SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 AND 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 -------------- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT 1934 For the transition period from _______ to _______ Commission File Number: 000-25345 --------- COMMUNITY CAPITAL BANCSHARES, INC. (Exact name of registrant as specified in its charter) Georgia 58-2413468 ------------------------------ ---------- (State or other jurisdiction of (IRS Employer Incorporation or organization) Identification No.) P.O. Drawer 71269, Albany, Georgia 31708 ---------------------------------------- (Address of principal executive offices) (229) 446-2265 -------------- (Registrant's telephone number, including area code) Not Applicable -------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- -------- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock as of March 31, 2002: 1,445,870 SHARES Transitional Small Business Disclosure Format (check one): Yes No X -------- -------- PART I - FINANCIAL INFORMATION Page No. --------- ITEM 1. Financial Statements Consolidated balance sheets (unaudited) as of December 31, 2001 and March 31, 2002 3 Consolidated statement of operations (unaudited) for the three months ended March 31, 2001 and 2002 4 Consolidated statement of comprehensive income (unaudited) for the three months ended March 31, 2001 and 2002 5 Statement of cash flows (unaudited) for the three months ended March 31, 2001 and 2002 6 Item 2. Management's Discussion and Analysis of Financial Condition and results of operations 8 PART II - OTHER INFORMATION ITEM 2. Changes in Securities and use of proceeds 11 ITEM 4. Submission of matters to a vote of Security Holders 11 ITEM 5. Other Matters 11 ITEM 6. Exhibits and reports on Form 8-K: 11 - 2 - COMMUNITY CAPITAL BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands) March 31,2002 December 31, 2001 --------------- ------------------- ASSETS ------ Cash and due from banks $ 3,663 $ 4,471 Federal funds sold 500 4,483 Securities available for sale 17,981 14,999 Loans 66,808 61,801 Less allowance for loan losses 630 618 --------------- ------------------- Loans, net 66,178 61,183 Premises and equipment 2,615 2,600 Other assets 999 949 --------------- ------------------- $ 91,936 $ 88,685 =============== =================== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Deposits Non-interest bearing $ 6,725 $ 6,103 Interest bearing 66,523 63,728 --------------- ------------------- Total deposits 73,248 69,831 Other borrowings 9,159 9,251 Other liabilities 349 418 --------------- ------------------- TOTAL LIABILITIES 82,756 79,500 --------------- ------------------- Shareholders' equity Preferred stock, par value not stated; 2,000,000 shares authorized; no shares issued $ - - $ - - Common stock, $1.00 par value, 10,000,000 shares authorized; 1,499,560 shares issued 1,500 1,500 Capital surplus 8,085 8,085 Accumulated deficit (92) (213) Accumulated other comprehensive income 60 180 Less cost of treasury stock, 53,690 shares as of March 31, 2002 and 52,690 shares as of December 31, 2001 (373) (365) --------------- ------------------- TOTAL SHAREHOLDERS' EQUITY 9,180 9,185 --------------- ------------------- $ 91,936 $ 88,685 =============== =================== - 3 - COMMUNITY CAPITAL BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Three months ended March 31, 2002 and 2001 (Dollars in thousands, except earnings per share) 2002 2001 ------ ------ INTEREST INCOME Loans $1,284 $ 998 Investment securities 185 267 Deposits in banks 5 10 Federal funds sold 18 29 ------ ------ TOTAL INTEREST INCOME 1,492 1,304 ------ ------ INTEREST EXPENSE Deposits 539 613 Other borrowed money 115 70 ------ ------ TOTAL INTEREST EXPENSE 654 683 ------ ------ NET INTEREST INCOME 838 621 Provision for loan losses 72 87 ------ ------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 766 534 ------ ------ OTHER INCOME Service charges on deposit accounts 81 54 Financial service fees 15 35 Mortgage origination fees 53 36 Other service charges, commissions and fees 17 13 ------ ------ 166 138 ------ ------ OTHER EXPENSES Salaries and employee benefits 406 325 Equipment and occupancy expenses 82 80 Marketing expenses 22 17 Data processing expenses 55 34 Administrative expenses 97 84 Other expenses 89 51 ------ ------ TOTAL EXPENSES 751 591 ------ ------ INCOME (LOSS) BEFORE INCOME TAXES 181 81 Income tax expense 60 - - ------ ------ NET INCOME $ 121 $ 81 ====== ====== BASIC EARNINGS PER SHARE (weighted average shares used in calculation: 1,445,914 in 2002 and 1,463,778 in 2001) $ .08 $ .06 ====== ====== DILUTED EARNINGS PER SHARE (weighted average shares used in calculation: 1,497,984 in 2002 and 1,471,237 in 2001) $ .08 $ .05 ====== ====== - 4 - COMMUNITY CAPITAL BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Three months ended March 31, 2002 and 2001 (Dollars in thousands) 2002 2001 ------ ----- NET INCOME $ 121 $ 81 Other comprehensive loss Net unrealized holding gains (losses) arising during period, net of tax expense (benefit) of $(61,000) in 2002 and $30,000 in 2001 (120) 66 ------ ----- COMPREHENSIVE INCOME $ 1 $ 147 ====== ===== - 5 - COMMUNITY CAPITAL BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months ended March 31, 2002 and 2001 (Dollars in thousands) 2002 2001 -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 121 $ 81 Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 43 39 Provision for loan losses 72 87 Decrease (increase) in interest receivable 19 (74) Other operating activities (76) (57) -------- --------- Net cash used in operating activities 179 76 -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (58) (4) Net decrease (increase) in federal funds sold 3,983 (5,474) Net increase in loans (5,067) (7,559) Proceeds from maturities of securities available for sale 2,326 4,852 Purchase of securities available for sale (5,488) (5,889) -------- --------- Net cash used in Investing activities (4,304) (14,084) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits 3,417 14,810 Proceeds from advances under line of credit Repayment of other borrowings (92) (92) Purchase of treasury stock (8) (17) -------- --------- Net cash provided by financing activities 3,317 14,701 -------- --------- Net increase (decrease) in cash (808) 693 Cash and due from banks at beginning of period 4,471 3,392 -------- --------- Cash and due from banks at end of period $ 3,663 $ 4,085 ======== ========= SUPPLEMENTAL DISCLOSURE Cash paid for interest $ 675 $ 662 ======== ========= NON-CASH TRANSACTION Unrealized (gains) losses on securities available for sale $ 180 $ 96 ======== ========= - 6 - COMMUNITY CAPITAL BANCSHARES, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Community Capital Bancshares, Inc. (the "Company") is a bank holding company whose business is conducted by its wholly-owned subsidiary, Albany Bank & Trust (the "Bank"). The Bank is a commercial bank located in Albany, Georgia. The Bank provides a full range of banking services in its primary market area of Dougherty County and the surrounding counties. The Bank commenced its banking operations on April 28, 1999. BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company and its subsidiary. Significant intercompany transactions and accounts are eliminated in consolidation. The preparation of financial statements in conformity with 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, 2002 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 the Bank file a consolidated income tax return. Each entity provides for income taxes based on its contribution to the income taxes (benefits) of the consolidated group. - 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion is intended to assist in an understanding of the Company's financial condition and results of operations. This analysis should be read in conjunction with the financial statements and related notes appearing in Item 1 of the March 31, 2002 Form 10-QSB and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the Company's Form 10-KSB for the year ended December 31, 2001. FINANCIAL CONDITION As of March 31, 2002 the Company's total assets were $91,936,000 representing an increase of $3,251,000 or 3.67% from December 31, 2001. Earning assets consist of Federal funds sold, investment securities and loans. These assets provide the majority of the Company's earnings. The mix of earning assets is a reflection of management's philosophy regarding earnings versus risk. Federal funds sold represent an overnight investment of funds and can be converted immediately to cash. At March 31, 2002, Federal funds sold were $500,000 as compared to the year-end amount of $4,483,000. This is a decrease of $3,983,000. 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 and large public fund deposits. During the first quarter, investment securities increased $2,982,000. 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 the Company. At March 31, 2002 net loans were $66,178,000. The loan portfolio increased $4,995,000 or 8.16% during the first quarter. At March 31, 2002, the allowance for loan losses was $630,000 or 0.94% of total loans. Management believes that this is an adequate but not excessive amount based upon the composition of the current loan portfolio and current economic conditions. The relationship of the allowance to total loans will vary over time based upon Management's evaluation of the loan portfolio. Management evaluates the adequacy of the allowance on a monthly basis and adjusts it accordingly by a monthly charge to earnings using the provision for loan losses. During the first quarter of 2002, the provision for potential loan losses was $72,000 as compared to the 2001 amount of $87,000. During the first quarter of 2002, the company reallocated its assets from lower earning overnight funds to higher yielding loans and investments. This reallocation should improve the company's net interest income over the remainder of the year. Non-earning assets consist of premises and equipment, and other assets. Premises and equipment decreased during the quarter as a result of depreciation expense on these assets. Other assets consist primarily of accrued interest receivable and increased $50,000 as a result of the larger loan portfolio upon which to accrue interest and increases in the Company's deferred tax asset. The Company funds its assets primarily through deposits from customers. Additionally, it will borrow funds from other sources to provide longer term fixed rate funding for its assets. The Company must pay interest on the majority of these funds and attempts to price these funds competitively in the market place but at a level that it can safely re-invest the funds profitably. At March 31, 2002, total deposits were $73,248,000 as compared to the year-end amount of $69,831,000. This is an increase of $3,417,000 or 4.89%. - 8 - Interest bearing deposits are comprised of the following categories: March 31, 2002 December 31, 2001 --------------- ------------------ Interest bearing demand and savings $ 22,676,000 $ 21,443,000 Certificates of deposit in denominations of $100,000 or greater 14,120,000 14,787,000 Other Certificates of deposit 29,727,000 27,498,000 --------------- ------------------ Total $ 66,523,000 $ 63,728,000 =============== ================== Other borrowings consist of Federal Home Loan Bank advances and are secured by investment securities and loans of the Company. No new advances were obtained during the current quarter. CAPITAL ADEQUACY The following table presents the Company's regulatory capital position as of March 31, 2002. Tier 1 Capital Ratio, actual 13.51% Tier 1 Capital minimum requirement 4.00% Tier 2 Capital Ratio, actual 14.44% Tier 2 Capital minimum requirement 8.00% Leverage Ratio 10.09% Leverage Ratio minimum requirement 4.00% The Company's ratios are well above the required regulatory minimums and provide a sufficient basis to support future growth of the Company. RESULTS OF OPERATIONS Net income for the current year is $121,000 as compared to the 2001 amount of $81,000. The increased net income was a result of an overall increase in the Company's net interest income and increased non-interest income. Total interest income increased $188,000 or 14.42% from the previous year. This was the result of increased interest income on loans, which increased $286,000. The increase in income was the direct result of the larger loan portfolio in the current year. This increase was in spite of the major reductions in interest rate levels during the past 12 months. Interest expense for 2002 was $654,000. This is the major expense item for the Company and decreased $29,000 from the previous year. This decrease is the direct result of the overall current lower interest rate environment. The Company has been able to reprice its increased level of deposits in the current year at a lower interest than the previous year. Net interest income after the provision for loan losses was $766,000 in 2002 as compared to the 2001 amount of $534,000. This is an increase of $232,000 or 43.45%. This increase is the combined result of the increased level of earning assets, and the lower cost of funds during the current year. The overall growth rate has declined from previous years. Management is currently emphasizing a better interest margin as opposed to the higher growth rate emphasis in previous years. - 9 - Other income increased $28,000 to $166,000 in 2002. Service charges on deposit accounts increased $27,000 or 50% due to the larger number of deposit accounts. Mortgage origination fees increased $17,000 over the previous year. These fees are generated by facilitating mortgage loans for customers which are sold in the secondary market. The low interest rate levels led to increases in this area of activity in the Bank. Non-interest expense increased $160,000 to $751,000 in 2002. This is an increase of 27.07%. The largest area of increase was in the salary and employee benefits category. This expense item is $406,000 in the current year as compared to the 2001 amount of $325,000. This is an increase of $81,000 or 24.92%. The growth in this expense item is due to the increased staffing required to properly serve the Company's customers and slightly higher levels of pay during the current year. Data processing expenses increased $21,000 or 61.76% over the previous year. This is the result of the larger size of the Company. Other expenses increased $38,000 to $89,000 in the current year. The majority of this increase is the result of increased expenses for the mortgage loan department. Diluted earnings per share for the current year are $0.08 and increased $0.03 or 60% from the previous year. FORWARD-LOOKING STATEMENTS This document contains statements that constitute "forward-looking statements" within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Sections 21E of the Securities Exchange Act of 1934, as amended. The words "believe", "estimate", "expect", "intend", "anticipate" and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates that they were made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Users are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties that the actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Users are therefore cautioned not to place undue reliance on these forward-looking statements. - 10 - ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) REPORTS ON FORM 8-K None - 11 - SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COMMUNITY CAPITAL BANCSHARES, INC. May 14, 2002 /s/ Robert E. Lee ------------------ --------------------------- Date Robert E. Lee, President May 14, 2002 /s/ David J. Baranko ------------------ --------------------------- Date David J. Baranko Chief Financial Officer (Duly authorized officer and principal financial / accounting officer ) - 12 -