AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 2004
REGISTRATION NO. _____________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
COMMUNITY CAPITAL BANCSHARES, INC.
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(Name of Small Business Issuer in its charter)
GEORGIA 6021 58-2413468
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(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
2815 MEREDYTH DRIVE
ALBANY, GEORGIA 31707
(229) 446-2265
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(Address and telephone number
of principal executive offices)
ROBERT E. LEE COPIES TO:
PRESIDENT KATHRYN L. KNUDSON, ESQ.
COMMUNITY CAPITAL BANCSHARES, INC. POWELL GOLDSTEIN FRAZER & MURPHY LLP
2815 MEREDYTH DRIVE 191 PEACHTREE STREET, N.E., 16TH FLOOR
ALBANY, GEORGIA 31707 ATLANTA, GEORGIA 30303
(229) 446-2265 (404) 572-6600
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(Name, address, and telephone number of
agent for service)
THOMAS O. POWELL, ESQ.
TROUTMAN SANDERS LLP
600 PEACHTREE STREET, N.E., SUITE 5200
ATLANTA, GEORGIA 30308
(404) 885-3294
Approximate date of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant to rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
If the delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / /
CALCULATION OF REGISTRATION FEE:
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Title of Each Class of Proposed Maximum Proposed Maximum Aggregate Amount of
Securities to be Registered Amount to be Registered Offering Price per Unit (1) Offering Price Registration Fee
----------------------------- ----------------------- ---------------------------- -------------------------- ----------------------
COMMON STOCK, 1,000,000 shares $11.72 $11,720,000 $1,485.00
$1.00 PAR VALUE
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(1) Estimated solely for the purpose of the registration fee pursuant to Rule 457(c) based on the average of the high and low prices
of the common stock as reported by the Nasdaq SmallCap Market for June 1, 2004.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS DATED __________, 2004; SUBJECT TO COMPLETION
1,000,000 SHARES
COMMUNITY CAPITAL BANCSHARES, INC.
COMMON STOCK
This is an offering of up to 1,000,000 shares of Community Capital
Bancshares, Inc. common stock. We have engaged FIG Partners, L.L.C. to act on a
best efforts basis as our selling agent in connection with the offering. As part
of the offering, our selling agent may offer and sell the common stock to our
officers and directors and other persons identified by us. Our common stock is
listed for trading on the Nasdaq SmallCap Market under the symbol "ALBY." On May
28, 2004, the closing price of the common stock was $12.44 per share
Because the offering is being conducted on a best efforts basis, the
selling agent is not required to sell any minimum number or dollar amount of
shares and is not obligated to purchase the shares if they are not sold to the
public. There is no minimum number of shares that must be sold in order to close
the offering.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS, WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
PER SHARE TOTAL
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Public offering price $____ $____
Selling Agent's commissions $____ $____
Proceeds to us, before expenses $____ $____
We will pay our selling agent a sales commission equal to 6.25% of the
offering price of the shares it sells in the offering. No commission, however,
will be paid on shares having an aggregate value up to $2,500,000 which are sold
to our directors and officers and other individuals identified by our directors
and officers to the selling agent. Accordingly, the table above reflects a sales
commission of 6.25% of the aggregate offering price for [__________] shares to
be sold by the selling agent.
THE SHARES OF COMMON STOCK OFFERED ARE NOT DEPOSITS, SAVINGS ACCOUNTS,
OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
We expect to deliver the shares to purchasers on or about ______, 2004,
upon receipt of the purchase price of the shares and subject to customary
closing conditions.
FIG PARTNERS, L.L.C.
The date of this prospectus is _________, 2004.
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SUMMARY
THIS SUMMARY DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD CONSIDER
BEFORE INVESTING IN THE COMMON STOCK. YOU SHOULD READ CAREFULLY THE ENTIRE
PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL REFERENCES TO "WE," "US," AND "OUR"
IN THIS PROSPECTUS REFER TO COMMUNITY CAPITAL BANCSHARES, INC. AND ITS
SUBSIDIARIES, ALBANY BANK & TRUST, N.A.; FIRST BANK OF DOTHAN, INC.; COMMUNITY
CAPITAL STATUTORY TRUST I; AND COMMUNITY CAPITAL TECHNOLOGY SERVICES, INC.
OUR COMPANY
Community Capital Bancshares, Inc.
2815 Meredyth Drive
Albany, Georgia 31707
(229) 446-2265
Community Capital Bancshares, Inc. is a multi-bank holding company
headquartered in Albany, Georgia. We were formed in August 1998 as a Georgia
corporation and currently serve as the holding company and sole shareholder of
Albany Bank & Trust and First Bank of Dothan. Our common stock is listed on the
Nasdaq SmallCap Market under the symbol "ALBY."
Albany Bank & Trust is a national bank that began its banking operations
on April 28, 1999. Since its opening, Albany Bank & Trust has grown to
approximately $142,052,000 in total assets as of March 31, 2004. During this
time Albany Bank & Trust has expanded its locations by adding branch offices in
Lee County, Georgia, east Albany and downtown Albany. In November 2003, we
expanded our market presence to Dothan, Alabama with our acquisition of First
Bank of Dothan, an Alabama state bank with total assets of approximately
$29,202,000 as of March 31, 2004. We believe that the Dothan market presents
opportunities similar to the Albany market and a potential for future growth.
We strive to provide superior customer service and maintain a friendly
"hometown" atmosphere for our customers. We believe that these features are our
competitive advantage in our local markets and have contributed to our growth
over the past five years. We provide a broad array of banking products through
our five branch locations, eight ATMs, Internet-based banking and telephone
banking. At March 31, 2004 we had total assets of $171,664,000, total deposits
of $135,541,000 and total shareholders' equity of $13,962,000. Future growth for
our company will be dependent upon a combination of internal growth within our
banks and external growth through new branch expansions to new markets or
acquisitions of existing banks in new markets.
For the first quarter of 2004, we had net income of $222,000 or $0.13
per share. This compares to the 2003 amount for the same period of $70,000 or
$0.05 per share.
MARKET OPPORTUNITY
The primary service areas for Community Capital are Dougherty and Lee
counties in southwest Georgia and Houston County in southeast Alabama.
Historically, Community Capital has primarily focused on the Albany Metropolitan
Statistical Area (MSA), which includes both Dougherty and Lee counties. With the
acquisition of First Bank of Dothan, we have expanded westward into southeastern
Alabama, primarily to the communities located in or near Dothan. Additionally,
in February, 2004, Albany Bank & Trust opened a loan production office in
Auburn, Alabama, which is located between Columbus, Georgia and Montgomery,
Alabama on Interstate 85. Upon completion of the offering, First Bank of Dothan
plans, subject to regulatory approval, to construct a branch office in Auburn,
Alabama and further strengthen its presence in southeastern Alabama. Management
believes its expansion into
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southeastern Alabama will increase Community Capital's prospects for future
growth and diversify its business, making it is less dependent on one economic
area.
OUR STRATEGY
Ultimately, our success depends on our ability to excel as bankers in
our market areas. As a smaller community banking organization, our banks are
unable to compete with larger banks purely on a pricing basis. We must
differentiate ourselves from them by providing superior customer service. This
is accomplished by providing a warm, friendly atmosphere for customers entering
our banks; prompt service to our customers by our knowledgeable bank staff; and
prompt resolution of customer problems. By gaining our customers' acceptance and
developing our reputation as a hometown bank, we hope to gain repeat business as
well as referrals from existing customers. Prompt, friendly service has been a
way of life at Albany Bank & Trust since it opened and will be transferred to
the staff at First Bank of Dothan as they are integrated into Community Capital.
THE OFFERING
Shares of common stock offered by
this prospectus..........................................1,000,000 shares. The selling agent will
use its best efforts to sell the shares of
common stock we are offering, but the
selling agent is not required to sell any
minimum number or dollar amount of shares.
Shares of common stock to be outstanding after the
offering, assuming all of the offered shares are sold....2,701,115 shares
Net proceeds.............................................The net proceeds from this offering will
be approximately $11,665,750 million, after
deducting offering expenses and selling
agent commissions and assuming an
offering price of $12.44 and all of the
shares offered are sold.
Use of proceeds..........................................We plan to use the net proceeds from
the offering to pay off $1.75 million in
existing debt, to provide additional
capital to our subsidiary banks to
support asset growth, to fund future
bank or branch acquisitions, and for
other general corporate purposes.
Risk factors.............................................See "Risk Factors" on page 6 for a
discussion of factors you should
carefully consider before deciding to
invest in shares of our common stock.
The number of shares of common stock to be outstanding after the
offering is based upon the number of shares outstanding as of April 30, 2004 and
excludes:
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o 64,149 shares of treasury stock;
o 242,935 shares issuable upon exercise of outstanding stock
options as of April 30, 2004 at a weighted average exercise
price of $8.94 per share;
o 266,135 shares issuable upon exercise of outstanding warrants as
of April 30, 2004 at a weighted average exercise price of $7.00
per share;
o 148,315 additional shares reserved for issuance pursuant to
future grants and awards under our stock incentive plans as of
April 30, 2004; and
o a number of shares equal to 5% of the number of shares sold in
this offering, which will be subject to an option that we intend
to grant to our president, Robert E. Lee, upon completion of
this offering. This option will be granted under our 1998 Stock
Incentive Plan. See "Management--Option Grant Upon Completion of
Offering" on page 41.
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SUMMARY CONSOLIDATED FINANCIAL DATA
Our summary consolidated financial information presented below as of and
for the years ended December 31, 2001 through December 31, 2003 is derived from
our audited consolidated financial statements. You should read it together with
our consolidated financial statements and the notes thereto included in our 2003
Annual Report to Shareholders, which is incorporated by reference into this
prospectus as part of our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2003, and our report on Form 10-QSB for the quarter ended March 31,
2004, which is also incorporated by reference into this prospectus. See
"Documents Incorporated by Reference" on page 63. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) that are
necessary for a fair presentation for such periods or dates have been made.
AT OR FOR QUARTER ENDED MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------- -------------------------------------
2004 2003 2003 2002 2001
---- ---- ---- ---- ----
(unaudited) (audited)
(Dollars in thousands, except per share amounts)
SELECTED BALANCE SHEET DATA:
Assets........................................ $ 171,664 $ 120,130 $ 158,729 $ 109,186 $ 88,685
Investment securities......................... 28,986 17,019 31,792 16,199 14,999
Loans receivable (net)........................ 108,991 89,142 107,471 80,891 61,183
Allowance for loan losses..................... 1,957 952 2,118 821 618
Goodwill and other intangible assets, net..... 2,560 - 2,590 - -
Deposits...................................... 135,541 94,916 123,222 86,004 69,831
Borrowings and securities sold under
agreements to repurchase.................... 17,177 10,823 16,019 10,885 9,251
Subordinated debt............................. 4,124 - 4,000 - -
Shareholders' equity.......................... 13,962 9,803 13,298 9,743 9,185
SELECTED RESULTS OF OPERATIONS DATA:
Interest income............................... $ 2,348 $ 1,658 $ 7,268 $ 6,316 $ 5,704
Interest expense.............................. 687 635 2,634 2,703 2,872
Net interest income........................... 1,661 1,023 4,634 3,613 2,832
Provision for loan losses..................... 15 130 409 442 393
Net interest income after provision
for loan losses............................. 1,646 893 4,225 3,171 2,439
Other income.................................. 225 250 1,065 899 688
Other expenses................................ 1,546 1,025 4,352 3,216 2,521
Income before income taxes.................... 325 118 938 854 606
Income taxes.................................. 103 48 288 287 (45)
Net income.................................... 222 70 650 567 651
PER SHARE DATA:
Earnings:
Basic....................................... $ 0.13 $ 0.05 $ 0.44 $ 0.39 $ 0.45
Diluted..................................... 0.12 0.04 0.39 0.38 0.44
Book value.................................... 8.21 6.85 7.93 6.81 6.35
Tangible book value........................... 6.70 6.85 6.38 6.81 6.35
Weighted average shares outstanding:
Basic....................................... 1,714,196 1,431,370 1,460,293 1,439,314 1,458,743
Diluted..................................... 1,924,240 1,610,849 1,666,143 1,510,241 1,486,126
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AT OR FOR QUARTER ENDED MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------- -------------------------------------
2004 2003 2003 2002 2001
---- ---- ---- ---- ----
(Dollars in thousands, except per share amounts)
PERFORMANCE RATIOS:
Return on average assets...................... 0.55% 0.25% 0.51% 0.56% 0.88%
Return on average equity...................... 6.66% 3.08% 6.38% 6.00% 7.43%
Net interest margin........................... 4.51% 3.88% 3.83% 3.83% 4.07%
Interest rate spread.......................... 4.34% 3.58% 3.59% 3.48% 3.41%
Efficiency ratio.............................. 81.97% 80.52% 76.36% 71.28% 71.63%
Average interest-earning assets to
average interest-bearing liabilities........ 1.09 1.12 1.11 1.12 1.16
Average loans to average deposits............. 88.22% 95.69% 93.72% 86.72% 58.82%
ASSET QUALITY RATIOS:
Nonperforming loans to net loans.............. 0.15% 0.05% 1.48% 0.04% 0.26%
Nonperforming assets to total assets.......... 0.66% 0.17% 1.55% 0.18% 0.18%
Net charge-offs to average total loans........ 0.16% -0.0012% 0.41% 0.34% 0.46%
Total allowance for loan losses to
total nonperforming loans................... 11.86 23.22 1.33 26.48 3.89
Total allowance for loan losses to
total loans receivable...................... 1.76% 1.06% 1.93% 1.00% 1.00%
CAPITAL RATIOS:
Average equity to average assets.............. 8.26% 8.23% 7.97% 9.38% 11.79%
Average tangible equity to average
tangible assets............................. 6.68% 8.23% 7.66% 9.38% 11.79%
Leverage ratio................................ 8.65% 10.64% 7.89% 9.38% 11.79%
Tier 1 risk-based capital ratio............... 12.14% 13.37% 11.96% 12.23% 14.79%
Total risk-based capital ratio................ 14.45% 14.47% 14.34% 13.24% 15.76%
5
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RISK FACTORS
AN INVESTMENT IN SHARES OF OUR COMMON STOCK INVOLVES VARIOUS RISKS.
BEFORE DECIDING TO INVEST IN OUR COMMON STOCK, YOU SHOULD CAREFULLY CONSIDER THE
RISKS DESCRIBED BELOW IN CONJUNCTION WITH THE OTHER INFORMATION IN THIS
PROSPECTUS AND INFORMATION INCORPORATED BY REFERENCE INTO THIS PROSPECTUS,
INCLUDING OUR CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES. OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE HARMED BY ANY OF THE
FOLLOWING RISKS OR OTHER RISKS, WHICH HAVE NOT BEEN IDENTIFIED OR WHICH WE MAY
BELIEVE ARE IMMATERIAL OR UNLIKELY. THE VALUE OR MARKET PRICE OF OUR COMMON
STOCK COULD DECLINE DUE TO ANY OF THESE RISKS, AND YOU MAY LOSE ALL OR PART OF
YOUR INVESTMENT.
IF WE DO NOT SUCCESSFULLY INTEGRATE FIRST BANK OF DOTHAN INTO OUR BUSINESS, WE
MAY NOT REALIZE THE EXPECTED BENEFITS FROM OUR ACQUISITION.
We acquired First Bank of Dothan on November 13, 2003. We may encounter
unforeseen expenses as well as difficulties and complications in integrating
First Bank of Dothan's operations with our overall operations. We expect to
maintain most of First Bank of Dothan's key customers and personnel and
integrate First Bank of Dothan's systems and procedures into ours with a minimal
amount of cost and diversion of management time and attention. If we are unable
to integrate First Bank of Dothan in a timely manner or if we experience
disruptions with First Bank of Dothan's customer relationships, the anticipated
benefits of the acquisition of First Bank of Dothan may not be realized and our
results of operations may be adversely affected.
WE MAY FACE RISKS WITH RESPECT TO FUTURE EXPANSION AND ACQUISITIONS OR MERGERS.
We continuously seek to acquire other financial institutions or parts of
those institutions and may engage in DE NOVO branch expansion, acquisitions or
mergers in the future. We may also consider and enter into new lines of business
or offer new products or services. We also may receive future inquiries and have
discussions with potential acquirors of us. Acquisitions and mergers involve a
number of risks, including:
o the time and costs associated with identifying and evaluating
potential acquisitions and merger partners;
o the estimates and judgments used to evaluate credit, operations,
management and market risks with respect to the target
institution may not be accurate;
o the time and costs of evaluating new markets, hiring experienced
local management and opening new offices, and the time lags
between these activities and the generation of sufficient assets
and deposits to support the costs of the expansion;
o our ability to finance an acquisition and possible dilution to
our existing shareholders;
o the diversion of our management's attention to the negotiation
of a transaction, and the integration of the operations and
personnel of the combining businesses;
o entry into new markets where we lack experience;
o the introduction of new products and services into our business;
o the incurrence and possible impairment of goodwill associated
with an acquisition and possible adverse short-term effects on
our results of operations; and
o the risk of loss of key employees and customers.
6
We may incur substantial costs to expand, and we can give no assurance
that such expansion will result in the levels of profits we seek. There can be
no assurance that integration efforts for any future mergers or acquisitions
will be successful. Also, we may issue equity securities, including common stock
and securities convertible into shares of our common stock in connection with
future acquisitions, which could cause ownership and economic dilution to our
current shareholders and to investors purchasing common stock in this offering.
There is no assurance that, following any future merger or acquisition, our
integration efforts will be successful or that our company, after giving effect
to the acquisition, will achieve profits comparable to or better than our
historical experience.
THE TRADING VOLUME IN OUR COMMON STOCK HAS BEEN LOW AND THE SALE OF SUBSTANTIAL
AMOUNTS OF OUR COMMON STOCK IN THE PUBLIC MARKET COULD DEPRESS THE PRICE OF OUR
COMMON STOCK.
The trading volume in our common stock on the Nasdaq SmallCap Market has
been relatively low when compared with larger companies listed on the Nasdaq
SmallCap Market, the Nasdaq National Market or the stock exchanges. We cannot
say with any certainty that a more active and liquid trading market for our
common stock will develop. Because of this, it may be more difficult for you to
sell a substantial number of shares for the same price at which you could sell a
smaller number of shares.
We cannot predict the effect, if any, that future sales of our common
stock in the market, or the availability of shares of common stock for sale in
the market, will have on the market price of our common stock. We, therefore,
can give no assurance that sales of substantial amounts of common stock in the
market, or the potential for large amounts of sales in the market, would not
cause the price of our common stock to decline or impair our future ability to
raise capital through sales of our common stock. Upon completion of this
offering, assuming all of the offered shares are sold, we will have
approximately 2,701,115 shares of common stock outstanding.
AN ECONOMIC DOWNTURN, ESPECIALLY IN SOUTHWESTERN GEORGIA AND SOUTHEASTERN
ALABAMA, COULD HAVE AN ADVERSE EFFECT ON THE QUALITY OF OUR LOAN PORTFOLIO AND
OUR FINANCIAL PERFORMANCE.
Economic recession over a prolonged period or other economic problems in
Albany, Georgia; Dothan, Alabama; or in Georgia and Alabama generally could have
a material adverse impact on the quality of our loan portfolio and the demand
for our products and services. For example, a downturn in the local economy
could make it more difficult for borrowers to repay their loans, which could
lead to loan losses. This could in turn reduce our net income and profitability.
UNEXPECTED CHANGES IN INTEREST RATES MAY DECREASE OUR NET INTEREST INCOME.
If we are unsuccessful in managing interest rate fluctuations, our net
interest income could decrease materially. Our operations depend substantially
on our net interest income, which is the difference between the interest income
earned on our interest-earning assets and the interest expense paid on our
interest-bearing liabilities. Like most depository institutions, our earnings
and net interest income are affected by changes in market interest rates and
other economic factors beyond our control. For example, as of March 31, 2004, we
had a one-year negative "gap," meaning that we had more interest rate-sensitive
liabilities than interest rate-sensitive assets maturing or repricing within one
year of that time. This means that our net interest income is likely to decrease
in an increasing interest rate environment unless we adjust our mix of assets
and liabilities to compensate for this effect. If we were in a positive "gap"
position, meaning we had more interest-sensitive assets than liabilities, our
net interest income would likely decrease in a decreasing interest rate
environment unless we adjusted our mix of assets and liabilities to compensate
for this effect. The measures that we take to guard against interest rate risk
may not be effective in minimizing our exposure to this risk. As of March 31,
2004, Community Capital's cumulative one-year interest rate-sensitivity gap
ratio was 78%. Community Capital's target ratio is 80% to 120% in this time
horizon. Community Capital has a substantial amount of certificates of deposit
repricing in the first half of 2004. While management believes these deposits
can be repriced at
7
the current low rates for an extended period, Community Capital's liquidity may
be negatively affected if these deposits reprice at higher rates than
anticipated. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Asset/Liability Management," page 26.
WE MAY LOSE PRINCIPAL AND INTEREST DUE TO US BECAUSE OF OUR BORROWERS' FAILURE
TO PERFORM ACCORDING TO THE TERMS OF THEIR LOAN AGREEMENTS.
One of the greatest risks facing lenders generally is credit risk; that
is, the risk of losing principal and interest due to a borrower's failure to
perform according to the terms of a loan agreement. Because many of the loans
made by our subsidiary banks are secured by real estate, any conditions
adversely affecting the real estate market in our primary market areas could
have a significant adverse effect on the level of our nonperforming loans and/or
the value of the collateral securing a substantial portion of our loans.
OUR ALLOWANCE FOR LOAN LOSSES COULD BECOME INADEQUATE.
We maintain an allowance for loan losses that we believe is adequate for
absorbing any potential losses in our loan portfolio. Our management determines
the amount of the allowance for loan losses based on general market conditions,
credit quality of the loan portfolio, and performance of our customers relative
to their financial obligations with us. Although we believe our allowance for
loan losses is adequate to absorb probable losses in our loan portfolio, we
cannot predict such losses or that our allowance will continue to be adequate in
the future. Excessive loan losses could have a material adverse effect on our
financial performance.
INDUSTRY COMPETITION MAY HAVE AN ADVERSE EFFECT ON OUR PROFITABILITY.
Competition in the banking and financial services industry is intense,
and our profitability depends upon our continued ability to compete in our
market areas. We compete with national, regional and community banks; savings
and loan associations; credit unions; finance companies; mutual funds; insurance
companies; and brokerage and investment banking firms operating locally and
elsewhere. In addition, because the Gramm-Leach-Bliley Act permits banks,
securities firms and insurance companies to affiliate, a number of larger
financial institutions and other corporations offering a wider variety of
financial services than we currently offer could enter and aggressively compete
in the markets we currently serve. Many of these competitors have substantially
greater resources, lending limits and operating histories than we do and may
offer services that we do not or cannot provide. See "Business--Competition,"
page 33.
DEPARTURES OF OUR KEY PERSONNEL MAY IMPAIR OUR OPERATIONS.
We are a customer-focused and relationship-driven organization. Our
growth and success have been in large part driven by the personal customer
relationships maintained by our senior management team. Each member of our
senior management team is important to our success, and the unexpected loss of
any of these persons could impair our day-to-day operations as well as our
strategic direction. Our senior management team includes:
o Charles M. Jones, III, Chief Executive Officer and Chairman of
the Board of Community Capital and Albany Bank & Trust;
o Robert E. Lee, President of Community Capital and Albany Bank &
Trust;
o David C. Guillebeau, Executive Vice President and Senior Lending
Officer of Albany Bank & Trust; and
o David J. Baranko, Chief Financial Officer of Community Capital
and Albany Bank & Trust.
8
Although we have entered into employment agreements with Messrs. Lee and
Guillebeau, we cannot assure you of their continued service. See "Management,"
page 39.
OUR ABILITY TO PAY DIVIDENDS IS RESTRICTED BY FEDERAL POLICIES AND REGULATIONS,
AND WE MAY NOT PAY DIVIDENDS IN THE FUTURE.
Federal Reserve Board policy, the Office of the Comptroller of the
Currency (the "OCC") regulations and the Alabama State Banking Department
regulations restrict our ability to pay dividends, and we cannot assure you that
we will pay dividends on our common stock in the future. Federal Reserve Board
policy states that bank holding companies should pay cash dividends on common
stock only out of net income available over the past year and only if
prospective earnings retention is consistent with the organization's expected
future needs and financial condition. The policy provides that a bank holding
company should not maintain a level of cash dividends that undermines its
ability to serve as a source of strength to its banking subsidiaries. Although
we have paid dividends in the past, we can make no assurance that we will be
able to continue to pay dividends in the future. Our ability to declare and pay
dividends on our common stock depends upon our earnings and financial condition,
our liquidity and capital requirements, the general economic and regulatory
climate, and other factors our Board of Directors deems relevant.
Our principal source of funds to pay dividends is cash dividends that we
receive from our subsidiaries, Albany Bank & Trust and First Bank of Dothan.
Under the terms of a Memorandum of Understanding, dated January 9, 2003, First
Bank of Dothan may not pay any cash dividends without the prior written consent
of the FDIC and the Alabama State Banking Department. In the absence of the
Memorandum of Understanding, First Bank of Dothan may not declare or pay a
dividend in excess of 90% of its net earnings until its surplus is equal to 20%
of its capital. First Bank of Dothan is also required by state law to obtain
prior approval of the Alabama State Banking Department for payments of dividends
if the total of all dividends in any year will exceed (1) the total of First
Bank of Dothan's net earnings for that year, plus (2) First Bank of Dothan's
retained net earnings for the preceding two years, less any required transfers
to surplus. Albany Bank & Trust is required by federal law to obtain prior
approval of the OCC for payments of dividends if the total of all dividends
declared by its Board of Directors in any year will exceed (1) the total of
Albany Bank & Trust's net profits for that year, plus (2) Albany Bank & Trust's
retained net profits of the preceding two years, less any required transfers to
surplus. See "Supervision and Regulation--Payment of Dividends," page 58, and
"Business--Lending Services--Memorandum of Understanding," page 36.
OUR EXECUTIVE OFFICERS AND DIRECTORS OWN A SIGNIFICANT PORTION OF OUR
OUTSTANDING COMMON STOCK AND MAY BE ABLE TO CONTROL THE OUTCOME OF CORPORATE
ACTIONS THAT REQUIRE SHAREHOLDER APPROVAL.
Our directors and executive officers may purchase up to approximately
200,000 shares of common stock in this offering. After this offering, and taking
into account their purchase of up to 200,000 shares in the offering, our
directors and executive officers are expected to beneficially own or control
approximately 1,073,184 shares, including shares subject to exercisable warrants
and options, representing approximately 34.7% of our outstanding common stock.
Additionally, on April 26, 2004, our Board of Directors approved the grant, upon
the closing of this offering to our president, Robert E. Lee, of an option to
purchase a number of shares equal to 5% of the shares sold in this offering with
an exercise price equal to the public offering price. As a result, our directors
and executive officers could exercise significant control over matters requiring
shareholder approval, including the election of directors or a change in control
of our company. See "Principal Shareholders and Stock Ownership of Management,"
page 37.
9
GOVERNMENT REGULATION MAY HAVE AN ADVERSE EFFECT ON OUR PROFITABILITY AND
GROWTH.
Bank holding companies and banks are subject to extensive state and
federal government supervision and regulation. First Bank of Dothan, which we
acquired in November 2003, is also subject to a Memorandum of Understanding,
dated January 9, 2003, which primarily places limitations on First Bank of
Dothan's lending practices, dividends and capital leverage ratios. Changes in
state and federal banking laws and regulations or in federal monetary policies
could adversely affect our ability to maintain profitability and continue to
grow. For example, new legislation or regulation could limit the manner in which
we may conduct our business, including our ability to obtain financing, attract
deposits, make loans and achieve satisfactory interest spreads. Many of these
regulations are intended to protect depositors, the public and the FDIC, not
shareholders. In addition, the burden imposed by federal and state regulations
may place us at a competitive disadvantage compared to competitors who are less
regulated. The laws, regulations, interpretations and enforcement policies that
apply to us have been subject to significant, and sometimes retroactively
applied, changes in recent years and may change significantly in the future.
Future legislation or government policy may also adversely affect the banking
industry or our operations. See "Supervision and Regulation," page 51.
IF WE RAISE ADDITIONAL CAPITAL BY ISSUING MORE SHARES OF COMMON STOCK, YOUR
OWNERSHIP INTEREST IN COMMUNITY CAPITAL MAY BE DILUTED.
The issuance of additional shares of common stock could dilute your
ownership interest in Community Capital. Our Board of Directors may elect to
raise additional capital by issuing additional shares of common stock or other
securities. We may issue additional securities at prices or on terms less
favorable than or equal to the public offering price and the other terms of this
offering.
WE HAVE BROAD DISCRETION IN USING THE NET PROCEEDS OF THIS OFFERING. OUR FAILURE
TO EFFECTIVELY USE THESE PROCEEDS COULD ADVERSELY AFFECT OUR ABILITY TO EARN
PROFITS.
We intend to use the net proceeds of this offering to pay off $1.75
million in existing debt, to provide additional capital to our subsidiaries to
support asset growth, for future bank or branch acquisitions and for other
general corporate purposes. In particular, we intend to provide an additional $5
million in capital to First Bank of Dothan. First Bank of Dothan intends to use
approximately $1,000,000 of the additional capital to construct a new branch
office in Auburn, Alabama. First Bank of Dothan plans to use the remaining
additional capital to support asset growth generally. In the event we do not
sell all of the shares offered, we intend to use the net proceeds first to
provide up to $5 million in additional capital to First Bank of Dothan and then
to pay off all, or part of, our existing $1.75 million debt. Otherwise, we have
not allocated specific amounts of the net proceeds to specific purposes and will
have significant flexibility in determining our application of the net proceeds.
Our failure to apply these funds effectively could reduce our ability to earn
profits.
10
CAUTIONARY STATEMENT ABOUT
FORWARD-LOOKING STATEMENTS
Various matters discussed in this document and in documents incorporated
by reference in this prospectus, including matters discussed under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," may constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements may involve risks, uncertainties and other factors that may cause our
actual results, performance or achievements to be materially different from our
future results, performance or achievements expressed or implied by such
forward-looking statements. The words "expect," "anticipate," "intend," "plan,"
"believe," "seek," "estimate," "may," "should," "could," "project," "predict,"
"potential" and similar expressions are intended to identify such
forward-looking statements.
The cautionary statements in the "Risk Factors" section and elsewhere in
this prospectus or in documents incorporated by reference also identify
important factors and possible events which involve risks and uncertainties that
could cause actual results to differ materially from those contained in the
forward-looking statements. If you are interested in purchasing shares of our
common stock, you should consider these risk factors carefully, as well as
factors discussed elsewhere in this prospectus and in documents incorporated by
reference, before making a decision to invest. All forward-looking statements in
this prospectus are based on information available to us on the date of this
prospectus. Our actual results may differ materially from the results
anticipated in forward-looking statements due to a variety of factors, including
governmental monetary and fiscal policies; deposit levels; loan demand; loan
collateral values; securities portfolio values; interest rate risk management;
the effects of competition in the banking business from other commercial banks,
thrifts, mortgage banking firms, consumer finance companies, credit unions,
securities brokerage firms, insurance companies, money market funds and other
financial institutions operating in our market areas and elsewhere, including
institutions operating through the Internet; and changes in governmental
regulation relating to the banking industry, including regulations relating to
branching and acquisitions, failure of assumptions underlying the establishment
of reserves for loan losses, including the value of collateral underlying
delinquent loans and other factors. We do not intend to and assume no
responsibility for updating any forward-looking statements that may be made by
us or on our behalf in this prospectus or otherwise.
11
USE OF PROCEEDS
The following table sets forth the calculation of our net proceeds from
the offering at an assumed public offering price of $12.44 per share, which was
the closing price of our common stock on May 28, 2004. Because this is a best
efforts offering and there is no minimum number of shares to be sold, we are
presenting this information assuming that we sell 25%, 50% and 100% of the
shares of common stock that we are offering.
25% 50% 100%
--- --- ----
Shares of common stock sold..................... 250,000 500,000 1,000,000
Public offering price........................... $ 12.44 $ 12.44 $ 12.44
Gross offering proceeds......................... 3,110,000 6,220,000 12,440,000
Selling agent's commission (1).................. 38,125 232,500 621,250
Estimated expenses of the offering.............. 153,000 153,000 153,000
Net proceeds to us.............................. $2,918,875 $5,834,500 $11,665,750
--------------
(1) Assumes shares having an aggregate value of $2,500,000 are purchased by
our directors and officers and other individuals identified by our
directors and officers, for which no commission will be paid.
We plan to use the net proceeds from the offering to:
o pay off $1.75 million in existing debt;
o provide additional capital to our subsidiary banks to support
asset growth;
o fund future bank or branch acquisitions; and
o support other general corporate purposes.
In particular, we intend to provide an additional $5 million in capital
to First Bank of Dothan. First Bank of Dothan intends to use approximately
$1,000,000 of the additional capital to construct a new branch office in Auburn,
Alabama. First Bank of Dothan plans to use the remaining additional capital to
support asset growth generally. In the event we do not sell all of the shares
offered, we intend to use the net proceeds first to provide up to $5 million in
additional capital to First Bank of Dothan and then to pay off all, or part of,
our existing $1.75 million debt. Otherwise, we have not established any
priorities for use of the net proceeds from the offering.
Our existing $1.75 million debt consists of a line of credit with Nexity
Bank, Birmingham, Alabama. The line of credit matures on November 14, 2016 and
bears interest at a rate equal to prime less 0.50% per annum. We obtained and
drew $1.75 million on the line of credit in January, 2004 in order to fund the
acquisition of First Bank of Dothan.
12
CAPITALIZATION
The following table shows our capitalization as of March 31, 2004. Our
capitalization is presented on an actual historical basis and as adjusted to
give effect to the receipt of the estimated net proceeds from the offering,
assuming that we sell 25%, 50% and 100% of the shares of common stock that we
plan to sell at an assumed offering price of $12.44 per share, which was the
closing price of our common stock on May 28, 2004. The "As Adjusted" columns
further assume that shares having an aggregate value of $2,500,000 are sold to
our directors and officers and other persons identified by our directors and
officers and no commissions are paid on the sale of those shares.
MARCH 31, 2004
-----------------------------------------------------------------
ACTUAL AS ADJUSTED
------ -----------
25% 50% 100%
--- --- ----
LONG-TERM DEBT:
Junior subordinated debentures due 2033 $ 4,124,000 $ 4,124,000 $ 4,124,000 $ 4,124,000
(related to trust preferred securities)
Long-Term Debt 1,750,000 1,750,000 915,500 --
SHAREHOLDERS' EQUITY:
Preferred stock, par value not stated; -- -- -- --
2,000,000 shares authorized, no shares
issued and outstanding (actual and as
adjusted)
Common stock; $1.00 par value; 10,000,000 1,765,264 2,015,264 2,265,264 2,765,264
shares authorized; 1,765,264 shares issued
and 1,701,115 shares outstanding (actual);
2,015,264; 2,265,264; and 2,765,264 shares
issued and 1,951,115; 2,201,115; 2,701,115
shares outstanding (as adjusted 25%, 50%
and 100%, respectively)
Additional paid-in capital 11,197,553 13,866,428 16,532,053 21,863,303
Retained earnings 1,103,547 1,103,547 1,103,547 1,103,547
Accumulated other comprehensive income 347,664 347,664 347,664 347,664
Less cost of treasury stock, (451,684) (451,684) (451,684) (451,684)
64,149 shares
TOTAL SHAREHOLDERS' EQUITY $13,962,344 $16,881,219 $19,796,844 $25,628,094
NET TANGIBLE BOOK VALUE PER SHARE $6.70 $7.34 $7.83 $8.54
13
PRICE RANGE OF OUR COMMON STOCK
Our common stock is quoted on the Nasdaq SmallCap Market under the
symbol "ALBY." On May 28, 2004, the closing price of our common stock reported
on the Nasdaq SmallCap Market was $12.44 per share. As of that date, there were
approximately 169 holders of record of our common stock.
The following table sets forth the high and low bid prices for our
common stock on the Nasdaq SmallCap Market for the calendar quarters indicated.
Stock price data on the Nasdaq SmallCap Market reflects inter-dealer prices,
without retail markup or markdown or commission, and may not necessarily
represent actual transactions. In addition, the table provides the cash dividend
per share we paid on our common stock in each of these calendar quarters.
HIGH AND LOW SALES PRICE DIVIDENDS DECLARED
PER SHARE PER SHARE
-----------------------------------------------
HIGH LOW
---- ---
2004
First Quarter $13.00 $10.92 $0.02
Second Quarter through May 28, 2004 $12.45 $10.55 $0.02
2003
First Quarter $13.08 $10.16 --
Second Quarter $15.00 $11.01 $0.02
Third Quarter $14.50 $11.50 $0.02
Fourth Quarter $14.00 $11.56 $0.02
2002
First Quarter $9.00 $7.35 --
Second Quarter $8.65 $7.00 --
Third Quarter $8.76 $6.50 --
Fourth Quarter $11.10 $7.75 --
We intend to continue paying cash dividends, but make no assurances that
we will pay any dividends. The amount and frequency of cash dividends, if any,
will be determined by our Board of Directors after consideration of various
factors, which may include the following:
o Our financial condition o Regulatory limitations
o Our results of operations o Tax considerations
o Investment opportunities o The amount of net proceeds
available to us retained by us
o Capital requirements o General economic conditions
Our ability to pay dividends depends upon the ability of our
subsidiaries to pay dividends to us and our borrowing capacity. Because our
subsidiary banks are subject to various banking laws and regulations, the
ability of these subsidiaries to pay dividends may be limited or otherwise
restricted. Under the terms of a Memorandum of Understanding, dated January 9,
2003, First Bank of Dothan may not pay any cash dividends without the prior
written consent of the FDIC and the Alabama State Banking Department. Absent the
Memorandum of Understanding, First Bank of Dothan may not declare or pay a
dividend in excess of 90% of its net earnings until First Bank of Dothan's
surplus is equal to 20% of its capital. First Bank of Dothan is also required by
state law to obtain prior approval of the Alabama State Banking Department for
payments of dividends if the total of all dividends in any year will exceed (1)
the total of First Bank of Dothan's net earnings for that year, plus (2) First
Bank of Dothan's retained net
14
earnings for the preceding two years, less any required transfers to surplus.
Albany Bank & Trust is required by federal law to obtain prior approval of the
OCC for payments of dividends if the total of all dividends declared by our
Board of Directors in any year will exceed (1) the total of Albany Bank &
Trust's net profits for that year, plus (2) Albany Bank & Trust's retained net
profits of the preceding two years, less any required transfers to surplus. See
"Supervision and Regulation--Payment of Dividends," page 58, and
"Business--Lending Services--Memorandum of Understanding," page 36.
In addition, under Federal Reserve policy, we are required to maintain
adequate regulatory capital and are expected to act as a source of financial
strength to our financial institution subsidiaries and to commit resources to
support these subsidiaries in circumstances where we might not otherwise do so.
This policy could have the effect of reducing the amount of dividends we are
allowed to declare. See "Supervision and Regulation--Community Capital--Support
of Subsidiary Institutions," page 54.
Our ability to pay cash dividends is further subject to our continued
payment of interest that we owe on our junior subordinated debentures. As of
March 31, 2004, we had approximately $4.1 million of junior subordinated
debentures outstanding. We have the right to defer payment of interest on the
junior subordinated debentures for a period not exceeding 20 consecutive
quarters. If we defer, or fail to make, interest payments on the junior
subordinated debentures, or if we fail to comply with certain covenants under
our loan agreements, we will be prohibited, subject to certain exceptions, from
paying cash dividends on our common stock until we pay all deferred interest and
resume interest payments on the junior subordinated debentures and until we
comply with the covenants under our loan agreements.
At March 31, 2004, under applicable regulations, the amount available to
be paid as dividends by Albany Bank & Trust without prior regulatory approval
was $2,073,000.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition of Community
Capital Bancshares, Inc. ("Community Capital") and its bank subsidiaries, Albany
Bank & Trust, N.A. and First Bank of Dothan, Inc., at March 31, 2004 and 2003
and December 31, 2003 and 2002 and the results of their operations for the
periods then ended. The purpose of this discussion is to focus on information
about Community Capital's financial condition and results of operations which
are not otherwise apparent from the audited consolidated financial statements.
Reference should be made to those statements and the other financial information
presented elsewhere in this prospectus for an understanding of the following
discussion and analysis.
OVERVIEW
Net income for the three months ended March 31, 2004 was $222,000 as
compared to $70,000 for the three months ended March 31, 2003. Net income before
taxes increased $207,000 to $325,000. Community Capital recorded provisions for
income taxes of $103,000, or 32% of net income before taxes, in the three months
ended March 31, 2004 compared to $48,000, or 41% of net income before taxes for
the three months ended March 31, 2003. Basic earnings per share for the three
months ended March 31, 2004 were $0.13 compared to $0.05 for the three months
ended March 31, 2003. Total assets increased during the three months ended March
31, 2004 by $12,900,000, or 8%.
Net income for 2003 was $650,000 as compared to the prior year amount of
$567,000, representing an increase in net income of $83,000. Net income before
taxes increased $84,000 to $938,000. Community Capital recorded provisions for
income taxes of $289,000, or 31% of net income before taxes, in 2003 compared to
$287,000, or 34% of net income before taxes, in 2002. Basic earnings per share
increased in 2003 to $0.44 from the 2002 amount of $0.39. Total assets increased
during the year by $49,500,000, or 45%. The acquisition of First Bank of Dothan
accounted for $29,900,000, or 60%, of the total increase in assets.
FINANCIAL CONDITION AT MARCH 31, 2004
As of March 31, 2004 Community Capital's total assets were $171,664,000
representing an increase of $12,935,000, or 8.15%, from December 31, 2003.
Earning assets consist of federal funds sold, investment securities and loans.
These assets provide the majority of Community Capital's earnings. The mix of
earning assets is a reflection of management's philosophy regarding earnings
versus risk.
Federal funds sold represent an overnight investment of funds and can be
converted immediately to cash. At March 31, 2004, federal funds sold were
$13,790,000. At December 31, 2003, Community Capital had federal funds sold of
$2,684,000.
Investment securities consist of U.S. Government and Agency securities
and municipal bonds. These investments are used to provide fixed maturities and
as collateral for advances from the Federal Home Loan Bank and large public fund
deposits. During the first quarter of 2004, investment securities decreased
$2,806,000 due to maturities and sales of securities. All securities are
classified as available for sale, and are carried at current market values.
The loan portfolio is the largest earning asset and is the primary
source of earnings for Community Capital. At March 31, 2004 net loans were
$108,991,000. The loan portfolio increased $1,359,000, or 1.24%, during the
first quarter. At March 31, 2004, the allowance for loan losses was
16
$1,957,000, or 1.76% of total loans. Management believes 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 first quarter of 2004, the provision for potential
loan losses was $15,000 as compared to the first quarter 2003 amount of
$130,000. The lower provision for the current year is the result of a higher
quality loan portfolio which does not require as much addition to the allowance
as new loans are added to the portfolio.
In March 2003, Community Capital formed a wholly owned Connecticut
statutory trust, Community Capital Statutory Trust I, which issued $4 million
aggregate principal amount of trust preferred securities. The trust preferred
securities represent guaranteed preferred beneficial interests in Community
Capital's junior subordinated deferrable interest debentures that qualify as
Tier 1 capital subject to the limitations under Federal Reserve Board
guidelines. Community Capital owns the entire $124,000 aggregate principal
amount of the common securities of the Trust. The proceeds from the issuance of
the common securities and the trust preferred securities were used by the Trust
to purchase $4.1 million of junior subordinated debentures of Community Capital,
which pay interest at a floating rate equal to the three-month LIBOR plus 315
basis points. The proceeds received by Community Capital from the sale of the
junior subordinated debentures were used to provide additional paid in capital
to Albany Bank & Trust, to support its future growth.
Non-earning assets consist of premises and equipment, and other assets.
Premises and equipment increased during the quarter as a result of the
construction costs for the downtown Albany branch of Albany Bank & Trust. Other
assets consist primarily of accrued interest receivable and increased $132,000
as a result of the larger loan portfolio upon which to accrue interest.
Community Capital 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. Community Capital 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 reinvest the
funds profitably. At March 31, 2004, total deposits were $135,541,000 as
compared to the year-end amount of $123,223,000. This is an increase of
$12,318,000, or 10.00%. During the first quarter of 2004, Community Capital
increased its overall deposits to fund future growth using the current low rate
environment.
Interest-bearing deposits are comprised of the following categories:
March 31, 2004 December 31, 2003
Interest-bearing demand and savings $ 39,834,000 $ 36,159,000
Certificates of deposit in denominations of $100,000 or
greater 29,208,000 23,396,000
Other certificates of deposit 53,305,000 49,633,000
------------------ ------------------
Total $ 122,347,000 $ 109,187,000
================== ==================
Other borrowings consist of Federal Home Loan Bank advances and are
secured by investment securities and loans of Albany Bank & Trust. No new
advances were obtained during the current quarter.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
Net income for the three months ended March 31, 2004 was $222,000 as
compared to $70,000 for the three months ended March 31, 2003. The increased net
income was a result of an overall increase in
17
Community Capital's net interest income and was offset by increased noninterest
expense. Also, 2004 is the first full year that First Bank of Dothan data will
be included in the amounts reported.
Total interest income increased $690,000, or 41.62%, for the three
months ended March 31, 2004 as compared to the same period in the previous year.
This was the result of increased interest income on loans, which increased
$533,000. The increase in income was the direct result of the larger loan
portfolio in the current year and the inclusion of First Bank of Dothan, which
was not a part of the amounts of the previous year. This increase was in spite
of the major reductions in interest rate levels during the past 12 months.
Interest expense for the three months ended March 31, 2004 was $687,000,
which is an increase of $52,000 over the same period in the previous year.
Although interest-bearing liabilities increased approximately 35% over the prior
year due to the acquisition of First Bank of Dothan and additional Federal Home
Loan Bank borrowings, interest expense incurred on total deposits and
obligations increased only 8.19%. Due to the current economic climate, the cost
of funds decreased 56 basis points from the same period in 2003.
Net interest income after the provision for loan losses was $1,646,000
for the three months ended March 31, 2004 as compared to the 2003 amount of
$893,000. This is an increase of $753,000, or 84.32%. This increase is the
combined result of the increased level of earning assets, and the lower cost of
funds during the current year. Management is currently emphasizing a better
interest margin as opposed to the higher growth rate emphasized in previous
years.
Other income decreased $25,000 to $225,000 for the three months ended
March 31, 2004. Service charges on deposit accounts increased $66,000, or 55%,
due to the larger number of deposit accounts and the addition of First Bank of
Dothan. Mortgage origination fees decreased $47,000 compared to the March 31,
2003 amount. These fees are generated by facilitating mortgage loans for
customers, which are sold in the secondary market. The higher interest rate
levels led to decreases in this area of activity in our subsidiary banks.
Noninterest expense increased $521,000 to $1,546,000 in for the quarter
ended March 31, 2004. This is an increase of 50.83%. The largest area of
increase was in the salary and employee benefits category. This expense item is
$752,000 in the current year as compared to the 2003 amount of $504,000. This is
an increase of $248,000, or 49.21%. The growth in this expense item is due to
the increased staffing required to properly serve Community Capital's customers
as well as the addition of First Bank of Dothan and slightly higher salaries and
benefits during the current year.
Equipment and occupancy expenses increased $73,000, or 50.34%, for the
three months ended March 31, 2004 from the same period in 2003. The increase is
due to expansion of Albany Bank & Trust and the addition of First Bank of
Dothan. Other expenses increased $78,000 to $198,000 in the current year. The
majority of this increase is the result of the addition of First Bank of Dothan.
Diluted earnings per share for the three months ended March 31, 2004
were $0.12 compared to $.04 in 2003, representing an increase of $.08 per share,
or 200%, from the same period in 2003.
18
FINANCIAL CONDITION AT DECEMBER 31, 2003 AND 2002
Following is a summary of Community Capital's balance sheets as of
December 31, 2003 and 2002.
DECEMBER 31,
-----------------------------
2003 2002
------------- -------------
(DOLLARS IN THOUSANDS)
-----------------------------
Cash and due from banks, including interest-bearing deposits of $126 and $4,573 $ 4,285 $ 6,920
Federal funds sold 2,684 --
Securities 32,906 16,968
Loans, net 107,471 80,891
Premises and equipment 4,739 3,058
Other assets 6,644 1,349
------------- -------------
$ 158,729 $ 109,186
============= =============
Total deposits $ 123,222 $ 86,004
Other borrowings 16,019 12,590
Guaranteed preferred benefits in junior subordinated debentures 4,000 --
Other liabilities 2,190 849
Stockholders' equity 13,298 9,743
------------- -------------
$ 158,729 $ 109,186
============= =============
As of December 31, 2003, Community Capital had total assets of $158.7
million, an increase of $49.5 million from the previous year end. Increased
deposits of $37.2 million, FHLB borrowings of $5.1 million and guaranteed
interests in subordinated debt of $4.0 million funded the majority of the
increase in total assets. The primary use of these funds was to fund loan
growth. Net loans increased $26.6 million during the year to $107.5 million. The
First Bank of Dothan acquisition accounted for $17.2 million, or 65%, of the
total increase in loans. Community Capital expects to continue its growth in
2004, but not at the same percentage increase.
As of December 31, 2002, Community Capital had total assets of $109.2
million. Total assets increased $20.5 million during the year 2002. The primary
increase in assets during this year was in the loan portfolio, which increased
$19.7 million to $80.9 million. The increase in assets was funded by increased
deposits of $16.1 million and increased FHLB borrowings of $1.6 million.
Community Capital's investment portfolio, consisting primarily of
Federal Agency bonds and mortgage-backed securities, amounted to $32.9 million
at December 31, 2003. This compares to the December 31, 2002 amount of $16.9
million. First Bank of Dothan accounted for $4.5 million, or 28%, of the total
increase of $16.0 million in securities in 2003. All securities are classified
as available for sale and carried at current market values except for restricted
equity securities, which are carried at cost. During 2002, Community Capital
began investing in more mortgage-backed securities as opposed to single-payment
investments. Mortgage-backed securities are providing relatively higher returns
and are also generating monthly cash flow which would be available for
investment at higher rates when interest rates begin to increase.
Community Capital has 66% of its loan portfolio collateralized by real
estate located in its primary market area of Dougherty County and surrounding
counties in Georgia and Houston County and surrounding counties in Alabama.
Community Capital's real estate mortgage and construction portfolio consists of
loans collateralized by one- to four-family residential properties (37%),
construction loans to build one- to four-family residential properties, (12%)
and nonresidential and multi-family properties consisting primarily of small
business commercial, agricultural and rental properties (17%). Community
19
Capital generally requires that loans collateralized by real estate not exceed
the collateral values by the following percentages for each type of real estate
loan listed:
One- to four-family residential properties 90%
Construction loans on one- to four-family residential properties 85%
Nonresidential and multi-family properties 85%
Community Capital's remaining 34% of its loan portfolio consists of
commercial, consumer, and other loans. Community Capital requires collateral
commensurate with the repayment ability and creditworthiness of the borrower.
The specific economic and credit risks associated with Community
Capital's loan portfolio, especially the real estate portfolio, include but are
not limited to a general downturn in the economy which could affect unemployment
rates in Community Capital's market area, general real estate market
deterioration, interest rate fluctuations, deteriorated or non-existing
collateral, title defects, inaccurate appraisals, financial deterioration of
borrowers, fraud, and any violation of banking protection laws. Construction
lending can also present other specific risks to the lender such as whether
developers can find builders to buy lots for home construction, whether the
builders can obtain financing for the construction, whether the builders can
sell the home to a buyer, and whether the buyer can obtain permanent financing.
Currently, management believes that real estate values and employment trends in
Community Capital's market area are stable with no indications of a significant
downturn in the general economy.
Community Capital attempts to reduce these economic and credit risks not
only by adherence to loan-to-value guidelines, but also by investigating the
creditworthiness of the borrower and monitoring the borrower's financial
position. Also, Community Capital establishes and periodically reviews its
lending policies and procedures. Banking regulations limit exposure by
prohibiting loan relationships that exceed 15% of a bank's statutory capital in
the case of loans which are not fully secured by readily marketable or other
permissible types of collateral.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
Following is a summary of Community Capital's operations for the periods
indicated.
YEAR ENDED DECEMBER 31,
----------------------------
2003 2002
------------ ------------
(DOLLARS IN THOUSANDS)
----------------------------
Interest income $ 7,268 $ 6,316
Interest expense 2,634 2,703
------------ ------------
Net interest income 4,634 3,613
Provision for loan losses 409 442
Other income 1,065 899
Other expenses 4.352 3,216
------------ ------------
Pretax income 938 854
Income tax expense (benefit) 289 287
------------ ------------
Net income $ 650 $ 567
============ ============
20
Net income for the year 2003 was $650,000 as compared to the prior year
amount of $567,000, representing an increase of $83,000. The acquisition of
First Bank of Dothan accounted for $57,000 of this increase.
Net income for the year ended December 31, 2002 was $567,000 as compared
to $651,000 for the prior year, representing a decrease of $84,000 in net income
for 2002. In 2001, Community Capital recorded an income tax benefit of $46,000
from the carryforward of net operating losses from prior years. The net
operating losses were completely utilized in 2001, and Community Capital
recorded an income tax expense of $287,000 in 2002, representing an increase of
$333,000 in income tax expense for 2002. In 2002, Community Capital reported
pretax income of $854,000 compared to pretax income of $605,000 in 2001,
representing an increase of $249,000 in pretax income for 2002.
NET INTEREST INCOME. Community Capital's results of operations are
determined by its ability to effectively manage interest income and expense, to
minimize loan and investment losses, to generate noninterest income, and to
control operating expenses. Since interest rates are determined by market forces
and economic conditions beyond the control of Community Capital, its ability to
generate net interest income is dependent upon its ability to obtain an adequate
net interest spread between the rate paid on interest-bearing liabilities and
the rate earned on interest-earning assets.
The net yield on average interest-earning assets during 2003 was 6.01%
compared to the 2002 level of 6.68%. The decline in yield is the result of the
overall lower interest rate environment. As rates remained low for an extended
period of time, it allowed more assets to reprice at lower rates. The rates paid
on average interest-bearing liabilities also decreased during 2003. The average
rate for 2003 was 2.42% compared to the 2002 rate of 3.20%. The interest rate
spread actually increased 11 basis points in 2003 as compared to 2002. However,
the net interest margin remained the same in both years at 3.83%. Management
expects the net interest margin to remain at a low level during 2004. Net
interest income increased $1.0 million to $4.6 million in 2003 compared to $3.6
million in 2002. This increase was due almost entirely to an increase in the
volume of interest-earning assets. Average interest-earning assets increased
$25.9 million to $120.8 million in 2003 compared to $94.9 million in 2002. The
acquisition of First Bank of Dothan increased average interest-earning assets in
2003 by $3.0 million. The most significant increase in interest-earning assets
was in loans, which increased $23.3 million to $94.1 million in 2003 compared to
$70.8 million in 2002.
For the year ended December 31, 2002, the net interest margin decreased
to 3.83% from 4.07% in 2001. This decrease was due to a lower yield on average
interest-earning assets for the year. The yield on earning assets decreased to
6.68% in 2002 from 8.20% in 2001. The cost of interest-bearing liabilities
decreased by approximately the same percentage, to 3.20% in 2002 from 4.79% in
2001.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $409,000 in
2003 as compared to $443,000 in 2002. The annual provision is based upon
management's evaluation of the loan portfolio. At December 31, 2003, the
allowance for loan losses was $2.1 million, or 1.93%, of total outstanding
loans. Management believes the allowance for loan losses is adequate to absorb
possible losses on existing loans that may become uncollectible. This evaluation
considers past-due and classified loans, underlying collateral values, and
current economic conditions which may affect the borrower's ability to repay. As
of December 31, 2003, Community Capital had $1.6 million in non-performing
loans.
NONINTEREST INCOME. Noninterest income consists of service charges on
deposit accounts and other miscellaneous revenues and fees. Fees on deposit
accounts increased $188,000 in 2003. The increase in fee income resulted from
the growth in deposit accounts during the year. Community Capital offers other
services to its customers which generate fee income. The financial services area
21
generated $207,000 in fees during 2003 as compared to the 2002 amount of
$71,000. This increase in fee income is reflective of an increase in customer
base and more favorable conditions in the stock market during 2003.
In 2002, noninterest income increased $211,000 to $899,000. The majority
of this increase was realized from the sale of investment securities of
$146,000. Mortgage origination fees increased in 2002 to $247,000 from $181,000
in 2001 as a result of increased volume during the year. Deposit fees increased
in 2002 by $97,000 to $378,000.
NONINTEREST EXPENSE. Noninterest expense for 2003 was $4,352,000 as
compared to the 2002 amount of $3,216,000, representing an increase of
$1,136,000, or 35.3%. Salaries and employee benefits comprised $609,000 of the
increase, which is a result of increased staffing levels due to growth and
expansion of Community Capital, including the acquisition of First Bank of
Dothan. Equipment and occupancy expense increased $200,000 during the year. A
major source of this increase was depreciation and the building rent for the Lee
County office, East Albany office, and the Operations Center opened during 2002.
In 2003, a full year's rent was paid as opposed to only paying a partial year's
rent in 2002. In addition, Community Capital purchased a full-service banking
facility in Dothan, Alabama. By acquiring First Bank of Dothan, management hopes
to expand its presence by being located in another market area. This location
provides lenders and customer service representatives for opening new accounts
and loans, an ATM, and a night depository. The remaining increases in
noninterest expense are due to the increased size and volume of Community
Capital. Management monitors these expenses and attempts to control them.
In 2002, noninterest expense increased $695,000 to $3,216,000 from the
prior year amount of $2,521,000. The majority of the increase was due to the
opening of three offices during 2002, which caused an increase in salaries,
employee benefits, and equipment and occupancy expenses. Marketing expenses
increased $46,000 from the previous year, and Community Capital began paying its
directors for attendance at board and committee meetings, which amounted to
$97,000 in 2002. Management monitors noninterest expense on a regular basis and
attempts to maintain these expenses at low levels.
INCOME TAX. Income tax expense for 2003 was $289,000 compared to
$287,000 in the previous year. The effective rate of tax on pretax income was
31% in 2003 and 34% in 2002.
CRITICAL ACCOUNTING POLICIES
The accounting and financial reporting policies of Community Capital
conform to accounting principles generally accepted in the United States of
America and to general practices within the banking industry. The following is a
description of the accounting policies applied by Community Capital which are
deemed "critical." Critical accounting policies are defined as policies that are
very important to the presentation of Community Capital's financial condition
and results of operations and that require management's most difficult,
subjective, or complex judgments. Community Capital's financial results could
differ significantly if different judgments or estimates are applied in the
application of the policies.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is established
through provisions for loan losses charged to operations. Loans are charged
against the allowance for loan losses when management believes that the
collection of principal is unlikely. Subsequent recoveries are added to the
allowance. Management's evaluation of the adequacy of the allowance for loan
losses is based on a formal analysis that assesses the risk within the loan
portfolio. This analysis includes consideration of historical performance,
current economic conditions, level of nonperforming loans, loan concentrations,
and review of certain individual loans.
22
Management believes that the allowance for loan losses is adequate.
While management uses available information to recognize losses on loans, future
additions to the allowance for loan losses may be necessary based on changes in
economic conditions. In addition, the regulatory agencies, as part of their
examination process, periodically review the subsidiary banks' allowance for
loan losses. Such agencies may require our subsidiary banks to make additions to
the allowance for loan losses based on their judgments about information
available to them at the time of their examination.
Considering current information and events regarding a borrower's
ability to repay its obligations, management considers a loan to be impaired
when the ultimate collectibility of all amounts due, according to the
contractual terms of the loan agreement, is in doubt. When a loan is impaired,
the amount of impairment is measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate. If the loan
is collateral-dependent, the fair value of the collateral is used to determine
the amount of impairment. Impairment losses are included in the allowance for
loan losses through a charge to the provision for loan losses.
Subsequent recoveries are credited to the allowance for loan losses.
Cash receipts for performing loans are applied to principal and interest under
the contractual terms of the loan agreement. Cash receipts on impaired loans for
which the accrual of interest has been discontinued are applied first to
principal then to interest income.
The accounting for impaired loans described above applies to all loans,
except for large pools of smaller-balance, homogeneous loans that are
collectively evaluated for impairment; loans that are measured at fair value or
the lower of cost or fair value; and debt securities. The allowance for loan
losses for large pools of smaller-balance, homogeneous loans is established
through consideration of such factors as changes in the nature and volume of the
portfolio, overall portfolio quality, adequacy of the underlying collateral,
loan concentrations, historical charge-off trends, and economic conditions that
may affect the borrower's ability to pay.
Certain economic and interest rate factors could have a material impact
on the determination of the allowance for loan losses. The national economy
showed signs of rebounding during the fourth quarter of 2003. If the economy's
momentum continues, certain factors could evolve which would positively impact
our net interest margin. An increase in interest rates by the Federal Reserve
Bank would favorably impact our net interest margin. An improving economy could
result in the expansion of businesses and creation of jobs which would
positively affect Community Capital's loan growth and improve our gross revenue
stream. Conversely, certain factors could result from an expanding economy which
could increase our credit costs and adversely impact our net earnings. A
significant, rapid rise in interest rates could create higher borrowing costs
and shrinking corporate profits, which could have a material impact on
borrowers' ability to pay. We will continue to concentrate on maintaining a
high-quality loan portfolio through strict administration of our loan policy.
Another factor that we have considered in the determination of the
allowance for loan losses is the concentration to individual borrowers or
industries. At December 31, 2003, Community Capital had ten individual loan
relationships that each exceeded $1 million, none of which exceeded $2 million.
A substantial portion of the loan portfolio is in the residential and
commercial real estate sectors. Those loans are secured by real estate in
Community Capital's primary market areas. All of the other real estate owned is
also located in those same markets. Therefore, the ultimate collectibility of a
substantial portion of our loan portfolio and the recovery of a substantial
portion of the carrying amount of other real estate owned are susceptible to
changes in market conditions in Community Capital's primary market areas.
23
Community Capital also monitors its exposure in the loan portfolio based
upon industry classifications of its customers. At the present time, the
dispersion of loans among different industries is such that management believes
that there is no significant exposure to Community Capital in one particular
industry. The composition of the loan portfolio is monitored by management, and
should it be determined that there is an exposure to Community Capital due to
one particular industry, then loans made to customers in that industry would be
monitored more closely and appropriate adjustments made to the allowance for
loan losses.
INCOME TAXES. SFAS No. 109, "Accounting for Income Taxes," requires the
asset and liability approach for financial accounting and reporting for deferred
income taxes. Community Capital uses the asset and liability method of
accounting for deferred income taxes and provides deferred income taxes for all
significant income tax temporary differences. Note 12 in "Notes to the
Consolidated Financial Statements" provides additional details concerning
deferred income taxes.
As part of the process of preparing the consolidated financial
statements, Community Capital is required to estimate the income taxes in each
of the jurisdictions in which it operates. This process involves estimating our
actual current tax exposure together with assessing temporary differences
resulting from differing treatment of items such as depreciation and the
provision for loan losses for tax and financial reporting purposes. These timing
differences result in deferred tax assets and liabilities that are included in
our consolidated balance sheet.
Management must also assess the likelihood that the deferred tax assets
will be recovered from future taxable income. To the extent that this is
determined unlikely, a valuation allowance must be established. Significant
management judgment is required in determining the provision for income taxes,
the deferred tax assets and liabilities, and any valuation allowance required
for net deferred tax assets. If a valuation allowance is established or adjusted
during a period, then the appropriate expense is recorded within the tax
provision in the income statement.
LONG-LIVED ASSETS, INCLUDING INTANGIBLES. We evaluate long-lived assets
such as property and equipment, specifically identifiable intangibles and
goodwill, when events or changes in circumstances indicate that the carrying
value of such assets might not be recoverable. Factors that could trigger an
impairment include significant underperformance relative to historical or
projected future operating results, significant changes in the manner of our use
of the acquired assets, and significant negative industry or economic trends.
The determination of whether an impairment has occurred is based on an
estimate of undiscounted cash flows attributable to the assets as compared to
the carrying value of the assets. If an impairment has occurred, the amount of
the impairment loss recognized would be determined by estimating the fair value
of the assets and recording a loss if the fair value was less than the book
value.
In determining the existence of impairment factors, our assessment is
based on market conditions, operational performance, and legal factors of
Community Capital and the banks. Our review of factors present and the resulting
appropriate carrying value of our goodwill, intangibles, and other long-lived
assets are subject to judgments and estimates that management is required to
make. Future events could cause us to conclude that impairment indicators exist
and that our goodwill, intangibles, and other long-lived assets might be
impaired.
LIQUIDITY AND CAPITAL RESOURCES
The purpose of liquidity management is to ensure that there are
sufficient cash flows to satisfy demands for credit, deposit withdrawals, and
other needs of Community Capital. Traditional sources of
24
liquidity include asset maturities and growth in core deposits. A company may
achieve its desired liquidity objectives from the management of assets and
liabilities and through funds provided by operations. Funds invested in
short-term marketable instruments and the continuous maturing of other earning
assets are sources of liquidity from the asset perspective. The liability base
provides sources of liquidity through deposit growth, the maturity structure of
liabilities, and accessibility to market sources of funds.
Scheduled loan payments are a relatively stable source of funds, but
loan payoffs and deposit flows fluctuate significantly, being influenced by
interest rates and general economic conditions and competition. Community
Capital attempts to price its deposits to meet its asset/liability objectives
consistent with local market conditions.
State and federal regulatory authorities monitor the liquidity and
capital resources of Community Capital on a periodic basis. Management believes
that its current liquidity position is satisfactory.
At March 31, 2004, Community Capital had loan commitments outstanding of
$16 million. Because these commitments generally have fixed expiration dates and
many will expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. If needed, our subsidiary banks
have the ability to borrow funds on a short-term basis and purchase federal
funds from other financial institutions. At March 31, 2004, our subsidiary banks
had arrangements with upstream correspondent banks for short-term advances of $5
million.
At March 31, 2004, Community Capital and its subsidiary banks were
considered well capitalized based on regulatory minimum capital requirements. In
2003, total capital increased $562,000 from retained earnings; $38,000 from the
sale of treasury stock through the employee stock purchase plan; $180,000 from
the exercise of warrants; and $3,043,000 from the issuance of stock in
connection with the acquisition of First Bank of Dothan. Capital decreased
$278,000 from unrealized net gains on securities available for sale. Total
capital increased a net $3,545,000 during 2003. During 2002, total capital
increased $567,000 from retained earnings, $115,000 from unrealized net gains on
securities available for sale and decreased $124,000 from purchase of treasury
stock, resulting in a net gain of $558,000 for the year.
The primary source of funds available to Community Capital will be the
payment of dividends by its subsidiary banks. Banking regulations limit the
amount of the dividends that may be paid without prior approval of the
regulatory agencies. As of March 31, 2004, $2,073,000 in dividends was able to
be paid by Albany Bank & Trust to Community Capital without regulatory approval.
Under the terms of a Memorandum of Understanding, dated January 9, 2003, First
Bank of Dothan may not pay any cash dividends without the prior written consent
of the FDIC and the Alabama State Banking Department. See "Business--Lending
Services--Memorandum of Understanding," page 36.
Under the terms of its Memorandum of Understanding, First Bank of Dothan
is required to maintain a Tier 1 Leverage Capital ratio of not less than 8%. See
"Business--Lending Services--Memorandum of Understanding," page 36. The minimum
capital requirements to be considered well capitalized under prompt corrective
action provisions, absent the Memorandum of Understanding, and the actual
capital ratios for Community Capital and its subsidiary banks as of March 31,
2004 are as follows:
25
ACTUAL
--------------------------------------------
COMMUNITY ALBANY FIRST BANK REGULATORY
CAPITAL BANK & TRUST OF DOTHAN REQUIREMENTS
---------------------------------------------------------------------------------------------------------
Leverage capital ratio 8.65% 9.99% 8.53% 5.00%
Risk-based capital ratios:
Core capital 12.14% 13.63% 12.65% 6.00%
Total capital 14.45% 14.74% 13.95% 10.00%
These ratios are expected to decline somewhat as asset growth continues,
but are expected to remain in excess of the regulatory minimum requirements.
At March 31, 2004, Community Capital had commitments of approximately
$850,000 to complete construction of a full-service branch in downtown Albany.
Community Capital also intends to construct a modular building for a loan
production office in Auburn, Alabama, which is estimated to require capital
expenditures of approximately $50,000.
Management believes that its liquidity and capital resources are
adequate and will meet its foreseeable short- and long-term needs. Management
anticipates that it will have sufficient funds available to meet current loan
commitments and to fund or refinance, on a timely basis, its other material
commitments and liabilities.
Except for expected growth common to a growing bank, management is not
aware of any other known trends, events, or uncertainties that will have or that
are reasonably likely to have a material effect on its liquidity, capital
resources, or operations. Management is also not aware of any current
recommendations by the regulatory authorities which, if they were implemented,
would have such an effect.
EFFECTS OF INFLATION
The impact of inflation on banks differs from its impact on
non-financial institutions. Banks, as financial intermediaries, have assets
which are primarily monetary in nature and which tend to fluctuate in concert
with inflation. A bank can reduce the impact of inflation if it can manage its
rate-sensitivity gap. This gap represents the difference between rate-sensitive
assets and rate-sensitive liabilities. Community Capital, through its
Asset/Liability Committee, attempts to structure the assets and liabilities and
manage the rate-sensitivity gap, thereby seeking to minimize the potential
effects of inflation. For information on the management of Community Capital's
interest-rate sensitive assets and liabilities, see "Asset/Liability Management"
below.
ASSET/LIABILITY MANAGEMENT
Community Capital's objective is to manage assets and liabilities to
provide a satisfactory, consistent level of profitability within the framework
of established cash, loan, investment, borrowing, and capital policies. Certain
officers are charged with the responsibility of monitoring policies and
procedures that are designed to ensure acceptable composition of the
asset/liability mix. Management's goal is to support asset growth primarily
through growth of core deposits made by local individuals, partnerships, and
corporations.
Community Capital's asset/liability mix is monitored with a report
reflecting the interest rate-sensitive assets and interest rate-sensitive
liabilities prepared and presented to the respective Boards of
26
Directors of the subsidiary banks on a quarterly basis. The report monitors
interest rate-sensitive assets and liabilities so as to minimize the impact of
substantial movements in interest rates on earnings. An asset or liability is
considered to be interest rate-sensitive if it will reprice or mature within the
time period analyzed, usually one year or less. The interest rate-sensitivity
gap is the difference between the interest-earning assets and interest-bearing
liabilities scheduled to mature or reprice within such time period. A gap is
considered positive when the amount of interest rate-sensitive assets exceeds
the amount of interest rate-sensitive liabilities. A gap is considered negative
when the amount of interest rate-sensitive liabilities exceeds the interest
rate-sensitive assets. During a period of rising interest rates, a negative gap
would tend to adversely affect net interest income, while a positive gap would
tend to result in an increase in net interest income. Conversely, during a
period of falling interest rates, a negative gap would tend to result in an
increase in net interest income, while a positive gap would tend to adversely
affect net interest income. If Community Capital's assets and liabilities were
equally flexible and moved concurrently, the impact of any increase or decrease
in interest rates on net interest income would be minimal.
A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, Community Capital also evaluates how the repayment of
particular assets and liabilities is impacted by changes in interest rates.
Income associated with interest-earning assets and costs associated with
interest-bearing liabilities may not be affected uniformly by changes in
interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on net interest income. For example,
although certain assets and liabilities may have similar maturities or periods
of repricing, they may react in different degrees to changes in market interest
rates. Interest rates on certain types of assets and liabilities fluctuate in
advance of changes in general market rates, while interest rates on other types
may lag behind changes in general market rates. In addition, certain assets,
such as adjustable-rate mortgage loans, have features (generally referred to as
"interest rate caps and floors") which limit changes in interest rates.
Prepayment and early withdrawal levels also could deviate significantly from
those assumed in calculating the interest rate gap. The ability of many
borrowers to service their debts also may decrease during periods of rising
interest rates.
Changes in interest rates also affect Community Capital's liquidity
position. Community Capital currently prices deposits in response to market
rates, and it is management's intention to continue this policy. If deposits are
not priced in response to market rates, a loss of deposits could occur which
would negatively affect Community Capital's liquidity position.
At March 31, 2004, Community Capital's cumulative one-year interest
rate-sensitivity gap ratio was 78%. Community Capital's targeted ratio is 80% to
120% in this time horizon. This indicates that Community Capital's
interest-earning liabilities will reprice during this period at a faster rate
than its interest-bearing assets. Community Capital is outside its targeted
parameters. Community Capital has a substantial amount of certificates of
deposit repricing in the first half of 2004. Management believes that these
deposits can be repriced at the current low rates for an extended period.
Management believes that as long as it pays the prevailing market rate on these
type deposits, Community Capital's liquidity, while not assured, will not be
negatively affected.
The following table sets forth the distribution of the repricing of
Community Capital's interest-earning assets and interest-bearing liabilities as
of March 31, 2004; the interest rate-sensitivity gap; the cumulative interest
rate-sensitivity gap; the interest rate-sensitivity gap ratio; and the
cumulative interest rate-sensitivity gap ratio. The table also sets forth the
time periods in which earning assets and liabilities will mature or may reprice
in accordance with their contractual terms. However, the table does not
necessarily indicate the impact of general interest rate movements on the net
interest margin since the repricing of various categories of assets and
liabilities is subject to competitive pressures and the needs of
27
Community Capital's customers. In addition, various assets and liabilities
indicated as repricing within the same period may, in fact, reprice at different
times within such period and at different rates.
AT MARCH 31, 2004
-------------------------------------------------------------------------
MATURING OR REPRICING WITHIN
-------------------------------------------------------------------------
THREE
ZERO TO MONTHS ONE TO OVER
THREE TO ONE THREE THREE
MONTHS YEAR YEARS YEARS TOTAL
------------- --------------- -------------- ------------- --------------
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------
EARNING ASSETS:
Interest-bearing deposits in banks $ 236 $ - $ - $ - $ 236
Federal funds sold 13,790 13,790
Investment securities 1,250 1,389 4,277 21,027 27,943
Loans 29,622 19,684 36,474 25,168 110,948
------------- --------------- -------------- ------------- --------------
44,898 21,073 40,751 72,352 152,917
------------- --------------- -------------- ------------- --------------
INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits (1) 16,464 - 17,688 - 34,152
Savings (1) - - 5,683 - 5,683
Certificates of deposit 27,444 29,857 22,513 2,698 82,512
Guaranteed preferred beneficial interests
in junior subordinated debentures 4,124 - - - 4,124
Other borrowings 1,842 5,274 5,061 5,000 17,177
------------- --------------- -------------- ------------- --------------
49,874 35,131 50,945 7,698 143,648
------------- --------------- -------------- ------------- --------------
INTEREST RATE SENSITIVITY GAP $ (4,976) $ (14,058) $ (10,194) $ 38,497 $ 9,269
============= =============== ============== ============= ==============
CUMULATIVE INTEREST RATE SENSITIVITY GAP $ (4,976) $ (19,034) $ (29,228) $ 9,269
============= =============== ============== =============
INTEREST RATE SENSITIVITY GAP RATIO 0.90 0.60 0.80 6.00
============= =============== ============== =============
CUMULATIVE INTEREST RATE SENSITIVITY GAP RATIO 0.90 0.78 0.79 1.06
============= =============== ============== =============
(1) Community Capital has found that NOW checking accounts and savings
deposits are generally not sensitive to changes in interest rates and,
therefore, it has placed such liabilities in the "One to Three Years"
category.
28
BUSINESS
GENERAL
Community Capital Bancshares, Inc. is a multi-bank holding company
headquartered in Albany, Georgia. We were formed in August 1998 as a Georgia
corporation and currently serve as the holding company and sole shareholder of
Albany Bank & Trust and First Bank of Dothan. Our common stock is listed on the
Nasdaq SmallCap Market under the symbol "ALBY."
Albany Bank & Trust is a national bank that began its banking operations
on April 28, 1999. Since its opening, Albany Bank & Trust has grown to
approximately $142,052,000 in total assets as of March 31, 2004. During this
time Albany Bank & Trust has expanded its locations by adding branch offices in
Lee County, Georgia, east Albany and downtown Albany. In November 2003, we
expanded our market presence to Dothan, Alabama with our acquisition of First
Bank of Dothan, an Alabama state bank with total assets of approximately
$29,202,000 as of March 31, 2004. We believe that the Dothan market presents
opportunities similar to the Albany market and a potential for future growth.
We strive to provide superior customer service and maintain a friendly
"hometown" atmosphere for our customers. We believe that these features are our
competitive advantage in our local markets and have contributed to our growth
over the past five years. We provide a broad array of banking products through
our five branch locations, eight ATMs, Internet-based banking and telephone
banking. At March 31, 2004 we had total assets of $171,664,000, total deposits
of $135,541,000 and total shareholders' equity of $13,962,000. Future growth for
our company will be dependent upon a combination of internal growth within our
banks and external growth through new branch expansions to new markets or
acquisitions of existing banks in new markets.
OUR PAST PERFORMANCE. We believe that our performance over the past five
years is a result of our effective implementation of our business plan and is
indicative of our ability to execute our core banking business. From April 28,
1999 to March 31, 2004, we achieved strong growth in our banking business and
have achieved the following:
o Increased our diluted earnings per share from a loss of $0.52 in
1999 to $0.39 for the year ended 2003;
o Expanded our branch network from our original one location to
five locations; and
o Completed our acquisition of First Bank of Dothan in November
2003 and began the process of integrating First Bank of Dothan's
systems into ours.
OUR SUBSIDIARY BANKS. Our banking business is conducted through our two
subsidiary banks:
o ALBANY BANK & TRUST - A national bank with $142,052,000 in
assets as of March 31, 2004 that was chartered on April 28,
1999. This bank engages in commercial banking activities in
Dougherty and Lee counties, Georgia. The bank has three
full-service branches, a loan production office and an
operations center.
o FIRST BANK OF DOTHAN - A state bank chartered under the laws of
the State of Alabama that engages in commercial banking in
Houston County, Alabama. It has one full-service branch and
total assets of approximately $29,202,000 as of March 31, 2004.
In March 2004, First Bank of Dothan filed an application to
convert to a national bank. Regulatory approval of the
application is not expected prior to the closing of this
offering.
29
Our subsidiary banks each operate under their separate charters under
the corporate umbrella of Community Capital Bancshares, Inc. Each bank has its
own local board of directors and management comprised of persons known in the
local community. While the banks follow similar policies and procedures in the
areas of loan administration, budgeting, marketing, human resource management,
operations and funding, each bank maintains local decision-making capabilities.
The following table provides selected financial data for the subsidiary
banks as of March 31, 2004:
ALBANY BANK & TRUST FIRST BANK OF DOTHAN (1)
------------------- ------------------------
(BASED ON EACH BANK'S CALL REPORT AS OF MARCH 31, 2004, DOLLARS IN
THOUSANDS)
Total assets $142,052 $29,802
Total deposits $112,215 $23,522
Total loans, net of reserve $ 91,673 $17,319
Total shareholder's equity $ 13,387 $ 5,147
Net interest income $ 1,282 $ 409
Net Income $ 285 $ 62
(1) Results of operations are for the period from the acquisition date
through March 31, 2004.
OUR MARKET AREAS AND COMPETITIVE POSITION
The primary service areas for Community Capital are the Albany
Metropolitan Statistical Area (MSA) in southwest Georgia and the Dothan and the
Auburn-Opelika MSAs in southeast Alabama. Historically, Community Capital has
focused on the Albany MSA, including Dougherty and Lee counties. With the
acquisition of First Bank of Dothan, we have expanded westward into southeastern
Alabama, primarily to the Dothan MSA. Additionally, in February 2004, Albany
Bank & Trust opened a loan production office in the Auburn MSA, located between
Columbus, Georgia and Montgomery, Alabama on Interstate 85. Upon completion of
the offering, First Bank of Dothan plans, subject to regulatory approval, to
construct an office in the Auburn MSA and further strengthen its presence in
southeastern Alabama. Management believes its expansion into southeastern
Alabama will increase Community Capital's prospects for future growth and
diversify its business, making it is less dependent on one economic area.
ALBANY, GEORGIA AND THE ALBANY MSA
Dougherty and Lee counties are located in the Albany MSA, one of seven
in Georgia. Albany is located approximately 175 miles south of Atlanta and 100
miles north of Tallahassee, Florida. Five interstates are accessible via
four-lane highways extending from Albany in multiple directions. Albany is
considered to be the commercial center (hub) of southwest Georgia, with the
majority of the area's retail sales, medical services and transportation
activity conducted in its marketplace. Albany also has a broad industrial base.
The Albany MSA has a broad and diversified economic base and is home to
the Marine Corps Logistics Base, a Miller Brewing Company plant, a Merck
pharmaceutical plant, a Cooper Tire plant, a Procter & Gamble plant, and a large
medical facility. Albany presents a generally stable market area with good
growth prospects. The Albany MSA's median household income is $34,829. The
following table illustrates the economic diversification and top employers for
the area.
30
ALBANY'S LARGEST EMPLOYERS
--------------------------
COMPANY EMPLOYEES PRODUCT/SERVICE
------- --------- ---------------
Phoebe Putney Memorial Hospital 3,399 Medical Services
Dougherty County Board of Education 3,240 Education
USMC Logistic Base (Civilian) 2,400 Defense
Procter & Gamble 1,394 Paper Products
Cooper Tire & Rubber Co. 642 Tires
City of Albany 890 Government
Dougherty County 650 Government
Miller Brewing Co. 642 Malt Beverages
CallTech Communications, L.L.C. 625 Technical Support
Albany State University 550 Education
Coats & Clark 470 Textiles
Merck & Co. 467 Pharmaceuticals
According to the 2000 U.S. Census, the population base for the Albany
MSA was 120,822. According to the FDIC, the overall deposit base in the Albany
MSA increased from $834 million in 1999 to $1.3 billion in 2003, an annualized
growth rate of 11.5%. During this time span, Albany Bank & Trust's deposits in
this market area grew from $10 million to $103 million, an annualized growth
rate of 79%. As of June 30, 2003, there were 12 financial institutions serving
the Albany MSA, including five regional banks, six community banks and one
thrift. The top four institutions control approximately 87% of the MSA's deposit
base. Albany Bank & Trust is one of only two community banks headquartered in
the Albany MSA, and is the larger of the two. Since 1999, Albany Bank & Trust's
deposit market share has increased from 1.2% to 8.0% of the Albany MSA,
representing the largest increase amongst all financial institutions in the
market.
DOTHAN, ALABAMA AND THE DOTHAN MSA
Dothan is located approximately 90 miles southwest of Albany, Georgia
and 90 miles southeast of Montgomery, Alabama. The city serves as a retail hub
for approximately 500,000 people within a 90-mile radius which includes
southeastern Alabama as well as parts of Florida and Georgia. The Dothan area is
home to numerous industrial parks that offer an array of industrial companies in
aviation, fabricated metals, distribution, customer service centers, food
products, electronics, machinery, and injection molding. Dothan's major
companies include Perdue Farms, Sony Magnetic Products, and Michelin. Like
Albany, Dothan also has a large medical community.
According to the 2000 U.S. Census, the population base for the Dothan
MSA was 137,916. According to the FDIC, the overall deposit base in the Dothan
MSA increased from $1.5 billion in 1999 to $1.6 billion in 2003, an annualized
growth rate of 2.5%. As of June 30, 2003, there were 14 financial institutions
serving the Dothan MSA, including five regional banks and eight community banks.
The top five institutions control approximately 69% of the MSA's deposit base.
As of June 30, 2003, First Bank of Dothan's deposit market share was 1.5% of the
Dothan MSA.
AUBURN, ALABAMA AND THE AUBURN-OPELIKA MSA
Auburn is located in Lee County, adjacent to I-85 and approximately 35
miles northwest of Columbus, Georgia and 55 miles east of Montgomery, Alabama.
Auburn's population base and economy are heavily influenced by the student
population (22,000) at Auburn University, Alabama's largest university and the
city's largest employer. According to the 2000 U.S. Census, the population base
31
for the Auburn-Opelika MSA was 115,092. According to the FDIC, the overall
deposit base in the Auburn-Opelika MSA increased from $978 million in 1999 to
$1,232 million in 2003, an annualized growth rate of 5.9%. As of June 30, 2003,
there were 12 financial institutions serving the Auburn-Opelika MSA, including
six regional banks, five community banks and one thrift. The top five
institutions control approximately 75% of the MSA's deposit base.
OUR STRATEGY
Ultimately, our success depends on our ability to excel as bankers in
our market areas. As smaller community banking organizations, our banks are
unable to compete with larger banks purely on a pricing basis. We must
differentiate ourselves from larger banks by providing superior customer
service. This is accomplished by providing a warm, friendly atmosphere for
customers entering our banks; prompt service to our customers by knowledgeable
bank staff; and prompt resolution of customer problems. By gaining our
customers' acceptance and developing our reputation as a hometown bank, we hope
to gain repeat business as well as referrals from existing customers. Prompt,
friendly service has been a way of life at Albany Bank & Trust since it opened
and will be transferred to the staff at First Bank of Dothan as they are
integrated into Community Capital.
OPERATING STRATEGIES. In order to accomplish our overall objective of
establishing our banks as leading community banks in our market areas, our
operating strategies are:
o TOTAL CUSTOMER SERVICE. Our position as a small community
banking organization provides us the flexibility to provide
innovative products to our customers in a faster, friendlier
manner than the larger, less autonomous competitors. Final
decisions regarding loan approval and other matters are made at
the local level without requiring approval from out-of-town
"home offices." As a result, we believe we are able to execute
transactions more efficiently than our competitors, which allows
us to provide a higher level of service and satisfaction to our
customers.
Since beginning our banking business in 1999, we have utilized
new technologies such as imaged statements and other imaging
products to provide more efficient service to our customers.
Additionally, we have provided customers with expanded access to
their accounts and our financial services through Internet and
telephone banking, courier services, conveniently located ATMs
and loan production offices.
o DISCIPLINED LENDING. While providing prompt and efficient
service to our customers, we still must ensure that the quality
of our loan portfolio remains at a high level. Since inception,
we have strived to generate relationships with high-quality
borrowers. We believe this lending approach is reflected in our
low number of past-due and non-performing loans. Our lenders
constantly monitor the quality of the loan portfolio and take
actions as appropriate to identify and correct loans which
deteriorate.
GROWTH STRATEGIES. Until 2003, we focused on internal growth through
developing and enhancing banking relationships in the Albany market. This
strategy served us well, as demonstrated by the growth in assets and deposits
over our first four years. Beginning in 2003, we began to explore opportunities
to expand outside of the Albany market area. In November 2003, we finalized the
acquisition of First Bank of Dothan. As we continue to mature, we are committed
to growth through both internal and external sources. Our growth strategies are:
o ENHANCING EXISTING RELATIONSHIPS. We believe our most efficient
way to grow is to expand relationships with current customers.
Our friendly atmosphere provides an
32
incentive for the customer to return for additional services.
Our staff is coached on the benefits of cross-selling and making
every effort to enhance existing relationships by providing
additional services to our customers.
o ADDITION OF MARKET SHARE. Since our opening in 1999, our major
source of growth has been the addition of new customers. Our
staff of experienced local bankers has aggressively sought out
new customers. Our focus is on small- to medium-sized businesses
and consumers who desire the additional personal attention that
we provide. We obtain this business through personal contact
with these customers and develop these relationships further by
using our ability to provide personal attention and timely local
decisions to their requests. We believe these traits enable us
to gain business from the regional and super-regional banks in
our area.
o GROWTH BY ACQUISITION. We will continue to seek and evaluate
potential acquisition opportunities as they arise. We completed
our first acquisition in November 2003 when we acquired First
Bank of Dothan. We continue to integrate this bank into our
systems and instill our sales and customer service culture in
its staff. We believe that by merging with institutions in new
market areas, we can diversify our geographic risks in the loan
portfolio. Any future potential acquisitions will be evaluated
based upon our ability to gain market share in the new market
and the potential impact of the acquisition on our overall
performance. We believe that the following areas present
opportunities for future expansion:
o the panhandle area of Florida from Apalachicola westward
to Pensacola;
o other metropolitan areas in Georgia outside of the
Atlanta area; and
o further expansion in Alabama in high-growth areas.
COMPETITION
We believe the major competitive factors in the financial industry are
convenience, pricing, breadth of products and customer service. The majority of
our competitors are regional and super-regional banks. These banks enjoy a
competitive advantage in terms of number of locations and pricing. We feel that
these advantages are offset by our superior customer service and our ability to
leverage our technology to provide services to our customers. Our systems allow
us to provide our customers with products that are comparable to those of larger
banks.
The maximum amount we can lend to any one borrower is limited by our
subsidiary banks' capital. Many of our larger competitors have much higher
lending limits than we do. If a customer's borrowing needs exceed our lending
limit, we participate the excess amount either with our banks or another
community bank. Since our target market is the small- to mid-sized business, our
customers' borrowing requirements rarely exceed our lending limits.
According to FDIC deposit data as of June 30, 2003, the Albany, Dothan
and Auburn-Opelika MSAs had total deposits of $4.1 billion. Of this amount,
approximately 65% was controlled by regional and super-regional financial
institutions, including SunTrust Banks, Inc., Regions Financial Corp., Compass
Bancshares, Inc., Synovus Financial Corp., and SouthTrust Corp. Despite these
competitors' considerable resources, we have gained market share in these
markets through our emphasis on customer service. At June 30, 2003, Community
Capital had a market share in its combined markets of approximately 3.0%. At
that time, Albany Bank & Trust had a market share in the Albany MSA of
approximately 8.0%, while First Bank of Dothan had a market share in the Dothan
MSA of 1.5%. We believe there is significant potential for growth in the Dothan
and Auburn-Opelika MSAs as we establish ourselves in these markets.
33
LENDING SERVICES
We offer the following types of loans to our customers:
o REAL ESTATE CONSTRUCTION. Our construction loan portfolio
consists of loans made for residential and non-agricultural,
commercial construction loans. The majority of these loans are
made on a pre-sold basis where the purchaser has already
obtained permanent financing for the completed building. A
smaller number of construction loans are made to contractors for
speculative purposes. The creditworthiness and financial
capabilities of the contractor play a major factor in the
decision to make these loans. At March 31, 2004, total
construction loans constituted 10.22% of our loan portfolio.
o REAL ESTATE MORTGAGE. Loans secured by one- to four-family
residential buildings comprise the largest portion of our loans.
These include any loan which has collateral consisting of one-
to four-family buildings. These loans may either be first or
junior lien positions. In many cases, we will take a lien
position on a business owner's other assets to ensure we have
additional collateral on the loan. We do not make 30-year
fixed-rate mortgages. Our real estate loans are either
floating-rate loans or loans that have a final maturity of less
than ten years. These loans constituted 35.74% of our loan
portfolio at March 31, 2004.
o COMMERCIAL, FINANCIAL, AND AGRICULTURAL. We make commercial
loans to qualified businesses in our market areas. This portion
of our portfolio primarily represents loans to businesses in
order to finance accounts receivable, inventory, and fixed-asset
expansion. Borrowers in this category are evaluated based upon
their cash flows to ensure there will be sufficient funds
generated to repay the loans. Additional collateral may be taken
on these loans to protect our position in the event that the
borrower's cash flow proves insufficient to repay the loan. To a
lesser extent we will make loans for agricultural purposes or
the financing of farmland. These loans are also evaluated using
the same cash flow criteria as commercial loans. These loans
constituted 42.65% of our loan portfolio at March 31, 2004.
o LOANS TO INDIVIDUALS. This portion of our portfolio consists of
loans to individuals for personal, family and household
purposes. These loans involve a high degree of risk due to the
nature of the collateral and the potential for insolvency or
bankruptcy of the borrower. Loans to individuals are evaluated
based upon the borrower's past performance and current ability
to repay the loan. At March 31, 2004, these loans constituted
11.39% of our loan portfolio.
We originate loans with a variety of terms, both fixed and floating
rate. In all cases, we emphasize the use of real estate as collateral due to its
inherent value. We emphasize loans in our market areas, but we occasionally make
loans outside of the market area to known customers or through correspondent
banks. This contributes to the geographic diversity of our portfolio, although
there are some additional risks due to the distance of the borrower or the
collateral from us. Loans outside of our market area are evaluated using our
normal credit standards.
Our loan portfolio represents the largest earning asset on our balance
sheet. The risks of lending are offset in part by our careful evaluation of
potential borrowers and by pricing the loans based upon the risks involved. At
December 31, 2003 and 2002, loans net of unearned income were $109,589,000 and
34
$81,712,000, respectively. This represents an increase in total loans of
$27,877,000, or 34%, from 2002 to 2003. These amounts represent 69% and 75% of
total assets, respectively. Of the increase, $18,000,000 was the result of the
acquisition of First Bank of Dothan. We strive to identify and properly account
for potential uncollectible loans in our portfolio. We do this by creating an
allowance for uncollectible loans with a corresponding charge to earnings. As of
the previous two year-ends, the allowance represented 1.93% and 1% of gross
loans for 2003 and 2002, respectively. The increase in the allowance in 2003
relates to the acquisition of First Bank of Dothan. Our earning assets,
including loans, are tied to the overall interest rate environment in the
economy. Our yield on loans has declined in the past year in response to the
overall economic conditions. The yield on loans declined to 6.75% in 2003 from
7.40% in 2002. By managing our cost of funds, we maintained our net interest
margin at 3.83% for both years.
The following table presents the amount of loans outstanding by category
in dollars and percent of loans for the past five years:
2003 2002 2001 2000 1999
TYPE Dollars % of Dollars % of Dollars % of Dollars % of Dollars % of
($000s) Total ($000s) Total ($000s) Total ($000s) Total ($000s) Total
Commercial 23,776 21.7% 14,553 17.8% 6,842 11.1% 10,037 26.0% 4,457 22.7%
Real estate 9,938 9.1% 12,379 15.2% 9,903 16.0% 1,585 4.1% 750 3.8%
construction
Real estate
farmland 2,737 2.5% 2,416 3.0% 1,859 3.0% -- -- -- --
Real estate 59,143 54.1% 40,743 50.0% 33,110 53.6% 20,710 53.6% 10,780 55.0%
mortgage
Individuals (and 13,795 12.6% 11,457 14.0% 10,087 16.3% 6,293 16.3% 3,621 18.5%
other)
Total 109,389 100% 81,548 100% 61,801 100% 38,625 100% 19,608 100%
The concentration of loans in the real estate sector results in our
obtaining high-quality collateral to secure the loans.
LENDING LIMITS. When the amount of loans to a single borrower exceeds an
individual lender's limit, the loan must be approved by a more experienced
officer with a higher limit or the respective bank's loan committee.
Lending limits vary based upon the type of loan and the borrower. In
general, under banking regulations, each bank is limited by its capital to the
amount it can extend to any one borrower. Generally, these limits provide that
no more than 15% of the bank's capital can be extended to any one borrower, plus
up to an additional 10% of the bank's capital, provided the amount that exceeds
10% is secured by readily marketable collateral. Because of our ability to sell
participations between our banks, we can combine our limits to extend larger
loans if we so desire. At March 31, 2004, our internally established lending
limits, which are below the regulatory limits, to any one borrower were $2
million for Albany Bank & Trust and $700,000 for First Bank of Dothan. We
believe that this amount provides us the ability to properly serve our
customers. While this is the total legal limit we are allowed, we base the total
lending to any once customer on their ability to repay and financial condition.
All loans are assigned a grade, based on the quality of the credit. These grades
are reviewed regularly by our lenders, bank examiners and third party loan
reviewers, and ratings are adjusted based upon the borrower's history and
financial condition.
35
UNDERWRITING. We have lenders of varying experience and expertise. Our
senior lenders are the primary contact points for our major loan customers.
These lenders are supported by the credit administration officer at the holding
company. These three people alone have 60 years of combined lending experience.
We have developed a credit underwriting and monitoring system. A portion of each
lender's annual bonus is based on generating new loans which meet these
guidelines.
MEMORANDUM OF UNDERSTANDING. On January 9, 2003, prior to its
acquisition by Community Capital, First Bank of Dothan entered a Memorandum of
Understanding with the FDIC and the Alabama State Banking Department primarily
regarding First Bank of Dothan's lending practices. Pursuant to the Memorandum
of Understanding, First Bank of Dothan has designated a qualified chief lending
officer, developed a definitive and strengthened loan review and grading
program, reduced the balance of its assets classified as substandard and
doubtful, and implemented an amended written loan policy and exception
procedures and reporting. Under the terms of the Memorandum of Understanding,
First Bank of Dothan is required to maintain a Tier 1 Leverage Capital ratio of
not less than 8% and may not pay any cash dividends without the prior written
consent of the FDIC and the Alabama State Banking Department. We believe First
Bank of Dothan has complied with the terms of the Memorandum of Understanding
and plan to request that it be terminated.
36
PRINCIPAL SHAREHOLDERS AND
STOCK OWNERSHIP OF MANAGEMENT
The following table lists, as of April 30, 2004, the number of shares
common stock beneficially owned by: (a) each current director of Community
Capital; (b) each executive officer listed in the Summary Compensation Table;
and (c) all current executive officers and directors as a group. The information
shown below is based upon information furnished to Community Capital by the
named persons. Additionally (unless otherwise indicated), the business address
for each person listed below is 2815 Meredyth Drive, Albany, Georgia 31707.
Information relating to beneficial ownership of Community Capital is
based upon "beneficial ownership" concepts described in the rules issued under
the Securities Exchange Act of 1934, as amended. Under these rules, a person is
deemed to be a "beneficial owner" of a security if that person has or shares
"voting power," which includes the power to vote or to direct the voting of the
security, or "investment power," which includes the power to dispose or to
direct the disposition of the security. Under the rules, more than one person
may be deemed to be a beneficial owner of the same securities. A person is also
deemed to be a beneficial owner of any security as to which that person has the
right to acquire beneficial ownership within 60 days after April 30, 2004.
Unless otherwise indicated in the "Nature of Beneficial Ownership" column, each
person is the record owner of and has sole voting and investment power with
respect to his or her shares.
NUMBER OF SHARES
SUBJECT TO
OPTIONS/WARRANTS AGGREGATE
NUMBER OF EXERCISABLE NUMBER OF PERCENT NATURE OF
NAME AND ADDRESS SHARES WITHIN 60 DAYS SHARES OF CLASS BENEFICIAL OWNERSHIP
---------------- ------ -------------- ------ -------- --------------------
DIRECTORS:
Robert M. Beauchamp 28,571 22,138 50,709 2.9
Bennett D. Cotten, Jr. 14,285 14,995 29,280 1.7
Glenn A. Dowling 21,428 22,138 43,566 2.5
Mary Helen Dykes 4,762 14,995 19,757 1.2
Charles M. Jones, III 43,657 39,995 83,652 4.8
Van Cise Knowles 43,476 4,996 48,472 2.8 Includes 23,571 shares held
in an IRA for the benefit of
Mr. Knowles.
C. Richard Langley 26,242 13,924 40,166 2.3 Includes 20,742 shares held
in an IRA for the benefit of
Mr. Langley.
37
NUMBER OF SHARES
SUBJECT TO
OPTIONS/WARRANTS AGGREGATE
NUMBER OF EXERCISABLE NUMBER OF PERCENT NATURE OF
NAME AND ADDRESS SHARES WITHIN 60 DAYS SHARES OF CLASS BENEFICIAL OWNERSHIP
---------------- ------ -------------- ------ -------- --------------------
Robert E. Lee 92,457 84,285 176,742 9.9 Includes 48,842 shares held
in an IRA for the benefit of
Mr. Lee and 857 shares held
jointly with Mr. Lee's
spouse.
Corinne C. Martin 42,782 13,638 56,420 3.3 Includes 4,284 shares held
by Ms. Martin as trustee for
grandchildren and 8,570
shares held by Ms. Martin as
trustee for her children as
to which beneficial
ownership is shared.
William F. McAfee 21,428 22,138 43,566 2.5
Mark M. Shoemaker 21,428 22,138 43,566 2.5
Jane Anne D. Sullivan 28,570 22,138 50,708 2.9 Includes 7,142 shares owned
by Ms. Sullivan's children
as to which beneficial
ownership is shared.
John P. Ventulett, Jr. 29,764 14,995 44,759 2.6
Lawrence B. Willson 21,428 22,138 43,566 2.5
James D. Woods 21,428 22,138 43,566 2.5 Includes 21,428 shares held
in a profit sharing plan for
the benefit of Dr. Woods.
EXECUTIVE OFFICERS* :
David J. Baranko 4,734 7,714 12,448 0.7 Includes 4,428 shares held
in an IRA for the benefit of
Mr. Baranko.
David C. Guillebeau 10,241 32,000 42,241 2.4
ALL DIRECTORS AND 476,681 396,503 873,184 41.6
EXECUTIVE OFFICERS, AS A
GROUP
5% SHAREHOLDERS:
Estate of Oscar Lantinga 100,867 0 100,867 5.9
508 Collingswood Dr.
Dothan, AL 36301
-------------------------
* Mr. Jones and Mr. Lee are also executive officers of Community Capital.
38
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table shows for each director: (a) his or her name; (b)
his or her age at December 31, 2003; (c) how long he or she has been a director
of Community Capital; (d) his or her position(s) with Community Capital, other
than as a director; and (e) his or her principal occupation and recent business
experience for the past five years. Each of the directors listed below is also a
director of Albany Bank & Trust.
DIRECTOR POSITION WITH COMMUNITY CAPITAL
NAME (AGE) SINCE AND BUSINESS EXPERIENCE
------------------------------------------ ----- --------------------------------------------------------------
Robert M. Beauchamp (41) 1998 Attorney, Beauchamp & Associates, LLC
Bennett D. Cotten, Jr. (50) 1998 Orthopedic Surgeon, Southwest Georgia Orthopedic and
Sports Medicine
Glenn A. Dowling (71) 1998 Podiatrist, Managing Partner, Ambulatory Surgery Center and
Albany Podiatry Associates; Business Owner and Developer,
Partridge Pea Plantation
Mary Helen Dykes (53) 1998 Business Owner/Administrator, Secretary and Treasurer,
Bob's Candies, Inc.
Charles M. Jones, III (53) 1998 Chairman of the Board of Directors of Community Capital
and Albany Bank & Trust; Chief Executive Officer of
Community Capital; Director of First Bank of Dothan; Chief
Executive Officer, Consolidated Loan & Mortgage Co. and
affiliated companies
Van Cise Knowles (63) 1998 Surgeon, Van C. Knowles M.D., P.C.
C. Richard Langley (55) 1998 Attorney, Langley & Lee
Robert E. Lee (1) (51) 1998 President of Community Capital and Albany Bank & Trust;
Chief Executive Officer of Albany Bank & Trust; Director of
First Bank of Dothan
Corinne C. Martin (61) 1998 Ownership interest in and President of Three Sisters, Inc.,
farming and timber property; Owner of Dunaway Enterprises,
real estate investment company; Owner of Covey Pointe
Shooting Preserve, commercial hunting property
William F. McAfee (66) 1998 Business Owner, Bill McAfee Leasing, commercial truck
lessor; Sales Manager, Allstar International, commercial truck
dealership; Manager, Fowltown Farms
Mark M. Shoemaker (49) 1998 Medical Doctor, Albany Anesthesia Associates
Jane Anne D. Sullivan (44) 1998 Business Owner, Buildings Exchange, a real estate holding
company
39
DIRECTOR POSITION WITH COMMUNITY CAPITAL
NAME (AGE) SINCE AND BUSINESS EXPERIENCE
------------------------------------------ ----- --------------------------------------------------------------
John P. Ventulett, Jr. (55) 1998 Executive Insurance Agent, Vice President, JSL/Howard
Ventulett & Bishop Insurors of Albany
James D. Woods (60) 1998 Medical Doctor, Drs. Adams and Woods, M.D. P.C. Medical
Practice
Lawrence B. Willson (53) 1998 Business Administrator, Vice President and Farm Manager,
Sunnyland Farms, Inc.
-------------------------
(1) Mr. Lee has served as President of Community Capital since August 1, 1998.
Prior to becoming an officer of Community Capital, Mr. Lee served as
Executive Vice President and Chief Financial Officer of a community bank.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to Community Capital for
the fiscal years 2003, 2002 and 2001 of our Chief Executive Officer, President
and Executive Vice President. No other executive officer received a combined
payment of salary and bonus in excess of $100,000 for services rendered to
Community Capital during 2003.
SUMMARY COMPENSATION TABLE
Annual Compensation(1) Long-Term Compensation Awards
----------------------------------------------- -----------------------------------
All Other
Compensation Salary Bonus Number of Securities Compensation
Name and Position Year ($) ($) Underlying Options ($)
----------------- -------------- --- ------- ------------------ ------------
Charles M. Jones, III, 2003 0 0 285 0
Chief Executive Officer 2002 0 0 285 0
2001 0 0 285 0
Robert E. Lee, 2003 160,600 83,717 25,000 10,340 (2)
President 2002 141,085 57,722 0 7,425 (2)
2001 128,260 35,171 0 6,850 (2)
David D. Guillebeau, 2003 101,609 14,000 10,000 5,018 (3)
Executive Vice President 2002 94,800 5,849 0 4,752 (3)
2001 90,900 8,208 0 4,526 (3)
-------------------------
(1) We have omitted information on perquisites and other personal benefits
because the aggregate value of these items does not meet the minimum amount
required for disclosure under the Securities and Exchange Commission
regulations.
(2) Includes a matching contribution to Mr. Lee's 401(k) plan of $5,500, $5,500
and $4,746 in 2003, 2002 and 2001, respectively, and premiums paid on a
term life insurance policy for the benefit of Mr. Lee of $4,480, $1,905 and
$1,325 in 2003, 2002 and 2001, respectively.
(3) Includes a matching contribution to Mr. Guillebeau's 401(k) plan of $5,018,
$4,752 and $4,526 in 2003, 2002 and 2000, respectively.
40
STOCK OPTION GRANTS IN FISCAL 2003
The following table set forth information at December 31, 2003, and for
the fiscal year then ended, concerning stock options granted to the executive
officers listed in the Summary Compensation Table. We have not granted any stock
appreciation rights, restricted stock or stock incentives other than stock
options.
Percent of
Number of Total Options
Securities Granted to
Underlying Employees in Exercise Price
Name Options Granted Fiscal Year Per Share Expiration Date
--------------------- --------------- ------------- --------------- ---------------
Charles M. Jones, III 285 0.37% $13.97 5/15/2013
Robert E. Lee 25,000 19.45% $13.97 5/15/2013
David C. Guillebeau 10,000 12.96% $10.18 2/24/2013
AGGREGATED OPTION EXERCISES IN FISCAL 2003 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information at December 31, 2003, and for
the fiscal year then ended, concerning stock options held by the executive
officers listed in the Summary Compensation Table. The listed executive officers
did not exercise any options to purchase common stock of Community Capital
during 2003.
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money Options at
Shares Options December 31, 2003 (1)
Acquired on Value ---------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
--------------------- ---------- -------- ----------- ------------- ----------- -------------
Charles M. Jones, III 0 -- 18,282 4,286 $83,659 $19,928
Robert E. Lee 0 -- 60,000 40,000 $300,000 $75,000
David C. Guillebeau 0 -- 24,000 16,000 $168,000 $143,800
(1) Calculated as the aggregate positive spread between the exercise price of
any such existing options and the year-end price ($12.00 per share) of Community
Capital's common stock.
OPTION GRANT UPON COMPLETION OF OFFERING
On April 26, 2004, our Board of Directors approved the grant, upon the
closing of this offering, to our president, Robert E. Lee, of an option to
purchase a number of shares of our common stock equal to 5% of the shares sold
in this offering with an exercise price equal to the public offering price. The
option will be granted under our 1998 Stock Incentive Plan as of the close of
this offering and will become exercisable in 20% annual increments beginning on
the first anniversary of the closing date. The option will remain exercisable
for the ten-year period following the closing date or for 90 days after the
option holder ceases to be employed by Community Capital, whichever is shorter.
The exercise price of the option will be subject to adjustment for stock splits,
recapitalizations or other similar events.
EQUITY COMPENSATION PLANS
The table below sets forth information regarding shares of Community
Capital common stock authorized for issuance under the following Community
Capital equity compensation plans and agreements:
41
o Community Capital Bancshares, Inc. 1998 Stock Incentive Plan;
o Community Capital Bancshares, Inc. 2000 Outside Directors' Stock
Option Plan;
o Community Capital Bancshares, Inc. Non-qualified Stock Option
Agreement with Charles M. Jones, III;
o Community Capital Bancshares, Inc. Non-qualified Stock Option
Agreement with Richard Bishop;
o Community Capital Bancshares, Inc. Restated Employee Stock
Purchase Plan; and
o Community Capital Bancshares, Inc. Non-qualified Stock Option
Agreements with David Baranko, David Guillebeau, Paul Joiner,
Rosa Ramsey, and La Donna Urick.
The 1998 Stock Incentive Plan was approved by shareholders on March 11,
1999. None of the other equity compensation plans or agreements listed above has
been approved by Community Capital's shareholders. Each of those plans or
agreements is described below.
Number of securities
remaining available for
future issuance under
the equity
Number of securities Weighted-average compensation plans
to be issued upon exercise price of (excluding shares
exercise of outstanding outstanding options subject to outstanding
options and warrants and warrants options)
----------------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved by security
holders 147,853 8.22 155,721
Equity compensation plans not approved by
security holders 368,872 7.50 12,725
Total 516,725 7.70 168,446
2000 OUTSIDE DIRECTORS' STOCK OPTION PLAN. The 2000 Outside Directors'
Stock Option Plan was adopted by the Board of Directors on April 24, 2000. This
plan is not subject to the Employment Retirement Income Security Act of 1974,
nor is it qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended. The 2000 Outside Directors' Stock Option Plan provides for the
issuance of non-qualified stock options to members of the Board of Directors who
are not employees of Community Capital or any of its affiliates and the Chairman
of the Board of Directors, regardless of whether he is an employee of Community
Capital. Community Capital has reserved up to 21,429 shares of Community
Capital's common stock for issuance under this plan upon exercise of an option.
This number may change in the event of future stock dividends, stock splits,
recapitalizations and similar events. If an option expires or terminates without
being exercised, the shares subject to the unexercised portion of the option may
again be available for awards under the 2000 Outside Directors' Stock Option
Plan. The purpose of this plan is to promote in its non-employee directors
personal interest in the welfare of Community Capital and provide incentives to
the individuals who are primarily responsible for shaping and carrying out the
long-term plans of Community Capital.
The 2000 Outside Directors' Stock Option Plan provides for an annual
grant of an option to purchase 142 shares of Community Capital's common stock to
the existing non-employee directors and an option to purchase 285 shares of
Community Capital's common stock to the Chairman of the Board as of the date of
each annual shareholders' meeting. Options granted pursuant to this plan are
generally nontransferable except by will or the laws of descent and distribution
unless otherwise permitted by the
42
Board of Directors. These options are fully vested and exercisable immediately,
subject to any restriction imposed by the primary federal regulator of Community
Capital. The exercise price of these options must be equal to the fair market
value of the common stock on the date the option is granted. The term of the
options may not exceed ten years from the date of grant. If a participant ceases
to be a director of Community Capital or any affiliate, the options expire,
terminate and become unexercisable no later than 90 days after the date the
participant ceases to provide such services.
NON-QUALIFIED STOCK OPTION AGREEMENT WITH CHARLES M. JONES, III. On
November 15, 1999, Mr. Jones was granted an option to purchase 21,429 shares of
Community Capital's common stock at an exercise price of $7.35 per share, as
adjusted to reflect Community Capital's ten-for-seven stock split effective in
January 2001. This option vests in 20% equal increments over five years
beginning on the first anniversary of the grant date for so long as Mr. Jones
serves as a director of Community Capital or any of its affiliates. The option
will be come fully vested if Mr. Jones retires on or after he reaches age 65 or
upon a change in control of Community Capital. The option will expire on the
tenth anniversary of the grant date or, if earlier, 90 days after Mr. Jones
ceases to be a director of Community Capital or any affiliate.
NON-QUALIFIED STOCK OPTION AGREEMENT WITH RICHARD BISHOP. On April 11,
2000, Mr. Bishop was granted an option to purchase 12,143 shares of Community
Capital's common stock at an exercise price of $7.00 per share, as adjusted to
reflect Community Capital's ten-for-seven stock split effective in January 2001.
This option vests in 20% equal increments over five years beginning on the first
anniversary of the grant date for so long as Mr. Bishop serves as an employee of
Community Capital or any of its affiliates. The option will be come fully vested
if Mr. Bishop retires on or after he reaches age 65 or upon a change in control
of Community Capital. The option will expire on the tenth anniversary of the
grant date or, if earlier, 90 days after Mr. Bishop ceases to be employee of
Community Capital or any affiliate.
NON-QUALIFIED STOCK OPTION AGREEMENT WITH MEMBERS OF MANAGEMENT. On
February 23, 2003, Community Capital granted five members of management options
to purchase an aggregate of 50,000 shares of Community Capital's common stock at
an exercise price of $10.18 per share. These options vest in 20% equal
increments over five years beginning on the first anniversary of the grant date
for so long as the individual serves as an employee of Community Capital or any
of its affiliates. The options will become fully vested if there is a change in
control of Community Capital. The options will expire on the tenth anniversary
of the grant date or, if earlier, 90 days after the optionee ceases to be
employee of Community Capital or any affiliate. Since the options were only
granted to officers of Community Capital and the Bank, the option grants did not
involve a public offering, and therefore were exempt from registration under
Section 4(2) of the Securities Act of 1933.
RESTATED EMPLOYEE STOCK PURCHASE PLAN. The Employee Stock Purchase Plan
enables eligible employees to purchase shares of Community Capital common stock
through payroll deductions. An employee is eligible to participate in the
Employee Stock Purchase Plan if that employee is a resident of Georgia and is
employed in a position that customarily requires at least 20 hours of work per
week. Under the Employee Stock Purchase Plan, employee payroll deductions are
combined with matching contributions made by Community Capital and used to
purchase shares of Community Capital common stock on behalf of the employee at
the end of each calendar quarter. The shares are purchased in the open market at
prevailing prices at the time of the purchase or may be purchased from Community
Capital at fair market value. Fair market value is determined by Community
Capital in good faith based on all relevant facts and circumstances as of the
date of purchase. If an employee terminates employment with Community Capital or
any affiliate or the employee no longer satisfies the eligibility requirements,
the employee's payroll deductions made under the Employee Stock Purchase Plan
that have not been used to
43
purchase shares of Community Capital's common stock will be returned to that
employee and any matching credits will be forfeited.
WARRANT AGREEMENTS WITH EACH OF COMMUNITY CAPITAL'S DIRECTORS. On March
11, 1999, Community Capital issued its directors warrants to purchase an
aggregate of 302,420 shares of Community Capital's common stock at $7.00 per
share, as adjusted to reflect Community Capital's ten-for-seven stock split
effective in January 2001. The warrants become exercisable in 20% annual
increments beginning on the first anniversary of the issuance date. Exercisable
warrants will remain exercisable for the ten-year period following the date of
issuance or for 90 days after the warrant holder ceases to be a director of
Community Capital, whichever is shorter. The exercise price of each warrant is
subject to adjustment for stock splits, recapitalizations or other similar
events. Additionally, if Albany Bank & Trust's capital falls below the minimum
level, as determined by the OCC, Community Capital may be directed to require
the directors to exercise or forfeit their warrants.
EMPLOYMENT AGREEMENTS
ROBERT E. LEE. On August 19, 1998, Community Capital and Albany Bank &
Trust entered into an employment agreement with Mr. Lee regarding Mr. Lee's
employment as Community Capital's President. The initial term of the agreement
began on August 1, 1998 and continued until July 31, 2003. At the end of the
initial five-year term and at the end of any extension of the term, the
agreement automatically extends for a period of 12 months, unless a party to the
agreement provides notice to the other parties that he or it does not intend to
extend the agreement.
Mr. Lee's base salary under the agreement during 2003 was $160,600 per
year. The Board of Directors is required to review the base salary amount
annually, and the base salary may be increased by an amount determined by the
Board of Directors. The agreement also provides that Mr. Lee is entitled to an
annual cash bonus based on Community Capital's consolidated earnings, provided
that the Board of Directors determines, according to reasonable safety and
soundness standards, that the overall financial condition of Albany Bank & Trust
will not be adversely affected by the payment of the bonus. Mr. Lee earned a
bonus of $83,717 during 2003. Additionally, the agreement requires Community
Capital to provide Mr. Lee with an automobile, health insurance, life insurance,
vacation time, reimbursement for reasonable business expenses, club memberships
and other customary benefits.
Generally, in the event Mr. Lee is terminated by Community Capital
without cause or Mr. Lee terminates his employment with cause, Community Capital
will be required to meet its obligations with respect to Mr. Lee's compensation
for a period equal to the greater of 12 months from the date of termination or
the remaining term of the agreement. In the event Community Capital terminates
Mr. Lee's employment due to his permanent disability, Community Capital will be
required to meet its obligations with respect to Mr. Lee's compensation for a
period of 12 months following the termination. If Mr. Lee terminates his
employment within six months following a change in control of Community Capital,
Mr. Lee will be entitled to a cash payment equal to 2.99 times his average base
salary for the preceding three years.
If Mr. Lee's employment is terminated by Community Capital with cause or
Mr. Lee terminates his employment without cause or upon a change in control, Mr.
Lee will generally be prohibited from competing with Albany Bank & Trust or
soliciting its customers or employees for a period of 12 months after the date
of termination.
DAVID C. GUILLEBEAU. On October 1, 1998, Community Capital and Albany
Bank & Trust entered into an employment agreement with Mr. Guillebeau regarding
his employment as Executive Vice President of Community Capital and Albany Bank
& Trust and Senior Loan Officer of Albany Bank &
44
Trust. The initial term of the agreement began on October 1, 1998 and continued
until September 30, 2001. At the end of the initial three-year term and at the
end of any extension of the term, the agreement automatically extends for a
period of 12 months, unless a party to the agreement provides notice to the
other parties that he or it does not intend to extend the agreement.
Mr. Guillebeau's base salary under the agreement during 2003 was
$101,609 per year. The President of Albany Bank & Trust is required to review
the base salary amount annually, and the base salary may be increased each year
by an amount determined by the President. The agreement also provides that Mr.
Guillebeau is entitled to an annual cash bonus based on criteria established by
the President of Albany Bank & Trust. Mr. Guillebeau earned a bonus of $14,000
during 2003. Additionally, the agreement requires Community Capital to provide
Mr. Guillebeau with an automobile, health insurance, vacation time,
reimbursement for reasonable business expenses, club memberships and other
customary benefits.
Generally, in the event Mr. Guillebeau is terminated by Community
Capital without cause or Mr. Guillebeau terminates his employment with cause,
Community Capital will be required to meet its obligations with respect to Mr.
Guillebeau's compensation for a period equal to the greater of 12 months from
the date of termination or the remaining term of the agreement. In the event
Community Capital terminates Mr. Guillebeau's employment due to his permanent
disability, Community Capital will be required to meet its obligations with
respect to Mr. Guillebeau's compensation for a period of 12 months following the
termination. If Mr. Guillebeau terminates his employment within six months
following a change in control of Community Capital, Mr. Guillebeau will be
entitled to a cash payment equal to the sum of his average base salary and cash
bonus for the preceding three years.
If Mr. Guillebeau's employment is terminated by Community Capital with
cause or Mr. Guillebeau terminates his employment without cause or upon a change
in control, Mr. Guillebeau will generally be prohibited from competing with
Albany Bank & Trust or soliciting its customers or employees for a period of 12
months after the date of termination.
DIRECTOR COMPENSATION
During 2003, directors of Community Capital received $250 for each board
meeting attended and $100 for each committee meeting attended. In April 2004, we
increased the amount that Community Capital directors receive for attending
board meetings to $500 per meeting.
On May 15, 2003, we granted our Chairman of the Board a non-qualified
option to purchase 285 shares of our common stock and granted every other
non-employee director a non-qualified option to purchase 142 shares of our
common stock for their service as directors during 2002. The options vested
immediately on the grant date, are exercisable at $13.97 per share, and have a
maximum term of ten years from the grant date.
Additionally, on April 26, 2004, we granted our Chairman of the Board a
non-qualified option to purchase 285 shares of our common stock and granted
every other non-employee director a non-qualified option to purchase 142 shares
of our common stock for their service as directors during 2003. The options
vested immediately on the grant date, are exercisable at $12.00 per share and
have a maximum term of ten years from the grant date.
On April 26, 2004, our Board of Directors approved in principle two
deferred compensation arrangements for directors. Under a deferred fee program,
directors will be permitted to defer up to 100% of their director and committee
fees each year. Under a deferred referral compensation program, directors will
be awarded annual fees for qualified referrals to our subsidiary banks. Under
both programs, the
45
contributions will accrue earnings based on a predetermined measurement, such as
a multiple of our return on assets, established by the Board on an annual basis.
The Board of Directors also approved the use of a bank-owned life insurance
instrument to fund the deferred compensation arrangements.
Directors of Albany Bank & Trust and First Bank of Dothan receive $500
for each board meeting and $100 for each committee meeting they attend.
CERTAIN TRANSACTIONS
From time to time our directors, officers and their affiliates,
including members of their families or businesses and other organizations with
which they are associated, may have banking transactions in the ordinary course
of business with our subsidiary banks. Our subsidiary banks' policies are that
any loans or other transactions with those persons or entities (a) are made in
accordance with applicable law and the bank's lending policies, (b) are made on
substantially the same terms, including price, interest rates and collateral, as
those prevailing at the time for comparable transactions with other unrelated
parties of similar standing, and (c) do not involve more than the normal risk of
collectibility or present other unfavorable features to Community Capital and
our subsidiary banks. In addition, all future transactions with our directors,
officers and their affiliates are intended to be on terms no less favorable than
could be obtained from an unaffiliated third party, and must be approved by a
majority of our directors, including a majority of the directors who do not have
an interest in the transaction.
On April 26, 2004, our Board of Directors approved the grant, upon the
closing of this offering, to our president, Robert E. Lee, of an option to
purchase a number of shares of our common stock equal to 5% of the shares sold
in this offering with an exercise price equal to the public offering. The option
will be granted under our 1998 Stock Incentive Plan as of the close of this
offering and will become exercisable in 20% annual increments beginning on the
first anniversary of the closing date. The option will remain exercisable for
the ten-year period following the closing date or for 90 days after the option
holder ceases to be employed by Community Capital, whichever is shorter. The
exercise price of the option will be subject to adjustment for stock splits,
recapitalizations or other similar events.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
Community Capital's Articles of Incorporation authorize Community
Capital to issue up to 10,000,000 shares of common stock, par value $1.00 per
share, of which up to 1,000,000 shares will be issued pursuant to this offering.
As of April 30, 2004, 1,765,264 shares of our common stock were issued and
1,701,115 shares were outstanding. As of April 30, 2004, 242,935 shares were
issuable upon exercise of outstanding stock options at a weighted average
exercise price of $8.94 per share; 266,135 shares were issuable upon exercise of
outstanding warrants at a weighted average exercise price of $7.00 per share;
and 148,315 additional shares were reserved for issuance pursuant to future
grants and awards under our stock incentive plans. Furthermore, a number of
shares equal to 5% of the number of shares sold in this offering will be subject
to an option that we intend to grant to our president, Robert E. Lee, upon
completion of this offering. This option will be granted under our 1998 Stock
Incentive Plan. See "Management--Option Grant Upon Completion of Offering," page
41.
All shares of common stock are entitled to share equally in dividends
from legally available funds when, as, and if declared by the Board of
Directors. Upon liquidation or dissolution of Community Capital, whether
voluntary or involuntary, all shares of common stock are entitled to share
equally in all assets of Community Capital available for distribution to the
shareholders. Each holder of common stock
46
will be entitled to one vote for each share on all matters submitted to the
shareholders. Holders of common stock will not have any preemptive right to
acquire authorized but unissued capital stock of Community Capital. There is no
cumulative voting, redemption right, sinking fund provision or right of
conversion in existence with respect to the common stock. All shares of the
common stock issued in accordance with the terms of the offering as described in
this prospectus will be fully paid and non-assessable.
PREFERRED STOCK
Community Capital's Articles of Incorporation also authorize the Board
of Directors to issue up to 2,000,000 shares of preferred stock, par value not
stated. The Board of Directors has the authority to determine the designations,
powers, preferences and relative rights of the preferred stock. Preferred stock
may have voting rights, subject to applicable law and determination by the Board
of Directors. No preferred stock has been issued. Although Community Capital has
no present plans to issue any preferred stock, the ownership and control of
Community Capital by the holders of the common stock would be diluted if
Community Capital were to issue preferred stock that had voting rights.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS
PROTECTIVE PROVISIONS
GENERAL. Shareholders' rights and related matters are governed by the
Georgia Business Corporation Code and Community Capital's Articles of
Incorporation and Bylaws. The Articles of Incorporation and the Bylaws of
Community Capital contain certain provisions which would have the effect of
impeding an attempt to change or remove management of Community Capital or to
gain control of Community Capital in a transaction not supported by its Board of
Directors. In general, one purpose of the protective provisions is to assist our
Board of Directors in playing a role in connection with attempts to acquire
control of Community Capital. The protective provisions allow our Board of
Directors to further and protect the interests of Community Capital and its
shareholders as appropriate under the circumstances, including if the Board of
Directors determines that a sale of control is in the best interests of
Community Capital and its shareholders by enhancing the Board's ability to
maximize the value to be received by the shareholders upon such a sale.
Although our management believes the protective provisions are
beneficial to Community Capital shareholders, the protective provisions also may
tend to discourage some takeover bids. As a result, Community Capital
shareholders may be deprived of opportunities to sell some or all of their
shares at prices that represent a premium over prevailing market prices. On the
other hand, defeating undesirable acquisition offers can be an expensive and
time-consuming process. To the extent that the protective provisions discourage
undesirable proposals, we may be able to avoid those expenditures of time and
money.
The protective provisions also may discourage open market purchases by a
potential acquirer. Such purchases may increase the market price of Community
Capital's common stock temporarily, enabling shareholders to sell their shares
at a price higher than that which otherwise would prevail. In addition, the
protective provisions may decrease the market price of Community Capital's
common stock by making the common stock less attractive to persons who invest in
securities in anticipation of price increases from potential acquisition
attempts. The protective provisions also may make it more difficult and
time-consuming for a potential acquirer to obtain control of Community Capital
through replacing the Board of Directors and management. Furthermore, the
protective provisions may make it more difficult for Community Capital
shareholders to replace the Board of Directors or management, even if a majority
47
of the shareholders believes that replacing them would be in the best interests
of Community Capital. As a result, the protective provisions may tend to
perpetuate the incumbent Board of Directors and management.
The Articles of Incorporation of Community Capital also contain a
provision which eliminates the potential personal liability of directors for
monetary damages. In addition, the Bylaws of Community Capital contain certain
provisions which provide indemnification for our directors. The protective
provisions and the provisions relating to elimination of liability and
indemnification of directors are discussed more fully below.
PREFERRED STOCK. The existence of preferred stock may impede the
takeover of Community Capital without the approval of our Board of Directors by
enabling the Board of Directors to issue preferred stock to persons friendly to
current management, which could render more difficult or discourage any attempt
to gain control of Community Capital through a proxy contest, tender offer,
merger or otherwise. In addition, the issuance of preferred stock with voting
rights may have an adverse effect on the rights of the holders of common stock,
and in certain circumstances, such issuances of preferred stock could decrease
the market price of the common stock.
STAGGERED TERMS FOR BOARD OF DIRECTORS. Article 7 of our Articles of
Incorporation provides that our Board of Directors will be divided into three
classes. Our directors serve staggered terms, which means that one-third of the
directors will be elected each year at Community Capital's annual meeting of
shareholders. Each director serves for a term of three years. This means that
unless the existing directors were to resign, it would take at least two annual
meetings of our shareholders to replace a majority of our directors.
CHANGE IN NUMBER OF DIRECTORS. Article 8 of our Articles of
Incorporation provides that any change in the number of directors of Community
Capital, as set forth in our Bylaws, would have to be made by the affirmative
vote of two-thirds (2/3) of the entire Board of Directors or by the affirmative
vote of the holders of at least two-thirds (2/3) of the outstanding shares of
common stock.
REMOVAL OF DIRECTORS. Article 9 of our Articles of Incorporation
provides that one or more of our directors may be removed for cause during their
terms only by the affirmative vote of the holders of a majority of the issued
and outstanding shares of Community Capital entitled to vote in an election of
directors. Article 9 also provides that our directors may be removed during
their terms without cause only by the affirmative vote of the holders of
two-thirds (2/3) of the issued and outstanding shares of Community Capital
entitled to vote in an election of directors.
SUPERMAJORITY VOTING ON CERTAIN TRANSACTIONS. Under Article 13 of our
Articles of Incorporation, with certain exceptions, any merger or consolidation
involving Community Capital or any sale or other disposition of all or
substantially all of our assets will require the affirmative vote of a majority
of our directors then in office and the affirmative vote of the holders of at
least two-thirds (2/3) of the outstanding shares of common stock. However, if
the Board of Directors has approved the particular transaction by the
affirmative vote of two-thirds (2/3) of the entire Board, then the applicable
provisions of Georgia law would govern and shareholder approval of the
transaction would require the affirmative vote of the holders of only a majority
of the outstanding shares of common stock entitled to vote on the transaction.
EVALUATION OF AN ACQUISITION PROPOSAL. Article 14 of our Articles of
Incorporation provides the factors that the Board of Directors shall consider in
evaluating whether any acquisition proposal made by another party is in the best
interests of Community Capital and its shareholders. As used herein, the term
"acquisition proposal" refers to any offer of another party (1) to make a tender
offer or exchange offer for
48
any equity security of Community Capital, (2) to merge or consolidate Community
Capital with another corporation, or (3) to purchase or otherwise acquire all or
substantially all of the properties and assets owned by Community Capital.
Article 14 charges the Board, in evaluating an acquisition proposal, to
consider all relevant factors, including (1) the expected social and economic
effects of the transaction on the employees, customers and other constituents
(e.g., suppliers of goods and services) of Community Capital and the banks, (2)
the expected social and economic effects on the communities within which
Community Capital and the banks operate, and (3) the consideration being offered
by the other corporation in relation (a) to the then current value of Community
Capital as determined by a freely negotiated transaction and (b) to the Board of
Director's then estimate of Community Capital's future value as an independent
entity. The enumerated factors are not exclusive, and the Board may consider
other relevant factors.
This Article has been included in our Articles of Incorporation because
our subsidiary banks are charged with providing support to and being involved
with the communities they serve. As a result, the Board believes its obligations
in evaluating an acquisition proposal extend beyond evaluating merely the
consideration being offered in relation to the then market value of the common
stock. No provisions of Georgia law specifically enumerate the factors a
corporation's board of directors should consider in the event the corporation is
presented with an acquisition proposal.
While the value of the consideration offered to shareholders is the main
factor when weighing the benefits of an acquisition proposal, the Board believes
it appropriate also to consider all other relevant factors. For example, this
Article directs the Board to evaluate the consideration being offered in
relation to the then current value of Community Capital determined in a freely
negotiated transaction and in relation to the Board's then estimate of the
future value of Community Capital as an independent concern. A takeover bid
often places the target corporation virtually in the position of making a forced
sale, sometimes when the market price of its stock may be depressed. The Board
believes that frequently the consideration offered in such a situation, even
though it may be in excess of the then market value (i.e., the value at which
shares are then currently trading), is less than that which could be obtained in
a freely negotiated transaction. In a freely negotiated transaction, management
would have the opportunity to seek a suitable partner at a time of its choosing
and to negotiate for the most favorable price and terms which reflect not only
the current value, but also the future value of Community Capital.
One effect of this Article may be to discourage a tender offer in
advance. Often an offeror consults the Board of a target corporation prior to or
after commencing a tender offer in an attempt to prevent a contest from
developing. The Board believes that this provision will strengthen its position
in dealing with any potential offeror which might attempt to acquire Community
Capital through a hostile tender offer. Another effect of this Article may be to
dissuade shareholders who might be displeased with the Board's response to an
acquisition proposal from engaging Community Capital in costly litigation.
Article 14 of our Articles of Incorporation would not make an
acquisition proposal regarded by the Board as being in the best interests of
Community Capital more difficult to accomplish. It would, however, permit the
Board to determine that an acquisition proposal was not in the best interests of
Community Capital (and thus to oppose it) on the basis of the various factors
deemed relevant. In some cases, such opposition by the Board might have the
effect of maintaining the positions of incumbent management.
INDEMNIFICATION
Our Bylaws contain certain indemnification provisions which provide that
directors, officers, employees or agents of Community Capital will be
indemnified against expenses actually and reasonably
49
incurred by them if they are successful on the merits of a claim or proceeding.
In addition, the Bylaws provide that Community Capital will advance to its
insiders reasonable expenses of any such proceeding, provided that such person
furnishes Community Capital with (i) a written affirmation of such person's good
faith belief that he or she has met the applicable standard of conduct and (ii)
a written undertaking to repay any advances if it is ultimately determined that
such person is not entitled to indemnification.
When a case or dispute is not ultimately determined on its merits (e.g.,
it is settled), the indemnification provisions provide that Community Capital
will indemnify insiders when they meet the applicable standard of conduct. The
applicable standard of conduct is met if the insider acted in a manner he or she
in good faith believed to be in or not opposed to the best interests of
Community Capital and, with respect to any criminal action or proceeding, if the
insider had no reasonable cause to believe his or her conduct was unlawful.
Whether the applicable standard of conduct has been met is determined by the
Board of Directors, the shareholders or independent legal counsel in each
specific case.
Our Bylaws also provide that the indemnification rights set forth in our
Bylaws are not exclusive of other indemnification rights to which an insider may
be entitled under any bylaw, resolution or agreement, either specifically or in
general terms approved by the affirmative vote of the holders of a majority of
the shares entitled to vote. Community Capital can also provide for greater
indemnification than that set forth in our Bylaws if we choose to do so, subject
to approval by our shareholders. Community Capital may not, however, indemnify
an insider for liability arising out of circumstances which constitute
exceptions to limitation of an insider's liability for monetary damages. See
"--Limitation of Liability" below.
The indemnification provisions of our Bylaws specifically provide that
we may purchase and maintain insurance on behalf of any director against any
liability asserted against such person and incurred by him or her in any such
capacity, whether or not Community Capital would have had the power to indemnify
against such liability.
We are not aware of any pending or threatened action, suit or proceeding
involving any of its insiders for which indemnification from Community Capital
may be sought.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Community Capital pursuant to the foregoing provisions or otherwise, Community
Capital has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities other than the payment by Community
Capital of expenses incurred or paid by a director, officer or controlling
person of Community Capital in the successful defense of any action, suit or
proceeding is asserted by such director, officer or controlling person in
connection with the securities being registered, Community Capital will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
LIMITATION OF LIABILITY
Article 11 of our Articles of Incorporation, subject to certain
exceptions, eliminates the potential personal liability of a director for
monetary damages to Community Capital and to our shareholders for breach of a
duty as a director. There is no elimination of liability for (1) a breach of
duty involving appropriation of a business opportunity of Community Capital, (2)
an act or omission not in good faith or involving intentional misconduct or a
knowing violation of law, (3) a transaction from which the director
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derives an improper material tangible personal benefit, or (4) as to any payment
of a dividend or approval of a stock repurchase that is illegal under the
Georgia Business Corporation Code. Article 11 does not eliminate or limit the
right of Community Capital or our shareholders to seek injunctive or other
equitable relief not involving monetary damages.
Article 11 was adopted by Community Capital pursuant to the Georgia
Business Corporation Code, which allows Georgia corporations to include in their
Articles of Incorporation a provision eliminating or limiting the liability of
directors, except in the circumstances described above. Article 11 was included
in our Articles of Incorporation to encourage qualified individuals to serve and
remain as directors of Community Capital. While we have not experienced any
problems in locating directors, we could experience difficulty in the future as
our business activities increase and diversify. Article 11 was also included to
enhance our ability to secure liability insurance for our directors at a
reasonable cost. Community Capital has obtained liability insurance covering
actions taken by its directors in their capacities as directors. The Board of
Directors believes that Article 11 enabled Community Capital to secure such
insurance on terms more favorable than if such a provision were not included in
the Articles of Incorporation.
AMENDMENTS
Any amendment of Articles 7, 9, 11, 13 and 14 of our Articles of
Incorporation requires the affirmative vote of the holders of at least
two-thirds (2/3) of the outstanding shares of common stock, unless two-thirds
(2/3) of the entire Board of Directors approves the amendment. If two-thirds
(2/3) of the Board approves the amendment, the applicable provisions of Georgia
law would govern and the approval of only a majority of the outstanding shares
of common stock would be required.
SUPERVISION AND REGULATION
Community Capital and its banking subsidiaries, Albany Bank & Trust and
First Bank of Dothan, are subject to extensive state and federal banking
regulations that impose restrictions on and provide for general regulatory
oversight of their operations. These laws are generally intended to protect
depositors and not shareholders. The following discussion describes the material
elements of the regulatory framework that applies to us.
COMMUNITY CAPITAL
Community Capital is a bank holding company under the federal Bank
Holding Company Act of 1956 and, as a result, is primarily subject to the
supervision, examination, and reporting requirements of the Bank Holding Company
Act and the regulations of the Federal Reserve.
ACQUISITIONS OF BANKS. The Bank Holding Company Act requires every bank
holding company to obtain the Federal Reserve's prior approval before:
o Acquiring direct or indirect ownership or control of any voting
shares of any bank if, after the acquisition, the bank holding
company will directly or indirectly own or control more than 5%
of the bank's voting shares;
o Acquiring all or substantially all of the assets of any bank; or
o Merging or consolidating with any other bank holding company.
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Additionally, the Bank Holding Company Act provides that the Federal
Reserve may not approve any of these transactions if it would result in or tend
to create a monopoly or substantially lessen competition or otherwise function
as a restraint of trade, unless the anticompetitive effects of the proposed
transaction are clearly outweighed by the public interest in meeting the
convenience and needs of the community to be served. The Federal Reserve is also
required to consider the financial and managerial resources and future prospects
of the bank holding companies and banks concerned and the convenience and needs
of the community to be served. The Federal Reserve's consideration of financial
resources generally focuses on capital adequacy, which is discussed below.
Under the Bank Holding Company Act, if adequately capitalized and
adequately managed, Community Capital or any other bank holding company located
in Georgia or Alabama may purchase a bank located outside Georgia or Alabama.
Conversely, an adequately capitalized and adequately managed bank holding
company located outside Georgia or Alabama may purchase a bank located inside
Georgia or Alabama. In each case, however, restrictions may be placed on the
acquisition of a bank that has only been in existence for a limited amount of
time or will result in specified concentrations of deposits. For example,
Georgia law prohibits a bank holding company from acquiring control of a
financial institution until the target financial institution has been
incorporated for three years. Alabama law prohibits a bank holding company from
acquiring control of a financial institution until the target financial
institution has been incorporated for five years. These limitations do not apply
to our banking subsidiaries because they have been in existence for the
applicable time periods.
CHANGE IN BANK CONTROL. Subject to various exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with related
regulations, require Federal Reserve approval prior to any person or company
acquiring "control" of a bank holding company. Control is conclusively presumed
to exist if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person or company acquires 10% or more, but less than 25%, of any class of
voting securities and either:
o the bank holding company has registered securities under Section
12 of the Securities Exchange Act of 1934; or
o no other person owns a greater percentage of that class of
voting securities immediately after the transaction.
Our common stock is registered under the Securities Exchange Act of
1934. The regulations provide a procedure for challenging the rebuttable
presumption of control.
PERMITTED ACTIVITIES. Bank holding companies are generally prohibited
under the Bank Holding Company Act from engaging in or acquiring direct or
indirect control of more than 5% of the voting shares of any company engaged in
any activity other than:
o banking or managing or controlling banks; and
o an activity that the Federal Reserve determines to be so closely
related to banking as to be a proper incident to the business of
banking.
Activities that the Federal Reserve has found to be so closely related
to banking as to be a proper incident to the business of banking include:
o factoring accounts receivable;
o making, acquiring, brokering or servicing loans and usual
related activities;
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o leasing personal or real property;
o operating a non-bank depository institution, such as a savings
association;
o trust company functions;
o financial and investment advisory activities;
o Conducting discount securities brokerage activities;
o underwriting and dealing in government obligations and money
market instruments;
o providing specified management consulting and counseling
activities;
o performing selected data processing services and support
services;
o acting as agent or broker in selling credit life insurance and
other types of insurance in connection with credit transactions;
and
o performing selected insurance underwriting activities.
Despite prior approval, the Federal Reserve may order a bank holding
company or its subsidiaries to terminate any of these activities or to terminate
its ownership or control of any subsidiary when it has reasonable cause to
believe that the bank holding company's continued ownership, activity or control
constitutes a serious risk to the financial safety, soundness, or stability of
it or any of its bank subsidiaries.
Generally, if Community Capital qualifies and elects to become a
financial holding company, it may engage in activities that are financial in
nature or incidental or complementary to financial activity. The Bank Holding
Company Act expressly lists the following activities as financial in nature:
o lending, trust and other banking activities;
o insuring, guaranteeing, or indemnifying against loss or harm or
providing and issuing annuities and acting as principal, agent,
or broker for these purposes, in any state;
o providing financial, investment, or advisory services;
o issuing or selling instruments representing interests in pools
of assets permissible for a bank to hold directly;
o underwriting, dealing in or making a market in securities;
o other activities that the Federal Reserve may determine to be so
closely related to banking or managing or controlling banks as
to be a proper incident to managing or controlling banks;
o foreign activities permitted outside of the United States if the
Federal Reserve has determined them to be usual in connection
with banking operations abroad;
o merchant banking through securities or insurance affiliates; and
o insurance company portfolio investments.
To qualify to become a financial holding company, each depository
institution subsidiary of Community Capital must be well capitalized and well
managed and must have a Community Reinvestment Act rating of at least
satisfactory. Additionally, Community Capital must file an election with the
Federal Reserve to become a financial holding company and must provide the
Federal Reserve with 30 days' written notice prior to engaging in a permitted
financial activity. Although we are eligible to elect to become a financial
holding company, we currently have no plans to make such an election.
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SUPPORT OF SUBSIDIARY INSTITUTIONS. Under Federal Reserve policy,
Community Capital is expected to act as a source of financial strength to its
banking subsidiaries and to commit resources to support the banks. This support
may be required at times when, without this Federal Reserve policy, Community
Capital might not be inclined to provide it. In addition, any capital loans made
by Community Capital to its banking subsidiaries will be repaid only after its
deposits and various other obligations are repaid in full. In the unlikely event
of Community Capital's bankruptcy, any commitment by it to a federal bank
regulatory agency to maintain the capital of Albany Bank & Trust or First Bank
of Dothan will be assumed by the bankruptcy trustee and entitled to a priority
of payment.
OUR BANKING SUBSIDIARIES
Since Albany Bank & Trust is chartered as a national bank, it is
primarily subject to the supervision, examination and reporting requirements of
the National Bank Act and the regulations of the OCC. The OCC regularly examines
Albany Bank & Trust's operations and has the authority to approve or disapprove
mergers, the establishment of branches and similar corporate actions. The OCC
also has the power to prevent the continuance or development of unsafe or
unsound banking practices or other violations of law.
Since First Bank of Dothan is chartered under the laws of the State of
Alabama, it is primarily subject to the supervision, examination and reporting
requirements of the FDIC and the Alabama State Banking Department. The FDIC and
the Alabama State Banking Department regularly examine First Bank of Dothan's
operations and have the authority to approve or disapprove mergers, the
establishment of branches and similar corporate actions. Both regulatory
agencies have the power to prevent the continuance or development of unsafe or
unsound banking practices or other violations of law.
Additionally, Albany Bank & Trust's and First Bank of Dothan's deposits
are insured by the FDIC to the maximum extent provided by law. The banks are
also subject to numerous state and federal statutes and regulations that affect
their business, activities and operations.
MEMORANDUM OF UNDERSTANDING. On January 9, 2003, prior to its
acquisition by Community Capital, First Bank of Dothan entered a Memorandum of
Understanding with the FDIC and the Alabama State Banking Department primarily
regarding First Bank of Dothan's lending practices. Pursuant to the Memorandum
of Understanding, First Bank of Dothan has designated a qualified chief lending
officer, developed a definitive and strengthened loan review and grading
program, reduced the balance of its assets classified as substandard and
doubtful, and implemented an amended written loan policy and exception
procedures and reporting. Under the terms of the Memorandum of Understanding,
First Bank of Dothan is required to maintain a Tier 1 Leverage Capital ratio of
not less than 8% and may not pay any cash dividends without the written prior
consent of the FDIC and the Alabama State Banking Department. We believe First
Bank of Dothan has complied with the terms of the Memorandum of Understanding
and plan to request that it be terminated.
BRANCHING. National banks are required by the National Bank Act to
adhere to branching laws applicable to state banks in the states in which they
are located. Under current Georgia law, Albany Bank & Trust may open branch
offices throughout Georgia with the prior approval of the OCC. In addition, with
prior regulatory approval, Albany Bank & Trust may acquire branches of existing
banks located in Georgia. Albany Bank & Trust and any other national or
state-chartered bank generally may branch across state lines by merging with
banks in other states if allowed by the applicable states' laws. Georgia law,
with limited exceptions, currently permits branching across state lines through
interstate mergers.
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Under current Alabama law, First Bank of Dothan may open branch offices
throughout Alabama with the prior approval of the Alabama State Banking
Department. In addition, with prior regulatory approval, First Bank of Dothan
may acquire branches of existing banks located in Alabama. First Bank of Dothan
and any other national or state-chartered bank generally may branch across state
lines by merging with banks in other states if allowed by the applicable states'
laws. Alabama law, with limited exceptions, currently permits branching across
state lines through interstate mergers.
Under the Federal Deposit Insurance Act, states may "opt-in" and allow
out-of-state banks to branch into their state by establishing a new start-up
branch in the state. Currently, neither Georgia nor Alabama has opted-in to this
provision. Therefore, interstate merger is the only method through which a bank
located outside of these states may branch into either of these states. This
provides a limited barrier of entry into the Georgia and Alabama banking
markets, which protects us from an important segment of potential competition.
However, because Georgia and Alabama have elected not to opt-in, our ability to
establish a new start-up branch in another state may be limited. Many states
that have elected to opt-in have done so on a reciprocal basis, meaning that an
out-of-state bank may establish a new start-up branch only if their home state
has also elected to opt-in. Consequently, until Georgia or Alabama changes its
election, the only way we will be able to branch into states that have elected
to opt-in on a reciprocal basis will be through interstate merger.
PROMPT CORRECTIVE ACTION. The Federal Deposit Insurance Corporation
Improvement Act of 1991 establishes a system of prompt corrective action to
resolve the problems of undercapitalized financial institutions. Under this
system, the federal banking regulators have established five capital categories
(well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized) in which all institutions are
placed. Federal banking regulators are required to take various mandatory
supervisory actions and are authorized to take other discretionary actions with
respect to institutions in the three undercapitalized categories. The severity
of the action depends upon the capital category in which the institution is
placed. Generally, subject to a narrow exception, the banking regulator must
appoint a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified by regulation the
relevant capital level for each category. At March 31, 2004, we qualified for
the "well capitalized" category.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency. A
bank holding company must guarantee that a subsidiary depository institution
meets its capital restoration plan, subject to various limitations. The
controlling holding company's obligation to fund a capital restoration plan is
limited to the lesser of 5% of an undercapitalized subsidiary's assets at the
time it became undercapitalized or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches or engaging in any new line of business, except under
an accepted capital restoration plan or with FDIC approval. The regulations also
establish procedures for downgrading an institution to a lower capital category
based on supervisory factors other than capital.
FDIC INSURANCE ASSESSMENTS. The FDIC has adopted a risk-based assessment
system for insured depository institutions that takes into account the risks
attributable to different categories and concentrations of assets and
liabilities. The system assigns an institution to one of three capital
categories: (1) well capitalized; (2) adequately capitalized; and (3)
undercapitalized. These three categories are substantially similar to the prompt
corrective action categories described above, with the "undercapitalized"
category including institutions that are undercapitalized, significantly
undercapitalized, and critically undercapitalized for prompt corrective action
purposes. The FDIC also assigns an institution to one of three supervisory
subgroups based on a supervisory evaluation that the institution's primary
federal regulator provides to the FDIC and information that the FDIC determines
to
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be relevant to the institution's financial condition and the risk posed to the
deposit insurance funds. Assessments range from 0 to 27 cents per $100 of
deposits, depending on the institution's capital group and supervisory subgroup.
In addition, the FDIC imposes assessments to help pay off the $780 million in
annual interest payments on the $8 billion Financing Corporation bonds issued in
the late 1980s as part of the government rescue of the thrift industry. This
assessment rate is adjusted quarterly and is set at 1.54 cents per $100 of
deposits for the second quarter of 2004.
The FDIC may terminate its insurance of deposits if it finds that the
institution has engaged in unsafe and unsound practices, is in an unsafe or
unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order, or condition imposed by the FDIC.
COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the OCC shall
evaluate the record of each financial institution in meeting the credit needs of
its local community, including low and moderate-income neighborhoods. These
facts are also considered in evaluating mergers, acquisitions, and applications
to open a branch or facility. Failure to adequately meet these criteria could
impose additional requirements and limitations on Albany Bank & Trust and First
Bank of Dothan. Since our aggregate assets are not more than $250 million, under
the Gramm-Leach-Bliley Act, we are subject to a Community Reinvestment Act
examination only once every 60 months if we receive an "outstanding" rating,
once every 48 months if we receive a "satisfactory" rating and as needed if our
rating is "less than satisfactory." Additionally, we must publicly disclose the
terms of various Community Reinvestment Act-related agreements.
OTHER REGULATIONS. Interest and other charges collected or contracted
for by Albany Bank & Trust and First Bank of Dothan are subject to state usury
laws and federal laws concerning interest rates. For example, under the
Soldiers' and Sailors' Civil Relief Act of 1940, a lender is generally
prohibited from charging an annual interest rate in excess of 6% on any
obligation for which the borrower is a person on active duty with the United
States military. Albany Bank & Trust's and First Bank of Dothan's loan
operations are also subject to federal laws applicable to credit transactions,
such as the:
o federal Truth-In-Lending Act, governing disclosures of credit
terms to consumer borrowers;
o Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and
public officials to determine whether a financial institution is
fulfilling its obligation to help meet the housing needs of the
community it serves;
o Equal Credit Opportunity Act, prohibiting discrimination on the
basis of race, creed or other prohibited factors in extending
credit;
o Fair Credit Reporting Act of 1978, governing the use and
provision of information to credit reporting agencies;
o Fair Debt Collection Act, governing the manner in which consumer
debts may be collected by collection agencies;
o Soldiers' and Sailors' Civil Relief Act of 1940, governing the
repayment terms of, and property rights underlying, secured
obligations of persons in military service; and
o rules and regulations of the various federal agencies charged
with the responsibility of implementing these federal laws.
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In addition to the federal and state laws noted above, the Georgia Fair
Lending Act ("GAFLA") imposes restrictions and procedural requirements on most
mortgage loans made in Georgia, including home equity loans and lines of credit.
On August 5, 2003, the OCC issued a formal opinion stating that the entirety of
GAFLA is preempted by federal law for national banks and their operating
subsidiaries. As a result, Albany Bank & Trust is exempt from the requirements
of GAFLA. GAFLA contains a provision that preempts GAFLA as to state banks in
the event that the OCC preempts GAFLA as to national banks. Therefore, First
Bank of Dothan is also exempt from the requirements of GAFLA.
The deposit operations of Albany Bank & Trust and First Bank of Dothan
are subject to:
o The Right to Financial Privacy Act, which imposes a duty to
maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative
subpoenas of financial records; and
o The Electronic Funds Transfer Act and Regulation E issued by the
Federal Reserve to implement that act, which govern automatic
deposits to and withdrawals from deposit accounts and customers'
rights and liabilities arising from the use of automated teller
machines and other electronic banking services.
CAPITAL ADEQUACY
Community Capital and our subsidiary banks are required to comply with
the capital adequacy standards established by federal regulators. Community
Capital is required to comply with the capital adequacy standards established by
the Federal Reserve. Albany Bank & Trust is required to comply with the capital
adequacy standards established by the OCC. First Bank of Dothan is required to
comply with the capital adequacy standards established by the FDIC. The Federal
Reserve has established a risk-based and a leverage measure of capital adequacy
for bank holding companies. Albany Bank & Trust and First Bank of Dothan are
subject to risk-based and leverage capital requirements adopted by the OCC and
the FDIC, respectively, which are substantially similar to those adopted by the
Federal Reserve for bank holding companies. Under the terms of a Memorandum of
Understanding, dated January 9, 2003, First Bank of Dothan is required to
maintain a Tier 1 Leverage Capital ratio of not less than 8%. See
"Business--Lending Services--Memorandum of Understanding," page 36.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items,
such as letters of credit and unfunded loan commitments, are assigned to broad
risk categories, each with appropriate risk weights. The resulting capital
ratios represent capital as a percentage of total risk-weighted assets and
off-balance-sheet items.
The minimum guideline for the ratio of total capital to risk-weighted
assets is 8%. Total capital consists of two components, Tier 1 Capital and Tier
2 Capital. Tier 1 Capital generally consists of common stock, minority interests
in the equity accounts of consolidated subsidiaries, noncumulative perpetual
preferred stock, and a limited amount of qualifying cumulative perpetual
preferred stock, less goodwill and other specified intangible assets. Tier 1
Capital must equal at least 4% of risk-weighted assets. Tier 2 Capital generally
consists of subordinated debt, other preferred stock, and a limited amount of
loan loss reserves. The total amount of Tier 2 Capital is limited to 100% of
Tier 1 Capital. At March 31, 2004 our ratio of total capital to risk-weighted
assets was 14.45% and our ratio of Tier 1 Capital to risk-weighted assets was
12.14%.
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In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and other specified
intangible assets, of 3% for bank holding companies that meet specified
criteria, including having the highest regulatory rating and implementing the
Federal Reserve's risk-based capital measure for market risk. All other bank
holding companies generally are required to maintain a leverage ratio of at
least 4%. At March 31, 2004, our leverage ratio was 8.65%. The guidelines also
provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without reliance on intangible assets. The
Federal Reserve considers the leverage ratio and other indicators of capital
strength in evaluating proposals for expansion or new activities.
Failure to meet capital guidelines could subject a bank or bank holding
company to a variety of enforcement remedies, including issuance of a capital
directive, the termination of deposit insurance by the FDIC, a prohibition on
accepting brokered deposits, and certain other restrictions on its business. As
described above, significant additional restrictions can be imposed on
FDIC-insured depository institutions that fail to meet applicable capital
requirements. See "--Prompt Corrective Action" above.
PAYMENT OF DIVIDENDS
Community Capital is a legal entity separate and distinct from Albany
Bank & Trust and First Bank of Dothan. The principal sources of Community
Capital's cash flow, including cash flow to pay dividends to its shareholders,
are dividends that Albany Bank & Trust and First Bank of Dothan pay to their
sole shareholder, Community Capital. Statutory and regulatory limitations apply
to Albany Bank & Trust's and First Bank of Dothan's payment of dividends to
Community Capital as well as to Community Capital's payment of dividends to its
shareholders.
Albany Bank & Trust is required by federal law to obtain prior approval
of the OCC for payments of dividends if the total of all dividends declared by
our board of directors in any year will exceed (1) the total of Albany Bank &
Trust's net profits for that year, plus (2) Albany Bank & Trust's retained net
profits of the preceding two years, less any required transfers to surplus.
Under the terms of its Memorandum of Understanding, First Bank of Dothan
may not pay cash any dividends without the prior written consent of the FDIC and
the Alabama State Banking Department. See "Business--Lending
Services--Memorandum of Understanding," page 36. Absent the Memorandum of
Understanding, First Bank of Dothan may not declare or pay a dividend in excess
of 90% of its net earnings until First Bank of Dothan's surplus is equal to 20%
of its capital. First Bank of Dothan is also required by state law to obtain
prior approval of the Alabama State Banking Department for payments of dividends
if the total of all dividends in any year will exceed (1) the total of First
Bank of Dothan's net earnings for that year, plus (2) First Bank of Dothan's
retained net earnings for the preceding two years, less any required transfers
to surplus.
The payment of dividends by Community Capital, Albany Bank & Trust and
First Bank of Dothan may also be affected by other factors, such as the
requirement to maintain adequate capital above regulatory guidelines. If, in the
opinion of its federal bank regulatory agency, Albany Bank & Trust or First Bank
and Dothan were engaged in or about to engage in an unsafe or unsound practice,
the federal bank regulatory agency could require, after notice and a hearing,
that the bank stop or refrain engaging in the practice. The federal bank
regulatory agencies have indicated that paying dividends that deplete a
depository institution's capital base to an inadequate level would be an unsafe
and unsound banking practice. Under the Federal Deposit Insurance Corporation
Improvement Act of 1991, a depository institution may not pay any dividend if
payment would cause it to become undercapitalized or if it already is
undercapitalized. Moreover, the federal agencies have issued policy statements
that provide that bank
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holding companies and insured banks should generally only pay dividends out of
current operating earnings. See "--Prompt Corrective Action" above.
RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES
Community Capital, Albany Bank & Trust and First Bank of Dothan are
subject to the provisions of Section 23A of the Federal Reserve Act. Section 23A
places limits on the amount of:
o A bank's loans or extensions of credit to affiliates;
o A bank's investment in affiliates;
o Assets a bank may purchase from affiliates, except for real and
personal property exempted by the Federal Reserve;
o Loans or extensions of credit to third parties collateralized by
the securities or obligations of affiliates; and
o A bank's guarantee, acceptance or letter of credit issued on
behalf of an affiliate.
The total amount of the above transactions is limited in amount, as to
any one affiliate, to 10% of a bank's capital and surplus and, as to all
affiliates combined, to 20% of a bank's capital and surplus. In addition to the
limitation on the amount of these transactions, each of the above transactions
must also meet specified collateral requirements. Albany Bank & Trust and First
Bank of Dothan must also comply with other provisions designed to avoid the
taking of low-quality assets.
Community Capital, Albany Bank & Trust and First Bank of Dothan are also
subject to the provisions of Section 23B of the Federal Reserve Act which, among
other things, prohibit an institution from engaging in the above transactions
with affiliates unless the transactions are on terms substantially the same, or
at least as favorable to the institution or its subsidiaries, as those
prevailing at the time for comparable transactions with nonaffiliated companies.
Albany Bank & Trust and First Bank of Dothan are also subject to
restrictions on extensions of credit to its executive officers, directors,
principal shareholders and their related interests. These extensions of credit
(1) must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties, and (2) must not involve more than the normal risk of repayment
or present other unfavorable features.
PRIVACY
Financial institutions are required to disclose their policies for
collecting and protecting confidential information. Customers generally may
prevent financial institutions from sharing nonpublic personal financial
information with nonaffiliated third parties except under narrow circumstances,
such as the processing of transactions requested by the consumer or when the
financial institution is jointly sponsoring a product or service with a
nonaffiliated third party. Additionally, financial institutions generally may
not disclose consumer account numbers to any nonaffiliated third party for use
in telemarketing, direct mail marketing or other marketing to consumers.
CONSUMER CREDIT REPORTING
On December 4, 2003, the President signed the Fair and Accurate Credit
Transactions Act (the FAIR Act), amending the federal Fair Credit Reporting Act
(the FCRA). These amendments to the FCRA that would place additional
requirements on our business will become effective later in 2004,
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depending on implementing regulations to be issued by the Federal Trade
Commission and the federal bank regulatory agencies.
The FCRA Amendments include, among other things:
o new requirements for financial institutions to develop policies
and procedures to identify potential identity theft and, upon
the request of a consumer, place a fraud alert in the consumer's
credit file stating that the consumer may be the victim of
identity theft or other fraud;
o new consumer notice requirements for lenders that use consumer
report information in connection with risk-based credit pricing
programs;
o for entities that furnish information to consumer reporting
agencies (which includes our banking subsidiaries) , new
requirements to implement procedures and policies regarding the
accuracy and integrity of the furnished information, and
regarding the correction of previously furnished information
that is later determined to be inaccurate; and
o a new requirement for mortgage lenders to disclose credit scores
to consumers.
Prior to the effective date of the FCRA Amendments, Community Capital
and its affected subsidiaries will implement policies and procedures to comply
with the new rules.
The FCRA Amendments also will prohibit a business that receives consumer
information from an affiliate from using that information for marketing purposes
unless the consumer is first provided a notice and an opportunity to direct the
business not to use the information for such marketing purposes (the "opt-out"),
subject to certain exceptions. Community Capital and its subsidiaries also will
implement procedures to comply with these new rules prior to the effective date
of the rules. We do not plan to share consumer information among our affiliated
companies for marketing purposes, except as may be allowed under exceptions to
the notice and opt-out requirements. This will limit the Community Capital's
cross-marketing possibilities as compared to prior years.
ANTI-TERRORISM LEGISLATION
The Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, signed
by the President on October 26, 2001, imposed new requirements and limitations
on specified financial transactions and account relationships, intended to guard
against money laundering and terrorism. Most of these requirements and
limitations took effect in 2002. Additional "know your customer" rules became
effective in June 2003, requiring our banking subsidiaries to establish a
customer identification program under Section 326 of the USA PATRIOT Act.
Community Capital and its subsidiaries implemented procedures and policies to
comply with those rules prior to the effective date of each of the rules.
PROPOSED LEGISLATION AND REGULATORY ACTION
New regulations and statutes are regularly proposed that contain
wide-ranging proposals for altering the structures, regulations and competitive
relationships of financial institutions operating and doing business in the
United States. We cannot predict whether or in what form any proposed regulation
or statute will be adopted or the extent to which our business may be affected
by any new regulation or statute.
60
EFFECT OF GOVERNMENTAL MONETARY POLICES
Our earnings are affected by domestic economic conditions and the
monetary and fiscal policies of the United States government and its agencies.
The Federal Reserve Bank's monetary policies have had, and are likely to
continue to have, an important impact on the operating results of commercial
banks through its power to implement national monetary policy in order, among
other things, to curb inflation or combat a recession. The monetary policies of
the Federal Reserve affect the levels of bank loans, investments and deposits
through its control over the issuance of United States government securities,
its regulation of the discount rate applicable to member banks and its influence
over reserve requirements to which member banks are subject. We cannot predict
the nature or impact of future changes in monetary and fiscal policies.
PLAN OF DISTRIBUTION
We are offering 1,000,000 shares of our common stock at the public
offering price set forth on the cover page of this prospectus. Community
Capital's common stock is listed for trading on the Nasdaq SmallCap Market under
the symbol "ALBY." On May 28, 2004, the closing price of the common stock was
$12.44 per share.
We have entered into a Selling Agency Agreement with FIG Partners,
L.L.C., under which FIG has agreed, subject to the terms and conditions set
forth in the agreement, to sell up to 1,000,000 shares of our common stock on a
best efforts basis. FIG has not agreed and is not obligated to sell any specific
number or dollar amount of shares. For its services, we have agreed to pay FIG a
sales commission equal to 6.25% of the aggregate purchase price of the shares it
actually sells in the offering. No commission, however, will be paid on shares
having an aggregate value up to $2,500,000 which are sold to our directors and
officers and other individuals identified by our directors and officers to FIG.
We also will reimburse FIG for its costs and expenses in connection with the
offering, including fees of FIG's legal counsel, travel and out-of-pocket
expenses associated with the offering, up to an amount not to exceed $45,000
without our prior approval. Additionally, we will pay without limitation all
counsel fees and disbursements associated with state securities filings. We have
also agreed to indemnify FIG against certain liabilities that it might incur in
connection with the offering, including liabilities under applicable securities
laws, or contribute to payments the selling agent may be required to make with
respect to these liabilities.
FIG has informed us that it proposes to sell the common stock for us,
subject to prior sale, when, as, and if issued by us, in part to the public at
the public offering price set forth on the cover page of this prospectus and, in
part, through certain selected dealers who are members of the National
Association of Securities Dealers, Inc. and to customers of such selected
dealers at the public offering price. Each selected dealer will receive a
commission of $____ for each share that it sells. FIG reserves the right to
reject any order for the purchase of common stock through it in whole or in
part.
The public offering price will be determined through negotiations
between us and FIG. A variety of factors will be considered in determining the
price, including the trading history of our common stock (including the
frequency and volume of trades and actual trading prices); our history and
prospects; our past and present earnings and our prospects for future earnings;
the current performance and prospects of the banking industry in general and the
banking markets in which we compete; and the general condition of the securities
markets and the prices of equity securities of comparable companies.
61
The offering is not contingent upon the sale of a minimum or maximum
number or dollar amount of shares. We expect to deliver the shares to purchasers
on or about ______, 2004, upon receipt of the purchase price of the shares and
subject to customary closing conditions.
We will pay our own expenses incurred in connection with the offering,
including legal, accounting, printing and mailing expenses, other solicitation
expenses, filing fees and expenses associated with qualifying the common stock
for sale under state securities laws. We expect that all those expenses will
amount to approximately $153,000, excluding sales commissions, and we will pay
those expenses from the sales proceeds. If we withdraw the offering or if no
shares of our common stock are sold, offering expenses will be charged against
our earnings.
For a period of 90 days after the date of this prospectus, we have
agreed that we will not, without the prior written consent of FIG, offer, sell
or otherwise dispose, directly or indirectly, of any shares of our common stock,
subject to certain exceptions.
FIG has advised us that it may make a market in our common stock. FIG,
however, is not obligated to make a market in the common stock. It also may
discontinue any market making at any time without notice.
FIG provides investment banking services to us from time to time in the
ordinary course of its business.
LEGAL MATTERS
Certain legal matters in connection with the shares of common stock
offered by this prospectus will be passed upon for Community Capital by Powell,
Goldstein, Frazer and Murphy LLP, Atlanta, Georgia. Certain legal matters in
connection with the offering will be passed upon for FIG Partners, L.L.C. by
Troutman Sanders LLP, Atlanta, Georgia.
EXPERTS
Mauldin & Jenkins, LLC, independent auditors, have audited Community
Capital Bancshares, Inc.'s consolidated financial statements as of and for the
two years ended December 31, 2003 included in this prospectus. These
consolidated financial statements are included in reliance on Mauldin & Jenkins,
LLC's report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION ABOUT US
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. Accordingly, we file periodic reports, proxy
statements and other information with the Securities and Exchange Commission.
You may inspect or copy these materials at the Public Reference Room at the SEC
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. For a fee, you may
also obtain copies of these materials by writing to the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the SEC
public reference room. Our filings are also available to the public on the SEC's
website on the Internet at http://www.sec.gov.
62
We have filed with the SEC a registration statement on Form S-2
(together with all amendments and exhibits thereto, the "Registration
Statement") with respect to the shares of common stock offered by this
prospectus. This prospectus does not contain all of the information included in
the Registration Statement. For further information about us and the shares of
common stock offered by this prospectus, please refer to the Registration
Statement and its exhibits and to the documents incorporated by reference into
the Registration Statement. You may obtain a copy of the Registration Statement
through the public reference facilities of the SEC described above. You may also
access a copy of the Registration Statement by means of the SEC's website at
http://www.sec.gov.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference documents that we have
previously filed with the SEC. This means that we can disclose important
information to you by referring to those documents, and the information in those
documents is considered to be part of this prospectus. Documents that we file
later with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below:
1. Community Capital Bancshares, Inc.'s Annual Report on Form
10-KSB (SEC File No. 000-25345) for the fiscal year ended
December 31, 2003;
2. Community Capital Bancshares, Inc.'s Quarterly Report on Form
10-QSB (SEC File No. 000-25345) for the quarter ended March 31,
2004; and
3. The description of the common stock set forth in Community
Capital Bancshares, Inc.'s Registration Statement on Form 8-A
(SEC File No. 000-25345) and any amendment or report filed for
the purpose of updating such description.
We will provide to each person, including any beneficial owner, to whom
this prospectus is delivered a copy of any or all of the information
incorporated by reference in the prospectus but not delivered with the
prospectus. You may request this information, at no cost, by writing or calling
us at:
COMMUNITY CAPITAL BANCSHARES, INC.
2815 Meredyth Drive
Albany, Georgia 31707
(229) 446-2265
Attention: David J. Baranko
63
FINANCIAL STATEMENT
Independent Auditor's Report.................................................F-2
Consolidated Balance Sheets as of December 31, 2003 and 2002.................F-3
Consolidated Statements of Income for the years ended
December 31, 2003 and 2002.................................................F-4
Consolidated Statements of Comprehensive Income for the years
ended December 31, 2003 and 2002...........................................F-5
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 2003 and 2002...........................................F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 2003 and 2002.................................................F-7
Notes to the Consolidated Financial Statements as of
December 31, 2003 and 2002 and for the years then ended....................F-8
Consolidated Balance Sheet as of March 31, 2004 (Unaudited).................F-31
Consolidated Statements of Income for the three months ended
March 31, 2004 and 2003 (Unaudited).......................................F-32
Consolidated Statements of Comprehensive Income for the
three months ended March 31, 2004 and 2003 (Unaudited)....................F-33
Consolidated Statements of Cash Flows for the three months ended
March 31, 2004 and 2003 (Unaudited).......................................F-34
Notes to the Consolidated Financial Statements as of
March 31, 2004 and 2003 and for the three-month periods then ended........F-35
F-1
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS
COMMUNITY CAPITAL BANCSHARES, INC.
ALBANY, GEORGIA
We have audited the accompanying consolidated balance sheets of
COMMUNITY CAPITAL BANCSHARES, INC. and Subsidiaries as of December 31, 2003 and
2002, and the related consolidated statements of income, comprehensive income,
stockholders' equity and cash flows for each of the two years in the period
ended December 31, 2003. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Community
Capital Bancshares, Inc. and Subsidiaries as of December 31, 2003 and 2002, and
the results of their operations and their cash flows for each of the two years
in the period ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Mauldin & Jenkins, LLC
Albany, Georgia
March 11, 2004
F-2
COMMUNITY CAPITAL BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
ASSETS 2003 2002
------ -------------- --------------
Cash and due from banks, including interest-bearing
deposits in other banks of $126,379 and $4,572,964 $ 4,285,218 $ 6,919,620
Federal funds sold 2,684,000 -
Securities available for sale, at fair value 31,792,033 16,198,634
Restricted equity securities 1,113,600 769,300
Loans 109,588,774 81,712,621
Less allowance for loan losses 2,117,555 821,334
-------------- --------------
Loans, net 107,471,219 80,891,287
Premises and equipment 4,738,785 3,058,202
Goodwill 2,117,166 -
Core deposit premiums 472,682 -
Other assets 4,054,396 1,348,486
-------------- --------------
$ 158,729,099 $ 109,185,529
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits
Noninterest-bearing $ 14,034,879 $ 6,730,753
Interest-bearing 109,187,618 79,273,158
-------------- --------------
Total deposits 123,222,497 86,003,911
Federal funds purchased - 1,705,000
Other borrowings 16,018,644 10,884,746
Guaranteed preferred beneficial interests in junior
subordinated debentures 4,000,000 -
Other liabilities 2,190,317 848,893
-------------- --------------
Total liabilities 145,431,458 99,442,550
-------------- --------------
Commitments and contingencies
Stockholders' equity
Preferred stock, par value not stated; 2,000,000 shares
authorized; no shares issued - -
Common stock, par value $1; 10,000,000 shares authorized;
1,741,191 and 1,499,560 issued and outstanding 1,741,191 1,499,560
Capital surplus 11,075,397 8,084,523
Retained earnings 915,679 353,899
Accumulated other comprehensive income 17,058 294,983
-------------- --------------
13,749,325 10,232,965
Less cost of treasury stock, 64,149 and 68,539 shares 451,684 489,986
-------------- --------------
Total stockholders' equity 13,297,641 9,742,979
-------------- --------------
$ 158,729,099 $ 109,185,529
============== ==============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
COMMUNITY CAPITAL BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
-------------- --------------
Interest income
Loans $ 6,327,800 $ 5,235,584
Taxable securities 841,016 970,481
Nontaxable securities 48,818 34,937
Deposits in banks 21,210 29,686
Federal funds sold 29,255 45,630
-------------- --------------
Total interest income 7,268,099 6,316,318
-------------- --------------
Interest expense
Deposits 2,011,522 2,238,993
Other borrowed money 622,288 463,621
-------------- --------------
Total interest expense 2,633,810 2,702,614
-------------- --------------
Net interest income 4,634,289 3,613,704
Provision for loan losses 408,921 442,509
-------------- --------------
Net interest income after provision for loan losses 4,225,368 3,171,195
-------------- --------------
Other income
Service charges on deposit accounts 565,850 378,273
Financial service fees 207,476 70,827
Mortgage origination fees 227,239 246,591
Gain on sale of investment securities - 145,544
Loss on sales of foreclosed properties (25,880) -
Other service charges, commissions and fees 90,381 57,695
-------------- --------------
Total other income 1,065,066 898,930
-------------- --------------
Other expenses
Salaries and employee benefits 2,032,978 1,423,622
Equipment and occupancy expenses 656,899 457,464
Marketing expenses 111,267 142,498
Data processing expenses 375,345 266,874
Administrative expenses 540,567 369,285
Stationery and supply expenses 109,205 95,283
Other operating expenses 525,864 460,918
-------------- --------------
Total other expenses 4,352,125 3,215,944
-------------- --------------
Income before income taxes 938,309 854,181
Income tax expense 288,666 287,095
-------------- --------------
Net income $ 649,643 $ 567,086
============== ==============
Basic earnings per share $ 0.44 $ 0.39
============== ==============
Diluted earnings per share $ 0.39 $ 0.38
============== ==============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
COMMUNITY CAPITAL BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
-------------- --------------
NET INCOME $ 649,643 $ 567,086
-------------- --------------
OTHER COMPREHENSIVE INCOME (LOSS):
Net unrealized holding gains (losses) arising during period,
net of tax benefits (expense) of $(140,519) and $68,000 (277,925) 114,993
Reclassification adjustment for gains included in net income,
net of taxes $49,485 - (96,059)
-------------- --------------
Total other comprehensive income (loss) (277,925) 18,934
-------------- --------------
COMPREHENSIVE INCOME $ 371,718 $ 586,020
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
COMMUNITY CAPITAL BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2003 AND 2002
ACCUMULATED
COMMON STOCK RETAINED OTHER TREASURY STOCK TOTAL
----------------------- CAPITAL EARNINGS COMPREHENSIVE ------------------ STOCKHOLDERS
SHARES PAR VALUE SURPLUS (DEFICIT) INCOME SHARES COST EQUITY
--------- ----------- ------------ ----------- ------------ ------- ---------- ------------
Balance, December 31, 2001 1,499,560 $ 1,499,560 $ 8,084,523 $ (213,187) $ 179,990 52,690 $ (365,470) $ 9,185,416
Net income - - - 567,086 - - - 567,086
Net treasury stock
transactions - - - - - 15,849 (124,516) (124,516)
Other comprehensive income - - - - 114,993 - - 114,993
--------- ----------- ------------ ----------- ------------ ------ ---------- ------------
Balance, December 31, 2002 1,499,560 1,499,560 8,084,523 353,899 294,983 68,539 (489,986) 9,742,979
Net income - - - 649,643 - - - 649,643
Stock issued upon exercise
of warrants 25,642 25,642 153,852 - - - - 179,494
Stock issued in connection
with bank acquisition,
net of stock issue
expense 215,989 215,989 2,837,022 - - - - 3,053,011
Dividends paid - - - (87,863) - - - (87,863)
Net treasury stock
transactions - - - - - (4,390) 38,302 38,302
Other comprehensive loss - - - - (277,925) - - (277,925)
--------- ----------- ------------ ----------- ------------ ------ ---------- ------------
Balance, December 31, 2003 1,741,191 $ 1,741,191 $ 11,075,397 $ 915,679 $ 17,058 64,149 $ (451,684) $ 13,297,641
========= =========== ============ =========== ============ ====== ========== ============
See Notes to Consolidated Financial Statements.
F-6
COMMUNITY CAPITAL BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
-------------- --------------
OPERATING ACTIVITIES
Net income $ 649,643 $ 567,086
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 302,143 220,803
Amortization of core deposit premuims 15,248 -
Provision for loan losses 408,921 442,509
Provision for deferred taxes (45,637) 40,135
Net gain on sale of investments available for sale - (145,544)
Net gain on sale of fixed assets - (100)
Increase in income taxes receivable (430,484) (111,833)
Increase in income taxes payable 105,032 210,893
(Increase) decrease in interest receivable (279,582) 30,750
Increase (decrease) in interest payable 75,097 (39,091)
Other operating activities (1,211,192) (158,945)
-------------- --------------
Net cash provided by (used in) operating activities (410,811) 1,056,663
-------------- --------------
INVESTING ACTIVITIES
Purchases of securities available for sale (17,060,312) (19,630,558)
Proceeds from sales of securities available for sa1e - 10,324,303
Proceeds from maturities of securities available for sale 4,049,643 8,906,993
Purchases of restricted equity securities (344,300) -
Net decrease in federal funds sold 781,000 4,483,000
Net increase in loans (10,021,715) (21,400,392)
Purchase of equipment (980,477) (678,567)
Net cash received from acquisition 1,852,531 -
-------------- --------------
Net cash used in investing activities (21,723,630) (17,995,221)
-------------- --------------
FINANCING ACTIVITIES
Net increase in deposits 11,941,208 16,172,575
Net increase (decrease) in federal funds purchased (1,705,000) 1,705,000
Net increase in other borrowings 5,133,898 1,633,898
Proceeds from issuance of guaranteed preferred beneficial
interests in junior subordinated debentures 4,000,000 -
Dividends paid (87,863) -
Proceeds from exercise of stock warrants 179,494 -
Treasury stock transactions, net 38,302 (124,516)
-------------- --------------
Net cash provided by financing activities 19,500,039 19,386,957
-------------- --------------
Net decrease in cash and due from banks (2,634,402) 2,448,399
Cash and due from banks at beginning of year 6,919,620 4,471,221
-------------- --------------
Cash and due from banks at end of year $ 4,285,21 $ 6,919,620
============== ==============
SUPPLEMENTAL DISCLOSURES
Cash paid for interest $ 2,558,71 $ 2,741,705
Income taxes $ 482,650 $ 146,138
NONCASH TRANSACTIONS
Unrealized gains (losses) on securities available for sale $ (418,444) $ 174,224
Common stock issued in connection with buiness acquisition $ 3,131,841 $ -
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
COMMUNITY CAPITAL BANCSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Community Capital Bancshares, Inc. (the "Company") is a multi-bank
holding company whose principal activity is the ownership and
management of its wholly-owned bank subsidiaries, Albany Bank and
Trust, N.A ("Albany Bank") and First Bank of Dothan, Inc. ("Dothan
Bank"), collectively referred to as "the Banks." Albany Bank's main
office is located in Albany, Dougherty County, Georgia, with one loan
production office in Albany and one full service branch in Lee
County, Georgia. Dothan Bank is located in Dothan, Houston County,
Alabama. The Banks provide a full range of banking services to
individual and corporate customers in their primary market areas of
Dougherty and Lee Counties, Georgia and Houston County, Alabama.
BASIS OF PRESENTATION AND ACCOUNTING ESTIMATES
The consolidated financial statements include the accounts of the
Company and its subsidiaries. Significant intercompany transactions
and balances have been eliminated in consolidation.
In preparing the consolidated financial statements in accordance with
accounting principles generally accepted in the United States of
America, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the
disclosure 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 relate to the determination of the allowance for loan losses,
the valuation of foreclosed real estate and intangible assets and
contingent assets and liabilities. The determination of the adequacy
of the allowance for loan losses is based on estimates that are
susceptible to significant changes in the economic environment and
market conditions. In connection with the determination of the
estimated losses on loans and the valuation of foreclosed real
estate, management obtains independent appraisals for significant
collateral. Intangible assets, primarily goodwill and core deposit
premiums, are evaluated annually for impairment.
CASH, DUE FROM BANKS AND CASH FLOWS
For purposes of reporting cash flows, cash and due from banks include
cash on hand, cash items in process of collection and amounts due
from banks. Cash flows from loans, federal funds sold, federal funds
purchased and deposits are reported net.
The Company is required to maintain reserve balances in cash or on
deposit with the Federal Reserve Bank, based on a percentage of
deposits. The total of those reserve balances was approximately
$359,000 and $272,000 at December 31, 2003 and 2002, respectively.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
SECURITIES
All debt securities are classified as available for sale and recorded
at fair value with unrealized gains and losses excluded from earnings
and reported in accumulated other comprehensive income, net of the
related deferred tax effect. Equity securities, including restricted
equity securities, without a readily determinable fair value are
classified as available for sale and recorded at cost.
The amortization of premiums and accretion of discounts are
recognized in interest income using methods approximating the
interest method over the life of the securities. Realized gains and
losses, determined on the basis of the cost of specific securities
sold, are included in earnings on the settlement date. Declines in
the fair value of available for sale securities below their cost that
are deemed to be other than temporary will be reflected in earnings
as realized losses. There have been no declines in fair value that
have been deemed to be other than temporary as of December 31, 2003.
LOANS
Loans are reported at their outstanding principal balances less
unearned income, net deferred fees, and the allowance for loan
losses. Interest income is accrued on the outstanding principal
balance. Loan origination fees, net of certain direct loan
origination costs, are deferred and recognized as an adjustment of
the related loan yield over the life of the loan using a method which
approximates a level yield.
The accrual of interest on loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due, unless the loan is well-secured. All interest
accrued but not collected for loans that are placed on nonaccrual or
charged off is reversed against interest income, unless management
believes that the accrued interest is recoverable through the
liquidation of collateral. Interest income on nonaccrual loans is
recognized on the cash-basis or cost-recovery method, until the loans
are returned to accrual status. Loans are returned to accrual status
when all the principal and interest amounts are brought current and
future payments are reasonably assured.
A loan is considered impaired when it is probable, based on current
information and events, the Company will be unable to collect all
principal and interest payments due in accordance with the
contractual terms of the loan agreement. Impaired loans are measured
by either the present value of expected future cash flows discounted
at the loan's effective interest rate, the loan's obtainable market
price, or the fair value of the collateral if the loan is collateral
dependent. The amount of impairment, if any, and any subsequent
changes are included in the allowance for loan losses. Interest on
accruing impaired loans is recognized as long as such loans do not
meet the criteria for nonaccrual status.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loan losses are charged against the
allowance when management believes the collectibility of the
principal is unlikely. Subsequent recoveries are credited to the
allowance.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The allowance is an amount that management believes will be adequate
to absorb estimated losses relating to specifically identified loans,
as well as probable credit losses inherent in the balance of the loan
portfolio, based on an evaluation of the collectibility of existing
loans and prior loss experience. This evaluation also takes into
consideration such factors as changes in the nature and volume of the
loan portfolio, overall portfolio quality, review of specific problem
loans, concentrations and current economic conditions that may affect
the borrower's ability to pay. This evaluation does not include the
effects of expected losses on specific loans or groups of loans that
are related to future events or expected changes in economic
conditions. While management uses the best information available to
make its evaluation, future adjustments to the allowance may be
necessary if there are significant changes in economic conditions. In
addition, regulatory agencies, as an integral part of their
examination process, periodically review the Banks' allowance for
loan losses, and may require the Banks to make additions to the
allowance based on their judgment about information available to them
at the time of their examinations.
The allowance consists of specific and general components. The
specific component relates to loans that are classified as either
doubtful, substandard or special mention. For such loans that are
also classified as impaired, an allowance is established when the
discounted cash flows (or collateral value or observable market
price) of the impaired loan is lower than the carrying value of that
loan. The general component covers non-classified loans and is based
on historical loss experience adjusted for qualitative factors,
including an unallocated component maintained to cover uncertainties
that could affect management's estimate of probable losses. This
unallocated component of the allowance reflects the margin of
imprecision inherent in the underlying assumptions used in the
methodologies for estimating specific and general losses in the
portfolio.
PREMISES AND EQUIPMENT
Land is carried at cost. Premises and equipment are stated at cost
less accumulated depreciation computed principally by the
straight-line method over the estimated useful lives of the assets.
OTHER REAL ESTATE OWNED
Other real estate owned represents properties acquired through or in
lieu of loan foreclosure and is initially recorded at the lower of
cost or fair value less estimated costs to sell. Any write-down to
fair value at the time of transfer to other real estate owned is
charged to the allowance for loan losses. Costs of improvements are
capitalized, whereas costs relating to holding other real estate
owned and subsequent adjustments to the value are expensed. The
carrying amount of other real estate owned at December 31, 2003 and
2002 was $863,571 and $163,964, respectively.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
GOODWILL AND INTANGIBLE ASSETS
Goodwill represents the excess of cost over the estimated fair value
of the net assets purchased in a business combination. Goodwill is
required to be tested annually for impairment, or whenever events
occur that may indicate that the recoverability of the carrying
amount is not probable. In the event of an impairment the amount by
which the carrying amount exceeds the fair value will be charged to
earnings. The Company will perform its annual test of impairment in
the third quarter of 2004 to determine if there is any impairment of
the carrying value.
Intangible assets consist of core deposit premiums acquired in
connection with the business combinations. The core deposit premium
was initially recognized based on an estimate of value performed as
of the consummation date. The core deposit premium is initially being
amortized over the average remaining life of the acquired customer
deposits, or 8 years. Amortization periods will be reviewed annually
in connection with an annual evaluation of the intangibles.
Once the final valuation is obtained, goodwill, intangibles assets
and the fair value of certain assets and liabilities will be adjusted
accordingly. This should occur during the first quarter of 2004.
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 bases of the various balance
sheet assets and liabilities and gives current recognition to changes
in tax rates and laws.
STOCK-BASED COMPENSATION
The Company has three stock-based employee compensation plans, which
are described more fully in Note 11. The Company accounts for those
plans under the recognition and measurement principles of APB Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
Interpretations. No stock-based employee compensation cost is
reflected in net income, as all options granted under those plans had
an exercise price equal to the market value of the underlying stock
on the date of grant.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
STOCK-BASED COMPENSATION (CONTINUED)
The following table illustrates the effect on net income and earnings
per share if the Company had applied the fair value recognition
provisions of FASB Statement No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, to stock-based employee compensation.
YEARS ENDED DECEMBER 31,
------------------------------
2003 2002
------------- -------------
Net income, as reported $ 649,643 $ 567,086
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax effects (100,670) (99,150)
------------- -------------
Pro forma net income $ 548,973 $ 467,936
============= =============
Earnings per share:
Basic - as reported $ .44 $ .39
============= =============
Basic - pro forma $ .37 $ .33
============= =============
Diluted - as reported $ .39 $ .38
============= =============
Diluted - pro forma $ .33 $ 31
============= =============
Options to purchase 27,131 shares of common stock at $13.97 per share
were outstanding during the second half of 2003 but were not included
in the computation of diluted EPS because the options' exercise price
was greater than the average market price of the common shares. The
options, which expire on May 15, 2013, were still outstanding at the
end of year 2003.
EARNINGS PER SHARE
Basic earnings per share are computed by dividing net income by the
weighted-average number of shares of common stock outstanding.
Diluted earnings per share are computed by dividing net income by the
sum of the weighted-average number of shares of common stock
outstanding and potential common shares. Potential common shares
consist of stock options.
COMPREHENSIVE INCOME
Accounting principles generally require that recognized revenue,
expenses, gains and losses be included in net income. Although
certain changes in assets and liabilities, such as unrealized gains
and losses on available for sale securities, are reported as a
separate component of the equity section of the balance sheet, such
items, along with net income, are components of comprehensive income.
TRUST DEPARTMENT
The Company's subsidiary, Albany Bank & Trust, as fiduciary or agent,
provides trust services to their customers. Property, other than cash
deposits held by Albany Bank & Trust in its fiduciary capacity, is
not accounted for in the accompanying financial statements.
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RECENT ACCOUNTING STANDARDS
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, an interpretation of
FASB Statements No. 5, 57, and 107 and a rescission of FASB
Interpretation No. 34". The interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees issued.
It also clarifies that a guarantor is required to recognize, at
inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing a guarantee. The initial recognition
and initial measurement provisions of the interpretation are
applicable to guarantees issued or modified after December 31, 2002.
The disclosure requirements in the interpretation are effective for
financial statements of interim or annual periods ending after
December 15, 2002. The adoption of the interpretation did not have a
material effect on the Company's financial condition or results of
operations.
In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure, an amendment of
FASB Statement No. 123". The Statement amends Statement No. 123,
"Accounting for Stock-Based Compensation", to provide alternative
methods of transition for a voluntary change to the fair value method
of accounting for stock-based employee compensation. In addition, the
statement amends the disclosure requirements of Statement No. 123 to
require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based
compensation and the effect on reported results of operations. The
disclosure requirements of the statement are required for fiscal
years ending after December 15, 2002 and interim periods beginning
after December 15, 2002. The Company has not adopted Statement No.
123 for accounting for stock-based compensation as of December 31,
2003; however all required disclosures of Statement No. 148 are
included above under the heading "Stock-Based Compensation".
In January 2003, the FASB issued Interpretation No. 46,
"Consolidation of Variable Interest Entities, an interpretation of
ARB No. 51", and on December 24, 2003, the FASB issued FASB
Interpretation No. 46 (Revised December 2003), "Consolidation of
Variable Interest Entities" which replaced FIN 46. The interpretation
addresses consolidation by business enterprises of variable interest
entities. A variable interest entity is defined as an entity subject
to consolidation according to the provisions of the interpretation.
The revised interpretation provided for special effective dates for
entities that had fully or partially applied the original
interpretation as of December 24, 2003. Otherwise, application of the
interpretation is required in financial statements of public entities
that have interests in special-purpose entities, or SPEs, for periods
ending after December 15, 2003. Application by public entities, other
than small business issuers, for all other types of variable interest
entities (i.e., non-SPEs) is required in financial statements for
periods ending after March 15, 2004. Application by small business
issuers to variable interest entities other than SPEs and by
nonpublic entities to all types of variable interest entities is
required at various dates in 2004 and 2005. The interpretations have
not had a material effect on the Company's financial condition or
results of operations.
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RECENT ACCOUNTING STANDARDS (CONTINUED)
In May 2003, the FASB issued Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity". The statement establishes standards for how
an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. The statement
requires that an issuer classify a financial instrument that is
within its scope as a liability. Many of those instruments were
previously classified as equity. The statement is effective for
financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatorily
redeemable financial instruments of nonpublic entities. Mandatorily
redeemable financial instruments of nonpublic entities are subject to
the provisions of the statement for the first fiscal period beginning
after December 15, 2003. The adoption of the statement did not have a
material effect on the Company's financial condition or results of
operations.
NOTE 2. BUSINESS COMBINATION
On November 11, 2003, the Company acquired all of the outstanding
common shares of the Dothan Bank in exchange for cash and the
Company's common stock. The acquisition was accounted for as a
purchase transaction; consequently, the results of operations of the
Dothan Bank have been included in the consolidated financial
statements since the date of acquisition. The Dothan Bank is a full
service commercial bank located in Dothan, Alabama. The Bank operates
as a wholly-owned subsidiary of the Company. The aggregate purchase
price was $5,004,000 which included cash of $1,872,000 and 215,989
shares of the Company's common stock valued at $3,132,000.
The following table summarizes the estimated fair values of the
assets acquired and liabilities assumed at the date of acquisition.
Current assets $ 26,500,000
Bank premises and equipment 1,002,000
Intangible assets, net of deferred taxes of $166,000 322,000
Goodwill 2,117,000
-------------
Total assets acquired 29,941,000
Current liabilities 24,937,000
-------------
Net assets acquired $ 5,004,000
=============
Acquired intangible assets represent core deposit premiums and are
being amortized over the estimated lives of the base deposits.
Goodwill represents the excess of cost over the fair value of the net
assets acquired. Goodwill and intangible assets arising from this
acquisition has been assigned to the Dothan Bank operating unit.
Under SFAS No. 142 goodwill and intangible assets that management
concludes has indefinite useful lives are not subject to
amortization, but are subject to impairment tests performed at least
annually.
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. SECURITIES
The amortized cost and fair value of securities available for sale
are summarized as follows:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------- ------------- ------------ ---------------
DECEMBER 31, 2003:
U. S. TREASURY AND U.S.
GOVERNMENT AGENCIES $ 18,989,743 $ 164,797 $ 235,906 $ 18,918,635
STATE AND MUNICIPAL SECURITIES 2,565,944 52,681 2,107 2,616,518
MORTGAGE-BACKED SECURITIES 7,953,859 81,400 42,378 7,992,880
OTHER 2,253,988 10,012 - 2,264,000
EQUITY SECURITIES 1,113,600 - - 1,113,600
--------------- ------------- ------------ ---------------
$ 32,877,134 $ 308,890 $ 280,391 $ 32,905,633
=============== ============= ============ ===============
December 31, 2002:
U. S. Treasury and U.S.
Government agencies $ 5,005,900 $ 196,323 $ - $ 5,202,223
State and municipal securities 1,849,539 65,163 - 1,914,702
Mortgage-backed securities 6,641,390 185,457 - 6,826,847
Other 2,254,862 - - 2,254,862
Equity securities 769,300 - - 769,300
--------------- ------------- ------------ ---------------
$ 16,520,991 $ 446,943 $ - $ 16,967,934
=============== ============= ============ ===============
The amortized cost and fair value of securities available for sale as
of December 31, 2003 by contractual maturity are shown below. Actual
maturities may differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
AMORTIZED FAIR
COST VALUE
------------- -------------
Due within one year $ 864,915 $ 881,278
Due from one to five years 14,207,960 14,353,087
Due from five to ten years 6,482,812 6,300,788
Due after ten years 3,367,588 3,377,600
Mortgage-backed securities 7,953,859 7,992,880
------------- -------------
$ 32,877,134 $ 32,905,633
============= =============
Securities with a carrying value of $3,791,034 and $6,359,538 at
December 31, 2003 and 2002, respectively, were pledged to secure
public deposits and for other purposes required or permitted by law.
As of December 31, 2003 and 2002, investment securities with a
carrying value of $3,815,570 and $3,497,348, respectively, were
pledged to secure advances from the FHLB.
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. SECURITIES (CONTINUED)
Gains and losses on sales of securities available for sale consist of
the following:
YEARS ENDED DECEMBER 31,
------------------------------
2003 2002
-------------- --------------
Gross gains $ - $ 145,544
Gross losses - -
-------------- --------------
Net realized gains $ - $ 145,544
============== ==============
The following table shows securities with gross unrealized losses and
the fair value of those securities, aggregated by category none of
which have been in a continuous unrealized loss position of more than
twelve months at December 31, 2003.
FAIR UNREALIZED
VALUE LOSSES
---------------- ---------------
U. S. Treasury and Government agencies $ 8,534,016 $ 235,906
State and municipal securities 588,878 2,107
Mortgage-backed securities 4,969,002 42,378
---------------- ---------------
Total temporarily impaired securities $ 14,091,896 $ 280,391
================ ===============
The unrealized losses are considered temporary because each security
carries an acceptable investment grade and the repayment sources of
principal and interest are government backed.
NOTE 4. LOANS
The composition of loans is summarized as follows:
December 31,
-----------------------------------
2003 2002
---------------- ---------------
Commercial $ 23,776,000 $ 14,553,278
Real estate - construction 9,937,512 12,379,095
Real estate - farmland 2,737,515 2,415,823
Real estate - mortgage 59,143,339 40,742,566
Consumer and other 13,795,000 11,457,193
---------------- ---------------
109,389,366 81,547,955
Net deferred loan fees and costs 199,408 164,666
---------------- ---------------
109,588,774 81,712,621
Allowance for loan losses (2,117,555) (821,334)
---------------- ---------------
Loans, net $ 107,471,219 $ 80,891,287
================ ===============
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. LOANS (CONTINUED)
Changes in the allowance for loan losses are as follows:
YEARS ENDED DECEMBER 31,
-----------------------------------
2003 2002
---------------- ---------------
Balance, beginning of year $ 821,334 $ 618,067
Provision for loan losses 408,921 442,509
Loans charged off (389,830) (308,985)
Recoveries of loans previously charged off 8,235 69,743
Acquired allowance for loan losses 1,268,895 -
---------------- ---------------
Balance, end of year $ 2,117,555 $ 821,334
================ ===============
The following is a summary of information pertaining to impaired
loans:
AS OF AND FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------
2003 2002
---------------- ---------------
Impaired loans without a valuation allowance $ - $ -
Impaired loans with a valuation allowance 1,590,000 31,000
---------------- ---------------
Total impaired loans $ 1,590,000 $ 31,000
================ ===============
Valuation allowance related to impaired loans $ 117,478 $ 1,000
================ ===============
Average investment in impaired loans $ 1,715,000 $ 34,000
================ ===============
Interest income recognized on impaired loans $ 1,866 $ -
================ ===============
Loans on nonaccrual status amounted to approximately $1,590,000 and
$31,000 at December 31, 2003 and 2002, respectively. There were no
loans past due ninety days or more and still accruing interest.
In the ordinary course of business, the Company has granted loans to
certain related parties, including executive officers, directors and
their affiliates. The interest rates on these loans were
substantially the same as rates prevailing at the time of the
transaction and repayment terms are customary for the type of loan.
Changes in related party loans for the year ended December 31, 2003
are as follows:
Balance, beginning of year $ 3,169,581
Advances 2,949,975
Repayments (1,248,099)
---------------
Balance, end of year $ 4,871,457
===============
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
December 31,
---------------------------------
2003 2002
--------------- --------------
Land $ 571,500 $ 332,734
Buildings 2,785,744 1,807,834
Furniture and equipment 2,087,804 1,464,707
Construction in progress, estimated cost to complete $1,070,000 774,660 -
--------------- --------------
6,219,708 3,605,275
Accumulated depreciation (1,480,923) (547,073)
--------------- --------------
$ 4,738,785 $ 3,058,202
=============== ==============
LEASES
The Company leases the Lee County and East Albany offices under a
noncancelable operating lease agreement from Carr Farms, LLP and
James F. Taylor, respectively. The leases had an initial lease term
of 3 years with an option for a 1 year, 2 years or 3 years renewal on
the Lee County office.
The Company also leases the operations center under a noncancelable
operating lease from Carter Commercial Properties, LLP. The lease had
an initial lease term of 5 years with one five year renewal option.
Rental expense under all operating leases amounted to $75,570 and
$31,193 for the years ended December 31, 2003 and 2002, respectively.
Future minimum lease payments on noncancelable operating leases are
summarized as follows:
2004 $ 75,570
2005 57,607
2006 52,920
2007 39,690
2008 -
Thereafter -
--------------
$ 225,787
==============
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. INTANGIBLE ASSETS
Following is a summary of information related to intangible assets:
AS OF DECEMBER 31, 2003 AS OF DECEMBER 31, 2002
------------------------------- ---------------------------------
GROSS GROSS
CARRYING ACCUMULATED CARRYING ACCUMULATED
AMOUNT AMORTIZATION AMOUNT AMORTIZATION
------------- ---------------- -------------- ----------------
Amortized intangible assets
(Core deposit premiums) $ 487,930 $ 15,248 $ - $ -
============= ================ ============== ================
The estimated amortization expense for each of the next five years is
as follows:
2004 $ 121,982
2005 104,556
2006 87,130
2007 69,704
2008 52,278
Changes in the carrying amount of goodwill for the year ended
December 31, 2003 are as follows:
Beginning balance $ -
Goodwill acquired 2,117,166
-----------------
Ending balance $ 2,117,166
=================
NOTE 7. DEPOSITS
The aggregate amount of time deposits in denominations of $100,000 or
more at December 31, 2003 and 2002 was $23,395,982 and $16,412,754,
respectively. The scheduled maturities of time deposits at December
31, 2003 are as follows:
2004 $ 57,655,407
2005 8,140,023
2006 5,572,790
2007 1,361,512
2008 298,457
Thereafter -
-----------------
$ 73,028,189
=================
The Company had no brokered time deposits at December 31, 2003.
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. OTHER BORROWINGS
Other borrowings consist of the following:
DECEMBER 31,
--------------------------------
2003 2002
--------------- --------------
Federal Home Loan Bank advances with interest and
principal payments due at various maturity dates
through 2008 and interest rates ranging from 1.86%
to 7.30% at December 31, 2003 (weighted average
interest rate is 3.25% at December 31, 2003). $ 15,518,644 $ 10,884,746
5 Line of credit in the amount of $1,750,000 with Nexity Bank
with interest due quarterly at prime less .50% or 3.50% at
December 31, 2003, collateralized by 750,000 shares of
Albany Bank & Trust common stock. Principal is due in
ten annual installments beginning November 14, 2006. 500,000 -
--------------- --------------
$ 16,018,644 $ 10,884,746
=============== ==============
Contractual maturities of other borrowings as of December 31, 2003
are as follows:
2004 $ 5,366,102
2005 152,542
2006 175,000
2007 5,175,000
2008 5,150,000
Thereafter -
---------------
$ 16,018,644
===============
The advances from the Federal Home Loan Bank are secured by certain
qualifying loans of approximately $26,024,000, Federal Home Loan Bank
stock of approximately $783,600 and $3,816,000 in investment
securities.
The Company and subsidiaries have available unused lines of credit
with various financial institutions totaling $1,250,000 at December
31, 2003. There were no other advances outstanding at December 31,
2003 or 2002.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. GUARANTEED PREFERRED BENEFICIAL INTERESTS IN JUNIOR
SUBORDINATED DEBENTURES
In March 2003, the Company formed a wholly-owned Connecticut
statutory business trust, Community Capital Statutory Trust I
("Statutory Trust I"), which issued $4,000,000 of guaranteed
preferred beneficial interests in the Company's junior subordinated
deferrable interest debentures (the "Trust Preferred Securities").
These debentures qualify as Tier I capital under Federal Reserve
Board guidelines. All of the common securities of Statutory Trust I
are owned by the Company. The proceeds from the issuance of the
common securities and the Trust Preferred Securities were used by
Community Capital Statutory Trust I to purchase $4,124,000 of junior
subordinated debentures of the Company, which carry a floating rate
based on a three-month LIBOR plus 315 basis points. The debentures
represent the sole asset of Statutory Trust I. The Trust Preferred
Securities accrue and pay distributions at a floating rate of
three-month LIBOR plus 315 basis points per annum of the stated
liquidation value of $1,000 per capital security. The Company has
entered into contractual arrangements which, taken collectively,
fully and unconditionally guarantee payment of: (i) accrued and
unpaid distributions required to be paid on the Trust Preferred
Securities; (ii) the redemption price with respect to any Trust
Preferred Securities called for redemption by Statutory Trust I and
(iii) payments due upon a voluntary or involuntary dissolution,
winding up or liquidation of Statutory Trust II. The Trust Preferred
Securities are mandatorily redeemable upon maturity of the debentures
in March 2033, or upon earlier redemption as provided in the
indenture. The Company has the right to redeem the debentures
purchased by Statutory Trust I in whole or in part, on or after March
26, 2008. As specified in the indenture, if the debentures are
redeemed prior to maturity, the redemption price will be the
principal amount, plus any unpaid accrued interest.
The Company will be required to adopt the provisions of FIN 46 in the
first quarter of 2004, and may be required to deconsolidate the trust
subsidiary. The adoption of FIN 46 is not expected to have a material
effect on the Company's consolidated financial statements.
NOTE 10. EMPLOYEE BENEFIT PLANS
Profit Sharing Plan
The Company has a 401(k) Employee Profit-Sharing Plan available to
all eligible employees, subject to certain minimum age and service
requirements. The contributions expensed were $57,584 and $43,425 for
the years ended December 31, 2003 and 2002, respectively.
NOTE 11. STOCK OPTIONS AND WARRANTS
The Company has a 1998 stock option plan reserving 325,000 shares of
common stock for the granting of options to directors, officers and
employees. Option prices reflect the fair market value of the
Company's common stock on the dates the options are granted. The
options may be exercised over a period of ten years in accordance
with vesting schedules determined by the Board of Directors.
WARRANT AGREEMENTS WITH EACH OF COMMUNITY CAPITAL'S DIRECTORS. On
March 11, 1999, Community Capital issued its directors warrants to
purchase an aggregate of 302,420 shares of Community Capital's common
stock at $7.00 per share, as adjusted to reflect Community Capital's
ten-for-seven stock split effective in January 2001. The warrants
become exercisable in 20% annual increments beginning on the first
anniversary of the issuance date. Exercisable warrants will remain
exercisable for the ten-year period following the date of issuance or
for 90 days after the warrant holder ceases to be a director of
Community Capital, whichever is shorter. The exercise price of each
warrant is subject to adjustment for stock splits, recapitalizations
or other similar events. Additionally, if the Bank's capital falls
below the minimum level, as determined by the Officer of the
Comptroller of the Currency, Community Capital may be directed to
exercise or forfeit their warrants. At December 31, 2003 and 2002,
there were 276,778 and 302,420 warrants outstanding, respectively.
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. STOCK OPTIONS AND WARRANTS (Continued)
Other pertinent information related to the options and warrants is as
follows:
2003 2002
---------------------------- ----------------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------------- -------------- ------------- --------------
Outstanding at beginning of year 165,673 $ 7.11 163,827 $ 7.10
Granted 77,131 11.51 2,131 8.15
Exercised (1,428) 7.00 - -
Terminated (1,428) 9.10 (285) 7.00
------------ ------------
Outstanding at end of year 239,948 $ 8.48 165,673 $ 7.11
============ ============
Options and warrants exercisable at year-end 131,235 99,533
============ ============
Weighted-average fair value of options and
warrants granted during the year $ 4.72 $ 3.77
Information pertaining to options outstanding at December 31, 2003 is
as follows:
OPTIONS AND WARRANTS OUTSTANDING OPTIONS AND WARRANTS EXERCISABLE
----------------------------------------------------- ------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
RANGE OF AVERAGE AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE OUTSTANDING PRICE
------------- ------------- ------------------ --------------- ----------------- ---------------
$ 7.00 118,713 5.3 years $ 7.00 94,972 $ 7.00
7.00 14,273 6.3 years 7.00 9,416 7.00
7.00 2,131 7.3 years 7.00 2,131 7.00
9.10 2,142 5.3 years 9.10 1,713 9.10
7.35 21,714 5.9 years 7.35 17,371 7.35
7.70 1,713 5.3 years 7.70 1,370 7.70
8.15 2,131 8.3 years 8.15 2,131 8.15
13.97 27,131 8.8 years 13.97 2,131 13.97
10.18 50,000 8.3 years 10.18 - 10.18
------------- -----------------
239,948 131,235
============= =================
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
YEARS ENDED DECEMBER 31,
--------------------------------
2003 2002
--------------- --------------
Dividend yield .78% - %
Expected life 10 years 10 years
Expected volatility 20.48% 23.83%
Risk-free interest rate 4.83% 4.60%
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. INCOME TAXES
The components of income tax expense are as follows:
YEARS ENDED DECEMBER 31,
--------------------------------
2003 2002
--------------- --------------
Current $ 334,303 $ 246,960
Deferred (45,637) 40,135
--------------- --------------
$ 288,666 $ 287,095
=============== ==============
The Company's income tax expense differs from the amounts computed by
applying the federal income tax statutory rates to income before
income taxes. A reconciliation of the differences is as follows:
YEARS ENDED DECEMBER 31,
--------------------------------
2003 2002
--------------- --------------
Tax provision at statutory federal rate $ 319,025 $ 290,424
Tax-exempt income, net (19,225) (15,880)
Other (11,134) 12,551
--------------- --------------
Income tax expense $ 288,666 $ 287,095
=============== ==============
The components of deferred income taxes are as follows:
2003 2002
--------------- --------------
Deferred tax assets:
Loan loss reserves $ 807,378 $ 206,523
Organizational and pre-opening expenses 5,001 12,502
Nonaccrual loan interest 27,115 -
--------------- --------------
839,494 219,025
--------------- --------------
Deferred tax liabilities:
Core deposit premiums 160,712 -
Depreciation 135,542 81,410
Deferred loan costs, net 67,798 52,963
Securities available for sale 11,441 151,961
--------------- --------------
375,493 286,334
--------------- --------------
Net deferred tax assets (liabilities) $ 464,001 $ (67,309)
=============== ==============
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. EARNINGS PER SHARE
Presented below is a summary of the components used to calculate
basic and diluted earnings per share:
YEARS ENDED DECEMBER 31,
--------------------------------
2003 2002
--------------- --------------
Net income $ 649,643 $ 567,086
=============== ==============
Weighted average number of
common shares outstanding 1,460,293 1,439,314
Effect of dilutive options 205,850 70,927
--------------- --------------
Weighted average number of common
shares outstanding used to calculate
dilutive earnings per share 1,666,143 1,510,241
=============== ==============
NOTE 14. COMMITMENTS AND CONTINGENCIES
LOAN COMMITMENTS
The Company is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments include
commitments to extend credit and standby letters of credit. Such
commitments involve, to varying degrees, elements of credit risk and
interest rate risk in excess of the amount recognized in the balance
sheets.
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to
extend credit and standby letters of credit is represented by the
contractual amount of those instruments. The Company uses the same
credit policies in making commitments as it does for on-balance-sheet
instruments. A summary of the Company's commitments is as follows:
2003 2002
--------------- --------------
Commitments to extend credit $ 13,229,000 $ 11,657,375
Standby letters of credit 341,000 142,230
--------------- --------------
$ 13,570,000 $ 11,799,605
=============== ==============
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The amount of collateral obtained, if deemed necessary
by the Company upon extension of credit, is based on management's
credit evaluation of the party. Collateral held varies, but may
include accounts receivable, crops, livestock, inventory, property
and equipment, residential real estate and income-producing
commercial properties.
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. COMMITMENTS AND CONTINGENCIES (Continued)
LOAN COMMITMENTS (CONTINUED)
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loans
to customers. Collateral held varies as specified above and is
required in instances which the Company deems necessary.
At December 31, 2003 and 2002, the carrying amount of liabilities
related to the Company's obligation to perform under standby letters
of credit was insignificant. The Company has not been required to
perform on any standby letters of credit, and the Company has not
incurred any losses on standby letters of credit for the years ended
December 31, 2003 and 2002.
CONTINGENCIES
In the normal course of business, the Company is involved in various
legal proceedings. In the opinion of management, any liability
resulting from such proceedings would not have a material adverse
effect on the Company's financial statements.
NOTE 15. CONCENTRATIONS OF CREDIT
CONCENTRATION BY GEOGRAPHIC LOCATION:
The Company originates primarily commercial, commercial real estate,
residential real estate and consumer loans to customers in Dougherty
and Lee Counties (Georgia) and Houston County (Alabama) and
surrounding counties. The ability of the majority of the Company's
customers to honor their contractual obligations is dependent on the
local and metropolitan Albany, Georgia and Dothan, Alabama economies.
Sixty-six percent of the Company's loan portfolio is concentrated in
loans secured by real estate. A substantial portion of these loans
are in the Company's primary market areas. In addition, a substantial
portion of the other real estate owned is located in those same
markets. Accordingly, the ultimate collectibility of the Company's
loan portfolio and recovery of the carrying amount of other real
estate owned are susceptible to changes in market conditions in the
Company's market areas. The other significant concentrations of
credit by type of loan are set forth in Note 4.
The Company, as a matter of policy, does not generally extend credit
to any single borrower or group of related borrowers in excess of 15%
of each Bank's statutory capital, or approximately $2,050,000 for
Albany Bank and $750,000 for Dothan Bank.
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. REGULATORY MATTERS
The Banks are subject to certain restrictions on the amount of
dividends that may be declared without prior regulatory approval. At
December 31, 2003, approximately $1,788,000 of retained earnings were
available for dividend declaration without regulatory approval.
The Company and Banks are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on consolidated
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company and
Banks must meet specific capital guidelines that involve quantitative
measures of the Company's and Banks' assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices. Capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Banks to maintain minimum
amounts and ratios of total and Tier I capital to risk-weighted
assets, as defined and of Tier I capital to average assets.
Management believes, as of December 31, 2003, the Company and the
Banks met all capital adequacy requirements to which they are
subject.
As of December 31, 2003, the most recent notification from the
regulators categorized Albany Bank and Dothan Bank as well
capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Banks must
maintain minimum total risk-based, Tier I risk-based and Tier I
leverage ratios as set forth in the following table. There are no
conditions or events since that notification that management believes
have changed the Banks' categories. Prompt corrective action
provisions are not applicable to bank holding companies.
The Company and Banks' actual capital amounts and ratios are
presented in the following table.
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
--------------------- --------------------- ---------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
---------- --------- ---------- --------- ---------- ---------
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------
DECEMBER 31, 2003:
TOTAL CAPITAL TO RISK WEIGHTED ASSETS:
CONSOLIDATED $ 15,876 14.34% $ 8,859 8% - - N/A - -
ALBANY BANK $ 13,831 15.13% $ 7,314 8% $ 9,143 10%
DOTHAN BANK $ 2,611 14.05% $ 1,487 8% $ 1,858 10%
TIER I CAPITAL TO RISK WEIGHTED ASSETS:
CONSOLIDATED $ 13,243 11.96% $ 4,430 4% - - N/A - -
ALBANY BANK $ 12,788 13.99% $ 3,657 4% $ 5,486 6%
DOTHAN BANK $ 2,373 12.77% $ 743 4% $ 1,115 6%
TIER I CAPITAL TO AVERAGE ASSETS :
CONSOLIDATED $ 13,243 7.89% $ 6,713 4% - - N/A - -
ALBANY BANK $ 12,788 9.92% $ 5,157 4% $ 6,446 5%
DOTHAN BANK $ 2,373 9.23% $ 1,028 4% $ 1,285 5%
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. REGULATORY MATTERS (Continued)
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
--------------------- --------------------- ---------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
---------- --------- ---------- --------- ---------- ---------
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------
December 31, 2002:
Total Capital to Risk Weighted Assets:
Consolidated $ 10,759 13.24% $ 6,595 8% - - N/A - -
Albany Bank $ 9,047 11.20% $ 6,501 8% $ 8,132 10%
Tier I Capital to Risk Weighted Assets:
Consolidated $ 9,938 12.23% $ 3,297 4% - - N/A - -
Albany Bank $ 8,226 10.19% $ 3,251 4% $ 4,880 6%
Tier I Capital to Average Assets:
Consolidated $ 9,938 9.38% $ 4,236 4% - - N/A - -
Albany Bank $ 8,226 7.82% $ 4,206 4% $ 5,258 5%
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the current amount that
would be exchanged between willing parties, other than in a forced
liquidation. Fair value is best determined based upon quoted market
prices. However, in many instances, there are no quoted market prices
for the Company's various financial instruments. In cases where
quoted market prices are not available, fair value is based on
discounted cash flows or other valuation techniques. These techniques
are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. Accordingly, the
fair value estimates may not be realized in an immediate settlement
of the instrument. SFAS No. 107, Disclosures about Fair Value of
Financial Instruments, excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented may not
necessarily represent the underlying fair value of the Company.
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
CASH, DUE FROM BANKS, INTEREST-BEARING DEPOSITS AT OTHER FINANCIAL
INSTITUTIONS AND FEDERAL FUNDS SOLD: The carrying amount of cash, due
from banks, interest-bearing deposits at other financial institutions
and federal funds sold approximates fair value.
SECURITIES: Fair value of securities is based on available quoted
market prices. The carrying amount of equity securities with no
readily determinable fair value approximates fair value.
LOANS: The carrying amount of variable-rate loans that reprice
frequently and have no significant change in credit risk approximates
fair value. The fair value of fixed-rate loans is estimated based on
discounted contractual cash flows, using interest rates currently
being offered for loans with similar terms to borrowers with similar
credit quality. The fair value of impaired loans is estimated based
on discounted contractual cash flows or underlying collateral values,
where applicable.
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
DEPOSITS: The carrying amount of demand deposits, savings deposits,
and variable-rate certificates of deposit approximates fair value.
The fair value of fixed-rate certificates of deposit is estimated
based on discounted contractual cash flows using interest rates
currently being offered for certificates of similar maturities.
FEDERAL FUNDS PURCHASED, OTHER BORROWINGS AND SUBORDINATED
DEBENTURES: The carrying amount of variable rate borrowings and
federal funds purchased approximate fair value. The fair value of
fixed rate other borrowings are estimated based on discounted
contractual cash flows using the current incremental borrowing rates
for similar type borrowing arrangements.
ACCRUED INTEREST: The carrying amount of accrued interest
approximates their fair value.
OFF-BALANCE-SHEET INSTRUMENTS: The carrying amount of commitments to
extend credit and standby letters of credit approximates fair value.
The carrying amount of the off-balance-sheet financial instruments is
based on fees charged to enter into such agreements.
The carrying amount and estimated fair value of the Company's
financial instruments were as follows:
December 31, 2003 December 31, 2002
--------------------------------- ---------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------- --------------- ---------------- ---------------
(Dollars in Thousands)
---------------------------------------------------------------------
Financial assets:
Cash, due from banks, interest-
bearing deposits at other financial
institutions and federal funds sold $ 6,969,218 $ 6,969,218 $ 6,919,620 $ 6,919,620
Securities 32,905,633 32,905,633 16,967,934 16,967,934
Loans 107,471,219 113,291,000 80,828,005 82,269,000
Accrued interest receivable 1,041,529 1,045,529 761,948 761,948
Financial liabilities:
Deposits 123,222,496 124,869,587 86,003,991 86,945,000
Federal funds purchased - - 1,705,000 1,705,000
Other borrowings and subordinated
debentures 20,018,644 20,427,000 10,884,746 11,211,473
Accrued interest payable 212,980 212,980 137,883 137,883
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets as of
December 31, 2003 and 2002 and statements of income and cash flows of
Community Capital Bancshares, Inc. for the periods ended December 31,
2003 and 2002.
CONDENSED BALANCE SHEETS
2003 2002
--------------- ---------------
ASSETS
Cash $ 314,721 $ 712,894
Investment in subsidiaries 17,873,051 8,520,816
Premises and equipment 32,284 358,132
Other assets 1,298,567 167,915
--------------- ---------------
Total assets $ 19,518,623 $ 9,759,757
=============== ===============
LIABILITIES
Trust preferred debt $ 4,000,000 $ -
Note payable 500,000 16,778
Other liabilities 1,730,981 -
--------------- ---------------
Total liabilities 6,230,981 16,778
--------------- ---------------
STOCKHOLDERS' EQUITY 13,287,642 9,742,979
--------------- ---------------
Total liabilities and stockholders' equity $ 19,518,623 $ 9,759,757
=============== ===============
CONDENSED STATEMENTS OF INCOME
2003 2002
--------------- ---------------
INCOME, other $ 19 $ 43
--------------- ---------------
EXPENSES
Interest expense 148,975 -
Salaries and employees benefits 176,047 40,242
Legal and professional 99,147 26,821
Occupancy expenses 5,276 39,228
Other operating expenses 169,087 129,427
--------------- ---------------
598,532 235,718
--------------- ---------------
Loss before income tax benefit and equity
in undistributed income of subsidiaries (598,513) (235,675)
INCOME TAX BENEFIT 211,930 81,773
--------------- ---------------
Loss before equity in undistributed income of subsidiaries (386,583) (153,902)
EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 1,036,226 720,988
--------------- ---------------
Net income $ 649,643 $ 567,086
=============== ===============
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
2003 2002
--------------- ---------------
OPERATING ACTIVITIES
Net income $ 649,643 $ 567,086
Adjustments to reconcile net income to net
cash used in operating activities:
Undistributed income of subsidiaries (1,036,226) (720,988)
Increase in taxes receivable (430,484) (111,833)
Depreciation - 27,884
Provision for deferred taxes - 13,736
Other operating activities (307,832) (3,677)
--------------- ---------------
Net cash used in operating activities (1,124,899) (227,792)
--------------- ---------------
INVESTING ACTIVITIES
Increase in investment in subsidiaries (3,600,000) -
Purchase of Dothan Bank (192,139) -
Purchase of fixed assets (32,285) (386,016)
--------------- ---------------
Net cash used in investing activities (3,824,424) (386,016)
--------------- ---------------
FINANCING ACTIVITIES
Dividends paid (87,863) -
Proceeds from issuance of common stock 179,494 -
(Purchase) sale of treasury stock 38,302 (124,516)
Proceeds from other borrowings 4,500,000 -
Stock issue expense related to purchase of Dothan Bank (78,783) -
--------------- ---------------
Net cash used in financing activities 4,551,150 (124,516)
--------------- ---------------
Net increase (decrease) in cash (398,173) (738,324)
Cash at beginning of period 712,894 1,451,218
--------------- ---------------
Cash at end of year $ 314,721 $ 712,894
=============== ===============
F-30
COMMUNITY CAPITAL BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
March 31,2004 December 31, 2003
----------------- -----------------------
ASSETS
Cash and due from banks $ 7,095 $ 4,285
Federal funds sold 13,790 2,684
Securities available for sale 28,986 31,792
Restricted equity securities 1,114 1,114
Loans 110,948 109,589
Less allowance for loan losses 1,957 2,118
----------------- -----------------------
Loans, net 108,991 107,471
Premises and equipment 4,942 4,739
Goodwill 2,118 2,117
Core deposit premium 442 473
Other assets 4,186 4,054
----------------- -----------------------
TOTAL ASSETS $ 171,664 $ 158,729
================= =======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest bearing $ 13,194 $ 14,035
Interest bearing 122,347 109,188
----------------- -----------------------
Total deposits 135,541 123,223
Other borrowings 17,177 16,018
Guaranteed preferred beneficial interests in junior subordinated
debentures 4,124 4,000
Other liabilities 860 2,191
----------------- -----------------------
TOTAL LIABILITIES 157,702 145,432
----------------- -----------------------
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;
1,765,264 and 1,741,191 shares issued 1,765 1,741
Capital surplus 11,198 11,075
Retained earnings 1,103 916
Accumulated other comprehensive income 348 17
Less cost of treasury stock, 64,149 shares (452) (452)
----------------- -----------------------
TOTAL SHAREHOLDERS' EQUITY 13,962 13,297
----------------- -----------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 171,664 $ 158,729
================= =======================
F-31
COMMUNITY CAPITAL BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three months ended March 31, 2004 and 2003
(Dollars in thousands, except earnings per share)
2004 2003
---------------------- ------------------
INTEREST INCOME
Loans $ 2,006 $ 1,473
Investment securities 331 174
Deposits in banks 1 6
Federal funds sold 10 5
---------------------- ------------------
TOTAL INTEREST INCOME 2,348 1,658
---------------------- ------------------
INTEREST EXPENSE
Deposits 517 532
Other borrowed money 170 103
---------------------- ------------------
TOTAL INTEREST EXPENSE 687 635
---------------------- ------------------
NET INTEREST INCOME 1,661 1,023
Provision for loan losses 15 130
---------------------- ------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,646 893
---------------------- ------------------
OTHER INCOME
Service charges on deposit accounts 186 120
Financial service fees 21 13
Mortgage origination fees 35 82
Loss on sale of foreclosed properties (51) - -
Other service charges, commissions and fees 34 35
---------------------- ------------------
225 250
---------------------- ------------------
OTHER EXPENSES
Salaries and employee benefits 752 504
Equipment and occupancy expenses 218 145
Marketing expenses 55 27
Data processing expenses 120 81
Stationary and supply expense 42 23
Administrative expenses 161 125
Other expenses 198 120
---------------------- ------------------
TOTAL EXPENSES 1,546 1,025
---------------------- ------------------
INCOME BEFORE INCOME TAXES 325 118
Income tax expense 103 48
---------------------- ------------------
NET INCOME $ 222 $ 70
====================== ==================
BASIC EARNINGS PER SHARE (weighted average shares used in
calculation: 1,714,196 in 2004 and 1,431,370 in 2003) $ .13 $ .05
============= ==============
DILUTED EARNINGS PER SHARE (weighted average shares used in
calculation: 1,924,240 in 2004 and 1,610,849 in 2003) $ .12 $ .04
============= ==============
F-32
COMMUNITY CAPITAL BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three months ended March 31, 2004 and 2003
(Dollars in thousands)
2004 2003
---- ----
NET INCOME $ 222 $ 70
Other comprehensive loss
Net unrealized holding gains (losses) arising during the
period, net of tax expense (benefit) of $68,000 in 2004 and
$(9,000) in 2003. 331 (16)
--------------------- ---------------------
COMPREHENSIVE INCOME $ 553 $ 54
===================== =====================
F-33
COMMUNITY CAPITAL BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months ended March 31, 2004 and 2003
(Dollars in thousands)
2004 2003
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 222 $ 70
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 98 64
Amortization of core deposit premiums 31 - -
Provision for loan losses 15 131
Net gain on sale of investments available for sale (2)
Provision for deferred taxes 46
Decrease (increase) in interest receivable 71 (37)
Other operating activities (1,522) (379)
------------------- --------------------
Net cash used in operating activities (1,041) (151)
------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (302) (26)
Net decrease in federal funds sold (11,106) (5,254)
Net increase in loans (1,535) (8,372)
Proceeds from sales of securities available for sale 3.753 - -
Proceeds from maturities of securities available for sale 1,466 899
Purchase of securities available for sale (2,012) (975)
Adjustment to acquisition (49) - -
------------------- --------------------
Net cash used in Investing activities (9,785) (13,728)
------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 12,318 8,912
Proceeds from Trust Preferred issuance - - 4,000
Decrease in federal funds purchased - - (1,705)
Net increase in other borrowings 1,158 (61)
Dividends paid (35)
Proceeds from exercise of stock warrants 195 - -
Sale (purchase) of treasury stock - - 6
------------------- --------------------
Net cash provided by financing activities 13,636 11,152
------------------- --------------------
Net increase (decrease) in cash 2,810 (2,727)
Cash and due from banks at beginning of period 4,285 6,920
------------------- --------------------
Cash and due from banks at end of period $ 7,095 $ 4,193
=================== ====================
SUPPLEMENTAL DISCLOSURE
Cash paid for interest $ 701 $ 534
Income taxes $ 30 $ 200
NON-CASH TRANSACTION
Unrealized losses on securities available for sale $ 399 $ 25
=================== ====================
F-34
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 multi-bank holding
company whose principal activity is the ownership and management of its
wholly-owned bank subsidiaries, Albany Bank and Trust, N.A ("Albany Bank") and
First Bank of Dothan, Inc. ("Dothan Bank"), collectively referred to as "the
Banks." Albany Bank's main office is located in Albany, Dougherty County,
Georgia, with one loan production office in Albany and one full service branch
in Lee County, Georgia. Dothan Bank is located in Dothan, Houston County,
Alabama. The Banks provide a full range of banking services to individual and
corporate customers in their primary market areas of Dougherty and Lee Counties,
Georgia and Houston County, Alabama.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant intercompany transactions and accounts are
eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles 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 March 31, 2004 are not necessarily
indicative of the results of a full year's operations, and should be read in
conjunction with the Company's annual report as filed on Form 10-KSB.
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 (GAAP) 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 its subsidiaries 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.
F-35
STOCK COMPENSATION PLANS
At March 31, 2004, the Company had two stock-based employee compensation plans,
which are described in more detail in the 2003 annual report. The Company
accounts for those plans under the recognition and measurement principles of
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. No stock-based employee compensation
cost is reflected in net income, as all options granted under those plans had an
exercise price equal to the market value of the underlying stock on the date of
grant. In addition, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure in December 2002. SFAS No. 148 amends
SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative
methods of transition for an entity that voluntarily changes to the fair value
based method of accounting for stock-based employee compensation. It also amends
the disclosure provisions of SFAS No. 123 to require prominent disclosure about
the effects on reported net income of an entity's accounting policy decisions
with respect to stock-based employee compensation. The Company has not elected
to adopt the recognition provisions of this Statement for stock-based employee
compensation and has elected to continue with accounting methodology in Opinion
No. 25 as permitted by SFAS No. 123.
QUARTER ENDED MARCH 31,
----------------------------------
2004 2003
---------------- -----------------
Net income, as reported $ 223,000 $ 70,000
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax effects (23,000) (23,000)
---------------- -----------------
Pro forma net income $ 200,000 $ 47,000
================ =================
Earnings per share:
Basic - as reported $ .13 $ .05
================ =================
Basic - pro forma $ .11 $ .03
================ =================
Diluted - as reported $ .12 $ .04
================ =================
Diluted - pro forma $ .10 $ .03
================ =================
ACCOUNTING STANDARDS
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51" and, on December
24, 2003, the FASB issued FASB Interpretation No. 46 (Revised December 2003),
"Consolidation of Variable Interest Entities" which replaced FIN 46. The
interpretation addresses consolidation by business enterprises of variable
interest entities. A variable interest entity is defined as an entity subject to
consolidation according to the provisions of the interpretation. The revised
interpretation provided for special effective dates for entities that had fully
or partially applied the original interpretation as of December 24, 2003.
Otherwise, application of the interpretation is required in financial statements
of public entities that have interests in special-purpose entities, or SPEs, for
periods ending after December 15, 2003. Application by public entities, other
than small business issuers, for all other types of variable interest entities
(i.e., non-SPEs) is required in financial statements for periods ending after
March 15, 2004. Application by small business issuers to
F-36
variable interest entities other than SPEs and by nonpublic entities to all
types of variable interest entities is required at various dates in 2004 and
2005. The Company adopted the provisions of FIN 46 as of January 1, 2004. As
required by the provisions of the Interpretation, the Company deconsolidated its
investment in its subsidiary trust which issued subordinated trust preferred
securities. The adoption of FIN 46 and related provisions had the effect of
increasing assets by $124,000 and liabilities by the same amount. The adoption
of the provisions had no effect on net income.
F-37
--------------------------------------------------------------------------------
TABLE OF CONTENTS PAGE
RISK FACTORS.............................6 COMMUNITY CAPITAL
BANCSHARES, INC.
CAUTIONARY STATEMENT ABOUT
FORWARD-LOOKING STATEMENTS.............11
1,000,000
USE OF PROCEEDS........................12
SHARES OF
CAPITALIZATION.........................13
COMMON STOCK
PRICE RANGE OF OUR COMMON STOCK........14
PROSPECTUS
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..................16
BUSINESS...............................29
PRINCIPAL SHAREHOLDERS AND STOCK
OWNERSHIP OF MANAGEMENT................37 _________, 2004
MANAGEMENT.............................39
CERTAIN TRANSACTIONS...................46
DESCRIPTION OF CAPITAL STOCK...........46
CERTAIN PROVISIONS OF THE ARTICLES
OF INCORPORATION AND BYLAWS............47 FIG PARTNERS, L.L.C.
SUPERVISION AND REGULATION.............51
PLAN OF DISTRIBUTION...................61
LEGAL MATTERS..........................62
EXPERTS................................62
WHERE YOU CAN FIND ADDITIONAL
INFORMATION ABOUT US...................62
DOCUMENTS INCORPORATED BY
REFERENCE..............................63
Index to Consolidated Financial
Statements.........................F-1
Prospective investors may rely only on the information contained in this
prospectus. Community Capital has not authorized anyone to provide prospective
investors with different or additional information. This prospectus is not an
offer to sell nor is it seeking an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted. The information contained
in this prospectus is correct only as of the date of this prospectus, regardless
of the time of the delivery of this prospectus or any sale of these securities.
No action is being taken in any jurisdiction outside the United States
to permit a public offering of the common stock or possession or distribution of
this prospectus in any such jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States and Canada are
required to inform themselves about and to observe the restrictions of that
jurisdiction related to this offering and the distribution of this prospectus.
--------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Consistent with the applicable provisions of the laws of Georgia, the
Registrant's bylaws provide that the Registrant will indemnify directors,
officers, employees or agents of the Registrant (collectively, the "insiders")
against expenses actually and reasonably incurred by them if they are successful
on the merits or otherwise in the defense of a claim or proceeding. With respect
to a claim or proceeding in which an insider is not successful on the merits or
otherwise, the indemnification provisions provide that the Registrant will
indemnify insiders who meet the applicable standard of conduct. The applicable
standard of conduct is met if the insider acted in a manner he or she in good
faith believed to be in or not opposed to the best interests of the Registrant
and, with respect to any criminal action or proceeding, if the insider had no
reasonable cause to believe his or her conduct was unlawful. Whether the
applicable standard of conduct has been met is determined by the Board of
Directors, the shareholders or independent legal counsel in each specific case.
The Registrant will make advances against expenses, so long as the
insider seeking indemnification provides a written affirmation of his or her
good faith belief that he or she has met the applicable standard of conduct and
agrees to refund the advance if it is ultimately determined that he or she is
not entitled to indemnification.
The bylaws of the Registrant also provide that the indemnification
rights set forth in the bylaws are not exclusive of other indemnification rights
to which an insider may be entitled under any bylaw, resolution or agreement,
either specifically or in general terms approved by the affirmative vote of the
holders of a majority of the shares entitled to vote. The Registrant can also
provide for greater indemnification than that set forth in the bylaws if it
chooses to do so, subject to approval by the Registrant's shareholders.
The bylaws specifically provide that the Registrant may purchase and
maintain insurance on behalf of any director against any liability asserted
against such person and incurred by him or her in any such capacity, whether or
not the Registrant would have had the power to indemnify against such liability.
In addition, the Registrant's articles of incorporation, subject to
certain exceptions, eliminate the potential personal liability of a director for
monetary damages to the Registrant and to the shareholders of the Registrant for
breach of a duty as a director. There is no elimination of liability for (1) a
breach of duty involving appropriation of a business opportunity of the
Registrant, (2) an act or omission not in good faith or involving intentional
misconduct or a knowing violation of law, (3) a transaction from which the
director derives an improper material tangible personal benefit, or (4) as to
any payment of a dividend or approval of a stock repurchase that is illegal
under the Georgia Business Corporation Code. Article 11 does not eliminate or
limit the right of the Registrant or its shareholders to seek injunctive or
other equitable relief not involving monetary damages.
II-1
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses of the sale of the Registrant's common stock, $1.00
par value, are as follows:
Securities and Exchange Commission Registration Fee $ 1,485
Legal Fees and Expenses 75,000
NASD Examination Fees 13,000
Blue Sky Fees and Expenses 25,000
Accounting Fees and Expenses 6,500
Printing and Engraving Expenses 30,000
Miscellaneous 2,015
--------
Total $153,000
========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The response to this Item is partially included in Community Capital's
Annual Report to Shareholders at page 49 and is incorporated herein by
reference.
On November 13, 2003, Community Capital acquired First Bank of Dothan
pursuant to the terms of an Agreement and Plan of Merger by and between First
Bank of Dothan and Community Capital. Under the terms of the agreement and as of
November 13, 2003, 150,000 outstanding shares of First Bank of Dothan common
stock were converted into the right to receive an aggregate of 216,000 shares of
Community Capital common stock. Additionally, 100,000 outstanding shares of
First Bank of Dothan common stock were converted into the right to receive cash
equal to $18.72 per share. The shares of Community Capital common stock issued
to First Bank of Dothan shareholders were issued to accredited investors and no
more than 35 unaccredited investors. The shares were issued in a private
placement exempted from registration under Rule 506 of the Securities Act of
1933.
ITEM 27. EXHIBITS.
Exhibit
Number Description
------ -----------
1.1+ Form of Selling Agency Agreement between Community Capital Bancshares, Inc. and FIG
Partners, L.L.C. /+
3.1 Articles of Incorporation./1
3.2 Bylaws./1
4.1 Instruments Defining the Rights of Security Holders. See Articles of Incorporation at
Exhibit 3.1 hereto and Bylaws at Exhibit 3.2 hereto.
4.2 Amended and Restated Declaration of Trust./2
4.3 Indenture Agreement. /2
4.4 Guarantee Agreement. /2
5.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP.
II-2
10.3* Amended and Restated Employment Agreement dated August 19, 1998, among Albany
Bank & Trust, N.A. (In Organization), Community Capital Bancshares, Inc. and Robert E.
Lee/1 and the Form of Amendment thereto./1
10.4* Employment Agreement dated October 1, 1998, among Albany Bank & Trust, N.A. (In
Organization), Community Capital Bancshares, Inc. and David C. Guillebeau, as amended
November 9, 1998/1 and the Form of Second Amendment thereto./1
10.5 Form of Community Capital Bancshares, Inc. Organizers' Warrant Agreement./3
10.6* Community Capital Bancshares, Inc. Amended and Restated 1998 Stock Incentive Plan./4
10.7* Form of Community Capital Bancshares, Inc. Incentive Stock Option Award./1
10.8* Community Capital Bancshares, Inc. 2000 Outside Directors' Stock Option Plan./5
10.9* Community Capital Bancshares, Inc. Non-Qualified Stock Option Agreement with Charles
Jones, dated November 15, 1999./5
10.10* Community Capital Bancshares, Inc. Non-Qualified Stock Option Agreement with Richard
Bishop, dated April 11, 2000./5
10.11* First Amendment to the Community Capital Bancshares, Inc. 1998 Stock Incentive Plan. /6
10.12* First Amendment to the Community Capital Bancshares, Inc. 2000 Outside Directors'
Stock Option Plan. /6
10.13* Community Capital Bancshares, Inc. Restated Employee Stock Purchase Plan. /6
10.14 Agreement and Plan of Merger by and between First Bank of Dothan, Inc. and Community
Capital Bancshares, Inc., dated as of July 2, 2003./7
10.15 First Amendment to the Agreement and Plan of Merger by and between First Bank of
Dothan, Inc. and Community Capital Bancshares, Inc., dated August 6, 2003./8
10.16 Second Amendment to the Agreement and Plan of Merger by and Between First Bank of
Dothan, Inc. and Community Capital Bancshares, Inc., dated September 24, 2003./9
13.1 Community Capital Bancshares, Inc. 2003 Annual Report to Shareholders. Except with
respect to those portions specifically incorporated by reference into this Report,
Community Capital's 2003 Annual Report to Shareholders is not deemed to be filed as
part of this Report.
22.1 Subsidiaries of Community Capital Bancshares, Inc.
23.1 Consent of Mauldin & Jenkins, LLC
24.1 Power of Attorney (appears on the signature pages to this Registration Statement).
-----------------------------------------------
+ To be filed by amendment or incorporated by reference.
* Compensatory plan or arrangement.
1 Incorporated herein by reference to exhibit of same number in Community
Capital's Registration Statement on Form SB-2, Registration No. 333-68307,
filed December 3, 1998.
2 Incorporated herein by reference to exhibit of the same number in Community
Capital's Quarterly Report on Form 10-QSB for the period ended March 31,
2003 (File no. 000-25345), filed May 15, 2003.
3 Incorporated herein by reference to exhibit of same number in Community
Capital's Amendment No. 1 to Registration Statement on Form SB-2,
Registration No. 333-68307, filed February 2, 1999
4 Incorporated by reference to exhibit of same number in Community Capital's
Amendment No. 2 to Registration Statement on Form SB-2, Registration No.
333-68307, filed February 2, 1999.
5 Incorporated by reference to exhibit of same number in Community Capital's
Quarterly Report on Form 10-QSB for the quarterly period ended September
30, 2000 (File no. 000-25345), filed November 14, 2000.
II-3
6 Incorporated by reference to exhibit of same number in Community Capital's
Form 10-KSB (File no. 000-25345), filed March 26, 2002.
7 Incorporated by reference to Exhibit 99.1 in Community Capital's Current
Report on Form 8-K (File no. 000-25345), filed July 7, 2003.
8 Incorporated by reference to exhibit of same number in Community Capital's
Quarterly Report on Form 10-QSB for the quarterly period ended June 30,
2003 (File no. 000-25345), filed August 14, 2003.
9 Incorporated by reference to Exhibit 99.1 in Community Capital's
Registration Statement on Form S-3, Registration No. 333-111323, filed
December 18, 2003.
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to foregoing provisions, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes as follows:
(a)(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration Statement;
and
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities being registered that remain unsold at the end of the
offering.
II-4
(b)(1) For determining any liability under the Securities Act, to treat
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 424(b)(1), or (4) or 497(h) under
the Securities Act as part of this Registration Statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Securities Act, to treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the Registration Statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-5
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned in the city of Albany,
state of Georgia, on June 1, 2004.
COMMUNITY CAPITAL BANCSHARES, INC.
By: /s/ Robert E. Lee
------------------------------------
Robert E. Lee,
President
II-6
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
on the signature page to this Registration Statement constitutes and appoints
Robert E. Lee, his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him or her and in his or her name,
place, and stead, in any and all capacities, to sign any and all amendments to
this Registration Statement, and to file the same, with all exhibits hereto, and
other documents in connection herewith with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
they might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ Robert M. Beauchamp Director June 1, 2004
------------------------------
Robert M. Beauchamp
/s/ Bennett D. Cotten, Jr. Director June 1, 2004
------------------------------
Bennett D. Cotten, Jr.
/s/ Glenn A. Dowling Director June 1, 2004
------------------------------
Glenn A. Dowling
/s/ Mary Helen Dykes Director June 1, 2004
------------------------------
Mary Helen Dykes
/s/ Charles M. Jones, III Chairman of the Board June 1, 2004
------------------------------ and Chief Executive Officer
Charles M. Jones, III
/s/ Van Cise Knowles Director June 1, 2004
------------------------------
Van Cise Knowles
/s/ C. Richard Langley Director June 1, 2004
------------------------------
C. Richard Langley
/s/ Robert E. Lee Director and President June 1, 2004
------------------------------ (Principal Executive Officer)
Robert E. Lee
II-7
/s/ Corinne C. Martin Director June 1, 2004
-----------------------------
Corinne C. Martin
/s/ William F. Mcafee Director June 1, 2004
-----------------------------
William F. McAfee
Director
-----------------------------
Mark M. Shoemaker
/s/ Jane Anne D. Sullivan Director June 1, 2004
-----------------------------
Jane Anne D. Sullivan
/s/ John P. Ventulett, Jr. Director June 1, 2004
-----------------------------
John P. Ventulett, Jr.
/s/ Lawrence B. Willson Director June 1, 2004
-----------------------------
Lawrence B. Willson
/s/ James D. Woods Director June 1, 2004
-----------------------------
James D. Woods
/s/ David J. Baranko Chief Financial Officer June 1, 2004
----------------------------- (Principal Financial and
David J. Baranko Accounting Officer)
II-8
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation./1
3.2 Bylaws./1
4.1 Instruments Defining the Rights of Security Holders. See Articles of Incorporation at
Exhibit 3.1 hereto and Bylaws at Exhibit 3.2 hereto.
4.2 Amended and Restated Declaration of Trust./2
4.3 Indenture Agreement. /2
4.4 Guarantee Agreement. /2
5.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP.
10.3* Amended and Restated Employment Agreement dated August 19, 1998, among Albany
Bank & Trust, N.A. (In Organization), Community Capital Bancshares, Inc. and Robert E.
Lee/1 and the Form of Amendment thereto./1
10.4* Employment Agreement dated October 1, 1998, among Albany Bank & Trust, N.A. (In
Organization), Community Capital Bancshares, Inc. and David C. Guillebeau, as amended
November 9, 1998/1 and the Form of Second Amendment thereto./1
10.5 Form of Community Capital Bancshares, Inc. Organizers' Warrant Agreement./3
10.6* Community Capital Bancshares, Inc. Amended and Restated 1998 Stock Incentive Plan./4
10.7* Form of Community Capital Bancshares, Inc. Incentive Stock Option Award./1
10.8* Community Capital Bancshares, Inc. 2000 Outside Directors' Stock Option Plan./5
10.9* Community Capital Bancshares, Inc. Non-Qualified Stock Option Agreement with Charles
Jones, dated November 15, 1999./5
10.10* Community Capital Bancshares, Inc. Non-Qualified Stock Option Agreement with Richard
Bishop, dated April 11, 2000./5
10.11* First Amendment to the Community Capital Bancshares, Inc. 1998 Stock Incentive Plan. /6
10.12* First Amendment to the Community Capital Bancshares, Inc. 2000 Outside Directors'
Stock Option Plan. /6
10.13* Community Capital Bancshares, Inc. Restated Employee Stock Purchase Plan. /6
10.14 Agreement and Plan of Merger by and between First Bank of Dothan, Inc. and
Community Capital Bancshares, Inc., dated as of July 2, 2003./7
10.15 First Amendment to the Agreement and Plan of Merger by and between First Bank of
Dothan, Inc. and Community Capital Bancshares, Inc., dated August 6, 2003./8
10.16 Second Amendment to the Agreement and Plan of Merger by and Between First Bank of
Dothan, Inc. and Community Capital Bancshares, Inc., dated September 24, 2003./9
13.1 Community Capital Bancshares, Inc. 2003 Annual Report to Shareholders. Except with
respect to those portions specifically incorporated by reference into this Report,
Community Capital's 2003 Annual Report to Shareholders is not deemed to be filed as
part of this Report.
22.1 Subsidiaries of Community Capital Bancshares, Inc.
23.1 Consent of Mauldin & Jenkins, LLC
24.1 Power of Attorney (appears on the signature pages to this Registration Statement).
-----------------------------------------------
* Compensatory plan or arrangement.
1 Incorporated herein by reference to exhibit of same number in Community
Capital's Registration Statement on Form SB-2, Registration No. 333-68307,
filed December 3, 1998.
2 Incorporated herein by reference to exhibit of the same number in Community
Capital's Quarterly Report on Form 10-QSB for the period ended March 31,
2003 (File no. 000-25345), filed May 15, 2003.
3 Incorporated herein by reference to exhibit of same number in Community
Capital's Amendment No. 1 to Registration Statement on Form SB-2,
Registration No. 333-68307, filed February 2, 1999
4 Incorporated by reference to exhibit of same number in Community Capital's
Amendment No. 2 to Registration Statement on Form SB-2, Registration No.
333-68307, filed February 2, 1999.
5 Incorporated by reference to exhibit of same number in Community Capital's
Quarterly Report on Form 10-QSB for the quarterly period ended September
30, 2000 (File no. 000-25345), filed November 14, 2000.
6 Incorporated by reference to exhibit of same number in Community Capital's
Form 10-KSB (File no. 000-25345), filed March 26, 2002.
7 Incorporated by reference to Exhibit 99.1 in Community Capital's Current
Report on Form 8-K (File no. 000-25345), filed July 7, 2003.
8 Incorporated by reference to exhibit of same number in Community Capital's
Quarterly Report on Form 10-QSB for the quarterly period ended June 30,
2003 (File no. 000-25345), filed August 14, 2003.
9 Incorporated by reference to Exhibit 99.1 in Community Capital's
Registration Statement on Form S-3, Registration No. 333-111323, filed
December 18, 2003.