 30, 2009 or December 31, 2008.

Note 7 – SUBSEQUENT EVENTS

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Nonrecognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring through August 13, 2009, the date the financial statements were issued and no subsequent events occurred requiring accrual or disclosure.

15

COMMUNITYCORP

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, 2009 compared to December 31, 2008, and the results of operations for the three and six months ended June 30, 2009 compared to the three and six months ended June 30, 2008. These comments should be read in conjunction with the Company’s condensed consolidated financial statements and accompanying footnotes appearing in this report. This report contains “forward-looking statements” relating to, without limitation, future economic performance, plans and objectives of management for future operations, and projections of revenues and other financial items that are based on the beliefs of the Company’s management, as well assumptions made by and information currently available to the Company’s management. The words “expect,” “estimate,” “anticipate” and “believe,” as well as similar expressions, are intended to identify forward-looking statements. The Company’s actual results may differ materially from the results discussed in the forward-looking statements, and the Company’s operating performance each quarter is subject to various risks and uncertainties that are discussed in detail in the Company’s filings with the Securities and Exchange Commission.

Results of Operations

Net Interest Income

The largest component of total income is net interest income, the difference between the income earned on assets and the interest accrued or paid on deposits and borrowings used to support such assets. The volume and mix of assets and liabilities and their sensitivity to interest rate movement determine changes in net interest income. Net interest margin is determined by dividing annualized net interest income by average earning assets. Net interest spread is derived from determining the weighted-average rate of interest paid on deposits and borrowings and subtracting them from the weighted-average yield on earning assets.

Net interest income for the six months ended June 30, 2009, was $2,695,038, compared to $2,779,947 for the same period last year, a decrease of $84,909 or 3.05 %. For the quarter ended June 30, 2009, net interest income was $1,342,351 compared to $1,377,487 for the quarter ended June 30, 2008, a decrease of $35,136 or 2.55%. The decrease in both periods was significantly impacted by the decline of the excess of interest earnings assets over interest bearing liabilities, which was $7,266,750 and $8,516,583 for the six and three months June 30, 2009, respectively. However, this was mitigated by the average volume of approximately 98% of fixed rate loans included in our loan portfolio for all periods presented.

For the six months ended June 30, 2009, average-earning assets totaled $149,987,769 with an annualized average yield of 6.04%, compared to $156,800,587 and 6.50%, respectively, for the same period last year. Average interest-bearing liabilities totaled $130,452,269 with an annualized average cost of 2.78% for the six months ended June 30, 2009, compared to $129,998,337 and 3.55%, respectively, for the same period last year. For the quarter ended June 30, 2009, average-earning assets totaled $151,186,286 with an annualized average yield of 5.89%, compared to $159,555,585 and 6.23%, respectively, for the same period last year. Average interest-bearing liabilities totaled $132,629,235 with an annualized average cost of 2.66% for the three months ended June 30, 2009, compared to $132,482,221 and 3.33%, respectively, for the same period last year.

Our annualized yield on earning assets decreased 46 and 34 basis points during the six months and quarter ended June 30, 2009, respectively, from the annualized yield on earnings assets for the same periods last year. Annualized average cost of our interest-bearing liabilities decreased 77 and 67 basis points during the six months and quarter ended June 30, 2009, respectively, from the annualized average cost of our interest-bearing liabilities for the same periods last year.

16

COMMUNITYCORP

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations -(continued)

Net Interest Income –(continued)

Our net interest margin and net interest spread was 3.62% and 3.26%, respectively for the six months ended June 30, 2009, compared to 3.56% and 2.95%, respectively for the six months ended June 30, 2008. For the quarter ended June 30, 2009 our net interest margin and our net interest spread was 3.56% and 3.24%, respectively compared to 3.46% and 2.90%, respectively, for the quarter ended June 30, 2008. The increases in both periods were primarily attributable to the increase in the average volume of our loans, which generally are our highest yielding assets.

Details of the components of earning assets and interest-bearing liabilities are discussed in the following paragraphs.

Because loans often provide a higher yield than other types of earning assets, one of our goals is to maintain our loan portfolio as the largest component of total earning assets. Loans comprised approximately 76.90% and 71.51% of average earning assets for the six months ended June 30, 2009 and 2008, respectively, and 76.44%, and 69.12% for the quarter ended June 30, 2009 and 2008, respectively. Loan interest income for the six months ended June 30, 2009 totaled $3,931,837 compared to $4,186,819 for the same period in 2008. The annualized average yield on loans was 6.87% and 7.49% for the six months ended June 30, 2009 and 2008, respectively. Loan interest income for the quarter ended June 30, 2009 totaled $1,945,666 compared to $2,039,699 for the same period in 2008. For the quarter ended June 30, 2009 and 2008 the annualized average yield on loans was 6.75% and 7.42%, respectively. Average balances of loans increased to $115,338,643 during the six months ended June 30, 2009, an increase of $3,213,206 over the average of $112,125,437 during the comparable period in 2008. For the quarter ended June 30, 2009, the average balances of loans increased by $5,281,915 over the average balances of loans of $110,280,200 for the quarter ended June 30, 2008, to $115,562,115, for the quarter ended June 30, 2009. The decline in the yield on loans for both periods was attributable to the decline in the interest rate market. The effect of the decline in the interest market was minimized by the significant volume of our fixed rate loans included in our loan portfolio. Fixed rate loans averaged approximately 98% of our loan portfolio for all periods presented.

Investment securities averaged $27,455,540, or 18.31% of average earning assets, for the six months ended June 30, 2009, compared to $33,941,342 or 22.79% of average earning assets, for the same period in 2008. For the quarter ended June 30, 2009, investment securities averaged $27,061,512, or 17.90%, of average earning assets compared to $35,074,403, or 21.98%, of average earnings assets, for the same period in 2008. Interest earned on investment securities amounted to $526,862 for the six months ended June 30, 2009, compared to $766,209 for the same period last year. For the quarter ended June 30, 2009, interest earned on investment securities amounted to $254,191 compared to $365,586 for the same period last year. Investment securities yielded 3.87% and 4.53% for the six months ended June 30, 2009 and 2008, respectively. For the quarter ended June 30, 2009 and 2008 the yields on investment securities was 3.77% and 4.18%, respectively.

Total interest expense for the six months ended June 30, 2009 and 2008 was $1,800,490 and $2,299,922, respectively. For the quarter ended June 30, 2009 and 2008, interest expense was $877,955 and $1,101,015, respectively. The largest component of interest expense is interest on deposit accounts. Interest expense for deposit accounts was $1,800,483 and $2,295,690, for the six months ended June 30, 2009 and 2008, respectively. The average balance of interest bearing deposits increased to $130,120,330 during the six months ended June 30, 2009 from $129,673,517 during the same period last year. During the quarter ended June 30, 2009, the average balances of interest bearing deposits increased to $132,629,235 from $132,325,231 for the same period last year. The annualized average cost of deposits was 2.78% for the six months ended June 30, 2009, compared to 3.55% for the same period in 2008. For the quarter ended June 30, 2009 and 2008, the annualized average cost of deposits was 2.66% and 3.34%, respectively.

For the six months ended June 30, 2009 and 2008, the total annualized average cost of funds was 2.78% and 3.55%, respectively. The overall cost of funds was 2.66% and 3.33% for the quarter ended June 30, 2009, and 2008, respectively.

Provision and Allowance for Loan Losses

We provide for loan losses using the allowance method. Increases to the allowance result from recording a provision for loan losses. Loan losses and recoveries are charged to the allowance. Charge-offs to the allowance are made when all or a portion of the loan is confirmed as a loss based on our review of the loan, through possession of the underlying security, or through a troubled debt restructuring transaction. Likewise, recoveries offset these increases through credits to the allowance.

17

COMMUNITYCORP

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations -(continued)

Provision and Allowance for Loan Losses – (continued)

The allowance is maintained at a level that we believe is sufficient to cover losses in the loan portfolio at a specific point in time. Assessing the adequacy of the allowance requires considerable judgment. The adequacy of the allowance is analyzed on a monthly basis using an internal analysis model. For purposes of this analysis, adequacy is defined as a level sufficient to absorb probable losses in the portfolio. This methodology relies upon our judgment. Our judgments are based on our assessment of various issues, including, but not limited to, the pace of loan growth, emerging portfolio concentrations, the risk management system relating to lending activities, entry into new markets, new product offerings, loan portfolio quality trends, and uncertainty in current economic and business conditions. An allowance model is used that takes into account factors including the composition of the loan portfolio such as risk grade classifications, historical asset quality trends including, but not limited to, previous loss experience ratios, our assessment of current economic conditions, and reviews of specific high risk sectors of the portfolio. Loans are graded at inception and are reviewed on a periodic basis to ensure that assigned risk grades are proper based on the definition of such classification. The value of underlying collateral is also considered during such analysis. The resulting monthly model and the related conclusions are reviewed and approved by Senior Management. Our analysis of allowance adequacy includes consideration for loan impairment. While we use the best information available to make evaluations, future adjustments to the allowance may be necessary if results differ substantially from the assumptions used in making the evaluations.

The methodology for assessing the adequacy of the allowance establishes both an allocated and unallocated component of the allowance. The allocated component is based principally on current loan grades and historical loss rates. The unallocated component is the result of the portion of the assessment that estimates probable losses in the portfolio that are not fully captured in the allocated allowance. This analysis includes, but is not necessarily limited to, industry concentrations, model imprecision, and the estimated impact of current economic conditions on historical loss rates. On a continual basis, we monitor trends within the portfolio, both quantitative and qualitative, and assess the reasonableness of the unallocated component.

The allowance is subject to examination and adequacy testing by regulatory agencies. In addition, such regulatory agencies could require allowance adjustments based on information available to them at the time of their examination.

The allowance for loan losses was 1.80% and 1.78% of total loans at June 30, 2009 and 2008 respectively. The allowance for loan losses at June 30, 2009 is reflective of the results of our allowance model methodology. We monitor and evaluate the adequacy of the allowance and loss exposure in the loan portfolio by considering the borrowers’ financial conditions and other factors in the unallocated component of the allowance. Accordingly, we believe the allowance as of June 30, 2009 is adequate, based on our assessment of probable losses, and available facts and circumstances then prevailing.

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, 2009, the provision charged to expense was $180,000 as compared to $100,000 for the same period in 2008. For the three months ended June 30, 2009 and 2008, the provision charged to expense was $90,000 and $25,000 respectively.

Noninterest Income

Noninterest income for the six months ended June 30, 2009 was $324,320, a decrease of $32,413, or 9.09% from the comparable period in 2008. This decline is primarily attributable to the decrease of $28,661 in service charges earned on deposit accounts during six months ended June 3, 2009. For the quarter ended June 30, 2009, noninterest income decreased $35,456 or 18.88% over the same period in 2008. Compared to the three months ended June 30, 2008, service charges on deposit accounts decreased $33,119 during the comparable period of 2009. The decrease in service charges for both periods is attributable to the closing of problematic deposit accounts.

18

COMMUNITYCORP

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations -(continued)

Noninterest Expense

Total noninterest expense for the six months ended June 30, 2009 and 2008 was $2,435,125 and $1,878,581, respectively. This represented an increase in noninterest expense of $556,544, or 29.63%. This increase is mainly attributable to the write down of investments totaling $461,935 that we had in a financial institution that was seized by the Federal Deposit Insurance Corporation (FDIC). Salaries and employee benefits decreased $11,084, or 1.10%, from $1,008,809 for the six months ended June 30, 2008 to $997,725 for the comparable period in 2009. For the six months ended June 30, 2009, other operating expense was $1,129,004 or 545,445, higher than the six months ended June 30, 2008. This increase includes the write down of the investments mentioned above plus an $80,000 special FDIC assessment for deposit insurance. Net occupancy and equipment expense decreased from $286,213 for the six ended June 30, 2008 to $308,395 for the comparable period in 2009.

For the quarter ended June 30, 2009, noninterest expense increased $87,963 or 9.21% over the same period in 2008. Noninterest expense was $1,042,598 and $954,635 for the quarter ended June 30, 2009 and 2008, respectively. The increase is mainly due to the $80,000 special FDIC assessment for deposit insurance. Compared to the quarter ended June 30, 2008, salaries and benefits decreased $25,494 or 4.97% to $487,234, net occupancy and equipment expense increased $2,189 or 1.46% to $152,061 and other operating expenses increased $111,267, or 38.10% to $403,302. The $111,267 increase in other operating expenses includes the $80,000 special FDIC assessment.

Income Taxes

The income tax provision for the six months ended June 30, 2009 and 2008 was $120,638 and $359,518, respectively. For the quarter ended June 30, 2009 and 2008, the income tax provision was $59,638 and $182,218, respectively. The decrease in both periods in the provision resulted primarily from the decrease in net income before taxes. The tax provision was also impacted by the relationship of the amount of non deductible items for income tax purposes that were included in net income before taxes.

Net Income

The combination of the above factors resulted in net income for the six months ended June 30, 2009 of $283,395 as compared to $798,581 for the same period in 2008. This represents a decrease of $514,986 or 64.49% from the same period in 2008. Net income for the quarter ended June 30, 2009 decreased $100,975 or 25.03% from the same period in 2008.

Assets and Liabilities

During the first six months of 2009, total assets decreased $2,253,233, or 1.41%, when compared to December 31, 2008. The decrease in total assets was mainly attributable to total cash and cash equivalents and investments and investment securities, which decreased $2,253,233 and $1,218,808, respectively. These decreases were reduced by the $1,143,837 increase in loans.

For the six months ended June 30, 2009 total liabilities decreased $2,205,462 or 1.50% from December 31, 2008 and deposits decreased $2,315,578, or 1.59%.

For more analysis of the components of the changes in asset and liabilities, see the following discussion of major balance sheet categories and the Consolidated Statements of Cash Flows included in “Item 1. Financial Statements.”

We closely monitor and seek to maintain appropriate levels of interest earning-assets and interest-bearing liabilities so that maturities of assets are such that adequate funds are provided to meet customer withdrawals and loan demands.

19

COMMUNITYCORP

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations -(continued)

Loans

At June 30, 2009, our total loans were $114,848,357 compared to $113,704,520 at December 31, 2008, an increase of $1,143,837 or 1.01%. At June 30, 2009 and 2008, approximately 98% of our loan portfolio consisted of fixed rate loans. Balances within the major loans receivable categories as of June 30, 2009 and December 31, 2008 are as follows

	June 30, 2009		December 31, 2008
Real estate – construction	$	4,033,352	$	4,564,879
Real estate – mortgage		34,808,497		31,204,675
Commercial and industrial		67,579,866		68,540,891
Consumer and other		8,426,642		9,394,075
	$	114,848,357	$	113,704,520

Risk Elements in the Loan Portfolio

The following table sets forth the Company’s nonperforming assets at the dates indicated:

	June 30,
	2009			2008
Nonaccrual loans	$	2,488,307		$	1,042,854
Total loans impaired not in nonaccrual		3,261,070			—
Loans 90 days or more past due and still accruing interest		3,072			2,026
Total impaired and nonperforming loans		5,752,449			1,044,880
Other real estate owned		75,000			—
Total impaired and nonperforming assets	$	5,827,449		$	1,044,880
Nonperforming assets to period end loans		5.07	%		0.95	%

At June 30, 2009 and 2008, total impaired and nonperforming assets totaled $5,827,449 and $1,044,880, respectively. Nonaccrual loans of $2,488,307 and $1,042,854 were included in impaired loans at June 30, 2009 and 2008, respectively. The impaired loans had specific valuation allowances of $437,834 and $156,428 at June 30, 2009 and 2008, respectively. The average balances of impaired loans during the six months ended June 30, 2009 and 2008 were $5,192,950 and $993,657, respectively.

During the fourth quarter 2008, we employed a more robust process for reviewing and categorizing loans, which caused part of the increase in the levels of impaired loans.

At June 30, 2009 real estate or other collateral secured practically all of the loans that were considered impaired. In the event of foreclosure on these loans, there can be no assurance that in liquidation, the collateral can be sold for its estimated fair market value or even for an amount at least equal to or greater than the loan amount.

The results our internal review process and applying the allowance model methodology are the primary determining factors in management’s assessment of the adequacy of the allowance for loan losses.

20

COMMUNITYCORP

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations -(continued)

Activity in the Allowance for Loan Losses is as follows:

	June 30,
	2009			2008
Balance, January 1,	$	1,981,637		$	1,929,319
Provision for loan losses for the period		180,000			100,000
Net loans (charged-off) recovered for the period		(97,499	)		(70,856	)
Balance, end of period	$	2,064,138		$	1,958,463
Gross loans outstanding, end of period	$	114,848,357		$	109,889,326
Allowance for loan losses to loans outstanding		1.80	%		1.78	%

Deposits

Total deposits decreased $2,315,578 or 1.59% from December 31, 2008. Interest-bearing deposits increased $659,792 to $130,721,384 at June 30, 2009. Noninterest-bearing deposits decreased $2,975,370 to $12,677,023 at June 30, 2009. Expressed in percentages, interest-bearing deposits increased 0.51% and noninterest-bearing deposits decreased 19.01%.

Balances within the major deposit categories are as follows:

	June 30, 2009		December 31, 2008
Noninterest-bearing demand deposits	$	12,677,023	$	15,652,393
Interest-bearing demand deposits		22,165,405		21,065,476
Savings deposits		17,139,953		16,442,403
Certificates of deposits		91,416,026		92,553,713
	$	143,398,407	$	145,713,985

Liquidity

Liquidity needs are met by us through scheduled maturities of loans and investments on the asset side and through pricing policies on the liability side for demand deposit accounts and short-term borrowings. The level of liquidity is measured by the loan-to-total funds ratio (total deposits plus short-term borrowings), which was 80.09% at June 30, 2009 and 78.03% at December 31, 2008.

Asset liquidity is provided from several sources, including amounts due from banks and federal funds sold. Available-for-sale securities, particularly those maturing within one year, provide a secondary source of liquidity. In addition, funds from maturing loans are a source of liquidity.

At June 30, 2009 the Bank had available an unused short-term line of credit to purchase up to $7,000,000 of federal funds from unrelated correspondent institutions. The Bank also has a credit availability agreement with the Federal Home Loan Bank totaling 15 percent of the Bank’s assets as of any quarter end. As of June 30, 2009, the available credit totaled approximately $24,338,000 and there were no borrowings outstanding. Any borrowings from the Federal Home Loan Bank will be secured by a blanket lien on all of the Bank’s 1-4 family residential first lien mortgage loans and or investment securities.

Interest Rate Sensitivity

Interest rate sensitivity is defined as the exposure to variability in net interest income resulting from changes in market-based interest rates. Asset/liability management is the process by which we monitor and control the mix, maturities, and interest sensitivity of our assets and liabilities. Asset/liability management seeks to ensure adequate liquidity and to maintain an appropriate balance between interest-sensitive assets and liabilities to minimize potentially adverse impacts on earnings from changes in market interest rates. Interest rate sensitivity can be managed by repricing assets or liabilities, selling securities available-for-sale, replacing an asset or

21

COMMUNITYCORP

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations -(continued)

liability at maturity, or adjusting the interest rate during the life of an asset or liability. We believe that interest rate risk management becomes increasingly important in an interest rate environment and economy such as the one that we are currently experiencing.

We monitor interest rate sensitivity by measuring our interest sensitivity through a “gap” analysis, which is the positive or negative dollar difference between assets and liabilities that are subject to interest rate repricing within a given time period. Currently we are liability-sensitive over periods with maturity dates of less than twelve months. However, since interest rates and yields on various interest sensitive assets and liabilities do not all adjust in the same degree when there is a change in prevailing interest rates (such as prime rate), the traditional gap analysis is only a general indicator of rate sensitivity and net interest income volatility. As stated in “Results of Operations for the Six Months and Three Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008 – Net Interest Income,” our net interest margin and net interest spread increased during both periods. If net interest margin were to decline, net income will likely decline.

Capital Resources

Total shareholders’ equity decreased from $17,693,418 at December 31, 2008 to $17,575,642 at June 30, 2009. The net decrease of $117,776 is attributable to earnings for the period of $283,595 less the payment of a cash dividend of $252,690, the net decrease of $200,879 from the sales and purchases of treasury stock and the net increase of $52,039 in the fair value of securities available-for-sale, net of income taxes.

Bank holding companies, such as ours, and their banking subsidiaries are required by banking regulators to meet certain minimum levels of capital adequacy, which are expressed in the form of certain ratios. Capital is separated into Tier 1 capital (essentially common shareholders’ equity less intangible assets) and Tier 2 capital (essentially the allowance for loan losses limited to 1.25% of risk-weighted assets). The first two ratios, which are based on the degree of credit risk in our assets, provide the weighting of assets based on assigned risk factors and include off-balance sheet items such as loan commitments and stand-by letters of credit. The ratio of Tier 1 capital to risk-weighted assets must be at least 4.0% and the ratio of total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets must be at least 8.0%. The capital leverage ratio supplements the risk-based capital guidelines. Banks and bank holding companies are required to maintain a minimum ratio of Tier 1 capital to adjusted quarterly average total assets of 3.0%.

The following table summarizes the Bank’s risk-based capital at June 30, 2009:

Shareholders’ equity	$	17,401,547
Less: intangibles		—
Tier 1 capital		17,401,547
Plus: allowance for loan losses (1)		1,555,963
96 Total capital	$	18,957,510
Net risk-weighted assets	$	124,477,000
Risk-based capital ratios
Tier 1 capital (to risk-weighted assets)		13.98	%
Total capital (to risk-weighted assets)		15.23	%
Tier 1 capital (to quarterly average assets)		10.53	%

(1) limited to 1.25% of gross risk-weighted assets

The Federal Reserve Board has similar requirements for bank holding companies. The Company is currently not subject to these requirements because the Federal Reserve guidelines contain an exemption for bank holding companies of less than $500,000,000 in consolidated assets.

Regulatory Matters

We are 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.

22

COMMUNITYCORP

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations -(continued)

Off-Balance Sheet Risk

Through the operations of our Bank, we have made contractual commitments to extend credit in the ordinary course of our business activities. These commitments are legally binding agreements to lend money to our customers at predetermined interest rates for a specified period of time. At June 30, 2009, we had issued commitments to extend credit of approximately $9,289,000 and standby letters of credit of approximately $1,178,000 through various types of commercial lending arrangements. We evaluate each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by us upon extension of credit, is based on our credit evaluation of the borrower. Collateral varies but may include accounts receivable, inventory, property, plant and equipment, commercial and residential real estate.

Critical Accounting Policies

We have adopted various accounting policies, which govern the application of accounting principles generally accepted in the United States in the preparation of our financial statements. Our significant accounting policies are described in the notes to the consolidated financial statements at December 31, 2008 as filed in our annual report on Form 10-K. Certain accounting policies involve significant judgments and assumptions by us, which have a material impact on the carrying value of certain assets and liabilities. We consider these accounting policies to be critical accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Because of the nature of the judgments and assumptions we make, actual results could differ from these judgments and estimates which could have a material impact on our carrying values of assets and liabilities and our results of operations.

We believe the allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation of our consolidated financial statements. Refer to the portion of this discussion that addresses our allowance for loan losses for a description of our processes and methodology for determining our allowance for loan losses.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Not applicable since we are a smaller reporting company.

Item 4. Controls and Procedures

Within 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC reports. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

In addition, we reviewed our internal controls, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.

23

COMMUNITYCORP

Part II – Other Information

Item 1 Legal Proceedings

There are no material pending legal proceedings to which we are a party or of which any of our properties are the subject.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable

Item 1A Risk Factors

There has been no change in the risk factors, which were reported on Form 10-K for the year ended December 31, 2008.

Item 3 Default Upon Senior Securities

Not applicable

Item 4 Submission of Matters to a Vote of Security Holders

On April 29, 2009, the Company held its Annual Meeting of Shareholders for the purpose of electing three directors for three-year terms.

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 with approximately 161,000 shareholders voting for the nominees out of an approximately 236,000 outstanding shareholders. During the election, there were no abstention votes, no votes against any of the nominees; however, there were 5,200 votes withheld for one of the nominees.

Item 5 Other Information

Not applicable

Item 6. Exhibits

(a) Exhibits – The following exhibits are filed with this report.

31.1	Rule 15d-14(a) Certifications
31.2	Rule 15d-14(a) Certifications
32	Section 1350 Certifications

24

SIGNATURES

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.

COMMUNITYCORP

Date: August 13, 2009	By:	/s/ W. ROGER CROOK
		W. Roger Crook
		President & Chief Executive Officer
Date: August 13, 2009	By:	/s/ GWEN P. BUNTON
		Gwen P. Bunton
		Chief Financial Officer

25