SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 AND 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2002
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT 1934
For the transition period from _______ to _______
Commission File Number: 000-25345
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COMMUNITY CAPITAL BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-2413468
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(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
P.O. Drawer 71269, Albany, Georgia 31708
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(Address of principal executive offices)
(229) 446-2265
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(Registrant's telephone number, including area code)
Not Applicable
---------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of September 30,2002:
1,430,329 SHARES
Transitional Small Business Disclosure Format (check one):
Yes No X
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PART I - FINANCIAL INFORMATION Page No.
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ITEM 1. Financial Statements
Consolidated balance sheets (unaudited) 3
Consolidated statements of operations (unaudited) 4
Consolidated statements of comprehensive income
(unaudited) 5
Consolidated statements of cash flows (unaudited) 6
Item 2. Management's discussion and analysis of
financial condition and results of operations 8
PART II - OTHER INFORMATION
ITEM 2. Changes in Securities and use of proceeds
ITEM 3. Controls and procedures 11
ITEM 5. Other Matters 11
ITEM 6. Exhibits and reports on Form 8-K: 11
Exhibit 99.1 - President/CEO and CFO Certification 13
COMMUNITY CAPITAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS)
ASSETS September 30, 2002 December 31, 2001
------ -----------------------------------------
Cash and due from banks $ 5,760 $ 4,471
Federal funds sold 3,062 4,483
Securities available for sale 18,685 14,999
Loans 74,644 61,801
Less allowance for loan losses 806 618
-------------------- -------------------
Loans, net 73,838 61,183
Premises and equipment 2,700 2,600
Other assets 1,559 949
-------------------- -------------------
$ 105,604 $ 88,685
==================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Deposits:
Non-interest bearing $ 6,946 $ 6,103
Interest bearing 79,052 63,728
-------------------- -------------------
Total deposits 85,998 69,831
Other borrowings 8,976 9,251
Other liabilities 863 418
-------------------- -------------------
TOTAL LIABILITIES 95,837 79,500
-------------------- -------------------
Shareholders' equity:
Preferred Stock, par value not stated; 2,000,000 shares
authorized; no shares issued $ - - $ - -
Common Stock, $1.00 par value, 10,000,000 shares
authorized; 1,499,560 shares issued 1,500 1,500
Capital surplus 8,085 8,085
Accumulated income (deficit) 268 (213)
Accumulated other comprehensive income 398 180
Less cost of treasury stock, 69,231 shares as of
September 30, 2002 and 52,690 shares as of
December 31, 2001 (484) (357)
-------------------- -------------------
TOTAL SHAREHOLDERS' EQUITY 9,767 9,185
-------------------- -------------------
$ 105,604 $ 88,685
==================== ===================
See Notes to Consolidated Financial Statements
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COMMUNITY CAPITAL BANCSHARES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands except earnings per share)
Three months ended Nine months ended
------------------------------ ------------------------------
September 30, September 30, September 30, September 30,
2001 2001 2002 2001
-------------- -------------- -------------- --------------
INTEREST INCOME
Loans 1,406 1,195 4,025 3,291
Taxable securities 268 236 711 750
Tax exempt securities 10 - - 24 - -
Deposits in banks 8 27 11 63
Federal funds sold 10 13 38 87
-------------- -------------- -------------- --------------
TOTAL INTEREST INCOME 1,702 1,471 4,809 4,191
-------------- -------------- -------------- --------------
INTEREST EXPENSE
Deposits 579 644 1,686 1,940
Other borrowed money 114 74 345 217
-------------- -------------- -------------- --------------
TOTAL INTEREST EXPENSE 693 718 2,031 2,157
-------------- -------------- -------------- --------------
NET INTEREST INCOME 1,009 753 2,778 2,034
Provision for loan losses 34 98 354 271
-------------- -------------- -------------- --------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES 975 655 2,424 1,763
-------------- -------------- -------------- --------------
OTHER INCOME
Service charges on deposit accounts 98 76 269 204
Financial service fees 10 36 60 159
Mortgage origination fees 72 35 164 118
Gain on sale of investment securities 66 - - 109 - -
Other service charges, commissions and fees 15 7 43 28
-------------- -------------- -------------- --------------
TOTAL OTHER INCOME 261 154 645 509
-------------- -------------- -------------- --------------
OTHER EXPENSES
Salaries and employee benefits 404 344 1,109 1,019
Equipment and occupancy expense 109 82 303 251
Marketing expense 40 19 111 73
Data processing expense 65 48 193 120
Administrative expenses 127 93 336 265
Other operating expenses 115 38 282 156
-------------- -------------- -------------- --------------
TOTAL OTHER EXPENSES 860 624 2,334 1,884
-------------- -------------- -------------- --------------
INCOME BEFORE INCOME TAXES 376 185 735 388
Income tax expense 128 - - 254 - -
-------------- -------------- -------------- --------------
NET INCOME $ 248 $ 185 $ 481 $ 388
============== ============== ============== ==============
INCOME PER COMMON SHARE $ 0.17 $ 0.13 $ 0.33 $ 0.27
============== ============== ============== ==============
DILUTED NET INCOME PER
COMMON SHARE 0.17 0.12 0.32 0.26
============== ============== ============== ==============
Weighted average shares
outstanding 1,437,488 1,461,161 1,442,092 1,462,388
============== ============== ============== ==============
See Notes to Consolidated Financial Statements
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COMMUNITY CAPITAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands)
Three months ended Nine months ended
-------------------------------- ----------------------------------
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
--------------- --------------- --------------- -----------------
NET INCOME (LOSS) $ 248 $ 185 $ 481 $ 388
Other Comprehensive Income:
Net unrealized holding gains (losses) 345 221 454 331
Tax effect (117) (82) (154) (111)
Reclassification adjustment for gains
included in net income, net of income
taxes of $27,000 for 3 months ended,
and $41,000 for 9 months ended
September 30, 2002 (54) (82)
=============== =============== =============== =================
COMPREHENSIVE INCOME (LOSS) $ 422 $ 324 $ 699 $ 608
=============== =============== =============== =================
See Notes to Consolidated Financial Statements
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COMMUNITY CAPITAL BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended September 30, 2002 and 2001
(Dollars in thousands)
2002 2001
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 481 $ 388
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 137 119
Provision for loan losses 354 271
Provision for deferred taxes (36) - -
Net (gain) on sale of investments available for
sale (108) - -
Increase in interest receivable (42) (121)
Other operating activities (311) (13)
--------------------
Net cash used in operating activities 559 644
--------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (237) (82)
Net decrease in Federal funds sold 1,421 1,180
Net increase in loans (13,009) (19,229)
Proceeds from maturities of securities available
for sale 10,575 11,685
Proceeds from sale of securities available for
sale 3,331 - -
Purchase of securities available for sale (17,126) (12,528)
--------------------
Net cash used in Investing activities (15,045) (18,974)
--------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 16,168 14,645
Proceeds from FHLB advance - - - -
Increase in Federal funds purchased - - 3,519
Repayment of other borrowings (275) (275)
Purchase of Treasury stock (118) (128)
--------------------
Net cash provided by financing activities 15,775 17,761
--------------------
Net increase (decrease) in cash 1,289 (569)
Cash and due from banks at beginning of period 4,471 3,392
--------------------
Cash and due from banks at end of period $ 5,760 $ 2,283
====================
SUPPLEMENTAL DISCLOSURE
Cash paid for interest $ 1,994 $ 2,140
====================
NON-CASH TRANSACTION
Unrealized gains on securities available for sale $ 221 $ 331
====================
See Notes to Consolidated Financial Statements
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COMMUNITY CAPITAL BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Community Capital Bancshares, Inc. (the "Company") is a bank holding company
whose business is conducted by its wholly-owned subsidiary, Albany Bank & Trust
(the "Bank"). The Bank is a commercial bank located in Albany, Georgia. The
Bank provides a full range of banking services in its primary market area of
Dougherty County and the surrounding counties. The Bank commenced its banking
operations on April 28, 1999.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its subsidiary. Significant intercompany transactions and accounts are
eliminated in consolidation.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of the
balance sheet date and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Material
estimates that are particularly susceptible to significant change in the near
term relate to the determination of the allowance for loan losses, the valuation
of foreclosed real estate and deferred taxes.
The interim financial statements included herein are unaudited but reflect all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the financial position and results of operations for the interim
period presented. All such adjustments are of a normal recurring nature. The
results of operations for the period ended September 30, 2001 are not
necessarily indicative of the results of a full year's operations.
The accounting principles followed by the Company and the methods of applying
these principles conform with accounting principles generally accepted in the
United States of America and with general practices within the banking industry.
INCOME TAXES
Deferred income tax assets and liabilities are determined using the balance
sheet method. Under this method, the net deferred tax asset or liability is
determined based on the tax effects of the temporary differences between the
book and tax basis of the various balance sheet assets and liabilities and gives
current recognition to changes in the tax rates and laws.
The Company and the Bank file a consolidated income tax return. Each entity
provides for income taxes based on its contribution to the income taxes
(benefits) of the consolidated group.
-7-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This discussion is intended to assist in an understanding of the Company's
financial condition and results of operations. This analysis should be read in
conjunction with the financial statements and related notes appearing in Item 1
of the September 30, 2002 Form 10-QSB and Management's Discussion and Analysis
of Financial Condition and Results of Operations appearing in the Company's Form
10-KSB for the year ended December 31, 2001.
FINANCIAL CONDITION
As of September 30, 2002 the Company's total assets were $105,604,000
representing an increase of $16,919,000 or 19.08% from December 31, 2000.
Earning assets consist of Federal funds sold, Investment securities and Loans.
These assets provide the majority of the Company's earnings. The mix of earning
assets is a reflection of management's philosophy regarding earning versus risk.
Federal funds sold represent an overnight investment of funds and can be
converted immediately to cash. At September 30, 2002, Federal funds sold were
3,062,000 as compared to the year-end amount of $4,483,000. This is a decrease
of $1,180,000.
Investment securities consist of U.S. Government, Agency and municipal
securities. These investments are used to provide fixed maturities and as
collateral for advances and large public fund deposits. During the year,
investment securities increased $3,686,000. In the third quarter, the Company
sold approximately $3,300,000 in bonds which it felt would be called. These
sales generated a gain of $66,000. All securities are classified as available
for sale under FASB 115 and are carried at current market values.
The loan portfolio is the largest earning asset and is the primary source of
earnings for the Company. At September 30, 2002 net loans were $73,838,000.
The loan portfolio increased $12,655,000 or 20.68% during the year. At
September 30, 2002, the allowance for loan losses was $806,000 or 1.08% of total
loans. Management believes that this is an adequate but not excessive amount
based upon the composition of the current loan portfolio and current economic
conditions. The relationship of the allowance to total loans will vary over
time based upon Management's evaluation of the loan portfolio. Management
evaluates the adequacy of the allowance on a monthly basis and adjusts it
accordingly by a monthly charge to earnings using the provision for loan losses.
During the year, the provision for potential loan losses was $354,000 as
compared to the 2001 amount of $271,000. This expense increased in the current
year due to loans deemed uncollectible in the first half of the year.
Management does not anticipate any significant loan charge offs during the
remainder of the current year.
Non-earning assets consist of premises and equipment, and other assets.
Premises and equipment increased during the year due to the investment in the
new branch locations opened during the second quarter. Other assets consist
primarily of accrued interest receivable and deferred income taxes. This
category increased $610,000 during the current year.
The Company funds its assets primarily through deposits from customers.
Additionally, it will borrow funds from other sources to provide longer term
fixed rate funding for its assets. The Company must pay interest on the
majority of these funds and attempts to price these funds competitively in the
market place but at a level that it can safely re-invest the funds profitably.
At September 30, 2002, total deposits were $85,998,000 as compared to the
year-end amount of $69,831,000. This is an increase of $16,167,000 or 23.15%.
The Company is beginning to see a slowing of its growth in deposits. This is a
-8-
result of the declining interest rate environment that is causing customers to
seek higher yields in other areas of investments.
Interest bearing deposits are comprised of the following categories:
September 30, 2002 December 31, 2001
------------------- ------------------
Interest bearing demand and savings $ 23,123,000 $ 21,443,000
Certificates of deposit in
denominations of $100,000 or greater 16,138,000 14,787,000
Other Certificates of deposit 39,791,000 27,498,000
------------------- ------------------
Total $ 79,052,000 $ 63,728,000
=================== ==================
Other borrowings consist of Federal Home Loan Bank advances and are secured by
investment securities owned and loans originated by the Bank. No new advances
were obtained during the current year.
CAPITAL ADEQUACY
The following table presents the Company's regulatory capital position as of
September 30, 2002.
Tier 1 Capital Ratio, actual 12.66%
Tier 1 Capital minimum requirement 4.00%
Tier 2 Capital Ratio, actual 13.74%
Tier 2 Capital minimum requirement 8.00%
Leverage Ratio 8.90%
Leverage Ratio minimum requirement 4.00%
The Company's ratios are well above the required regulatory minimums and provide
a sufficient basis to support future growth of the Company.
RESULTS OF OPERATIONS
Net income for the current year is $481,000 as compared to the 2001 amount of
$388,000. The increased net income was a result of an overall increase in the
Company's net interest income and increased non-interest income.
Total interest income increased $618,000 or 14.75% from the previous year. This
was the result of increased interest income on loans, which increased $734,000.
Interest expense for 2002 is $2,031,000. This is the major expense item for the
Company and decreased $126,000 from the previous year. The reason for this
decrease was the dramatic decrease in the overall interest rate environment over
the past twelve months. The lower rate environment is reflected in interest
expense as the interest bearing liabilities reprice.
Net interest income after the provision for loan losses was $2,424,000 in 2002
as compared to the 2001 amount of $1,763,000. This is an increase of $661,000
or 37.49%. Again the improved earnings are the result of a larger volume in all
categories of earning assets and decreased costs on paying liabilities during
2001.
-9-
Other income increased $136,000 to $645,000 in 2002. Service charges on deposit
accounts increased $64,000 or 31.9% due to the larger number of deposit
accounts. The other major area of increase was the gain from the sale of
investment securities during the current year of $109,000.
Non-interest expense increased $450,000 to $2,334,000 in 2002. This is an
increase of 23.9%. The increases in expenses were generally spread in all
categories and are representative of the increased size of the Company.
During the current year, the Company began accruing income tax expense. In the
previous year no income tax expense was accrued due to the reversal of
valuations allowances on deferred tax benefits established in the Company's
start-up years. All valuation allowances were reversed in the previous years.
Income tax expense for the current year is $254,000. Net income before taxes
for the current year is $735,000 as compared to the 2001 amount of $388,000.
This is an increase of $347,000 or 89%. The Company will be subject to income
taxes for the foreseeable future.
Fully diluted net income per share for the current year is $0.32 and increased
$0.06 from the previous year.
FORWARD-LOOKING STATEMENTS
This document contains statements that constitute "forward-looking statements"
within the meaning of Sections 27A of the Securities Act of 1933, as amended,
and Sections 21E of the Securities Exchange Act of 1934, as amended. The words
"believe", "estimate", "expect", "intend", "anticipate" and similar expressions
and variations thereof identify certain of such forward-looking statements,
which speak only as of the dates that they were made. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, or otherwise. Users are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties that the actual results may
differ materially from those indicated in the forward-looking statements as a
result of various factors. Users are therefore cautioned not to place undue
reliance on these forward-looking statements.
-10-
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation
of the Company's disclosure controls and procedures pursuant to Exchange
Act Rule 13a-14. Based upon that evaluation, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective in timely alerting them to material
information relating to the Company (including its consolidated
subsidiaries) that is required to be included in the Company's periodic
filings with the Securities and Exchange Commission. There have been no
significant changes in the Company's internal controls or, to the Company's
knowledge, in other factors that could significantly affect those internal
controls subsequent to the date the Company carried out its evaluation, and
there have been no corrective actions with respect to significant
deficiencies or material weaknesses
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. REPORTS ON FORM 8-K
None
b. OTHER EXHIBITS
Certification by the Chief Executive Officer
and Chief Financial Officer. See page 13.
-11-
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY CAPITAL BANCSHARES, INC.
November 13, 2002 /s/ Robert E. Lee
----------------- ------------------
Date Robert E. Lee,
President
November 13, 2002 /s/ David J. Baranko___
----------------- ---------------------
Date David J. Baranko
Chief Financial Officer
(Duly authorized officer and
principal financial / accounting
officer)
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Certification
I, Charles M. Jones, III, Chief Executive Officer of Community Capital
Bancshares, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Community Capital
Bancshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002
/s/ Charles M. Jones, III
-----------------------------
Charles M. Jones, III
Chief Executive Officer
-13-
Certification
I, David J. Baranko, Chief Financial Officer of Community Capital Bancshares,
Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Community Capital
Bancshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002
/s/ David J. Baranko
-----------------------
David J. Baranko
Chief Financial Officer
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