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, 1997
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 33-76644
COMMUNITYCORP
(Exact name of registrant as specified in its charter)
South Carolina 57-1019001
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1100 N. JEFFERIES BOULEVARD
WALTERBORO, SC 29488
(Address of principal executive
offices, including zip code)
(803) 549-2265
(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.
300,000 SHARES OF COMMON STOCK, $5.00 PAR VALUE
PAGE 1 OF 14
EXHIBIT INDEX ON PAGE 2
COMMUNITYCORP
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - September 30, 1997 and
December 31, 1996............................................ 3
Condensed Consolidated Statements of Income - Nine months ended
September 30, 1997 and 1996 and Three months ended September
30, 1997 and 1996............................................ 4
Condensed Consolidated Statement of Shareholders' Equity - Nine
months ended September 30, 1997.............................. 5
Condensed Consolidated Statements of Cash Flows - Nine months
ended September 30, 1997 and 1996............................ 6
Notes to Condensed Consolidated Financial Statements......... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. ............................... 8-14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................... 14
(a) Exhibits. ........................................... 14
(b) Reports on Form 8-K. ................................ 14
COMMUNITYCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPT. 30, DEC. 31,
1997 1996
------------------- -------------------
ASSETS:
Cash and cash equivalents:
Cash and due from banks $ 2,607,117 $ 2,382,087
Federal funds sold and repurchase agreements 2,920,000 640,000
------------------- -------------------
5,527,117 3,022,087
Time deposits with other banks 10,000 10,000
Securities available-for-sale 9,590,285 10,187,941
Securities held-to-maturity (estimated market value
of $6,372,248 and $6,821,855 at September 30, 1997
and December 31, 1996, respectively) 6,353,160 6,810,399
Loans receivable 38,233,197 35,153,845
Less allowance for loan losses (731,897) (638,688)
------------------- -------------------
Loans, net 37,501,300 34,515,157
Accrued interest receivable 658,847 690,700
Premises, furniture & equipment, net 1,859,354 1,262,024
Other assets 268,262 280,190
------------------- -------------------
Total assets $ 61,768,325 $ 56,778,498
=================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits:
Non-interest bearing $ 6,690,163 $ 5,673,918
Interest bearing 47,064,520 44,391,280
------------------- -------------------
53,754,683 50,065,198
Short-term borrowings 610,000
Accrued interest and other liabilities 405,755 330,048
------------------- -------------------
Total liabilities 54,770,438 50,395,246
------------------- -------------------
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 1,731,708 1,731,708
Unrealized gain (loss) on securities
available-for-sale, net of deferred taxes 21,775 38,800
Retained earnings 3,772,815 3,131,155
Treasury stock (28,411) (18,411)
------------------- -------------------
Total shareholders' equity 6,997,887 6,383,252
------------------- -------------------
Total liabilities and shareholders' equity $ 61,768,325 $ 56,778,498
=================== ===================
See notes to condensed consolidated financial statements
3
COMMUNITYCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------------------------- ----------------------------------------
1997 1996 1997 1996
------------------ ------------------ ------------------ ------------------
Interest income:
Loans, including fees $ 2,597,864 $ 2,237,317 $ 909,748 $ 758,024
Securities 754,508 614,488 245,122 252,567
Other interest income 165,710 188,231 76,715 60,151
------------------ ------------------ ------------------ ------------------
Total 3,518,082 3,040,036 1,231,585 1,070,742
------------------ ------------------ ------------------ ------------------
Interest expense:
Deposit accounts 1,572,524 1,415,576 537,069 505,335
Other interest
expense 12,415 12,641 9,363 40
------------------ ------------------ ------------------ ------------------
1,584,939 1,428,217 546,432 505,375
------------------ ------------------ ------------------ ------------------
Net interest income 1,933,143 1,611,819 685,153 565,367
Provision for loan
losses 105,000 90,000 40,000 30,000
------------------ ------------------ ------------------ ------------------
Net interest income
after provision for
loan losses 1,828,143 1,521,819 645,153 535,367
------------------ ------------------ ------------------ ------------------
Other operating income:
Service charges 174,208 148,194 57,205 49,932
Other income 14,970 15,544 3,193 6,967
------------------ ------------------ ------------------ ------------------
Total 189,178 163,738 60,398 56,899
------------------ ------------------ ------------------ ------------------
Other operating expenses:
Salaries and benefits 414,944 365,875 145,931 127,063
Net occupancy expense 60,002 52,907 22,464 18,520
Equipment expense 132,605 88,199 47,758 31,677
Other operating
expenses 319,914 288,279 106,270 102,448
------------------ ------------------ ------------------ ------------------
Total 927,465 795,260 322,423 279,708
------------------ ------------------ ------------------ ------------------
Income before taxes 1,089,856 890,297 383,128 312,558
Income tax provision 364,500 304,700 127,000 100,500
------------------ ------------------ ------------------ ------------------
Net income $ 725,356 $ 585,597 $ 256,128 $ 212,058
================== ================== ================== ==================
Earnings per share:
Weighted average common
shares outstanding 298,723 299,589 298,648 298,917
================== ================== ================== ==================
Net income per common
share $ 2.43 $ 1.95 $ .86 $ .71
================== ================== ================== ==================
See notes to condensed consolidated financial statements
4
COMMUNITYCORP
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
for the nine months ended September 30, 1997
(UNAUDITED)
Unrealized
Gain (Loss) on
Securities Total
Common Stock Capital Available Retained Treasury Shareholders
Shares Amount Surplus for Sale, net Earnings Stock Equity
Balance,
December 31, 1996 300,000 $ 1,500,000 $ 1,731,708 $ 38,800 $ 3,131,155 $ (18,411) $6,383,252
Cash dividends declared
- $.28 per share (83,696) (83,696)
Change in fair value
during for the period (17,025) (17,025)
Purchase of Treasury
Stock (10,000) (10,000)
Net income
for the period 725,356 725,356
------------ ------------ ------------ ------------ ------------- ------------ ------------
Balance,
September 30, 1997 300,000 $ 1,500,000 $ 1,731,708 $ 21,775 $ 3,772,815 $ (28,411) $6,997,887
============ ============ ============ ============ ============= ============ =========
See notes to condensed consolidated financial statements
5
COMMUNITYCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
--------------------------------------
1997 1996
------------------ ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 725,356 $ 585,597
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 124,600 63,550
Provision for possible loan losses 105,000 90,000
Amortization less accretion on investments 19,702 13,135
Amortization of deferred loan costs 28,035 26,330
(Increase) decrease in interest receivable
and other assets 44,222 (161,281)
Increase (decrease) in interest payable
and other liabilities 75,707 (194,325)
------------------ ------------------
Net cash provided by operating
activities 1,122,622 423,006
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans to customers (3,119,178) (1,766,180)
Purchases of securities available-for-sale (2,217,357) (8,379,992)
Maturities of securities available-for-sale 2,790,354 2,068,015
Sales of securities available-for-sale 100,125
Purchases of securities held-to-maturity (99,709) (3,310,939)
Maturities of securities held-to-maturity 535,895 711,119
Purchases of premises and equipment (713,386) (496,063)
------------------ ------------------
Net cash used
by investing activities (2,823,381) (11,073,915)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits accounts 3,689,485 10,054,346
Increase (decrease) in short-term borrowings 610,000 (989,554)
Purchase of treasury stock (10,000) (18,411)
Dividends paid (83,696) (75,000)
------------------ ------------------
Net cash provided by financing activities 4,205,789 8,971,381
------------------ ------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,505,030 (1,679,528)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,022,087 6,628,028
------------------ ------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,527,117 $ 4,948,500
================== ==================
Cash paid during the period for:
Income taxes $ 427,024 $ 475,129
Interest $ 1,529,009 $ 1,413,509
See notes to condensed consolidated financial statements
6
COMMUNITYCORP
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, 1997 and for the interim periods ended
September 30, 1997 and 1996 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,
1996 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 1996 Annual Report.
7
COMMUNITYCORP
Item 2. Management's Discussion and Analysis of Financial Condition
The following is a discussion of the Company's financial condition as of
September 30, 1997 compared to December 31, 1996, and the results of operations
for the three and nine months ended September 30, 1997 compared to the three and
nine months ended September 30, 1996. 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, 1997, net interest income increased
$321,324 or 19.94% over the same period in 1996. The net interest margin
realized on earning assets increased slightly from 4.36% for the nine months
ended September 30, 1996 to 4.55% for the same period in 1997. The interest rate
spread also increased by 22 basis points from 3.58% at September 30, 1996 to
3.80% at September 30, 1997. Yields on earning assets decreased slightly while
an increase in certificates of deposit resulted in higher rates paid on interest
bearing liabilities. The increase in investment securities which tend to have
lower earning yields than loans contributed to the decrease in the interest
margin and interest rate spread.
Net interest income increased from $535,367 for the quarter ending September 30,
1996 to $645,153 for the quarter ending September 30, 1997. This represents an
increase of $119,786 or 21.19%. The net interest margin realized on earning
assets increased from 4.34% for the quarter ended September 30, 1996 to 4.66%
for the quarter ended September 30, 1997. The interest rate spread also
increased by 29 basis points from 3.61% at September 30, 1996 to 3.90% at
September 30, 1997.
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, 1997, the
provision charged to expense was $105,000. This was an increase of $15,000 over
the comparable period in 1996. For the quarter ended September 30, 1997 and
1996, the provision charged to expense was $40,000 and $30,000, respectively.
Based on present information, management believes the allowance for loan losses
is adequate at September 30, 1997 to meet presently known and inherent risks in
the loan portfolio.
8
COMMUNITYCORP
Item 2. Management's Discussion and Analysis -- continued
Non-Interest Income
Non-interest income during the nine months ended September 30, 1997 was
$189,178, an increase of $25,440 or 15.54% from the comparable period in 1996.
The increase is primarily a result of an increase in overdraft and NSF fees from
$100,795 at September 30, 1996 to $121,095 at September 30, 1997. This increase
is the result of continued growth in deposit accounts over the two periods.
Deposits at September 30, 1996 were $50,693,953 compared to $53,754,683 at
September 30, 1997.
For the quarter ended September 30, 1997, non-interest income increased $3,499
or 6.15% over the same period in 1996. This increase is primarily due to service
charges which increased $7,273 or 14.57% to $57,205 for the quarter ended
September 30, 1997. Other income decreased $3,774 for the quarter ended
September 30, 1997 compared to the quarter ended September 30, 1996.
Non-Interest Expense
Total non-interest expense for the nine months ended September 30, 1997 was
$927,465 or 16.62% greater than the nine months ended September 30, 1996.
Salaries and employee benefits increased from $365,875 at September 30, 1996 to
$414,944 for the nine months ended September 30, 1997. This increase is due to
pay raises and additional part-time help to assist in various areas of the
Company.
For the quarter ended September 30, 1997, non-interest expense increased $42,715
or 15.27% over the same period in 1996. The largest increase between the quarter
ended September 30, 1997 and the quarter ended September 30, 1996 was in
equipment expense which increased $16,081 or 50.76%. This increase was primarily
attributable to the depreciation on the new computer system.
Income Taxes
The income tax provision for the nine months ended September 30, 1997 was
$364,500 as compared to $304,700 for the same period in 1996. The effective tax
rates were 33.44% and 34.22% at September 30, 1997 and 1996, respectively. The
effective tax rates were 33.15% and 32.15% for the quarter ended September 30,
1997 and September 30, 1996, respectively.
Net Income
The combination of the above factors resulted in net income for the nine months
ended September 30, 1997 of $725,356 as compared to $585,597 for the same period
in 1996. This represents an increase of $139,759 or 23.87% over the same period
in 1996. For the quarter ended September 30, 1997, net income was $256,128 as
compared to $212,058 for the quarter ended September 30, 1996. This represents
an increase of $44,070 or 20.78% from the quarter ending September 30, 1996.
9
COMMUNITYCORP
Item 2. Management's Discussion and Analysis -- continued
Assets and Liabilities
During the first nine months of 1997, total assets grew $4,989,827 or 8.79% when
compared to December 31, 1996. The primary source of growth in assets was in
loans receivable with an increase of $3,079,352 or 8.76% during the first nine
months of 1997. Total deposits increased $3,689,485 or 7.37% from the December
31, 1996 amount of $50,065,198. Within the deposit area, certificates of deposit
increased $1,352,894 or 6.10% during the first nine months of 1997.
Investment Securities
Investment securities decreased from $16,998,340 at December 31, 1996 to
$15,943,445 at September 30, 1997. Securities available-for-sale decreased
$597,656 or 5.87% from December 31, 1996 to September 30, 1997. Securities held
to maturity decreased $457,239 or 6.71% to a balance of $6,353,160 at September
30, 1997. The decrease in investments is attributable to the need to use funds
for the growth in the loan portfolio.
Loans
The demand for loans increased in the Walterboro marketplace during the first
nine months of 1997. Net loans increased $2,986,143 or 8.65% during the period.
Balances within the major loans receivable categories as of September 30, 1997
and December 31, 1996 are as follows:
September 30, December 31,
1997 1996
-------------------- --------------------
Commercial and industrial $ 26,137,722 $ 24,135,094
Real estate 4,534,780 4,564,843
Consumer 6,660,405 5,791,518
Agricultural 292,259 255,994
Other, net 608,031 406,396
-------------------- --------------------
$ 38,233,197 $ 35,153,845
==================== ====================
10
COMMUNITYCORP
Item 2. Management's Discussion and Analysis -- continued
Risk Elements in the Loan Portfolio
The following is a summary of risk elements in the loan portfolio:
September 30,
---------------------------------------------
1997 1996
-------------------- --------------------
Loans:
Nonaccrual loans $ 518,869 $ 321,428
Accruing loans more than 90
days past due $ 0 $ 0
Loans identified by the internal review mechanism:
Criticized $ 205,712 $ 0
Classified $ 681,791 $ 602,130
Activity in the Allowance for Loan Losses is as follows:
September 30,
---------------------------------------------
1997 1996
-------------------- --------------------
Balance, January 1, $ 638,688 $ 617,457
Provision for loan losses for the period 105,000 90,000
Net loans (charged off) recovered for
the period (11,791) (61,227)
-------------------- --------------------
Balance, end of period $ 731,897 $ 646,230
==================== ====================
Gross loans outstanding, end of period $ 38,233,197 $ 31,893,984
Allowance for Loan Losses to
loans outstanding 1.91% 2.03%
Premises, Furniture & Equipment
Premises, furniture and equipment increased from $1,262,024 at December 31, 1996
to $1,859,354 at September 30, 1997. This increase of $597,330 or 47.33% is
primarily the result of the additional branch built in Ravenel, South Carolina.
Costs associated with this branch were approximately $540,000 through September
30, 1997. The branch opened for business on October 6, 1997.
11
COMMUNITYCORP
Item 2. Management's Discussion and Analysis -- continued
Deposits
At September 30, 1997, total deposits increased by $3,689,485 or 7.37% from
December 31, 1996. Expressed in percentages, non-interest bearing deposits
increased 17.91% and interest bearing deposits increased 6.02%.
Balances within the major deposit categories as of September 30, 1997 and
December 31, 1996 are as follows:
September 30, December 31,
1997 1996
-------------------- --------------------
Non-interest bearing demand deposits $ 6,690,163 $ 5,673,918
Interest bearing demand deposits 7,165,346 6,886,479
Savings deposits 16,355,750 15,314,272
Certificates of deposit 23,543,424 22,190,529
-------------------- --------------------
$ 53,754,683 $ 50,065,198
==================== ====================
Liquidity
Liquidity needs are met by the Company through scheduled maturities of loans and
investments on the asset side and through pricing policies on the liability side
for interest-bearing deposit accounts. The level of liquidity is measured by the
loan-to-total borrowed funds ratio which was at 68.98% at September 30, 1997 and
68.94% at December 31, 1996.
Securities available-for-sale which totaled $9,590,285 at September 30, 1997,
serve as a ready source of liquidity. The Company also has lines of credit
available with correspondent banks to purchase federal funds for periods from
one to seven days. At September 30, 1997, unused lines of credit totaled
$2,500,000.
12
COMMUNITYCORP
Item 2. Management's Discussion and Analysis -- continued
Capital Resources
Total shareholders' equity increased from $6,383,252 at December 31, 1996 to
$6,997,887 at September 30, 1997. The increase of $614,635 is primarily
attributable to earnings for the period of $725,356 with dividends paid of
$83,696. A negative change of $17,025 in the fair value of securities
available-for-sale and the purchase of treasury stock of $10,000 resulted in
decreases to total equity.
Bank holding companies, such as the Company, 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 I capital (essentially common shareholders' equity less intangible
assets) and Tier II 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 the Company's 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 I capital to
risk-weighted assets must be at least 4.0% and the ratio of total capital (Tier
I 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 I
capital to adjusted quarterly average total assets of 3.0%.
The following table summarizes the Company's risk-based capital at September 30,
1997:
Shareholders' equity $ 6,976,112
Less: intangibles (32,890)
--------------------
Tier I capital 6,943,222
Plus: allowance for loan losses (1) 548,387
--------------------
Total capital $ 7,491,609
====================
Risk-weighted assets $ 43,870,926
====================
Risk based capital ratios
Tier I 15.84%
Total capital 17.09%
Leverage ratio 11.24%
(1) limited to 1.25% of risk-weighted assets
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.
13
COMMUNITYCORP
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended September 30, 1997
Items 1, 2, 3, 4 and 5 are not applicable.
14
COMMUNITYCORP
PART II - OTHER INFORMATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITYCORP
By:
--------------------------------------
W. Roger Crook
President & Chief Executive Officer
Date: November 3, 1997 By:
--------------------------------------
Gwen P. Bunton
Chief Financial Officer
15