Community Capital Corp/SC · 10-K · For 12/31/02

Filed On 3/31/03 10:39am ET   ·   SEC File 0-18460   ·   Accession Number 1021408-3-5367

Annual Report   ·   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Community Capital Corp.                               71    420K 
 2: EX-3.4      Amendment to Bylaws                                    2±    10K 
 3: EX-10.34    Split Dollar Agreement Greenwood/William Stevens       5     23K 
 4: EX-10.35    Split Dollar Agreement Greenwood/Steve White           5     23K 
 5: EX-10.36    Split Dollar Agreement Greenwood/Hazel Hughes          5     23K 
 6: EX-23.1     Consent of Elliott Davis                               1      6K 
 7: EX-24.1     Directors' Powers of Attorney                         14     37K 
 8: EX-99.1     Certification/Stevens                                  1      7K 
 9: EX-99.2     Certification/Brewer                                   1      7K 

10-K   ·   Community Capital Corp.
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SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549

 FORM 10-K

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2002

 Commission file number: 0-18460

 COMMUNITY CAPITAL CORPORATION
(Exact name of Registrant as specified in its charter)

        South Carolina                                      57-0866395
  (State or other jurisdiction of                         (I. R. S. Employer
    incorporation or organization)                         Identification No.)

1402-C Highway 72 West                                        
Greenwood, South Carolina                                    29649
(Address of principal executive offices)                         (Zip Code)     

Registrant's telephone number, including area code: (864) 941-8200

 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                                     Name of Each Exchange
Title of Each Class                                       On Which Reported     
-------------------                                     ---------------------   

Common Stock, par value $1. 00 per share                American Stock Exchange 

 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None

  Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of   
1934 during the preceding 12 months (or for such shorter period that the        
Registrant was required to file such reports), and (2) has been subject to such 
filing requirements for the past 90 days. Yes [X] No [ ]                        

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements   
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]                                                                  

   Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]                             

  The aggregate market value of voting stock held by non-affiliates of the
Registrant on March 21, 2003 was approximately $42.5 million based upon the last
sale price reported for such date on the American Stock Exchange, which was     
$14.20 per share.                                                               

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
 PRECEDING FIVE YEARS.

   Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15 (d) of the Securities     
Exchange Act of 1934 subsequent to the distribution of securities under a plan  
confirmed by a court. Yes [ ] No [ ]                                            

APPLICABLE ONLY TO CORPORATE REGISTRANTS

 On March 21, 2003, the number of shares outstanding of the Registrant's
common stock, $1.00 par value, was 3,490,208.                                   

 DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement in connection with its 2003 Annual 
Meeting of Stockholders (Part III).                                             

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Advisory Note Regarding Forward-Looking Statements

Certain of the statements contained in this report on Form 10-K that are not    
historical facts are forward-looking statements subject to the safe harbor      
created by the Private Securities Litigation Reform Act of 1995. We caution     
readers of this report that such forward-looking statements involve known and   
unknown risks, uncertainties and other factors that may cause the actual        
results, performance or achievements of us to be materially different from those
expressed or implied by such forward-looking statements. Although we believe    
that our expectations of future performance is based on reasonable assumptions  
within the bounds of our knowledge of our business and operations, we have no   
assurance that actual results will not differ materially from our expectations. 

Factors that could cause actual results to differ from expectations include,    
among other things: (1) the challenges, costs, and complications associated with
the continued development of our branches; (2) the potential that loan          
charge-offs may exceed the allowance for loan losses or that such allowance will
be increased as a result of factors beyond the control of us; (3) our dependence
on senior management; (4) competition from existing financial institutions      
operating in our market areas as well as the entry into such areas of new       
competitors with greater resources, broader branch networks, and more           
comprehensive services; (5) adverse conditions in the stock market, the public  
debt market, and other capital markets (including changes in interest rate      
conditions); (6) changes in deposit rates, the net interest margin, and funding 
sources; (7) inflation, interest rate, market, and monetary fluctuations; (8)   
risks inherent in making loans including repayment risks and value of           
collateral; (9) the strength of the United States economy in general and the    
strength of the local economies in which we conduct operations may be different 
than expected resulting in, among other things, a deterioration in credit       
quality or a reduced demand for credit, including the resultant effect on our   
loan portfolio and allowance for loan losses; (10) fluctuations in consumer     
spending and saving habits; (11) the demand for our products and services; (12) 
technological changes; (13) the challenges and uncertainties in the             
implementation of our expansion and development strategies; (14) the ability to 
increase market share; (15) the adequacy of expense projections and estimates of
impairment loss; (16) the impact of changes in accounting policies by the       
Securities and Exchange Commission; (17) unanticipated regulatory or judicial   
proceedings; (18) the potential negative effects of future legislation affecting
financial institutions (including without limitation laws concerning taxes,     
banking, securities, and insurance); (19) the effects of, and changes in, trade,
monetary and fiscal policies and laws, including interest rate policies of the  
Board of Governors of the Federal Reserve System; (20) the timely development   
and acceptance of products and services, including products and services offered
through alternative delivery channels such as the Internet; (21) the impact on  
our business, as well as on the risks set forth above, of various domestic or   
international military or terrorist activities or conflicts; (22) other factors 
described in this report and in other reports we have filed with the Securities 
and Exchange Commission; and (23) our success at managing the risks involved in 
the foregoing.                                                                  

PART I

Item 1. Business.                                                               

General                                                                         

Community Capital Corporation is a bank holding company headquartered in        
Greenwood, South Carolina. We were incorporated under the laws of the State of  
South Carolina on April 8, 1988 as a holding company for Greenwood Bank & Trust,
which opened in 1989.                                                           

We were formed principally in response to perceived opportunities resulting from
takeovers of several South Carolina-based banks by large southeastern regional  
bank holding companies. In many cases, when these consolidations occur, local   
boards of directors are dissolved, and local management is relocated or         
terminated. We believe this situation creates favorable opportunities for new   
community banks with local management and local directors. Management believes  
that such banks can be successful in attracting individuals and small to        
medium-sized businesses as customers who wish to conduct business with a locally
owned and managed institution that demonstrates an active interest in their     
business and personal financial affairs.                                        

In 1994, we made the strategic decision to expand beyond the Greenwood County   
area by creating an organization of independently managed community banks that  
serve their respective local markets, but which share a common vision and       
benefit from the strength, resources and economies of a larger institution. In  
1995, we opened Clemson Bank & Trust in Clemson, South Carolina. In 1997, we    
opened Community Bank & Trust in Barnwell, South Carolina, TheBank in           

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Belton, South Carolina, and Mid State Bank in Newberry, South Carolina. During  
2000, each of these five community banks operated as a wholly-owned subsidiary  
of the Company and engaged in a general commercial banking business, emphasizing
the banking needs of individuals and small to medium-sized businesses in each   
bank's primary service area. Each of the five community banks was a state       
chartered Federal Reserve member bank. On January 1, 2001, we merged the five   
community banks into one bank known as CapitalBank.                             

Market Areas                                                                    

At December 31, 2002, CapitalBank had banking locations in Greenwood, Clemson,  
Abbeville, Belton, Greenville, Honea Path, Anderson, Newberry, and Saluda, South
Carolina.                                                                       

The following table sets forth certain information concerning CapitalBank at    
December 31, 2002:                                                              

                                   Number of     Total      Total      Total
                                    Locations    Assets      Loans    Deposits
                                    ---------   --------   --------   --------
                                                (Dollars in thousands)
CapitalBank.......................       13      $380,771   $288,842   $276,561 

CapitalBank offers a full range of commercial banking services, including       
checking and savings accounts, NOW accounts, IRA accounts, and other savings and
time deposits of various types ranging from money markets to long-term          
certificates of deposit. CapitalBank also offers a full range of consumer credit
and short-term and intermediate-term commercial and personal loans. CapitalBank 
conducts residential mortgage loan origination activities pursuant to which     
mortgage loans are sold to investors in the secondary markets. Servicing of such
loans is not retained by CapitalBank.                                           

CapitalBank also offers trust and related fiduciary services. Discount          
securities brokerage services are available through a third-party brokerage     
service that has contracted with CapitalBank.                                   

Lending Activities                                                              

General. Through CapitalBank, we offer a range of lending services, including   
real estate, consumer, and commercial loans, to individuals and small business  
and other organizations that are located in or conduct a substantial portion of 
their business in CapitalBank's market areas. Our total loans at December 31,   
2002, were $288.8 million, or 83.14% of total earning assets. The interest rates
charged on loans vary with the degree of risk, maturity, and amount of the loan,
and are further subject to competitive pressures, availability of funds, and    
government regulations. We have no foreign loans or loans for highly leveraged  
transactions.                                                                   

Our primary focus has been on commercial and installment lending to individuals 
and small to medium-sized businesses in its market areas, as well as residential
mortgage loans. These loans totaled approximately $204.9 million, and           
constituted approximately 70.27% of our loan portfolio, at December 31, 2002.   

The following table sets forth the composition of our loan portfolio for each of
the five years in the period ended December 31, 2002.                           

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Loan Composition

(Dollars in thousands)

                                                        [Enlarge/Download Table]

                                                                   December 31,                     
                                               ---------------------------------------------------- 
                                                 2002       2001       2000       1999       1998   
                                               --------   --------   --------   --------   -------- 
                                                                                                    
Commercial, financial and agricultural........    10.48%     13.26%     18.54%     13.58%     16.80%
Real estate:                                                                                        
      Construction............................     4.48       5.26       7.27      13.09      13.72 
   Mortgage:                                                                                        
      Residential.............................    52.91      49.25      39.89      30.17      30.51 
      Commercial (1)..........................    25.25      23.58      21.45      26.67      20.87 
Consumer and other............................     6.88       8.65      12.85      16.49      18.10 
Total loans...................................   100.00%    100.00%    100.00%    100.00%    100.00%
                                               ========   ========   ========   ========   ======== 

Total loans (dollars)......................... $288,842   $248,390   $280,506   $219,054   $172,545 
                                               ========   ========   ========   ========   ======== 

(1)  The majority of these loans are made to operating businesses where real    
property has been taken as additional collateral.                     

Loan Approval. Certain credit risks are inherent in the loan making process.    
These include prepayment risks, risks resulting from uncertainties in the future
value of collateral, risks resulting from changes in economic and industry      
conditions, and risks inherent in dealing with individual borrowers. In         
particular, longer maturities increase the risk that economic conditions will   
change and adversely affect collectibility. We attempt to minimize loan losses  
through various means and use standardized underwriting criteria. During 2002,  
these means included the use of policies and procedures that impose officer and 
customer lending limits and require loans in excess of certain limits to be     
approved by the Board of Directors of CapitalBank.                              

Loan Review. We have a continuous loan review process designed to promote early 
identification of credit quality problems. All loan officers are charged with   
the responsibility of reviewing all past due loans in their respective          
portfolios. CapitalBank establishes watch lists of potential problem loans.     

Deposits                                                                        

The principal sources of funds for CapitalBank are core deposits, consisting of 
demand deposits, interest-bearing transaction accounts, money market accounts,  
saving deposits, and certificates of deposit. Transaction accounts include      
checking and negotiable order of withdrawal (NOW) accounts that customers use   
for cash management and that provide CapitalBank with a source of fee income and
cross-marketing opportunities, as well as a low-cost source of funds. Time and  
savings accounts also provide a relatively stable source of funding. The largest
source of funds for CapitalBank is certificates of deposit. Certificates of     
deposit in excess of $100,000 are held primarily by customers in CapitalBank's  
market areas. Deposit rates are set weekly by senior management of CapitalBank, 
subject to approval by our management. Management believes that the rates       
CapitalBank offers are competitive with other institutions in CapitalBank's     
market areas.                                                                   

Competition                                                                     

CapitalBank generally competes with other financial institutions through the    
selection of banking products and services offered, the pricing of services, the
level of service provided, the convenience and availability of services, and the
degree of expertise and the personal manner in which services are offered. South
Carolina law permits statewide branching by banks and savings institutions, and 
many financial institutions in the state have branch networks. Consequently,    
commercial banking in South Carolina is highly competitive. South Carolina law  
also permits regional interstate banking whereby out-of-state banks and bank    
holding companies are allowed to acquire and merge with South Carolina banks and
bank holding companies, as long as the South Carolina South Carolina State Board
of Financial Institutions of Financial Institutions gives prior approval for the
acquisition or merger. Many large banking organizations currently operate in the
market areas of CapitalBank, several of which are controlled by out-of-state    
ownership. In addition, competition between commercial banks and thrift         
institutions (savings institutions and credit unions) has been intensified      
significantly by the                                                            

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elimination of many previous distinctions between the various types of financial
institutions and the expanded powers and increased activity of thrift           
institutions in areas of banking that previously had been the sole domain of    
commercial banks. Recent legislation, together with other regulatory changes by 
the primary regulators of the various financial institutions, has resulted in   
the almost total elimination of practical distinctions between a commercial bank
and a thrift institution. Consequently, competition among financial institutions
of all types is largely unlimited with respect to legal ability and authority to
provide most financial services. See "Government Supervision and Regulation. "  

CapitalBank faces increased competition from both federally-chartered and       
state-chartered financial and thrift institutions, as well as credit unions,    
consumer finance companies, insurance companies and other institutions in       
CapitalBank's market areas. Some of these competitors are not subject to the    
same degree of regulation and restriction imposed upon CapitalBank. Many of     
these competitors also have broader geographic markets and substantially greater
resources and lending limits than CapitalBank and offer certain services that   
CapitalBank does not currently provide. In addition, many of these competitors  
have numerous branch offices located throughout the extended market areas of    
CapitalBank that we believe may provide these competitors with an advantage in  
geographic convenience that CapitalBank does not have at present. Such          
competitors may also be in a position to make more effective use of media       
advertising, support services, and electronic technology than can CapitalBank.  

Employees                                                                       

Including the employees of CapitalBank, we currently have in the aggregate 138  
full-time employees and 22 part-time employees.                                 

Government Supervision and Regulation                                           

General                                                                         

We, along with CapitalBank, are subject to an extensive collection of state and 
federal banking laws and regulations that impose specific requirements and      
restrictions on, and provide for general regulatory oversight with respect to,  
virtually all aspects of our and CapitalBank's operations. These regulations are
generally intended to provide protections for CapitalBank's depositors and      
borrowers, rather than for our shareholders. We, along with CapitalBank, are    
also affected by government monetary policy and by regulatory measures affecting
the banking industry in general. The actions of the Federal Reserve System      
affect the money supply and, in general, CapitalBank's lending abilities in     
increasing or decreasing the cost and availability of funds to CapitalBank.     
Additionally, the Federal Reserve System regulates the availability of bank     
credit in order to combat recession and curb inflationary pressures in the      
economy by open market operations in United States government securities,       
changes in the discount rate on member bank borrowings, changes in the reserve  
requirements against bank deposits, and limitations on interest rates that banks
may pay on time and savings deposits.                                           

The following is a brief summary of certain statutes, rules, and regulations    
affecting CapitalBank and us. This summary is qualified in its entirety by      
reference to the particular statutory and regulatory provisions referred to     
below and is not intended to be an exhaustive description of the statutes or    
regulations applicable to our and CapitalBank's business. Any change in         
applicable laws or regulations may have a material adverse effect on our and    
CapitalBank's business and prospects.                                           

The Company                                                                     

We are a bank holding company within the meaning of the Federal Bank Holding    
Company Act of 1956, as amended, and the South Carolina Banking and Branching   
Efficiency Act of 1996, as amended. We are registered with both the Federal     
Reserve System and the South Carolina State Board of Financial Institutions. We 
are required to file with both of these agencies annual reports and other       
information regarding our business operations and those of our subsidiaries. We 
are also subject to the supervision of, and to regular examinations by, these   
agencies. The regulatory requirements to which we are subject also set forth    
various conditions regarding the eligibility and qualifications of our directors
and officers.                                                                   

The Federal Bank Holding Company Act of 1956, as amended, requires every bank   
holding company to obtain the prior approval of the Federal Reserve Board before
it (i) or any of its subsidiaries (other than a bank) acquires substantially all
of the assets of any bank, (ii) acquires ownership or control of any voting     
shares of any bank if after such acquisition it would own or control, directly  
or indirectly, more than 5% of the voting shares of such bank, or (iii) merges  
or                                                                              

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consolidates with any other bank holding company. Under the South Carolina      
Banking and Branching Efficiency Act of 1996, as amended, a South Carolina bank 
holding company shall not, without the prior approval of the South Carolina     
State Board of Financial Institutions, (i) acquire direct or indirect ownership 
or control of more than 5% of the voting shares of any bank or any other bank   
holding company, (ii) acquire all or substantially all of the assets of a bank  
or any other bank holding company, or (iii) merge or consolidate with any other 
bank holding company.                                                           

The Federal Bank Holding Company Act of 1956, as amended, generally prohibits a 
bank holding company from engaging in, or acquiring direct or indirect control  
of more than 5% of the voting shares of any company engaged in, nonbanking      
activities unless the Federal Reserve Board, by order or regulation, has found  
those activities to be so closely related to banking or managing or controlling 
banks as to be a proper incident thereto. Some of the activities that the       
Federal Reserve Board has determined by regulation to be proper incidents to the
business of a bank holding company include making or servicing loans and certain
types of leases, engaging in certain insurance and discount brokerage           
activities, performing certain data processing services, acting in certain      
circumstances as a fiduciary or investment or financial adviser, owning savings 
associations and making investments in certain corporations or projects designed
primarily to promote community welfare.                                         

In determining whether an activity is so closely related to banking as to be    
permissible for bank holding companies, the Federal Reserve Board must consider 
whether the performance of the particular activities by a bank holding company  
or its subsidiaries can reasonably be expected to produce benefits to the public
(such as greater convenience, increased competition, and gains in efficiency)   
that outweigh possible adverse effects (such as undue concentration of          
resources, decreased or unfair competition, conflicts of interests, and unsound 
banking practices). Generally, bank holding companies must obtain prior approval
of the Federal Reserve Board to engage in any new activity not previously       
approved by the Federal Reserve Board. Despite prior approval, the Federal      
Reserve Board may order a bank holding company or its subsidiaries to terminate 
any activity or to terminate its ownership or control of any subsidiary when the
Federal Reserve Board has reasonable cause to believe that the holding company's
continued ownership, activity, or control constitutes a serious risk to the     
financial safety, soundness, or stability of any of its bank subsidiaries.      

The Federal Bank Holding Company Act of 1956, as amended, and the Federal Change
in Bank Control Act, together with regulations promulgated by the Federal       
Reserve Board, require that, depending on the particular circumstances, either  
the Federal Reserve Board's approval must be obtained or notice must be         
furnished to the Federal Reserve Board and not disapproved prior to any person  
or company acquiring control of a bank holding company, such as us, subject to  
certain exemptions. Control is conclusively presumed to exist when an individual
or company acquires 25 percent or more of any class of voting securities of the 
bank holding company. Control is rebuttably presumed to exist if a person       
acquires 10 percent or more, but less than 25 percent, of any class of voting   
securities and either the bank holding company has registered securities under  
Section 12 of the Securities Exchange Act of 1934 or no other person owns a     
greater percentage of that class of voting securities immediately after the     
transaction.                                                                    

The Federal Reserve Board, pursuant to regulation and published policy          
statements, has maintained that a bank holding company must serve as a source of
financial strength to its subsidiary banks. In adhering to the Federal Reserve  
Board policy, we may be required to provide financial support to a subsidiary   
bank at a time when, absent such Federal Reserve Board policy, we may not deem  
it advisable to provide such assistance. Under Federal Bank Holding Company Act 
of 1956, as amended, the Federal Reserve Board may also require a bank holding  
company to terminate any activity or relinquish control of a nonbank subsidiary,
other than a nonbank subsidiary of a bank, upon the Federal Reserve Board's     
determination that the activity or control constitutes a serious risk to the    
financial soundness or stability of any subsidiary depository institution of the
bank holding company. Further, federal bank regulatory authorities have         
additional discretion to require a bank holding company to divest itself of any 
bank or nonbank subsidiary if the agency determines that divestiture may aid the
depository institution's financial condition.                                   

CapitalBank                                                                     

CapitalBank is subject to various statutory requirements and rules and          
regulations promulgated and enforced primarily by the South Carolina State Board
of Financial Institutions, the Federal Reserve System, and the FDIC. The South  
Carolina State Board of Financial Institutions and the FDIC regulate or monitor 
all areas of CapitalBank's operations, including security devices and           
procedures, adequacy of capitalization and loss reserves, loans, investments,   
borrowings, deposits, mergers, issuances of securities, payment of dividends,   
interest rates payable on deposits, interest rates or fees chargeable on loans, 
establishment of branches, corporate reorganizations, maintenance of books and  
records, and adequacy of staff training to carry on safe lending and deposit    
gathering practices.                                                            

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The Federal Reserve System and the FDIC also require CapitalBank to maintain    
certain capital ratios (see "Federal Capital Regulations"), and the provisions  
of the Federal Reserve Act require CapitalBank to observe certain restrictions  
on any extensions of credit to us, or with certain exceptions, other affiliates,
on investments in the stock or other securities of other banks, and on the      
taking of such stock or securities as collateral on loans to any borrower. In   
addition, CapitalBank may not engage in certain "tie-in" or "tying" arrangements
in connection with any extension of credit or the providing of any property or  
service. Tying is generally defined as any arrangement in which a bank requires 
a customer who wants one service, such as credit, to buy other products or      
services from the bank or its affiliates as a condition of receiving the first  
service. The regulatory requirements to which CapitalBank is subject also set   
forth various conditions regarding the eligibility and qualification of their   
directors and officers.                                                         

Dividends                                                                       

Although we are not presently subject to any direct legal or regulatory         
restrictions on dividends (other than the South Carolina state business         
corporation law requirements that dividends may be paid only if such payment    
would not render us insolvent or unable to meet our obligations as they come    
due), our ability to pay cash dividends will depend primarily upon the amount of
dividends paid by CapitalBank and any other subsequently acquired entities.     
CapitalBank is subject to regulatory restrictions on the payment of dividends,  
including the prohibition of payment of dividends from CapitalBank's capital.   
All dividends of CapitalBank must be paid out of the respective undivided       
profits then on hand, after deducting expenses, including losses and bad debts. 
In addition, as a member of the Federal Reserve System, CapitalBank may not     
declare a dividend on its shares of common stock until its surplus equals its   
stated capital, unless there has been transferred to surplus no less than       
one-tenth of CapitalBank's net profits of the preceding two consecutive         
half-year periods (in the case of an annual dividend). CapitalBank must obtain  
the approval of the Federal Reserve Board if the total of all dividends declared
by CapitalBank in any calendar year exceeds the total of its net profits for    
that year combined with CapitalBank's retained net profits for the preceding two
years, less any required transfers to surplus. CapitalBank is subject to various
other federal and state regulatory restrictions on the payment of dividends.    

FIRREA                                                                          

The Financial Institutions Reform, Recovery and Enforcement Act of 1989         
established two insurance funds under the jurisdiction of the FDIC: the Savings 
Association Fund and the Bank Insurance Fund (see "FDIC Regulations"). The      
Financial Institutions Reform, Recovery and Enforcement Act of 1989 also        
imposed, with certain exceptions, a "cross guaranty" on the part of commonly    
controlled depository institutions such as CapitalBank. Under this provision, if
one depository institution subsidiary of a multi-bank holding company fails or  
requires FDIC assistance, the FDIC may assess a commonly controlled depository  
institution for the estimated losses suffered by the FDIC. The FDIC's claim is  
junior to the claims of nonaffiliated depositors, holders of secured            
liabilities, general creditors, and subordinated creditors, but is superior to  
the claims of shareholders.                                                     

FDIC Regulations                                                                

The FDIC establishes rates for the payment of premiums by federally insured     
banks and thrifts for deposit insurance. Deposits in CapitalBank are insured by 
the FDIC up to a maximum amount (generally $100,000 per depositor, subject to   
aggregation rules), and the FDIC maintains an insurance fund for commercial     
banks with insurance premiums from the industry used to offset losses from      
insurance payouts when banks fail. CapitalBank pays premiums to the FDIC on its 
deposits. Under FDIC rules, a depository institution pays to the FDIC a premium 
of from $0. 00 to $0. 31 per $100 of insured deposits, depending on its capital 
levels and risk profile as determined by its primary federal regulator on a     
semi-annual basis.                                                              

Federal Capital Regulations                                                     

In an effort to achieve a measure of capital adequacy that is more sensitive to 
the individual risk profiles of financial institutions, the Federal Reserve     
Board, the FDIC, and other federal banking agencies have adopted risk-based     
capital adequacy guidelines for banking organizations insured by the FDIC,      
including CapitalBank. The capital adequacy guidelines issued by the Federal    
Reserve Board are applied to bank holding companies, such as us, on a           
consolidated basis with the banks owned by the holding company. These guidelines
redefine traditional capital ratios to take into account assessments of risks   
related to each balance sheet category, as well as off-balance sheet financing  
activities. The guidelines define a two-tier capital framework. Tier 1 capital  
consists of common and qualifying preferred shareholders' equity, excluding the 
unrealized gain (loss) on available-for-sale securities, less goodwill and other
adjustments. Tier 2                                                             

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capital consists of mandatory convertible, subordinated and other qualifying    
term debt, preferred stock not qualifying for Tier 1, and a limited allowance   
for credit losses up to a designated percentage of risk-weighted assets. Under  
the guidelines, institutions must maintain a specified minimum ratio of         
"qualifying" capital to risk-weighted assets. At least 50% of an institution's  
qualifying capital must be "core" or "Tier 1" capital, and the balance may be   
"supplementary" or "Tier 2" capital. The guidelines imposed on us and           
CapitalBank include a minimum leverage ratio standard of capital adequacy. The  
leverage standard requires top-rated institutions to maintain a minimum Tier 1  
capital to assets ratio of 3%, with institutions receiving less than the highest
rating required to maintain a minimum ratio of 4% or greater, based upon their  
particular circumstances and risk profiles. Each of our and CapitalBank's       
leverage and risk-based capital ratios at December 31, 2002 exceeded their      
respective fully phased-in minimum requirements.                                

Other Regulations                                                               

Interest and certain other charges collected or contracted for by CapitalBank   
are subject to state usury laws and certain federal laws concerning interest    
rates. CapitalBank's loan operations are also subject to certain federal laws   
applicable to credit transactions, such as the federal Truth-In-Lending Act     
governing disclosures of credit terms to consumer borrowers, the Community      
Reinvestment Act of 1977 requiring financial institutions to meet their         
obligations to provide for the total credit needs of the communities they serve,
including investing their assets in loans to low- and moderate-income borrowers,
the Home Mortgage Disclosure Act of 1975 requiring financial institutions to    
provide information to enable public officials to determine whether a financial 
institution is fulfilling its obligations to help meet the housing needs of the 
community it serves, the Equal Credit Opportunity Act prohibiting discrimination
on the basis of race, creed, or other prohibited factors in extending credit,   
the Fair Credit Reporting Act governing the manner in which consumer debts may  
be collected by collection agencies, and the rules and regulations of the       
various federal agencies charged with the responsibility of implementing such   
federal laws. The deposit operations of CapitalBank also are subject to 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 the Electronic Funds Transfer
Act and Regulation E issued by the Federal Reserve Board 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.                                 

Interstate and Intrastate Banking and Branching                                 

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,  
eligible bank holding companies in any state are permitted, with Federal Reserve
Board approval, to acquire banking organizations in any other state. As such,   
all existing regional compacts and substantially all regional limitations on    
interstate acquisitions of banking organizations have been eliminated. The      
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 also removed
substantially all of the existing prohibitions on interstate branching by banks.
A bank operating in any state is now entitled to establish one or more branches 
within any other state without, as formerly required, the establishment of a    
separate banking structure within the other state. The South Carolina Banking   
and Branching Efficiency Act of 1996, as amended permits the acquisition of     
South Carolina banks and bank holding companies by, and mergers with,           
out-of-state banks and bank holding companies with the prior approval of the    
South Carolina State Board of Financial Institutions. The South Carolina Banking
and Branching Efficiency Act of 1996, as amended also permits South Carolina    
state banks, with prior approval of the South Carolina State Board of Financial 
Institutions, to operate branches outside the State of South Carolina. Although 
the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 has the 
potential to increase the number of competitors in the marketplace of           
CapitalBank, we cannot predict the actual impact of such legislation on the     
competitive position of CapitalBank.                                            

Gramm-Leach Bliley Act                                                          

The Gramm-Leach-Bliley Act (popularly referred to as the Financial Services     
Modernization Act of 1999 prior to enactment) became effective March 11, 2000.  
The Gramm-Leach-Bliley Act accomplished a variety of purposes, including        
facilitating the affiliation among banks, securities firms, and insurance       
companies and providing privacy protections for customers. Specifically, the    
Gramm-Leach-Bliley Act (a) amends the Banking Act of 1933 (the Glass-Steagall   
Act) to repeal the prohibitions against affiliation of any Federal Reserve      
member bank, such as CapitalBank, with an entity engaged principally in         
securities activities, and to repeal the prohibitions against simultaneous      
service by any officer, director, or employee of a securities firm as an        
officer, director, or employee of any member bank; (b) amends the Federal Bank  
Holding Company Act of 1956, as amended, to permit bank holding companies to own
shares in non-banking organizations whose activities have been determined by the
Federal Reserve System to be permissible for bank                               

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holding companies; (c) creates a new type of bank, wholesale financial          
institutions (also referred to as "woofies"), that are regulated by the Federal 
Bank Holding Company Act of 1956, as amended, and are not able to accept insured
deposits, potentially giving holding companies with woofies greater flexibility 
to engage in non-financial investments; (d) subject to specified exemptions,    
pre-empts state anti-affiliation laws restricting transactions among insured    
depository institutions, wholesale financial institutions, insurance concerns,  
and national banks; (e) amends the Federal Bank Holding Company Act of 1956, as 
amended, and the Federal Deposit Insurance Act to mandate public meetings       
concerning proposed large bank mergers and acquisitions; (f) amends the         
Electronic Fund Transfer Act to mandate certain fee disclosures related to      
electronic fund transfer services; and (g) imposes certain obligations on       
financial institutions to protect the privacy and confidentiality of customer   
nonpublic personal information, including the requirements that financial       
institutions establish standards for safeguards to protect privacy and          
confidentiality, provide the standards to customers at the time of establishing 
the customer relationship and annually during the continuation of the           
relationship, condition disclosure of the private information to nonaffiliated  
third parties on the giving of specific disclosures to consumers, and giving    
consumers the opportunity to prevent such disclosure to third parties.          

Although the Gramm-Leach-Bliley Act has the potential to mix commerce and       
banking and increase our and CapitalBank's abilities to diversify into a variety
of areas, we cannot predict the actual impact of such legislation on CapitalBank
or us.                                                                          

Sarbanes-Oxley Act of 2002                                                      

On July 30, 2002, the Sarbanes-Oxley Act of 2002 was signed into law. It        
mandated sweeping reforms and implemented a number of requirements for public   
companies. Among the reforms and new requirements, some of which are not yet    
effective based on implementing rules, are the following:                       

   o    Creation of the Public Company Accounting Oversight Board to oversee
audits of public companies.                                 

     o    Implementation of a variety of requirements designed to ensure greater
       auditor independence, including the prohibition of certain services
that auditors had traditionally provided to clients.        

o    Implementation of a variety of requirements regarding audit      
      committees, including that they be entirely independent; that they
      establish procedures for the confidential, anonymous submission by
       employees of concerns regarding questionable accounting or auditing
         matters; and that issuers disclose whether at least one member of the
committee is a "financial expert."                          

   o    Requirement that changes in equity ownership by directors, officers,
        and 10% stockholders be reported more promptly, generally by the end
      of the second business day following the trade (subject to limited
exceptions).                                                

    o    Requirement that CEOs and CFOs certify that the financial information
       in each annual and quarterly report fairly presents in all material
     respects the financial condition and results of operations of the
   issuer as of, and for, the periods presented in the report, and
         establish and maintain internal controls designed to ensure discovery
of material information.                                    

o    Implementation of rules relating to disclosure of all material   
    off-balance sheet transactions and obligations and regarding the
        presentation of pro-forma financial information in any press release
or other public disclosure that was "non-GAAP."             

    o    Requirement that issuers disclose whether they have adopted a code of
        ethics for senior executives and any waivers or changes in the code.

 o    Requirement that CEOs and CFOs disgorge incentive compensation and
       profits from their sales of company securities after restatement of
financial information.                                      

    o    Prohibition against directors and executive officers from transacting
       in company equity securities received in connection with employment
during any pension fund blackout of such equity.            

  o    Requirement that SEC review each issuer's periodic reports at least
once every three years.                                     

     o    Acceleration of the time schedule during which Forms 10-K and 10-Q and
    8-K must be filed for certain issuers and expansion of the items
reportable under Form 8-K.                                  

     o    Issuance of new requirements regarding the obligations of attorneys to
          report evidence of a material violation of securities law or breach of
         fiduciary duty to the issuer's chief legal counsel or chief executive
officer and ultimately to the Board of Directors.           

   o    Adoption of new rules regarding statutes of limitation and penalties
with respect to securities law violations.                  

Though the Sarbanes-Oxley Act will have a meaningful impact on our operations,  
we do not believe that we will be affected by Sarbanes-Oxley in ways that are   
materially different or more onerous than other public companies of similar size
and nature.                                                                     

Item 2. Properties.                                                             

We operate out of an approximately 3,000 square foot building located on        
approximately one acre of land leased from a third party in Greenwood, South    
Carolina. At December 31, 2002, CapitalBank operated thirteen full service      
branches in South Carolina, three of which are located in Greenwood and one of  
which is located in each of Anderson, Newberry, Belton, Greenville, Clemson,    
Saluda, Prosperity, Honea Path, and Calhoun Falls. Of CapitalBank's branches,   
seven are located on land owned by CapitalBank, four are located on land owned  
by us and leased to CapitalBank, one is located on land CapitalBank leases from 
one of our former directors, and one is located on land CapitalBank leases from 
a third party.                                                                  

Item 3. Legal Proceedings.                                                      

We and CapitalBank are parties to legal proceedings that have arisen in the     
ordinary course of our respective businesses. None of these proceedings is      
expected to have a material effect on our consolidated financial condition.     

Item 4. Submission of Matters to a Vote of Security Holders.                    

None.                                                                           

 PART II

Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.  

Our common stock is listed for trading on the American Stock Exchange under the 
symbol "CYL". The following table reflects the high and low sales price per     
share for our common stock reported on the American Stock Exchange for the      
periods indicated.                                                              

Year    Quarter                              High      Low                      
----    -------                             ------   ------                     

2002    Fourth ..........................   $14.50   $12.00                     
Third ...........................    15.60    11.95             
Second ..........................    14.75    12.25             
First ...........................    12.70    11.25             

2001    Fourth ..........................   $11.24   $10.25                     
Third ...........................    11 50     9.45             
Second ..........................    10.10     8.10             
First ...........................     8.75     5.38             

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As of March 21, 2003, there were 3,490,208 shares of our common stock           
outstanding held by approximately 1,200 shareholders of record.                 

Until September 17, 2001, we had not declared or distributed any cash dividends 
to our shareholders since our organization in 1988. On September 17, 2001 and on
December 10, 2001, the Company paid cash dividends to its shareholders of record
as of August 31, 2001, and November 19, 2001 respectively, at $0.03 per share.  
On January 16, 2002, the Board of Directors declared a cash dividend of $0.03   
per share, which was paid to shareholders on March 8, 2002. On April 17, 2002,  
the Board of Directors declared a cash dividend of $0.04 per share, which was   
paid to shareholders on June 7, 2002. On July 18, 2002, the Board of Directors  
declared a cash dividend of $0.05 per share, which was paid to shareholders on  
September 6, 2002. On October 16, 2002, the Board of Directors declared a cash  
dividend of $0.05 per share, which was paid to shareholders on December 6, 2002.

Our Board of Directors expects comparable dividends to be paid to our           
shareholders for the foreseeable future. Notwithstanding the foregoing, our     
future dividend policy is subject to the discretion of the Board of Directors   
and will depend upon a number of factors, including future earnings, financial  
condition, cash requirements, and general business conditions. Our ability to   
distribute cash dividends will depend entirely upon CapitalBank's ability to    
distribute dividends to us. As a state bank, CapitalBank is subject to legal    
limitations on the amount of dividends each is permitted to pay. In particular, 
CapitalBank must receive the approval of the South Carolina State Board of      
Financial Institutions prior to paying dividends to us. Furthermore, neither we 
nor CapitalBank may declare or pay a cash dividend on any of our capital stock  
if we are insolvent or if the payment of the dividend would render us insolvent 
or unable to pay our obligations as they become due in the ordinary course of   
business. See "Government Supervision and Regulation -- Dividends. "            

Equity Compensation Plan Information                                            

The following table sets forth, as of the end of December 31, 2002, certain     
information relating to our compensation plans (including individual            
compensation arrangements) under which our common stock are authorized for      
issuance.                                                                       

                                                        [Enlarge/Download Table]

                                                                                           Number of shares of our 
                                                                                           common stock remaining  
                                                                                          and available for future 
                                   Number of shares of our                                  issuance under equity  
                                  common stock to be issued   Weighted-average exercise      compensation plans    
                                       upon exercise of          price of outstanding     (excluding shares of our 
                                    outstanding options,         options, warrants,       common stock reflected in
Plan Category(1)                    warrants, and rights             rights                       column (a))      

                                            (a)                         (b)                         (c)            
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
Equity compensation plans                                                                                          
   approved by security holders            548,852                      $9.34                     111,807          

Equity compensation plans not                                                                                      
   approved by security holders                -0-                      $   0                         -0-          

Total                                      548,852                      $9.34                     111,807          

(1)  Disclosures are provided with respect to any compensation plan and         
individual compensation arrangement of us or of our subsidiaries or   
 affiliates) under which our common stock are authorized for issuance to
employees or non-employees (such as directors, consultants, advisors, 
     vendors, customers, suppliers, or lenders) in exchange for consideration in
the form of goods or services as described in Statement of Financial  
Accounting Standards No. 123, Accounting for Stock-Based Compensation.

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Item 6. Selected Financial Data                                                 

 Selected Financial Data

The following selected consolidated financial data for the five years ended     
December 31, 2002 are derived from our consolidated financial statements and    
other data. The selected consolidated financial data should be read in          
conjunction with our consolidated financial statements, including the           
accompanying notes, included elsewhere herein.                                  

                                                        [Enlarge/Download Table]

Year Ended December 31,                                                                                      
(Dollars in thousands, except per share)                  2002       2001       2000       1999       1998   
                                                        --------   --------   --------   --------   -------- 
                                                                                                             
Income Statement Data:                                                                                       
   Interest income                                      $ 22,204   $ 26,961   $ 29,722   $ 23,199   $ 21,043 
   Interest expense                                        7,793     13,675     16,636     11,850     11,198 
                                                        --------   --------   --------   --------   -------- 
   Net interest income                                    14,411     13,286     13,086     11,349      9,845 
   Provision for loan losses                                 773      1,920        471      1,037      1,836 
                                                        --------   --------   --------   --------   -------- 
   Net interest income after provision for loan losses    13,638     11,366     12,615     10,312      8,009 
   Net securities gains                                      106        290         --        175        220 
   Noninterest income                                      4,433      9,824      3,303      3,005      2,797 
   Noninterest expense                                    11,892     15,102     13,976     12,014     10,228 
                                                        --------   --------   --------   --------   -------- 
   Income before income taxes                              6,285      6,378      1,942      1,478        798 
   Income tax expense                                      1,683      1,900        290        150         34 
                                                        --------   --------   --------   --------   -------- 
   Net income                                           $  4,602   $  4,478   $  1,652   $  1,328   $    764 
                                                        ========   ========   ========   ========   ======== 

Balance Sheet Data:                                                                                          
   Assets                                               $380,765   $340,682   $422,250   $359,668   $321,031 
   Earning assets                                        347,377    314,769    387,146    328,478    295,213 
   Securities (1)                                         55,812     62,806    106,041    108,926    120,695 
   Loans (2)                                             288,842    248,390    280,506    219,054    172,545 
   Allowance for loan losses                               4,282      4,103      3,060      2,557      2,399 
   Deposits                                              276,561    258,330    332,976    257,247    260,120 
   Federal Home Loan Bank advances                        31,140     31,270     32,399     20,729      9,434 
   Shareholders' equity                                   44,408     39,273     35,144     31,218     33,430 
Per Share Data (3):                                                                                          
   Basic earnings per share                             $   1.34   $   1.31   $   0.48   $   0.40   $   0.24 
   Diluted earnings per share                               1.26       1.26       0.48       0.40       0.23 
   Book value (period end) (4)                             12.71      11.66      10.79      10.10      10.81 
   Tangible book value (period end) (4)                    11.57      10.37       8.72       8.48       9.01 
   Cash dividends                                           0.17       0.06         --         --         -- 
Performance Ratios:                                                                                          
   Return on average assets                                 1.28%      1.19%      0.41%      0.40%      0.27%
   Return on average equity                                11.11      11.68       4.57       3.90       2.33 
   Net interest margin (5)                                  4.50       4.08       3.83       3.96       3.77 
   Efficiency (6)                                          61.45      72.71      81.75      79.55      78.50 
   Allowance for loan losses to loan                        1.48       1.65       1.09       1.17       1.39 
   Net charge-offs to average loans                         0.22       0.34       0.12       0.47       0.62 
   Nonperforming assets to period end loans (2)(7)          0.71       0.68       0.25       0.56       0.78 
Capital and Liquidity Ratios:                                                                                
   Average equity to average assets                        11.71      10.22       9.07      10.22      11.47 
   Leverage (4.00% required minimum)                       10.59      10.21       7.02       8.37       8.89 
   Tier 1 risk-based capital ratio                         14.16      14.26      10.05      11.85      13.78 
   Total risk-based capital ratio                          15.41      15.53      11.12      12.90      15.00 
   Average loans to average deposits                      103.86      90.03      86.46      72.97      69.65 

----------                                                                      
Securities held-to-maturity are stated at amortized cost, and securities        
available-for-sale are stated at fair value.                                    
Loans are stated before the allowance for loan losses and include loans held for
sale.                                                                           
All share and per-share data have been adjusted to reflect the 5% common stock  
dividends in September 1998, June 2000 and June 2001.                           
Excludes the effect of any outstanding stock options.                           
Tax equivalent net interest income divided by average earning assets.           
Noninterest expense divided by the sum of tax equivalent net interest income and
noninterest income, excluding gains and losses on sales of assets and the       
writedown of intangible assets related to the sale of those assets.             
Nonperforming loans and nonperforming assets do not include loans past due 90   
days or more that are still accruing interest.                                  

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 Selected Financial Data (continued)

                                                        [Enlarge/Download Table]

(Dollars in thousands)                2002 Quarter ended                      2001 Quarter ended          
                            --------------------------------------  --------------------------------------
except per share            Dec. 31   Sept. 30   June 30   Mar. 31  Dec. 31   Sept. 30   June 30   Mar. 31
                            -------   --------   -------   -------  -------   --------   -------   -------
                                                                                                          
Net interest income          $3,567    $3,644     $3,634    $3,566   $3,392    $3,212     $3,266    $3,416
Provision for loan losses       110       340        213       110      820       600        400       100
Noninterest income            1,335     1,102      1,005     1,097    1,341     1,215      6,666       892
Noninterest expense           3,086     3,000      2,869     2,937    3,131     2,941      5,522     3,508
Net income                    1,273     1,026      1,149     1,154      600       666      2,662       550
Basic earnings per share       0.36      0.29       0.34      0.35     0.18      0.19       0.77      0.17
Diluted earnings per share     0.35      0.28       0.31      0.32     0.17      0.18       0.74      0.17

 Basis of Presentation

The following discussion should be read in conjunction with the preceding       
"Selected Financial Data" and our Financial Statements and the Notes thereto and
the other financial data included elsewhere in this Annual Report. The financial
information provided below has been rounded in order to simplify its            
presentation. However, the ratios and percentages provided below are calculated 
using the detailed financial information contained in the Financial Statements, 
the Notes thereto and the other financial data included elsewhere in this Annual
Report.                                                                         

 General

Community Capital Corporation serves as a bank holding company for CapitalBank. 
CapitalBank was formed on January 1, 2001 during a restructuring that           
consolidated our operations into a single subsidiary. CapitalBank operates      
thirteen branches throughout South Carolina. CapitalBank offers a full range of 
banking services, including a wealth management group featuring a wide array of 
financial services, with personalized attention, local decision making and      
strong emphasis on the needs of individuals and small to medium-sized           
businesses.                                                                     

We were formed in 1988 to serve as a holding company for Greenwood National     
Bank, which later changed its name to Greenwood Bank & Trust. In 1994 we made   
the decision to expand beyond Greenwood County by creating an organization of   
independent banks in four additional markets. In June 1995, we opened Clemson   
Bank and Trust in Clemson, South Carolina. In 1996 and 1997, we opened Community
Bank and Trust, TheBank, and Mid State Bank. We formed a separate trust         
organization in 1997 known as Community Trust Company. In May 2000, Community   
Trust Company was sold. During 1997 and 1998, we also acquired several Carolina 
First branches.                                                                 

As discussed, on January 1, 2001, we merged the five subsidiary banks into one  
bank charter known as CapitalBank. We made the decision to restructure the      
organization into one bank in order to improve operational efficiencies, provide
new opportunities for employees, and improve service to customers. Customers are
able to receive the benefit of being able to transact business at any of        
CapitalBank's branches, through the ATM network, and through the internet       
banking products. Additionally, we believe that the new centralized credit      
function provides additional controlled decisions while streamlining the credit 
process. Centralized deposit pricing supports management's strategy from market 
to market. We also believe that the name recognition has enhanced our business. 

On January 29, 2001, CapitalBank, the new bank subsidiary, announced that it had
signed a definitive agreement with Enterprise Bank of South Carolina to sell its
five branch offices located in Barnwell, Blackville, Williston, Springfield and 
Salley, South Carolina. On May 14, 2001, CapitalBank sold the five branches,    
which had approximately $67.1 million in deposits.                              

 Results of Operations

Year ended December 31, 2002, compared with year ended December 31, 2001        

Net interest income increased $1.1 million, or 8.47%, to $14.4 million in 2002  
from $13.3 million in 2001. The increase in net interest income was due         
primarily to an increase in the volume of average loans and the decrease in     
yields on average interest bearing liabilities. Average earning assets decreased
$13.7 million, or 3.96%, and average interest-bearing liabilities decreased     
$18.5 million, or 6.04%, due primarily to the sale of the five branches in 2001.

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 Results of Operations (continued)

Our tax equivalent net interest spread and tax equivalent net interest margin   
were 4.14% and 4.50%, respectively, in 2002 compared to 3.58% and 4.08% in 2001.
The increase in the net interest spread was primarily the result of the decrease
in yields on interest-bearing liabilities used to fund loans and securities.    
Yields on interest-bearing liabilities decreased from 4.46% in 2001 to 2.70% in 
2002. Yields on interest-earning assets decreased 120 basis points. However,    
yields on interest-bearing liabilities decreased 176 basis points.              

The provision for loan losses was $773,000 in 2002 compared to $1.9 million in  
2001. The significant amount charged to the provision in 2001 was primarily the 
result of management's efforts to fund the allowance for potential problem loans
and to protect against a deteriorating economy. Our allowance for loan losses   
was 1.48 of total loans outstanding at December 31, 2002. In addition, the      
provision was funded to maintain the allowance for loan losses at a level       
sufficient to cover known and inherent losses in the loan portfolio.            

Noninterest income decreased $5.6 million, or 55.12%, to $4.5 million in 2002   
from $10.1 million in 2001, which was primarily attributable to the premium on  
the branches sold to Enterprise Bank in 2001. The premium totaled $5.8 million. 
Service charges on deposit accounts increased $450,000, or 21.15% to $2.6       
million in 2002. Residential mortgage origination fees decreased $96,000, or    
11.68% to $726,000 in 2002 from $822,000 in 2001. Mortgage originations have    
declined as rates leveled off and as fewer customers are refinancing their      
mortgages. Noninterest income in 2002 included $106,000 from the gain on sales  
of securities available for sale, whereas, noninterest income for 2001 included 
$290,000 from the gain on sales of nonmarketable equity securities. Income from 
fiduciary activities increased $150,000, or 114.50% to $281,000 in 2002 from    
$131,000 in 2001. Commissions on the sale of mutual funds increased $74,000, or 
231.25% to $106,000 in 2002 compared to $32,000 in 2001.                        

Noninterest expense decreased $3.2 million, or 21.26%, to $11.9 million in 2002 
from $15.1 million in 2001. The primary component of noninterest expense was    
salaries and employee benefits, which decreased $104,000, or 1.59%, to $6.4     
million in 2002 from $6.5 million in 2001. Many of the categories of expenses   
decreased in 2002 compared to 2001 because of the sale of the branches to       
Enterprise Bank in 2001. Other categories of expenses decreased due to the sale 
of the branches and improved efficiency from the consolidation of the subsidiary
banks. Net occupancy expense was $697,000 in 2002 compared to $749,000 in 2001, 
and furniture and equipment expense was $1.0 million in 2002 compared to $1.4   
million in 2001. Another significant decrease in noninterest expense was in the 
amortization of intangible assets. Total amortization of intangible assets was  
$346,000 in 2002, as compared to $2.4 million in 2001. This significant decrease
was also due to the sale of the five branches to Enterprise Bank. Our efficiency
ratio was 61.45% in 2002 compared to 72.71% in 2001.                            

Net income increased $124,000, or 2.77%, to $4.6 million in 2002 from $4.5      
million in 2001. Basic earnings per share was $1.34 in 2002, compared to $1.31  
in 2001. Diluted earnings per share was $1.26 in 2002, compared to $1.26 in     
2001. Return on average assets during 2002 was 1.28% compared to 1.19% during   
2001, and return on average equity was 10.93% during 2002 compared to 11.68%    
during 2001.                                                                    

Year ended December 31, 2001, compared with year ended December 31, 2000        

Net interest income increased $200,000, or 1.53%, to $13.3 million in 2001 from 
$13.1 million in 2000. The increase in net interest income was due primarily to 
an increase in net interest margin. Average earning assets decreased $18.9      
million, or 5.19%, and average interest-bearing liabilities decreased $23.7     
million, or 7.17%, due primarily to the sale of the five branches.              

Our tax equivalent net interest spread and tax equivalent net interest margin   
were 3.58% and 4.08%, respectively, in 2001 compared to 3.36% and 3.83% in 2000.
The increase in the net interest spread was primarily the result of the decrease
in yields on interest-bearing liabilities used to fund loans and securities.    
Yields on interest-bearing liabilities decreased from 5.03% in 2000 to 4.46% in 
2001. Yields on interest-earning assets decreased 35 basis points. However,     
yields on interest-bearing liabilities decreased 57 basis points.               

The provision for loan losses was $1.9 million in 2001 compared to $471,000 in  
2000. The significant amount charged to the provision in 2001 was primarily the 
result of management's efforts to fund the allowance for potential              

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 Results of Operations (continued)

problem loans and to protect against a deteriorating economy. Our allowance for 
loan losses was 1.63% of total loans outstanding at December 31, 2001. In       
addition, the provision was funded to maintain the allowance for loan losses at 
a level sufficient to cover known and inherent losses in the loan portfolio.    

Noninterest income increased $6.8 million, or 206.06%, to $10.1 million in 2001 
from $3.3 million in 2000, which was primarily attributable to the premium on   
the branches sold to Enterprise Bank. The premium totaled $5.8 million. Service 
charges on deposit accounts increased $422,000, or 24.74%, to $2.1 million in   
2001. Residential mortgage origination fees increased $319,000, or 63.41% to    
$822,000 in 2001. Noninterest income in 2001 included $290,000 from the gain on 
sales of nonmarketable equity securities as compared to no gains in 2000.       
Noninterest income for the year ended December 31, 2000 included $150,000 from  
the gain on the sale of Community Trust Company.                                

Noninterest expense increased $1.1 million, or 7.86%, to $15.1 million in 2001  
from $14.0 million in 2000. The primary component of noninterest expense was    
salaries and employee benefits, which decreased $265,000, or 3.90%, to $6.5     
million in 2001 from $6.8 million in 2000. The decrease is attributable to a    
decrease in the number of employees due to the sale of the branches to          
Enterprise Bank. Other categories of expenses decreased due to the sale of the  
branches and improved efficiency from the consolidation of the subsidiary banks.
Net occupancy expense was $749,000 in 2001 compared to $880,000 in 2000, and    
furniture and equipment expense was $1.4 million in 2001 compared to $1.6       
million in 2000. The most significant increase in noninterest expense was in the
amortization of intangible assets. We recorded amortization of intangible assets
related to the sale of branches to Enterprise Bank of $1.9 million. Total       
amortization of intangible assets was $2.4 million in 2001, as compared to      
$612,000 in 2000. Our efficiency ratio was 72.71% in 2001 compared to 81.75% in 
2000.                                                                           

Net income increased $2.8 million, or 164.71%, to $4.5 million in 2001 from $1.7
million in 2000. Basic earnings per share was $1.31 in 2001, compared to $0.48  
in 2000. Diluted earnings per share was $1.26 in 2001, compared to $0.48 in     
2000. Return on average assets during 2001 was 1.19% compared to 0.41% during   
2000, and return on average equity was 11.68% during 2001 compared to 4.57%     
during 2000.                                                                    

Net Interest Income 

General. The largest component of our net income is our net interest income,    
which is the difference between the income earned on assets and interest paid on
deposits and borrowings used to support such assets. Net interest income is     
determined by the yields earned on our interest-earning assets and the rates    
paid on our interest-bearing liabilities, the relative amounts of               
interest-earning assets and interest-bearing liabilities and the degree of      
mismatch and the maturity and repricing characteristics of our interest-earning 
assets and interest-bearing liabilities. Net interest income divided by average 
interest-earning assets represents our net interest margin.                     

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Net Interest Income (continued) 

Average Balances, Income and Expenses, and Rates                                

                                                        [Enlarge/Download Table]

Year ended December 31,                         2002                        2001                          2000           
                                    ---------------------------  ---------------------------  ---------------------------
                                    Average    Income/   Yield/  Average    Income/   Yield/  Average    Income/   Yield/
(Dollars in thousands)              Balance    Expense    Rate   Balance    Expense    Rate   Balance    Expense    Rate 
                                    --------   -------   ------  --------   -------   ------  --------   -------   ------
                                                                                                                         
Assets:                                                                                                                  
   Earning Assets:                                                                                                       
   Loans/(1)(3)/                    $274,365   $19,338    7.05%  $259,661   $22,404    8.63%  $254,064   $23,552    9.27%
   Securities, taxable/(2)/           26,461     1,494    5.65     52,302     3,053    5.84     78,246     4,593    5.87 
   Securities, nontaxable/(2)(3)/     25,372     1,687    6.65     25,878     2,018    7.80     26,671     2,119    7.95 
   Nonmarketable equity                                                                                                  
      securities                       5,345       188    3.52      5,583       226    4.05      5,329       308    5.78 
   Federal funds sold                                                                                                    
      and other                          261         4    1.53      2,078        75    3.61         87         6    6.90 
                                    --------                     --------   -------           --------   -------         
         Total earning assets        331,804    22,711    6.84    345,502    27,776    8.04    364,397    30,578    8.39 
                                    --------   -------           --------   -------           --------   -------         
   Cash and due from banks             7,897                        8,859                        9,728                   
   Premises and equipment             10,113                       12,140                       14,024                   
   Other assets                       13,529                       12,028                       13,109                   
   Allowance for loan losses          (4,213)                      (3,316)                      (2,814)                  
                                    --------                     --------                     --------                   
      Total assets                  $359,130                     $375,213                     $398,444                   
                                    ========                     ========                     ========                   

Liabilities:                                                                                                             
   Interest-Bearing Liabilities:                                                                                         
      Interest-bearing transaction                                                                                       
         accounts                     95,323     1,068    1.12%  $100,319     2,463    2.45%  $ 99,718   $ 3,553    3.56%
      Savings deposits                27,840       745    2.68     30,012     1,182    3.94     29,051     1,096    3.77 
      Time deposits                  113,946     3,605    3.16    131,842     7,401    5.61    136,144     7,878    5.79 
      Other short-term borrowings     19,217       344    1.79     10,085       411    4.07     29,182     1,772    6.07 
      Federal Home Loan Bank                                                                                             
         advances                     31,198     1,947    6.24     31,408     1,958    6.23     31,943     1,931    6.05 
      Long-term debt                      --        --              2,191       156    7.12      3,299       286    8.67 
      Obligations under capital                                                                                          
         leases                          836        84   10.05      1,036       104   10.04      1,239       120    9.69 
                                    --------   -------           --------   -------           --------   -------         

            Total interest-bearing                                                                                       
               liabilities           288,360     7,793    2.70    306,893    13,675    4.46    330,576    16,636    5.03 
                                    --------   -------           --------   -------           --------   -------         
   Demand deposits                    27,044                       26,248                       28,925                   
   Accrued interest and other                                                                                            
      liabilities                      2,321                        3,742                        2,813                   
   Shareholders' equity               41,405                       38,330                       36,130                   
                                                                 --------                     --------                   
         Total liabilities and                                                                                           
         shareholders' equity       $359,130                     $375,213                     $398,444                   
                                    ========                     ========                     ========                   

Net interest spread                                       4.14%                        3.58%                        3.36%

Net interest income                 $ 14,918                     $ 14,101                     $ 13,942                   
                                    ========                     ========                     ========                   

Net interest margin                                       4.50%                        4.08%                        3.83%

----------                                                                      
/(1)/  The effect of loans in nonaccrual status and fees collected is not       
   significant to the computations. All loans and deposits are domestic.
/(2)/  Average investment securities exclude the valuation allowance on         
securities available-for-sale.                                    
/(3)/  Fully tax-equivalent basis at 38% tax rate for nontaxable securities and 
loans.                                                            

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 Net Interest Income (continued)

Average Balances, Income and Expenses, and Rates. The previous table sets forth,
for the periods indicated, certain information related to our average balance   
sheet and our average yields on assets and average costs of liabilities. Such   
yields are derived by dividing income or expense by the average balance of the  
corresponding assets or liabilities. Average balances have been derived from the
daily balances throughout the periods indicated.                                

Analysis of Changes in Net Interest Income. The following table sets forth the  
effect that the varying levels of earning assets and interest-bearing           
liabilities and the applicable rates have had on changes in net interest income 
from 2002 to 2001 and 2001 to 2000.                                             

Analysis of Changes in Net Interest Income                                      

                                                        [Enlarge/Download Table]

                                               2002 Compared With 2001             2001 Compared With 2000      
                                          ---------------------------------   --------------------------------- 
                                                   Variance Due to                     Variance Due to          
                                          ---------------------------------   --------------------------------- 
(Dollars in thousands)                    Volume/(1)/   Rate/(1)/    Total    Volume/(1)/   Rate/(1)/    Total  
----------------------                    -----------   ---------   -------   -----------   ---------   ------- 
                                                                                                                
Earning Assets                                                                                                  
Loans                                       $ 1,214      $(4,280)   $(3,066)    $   509      $(1,657)   $(1,148)
Securities, taxable                          (1,463)         (96)    (1,559)     (1,517)         (23)    (1,540)
Securities, nontaxable                          (38)        (293)      (331)        (64)         (37)      (101)
Nonmarketable equity securities                 (10)         (28)       (38)         14          (96)       (82)
Federal funds sold and other                    (43)         (28)       (71)         73           (4)        69 
                                            -------      -------    -------     -------      -------    ------- 
      Total interest income                    (340)      (4,725)    (5,065)       (985)      (1,817)    (2,802)
                                            -------      -------    -------     -------      -------    ------- 

Interest-Bearing Liabilities                                                                                    
Interest-bearing deposits:                                                                                      
   Interest-bearing transaction accounts       (117)      (1,278)    (1,395)         21       (1,111)    (1,090)
   Savings and market rate investments          (81)        (356)      (437)         36           50         86 
   Time deposits                               (900)      (2,896)    (3,796)       (240)        (237)      (477)
                                            -------      -------    -------     -------      -------    ------- 

Total interest-bearing deposits              (1,098)      (4,530)    (5,628)       (183)      (1,298)    (1,481)

Other short-term borrowings                     244         (311)       (67)       (907)        (454)    (1,361)

Federal Home Loan Bank advances                 (14)           3        (11)        (31)          58         27 

Long-term debt                                  (78)         (78)      (156)        (85)         (45)      (130)

Obligations under capital leases                (20)          --        (20)        (20)           4        (16)
                                            -------      -------    -------     -------      -------    ------- 

      Total interest expense                   (966)      (4,916)    (5,882)     (1,226)      (1,735)    (2,961)
                                            -------      -------    -------     -------      -------    ------- 

Net interest income                         $   626      $   190    $   817     $   244      $   (82)   $   159 
                                            =======      =======    =======     =======      =======    ======= 

    (1)  Volume-rate changes have been allocated to each category based on the
percentage of the total change.                             

Interest Sensitivity. We monitor and manage the pricing and maturity of our     
assets and liabilities in order to diminish the potential adverse impact that   
changes in interest rates could have on our net interest income. The principal  
monitoring technique we employ is the measurement of our interest sensitivity   
"gap," which is the positive or negative dollar difference between assets and   
liabilities that are subject to interest rate repricing within a given period of
time. Interest rate sensitivity can be managed by repricing assets or           
liabilities, selling securities available-for-sale, replacing an asset or       
liability at maturity, or adjusting the interest rate during the life of an     
asset or liability. Managing the amount of assets and liabilities repricing in  
the same time interval helps to hedge the risk and minimize the impact on net   
interest income of rising or falling interest rates.                            

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 Net Interest Income (continued)

The following table sets forth our interest rate sensitivity at December 31,    
2002.                                                                           

Interest Sensitivity Analysis                                                   

                                                        [Enlarge/Download Table]

                                                                                             Greater            
                                                        After One   After Three             Than One            
                                              Within     Through      Through     Within     Year or            
December 31, 2002                               One       Three        Twelve      One        Non-              
(Dollars in thousands)                         Month      Months       Months      Year     Sensitive     Total 
----------------------                       --------   ---------   -----------  --------   ---------   --------
                                                                                                                
Assets                                                                                                          
Earning assets:                                                                                                 
   Loans/(1)/                                $ 90,189    $ 13,707    $ 40,332    $144,228    $145,405   $289,633
   Securities                                     502         617       7,627       8,746      47,066     55,812
   Federal funds sold and other                    39          --          --          39          --         39
                                             --------    --------    --------    --------    --------   --------

         Total earning assets                  90,730      14,324      47,959     153,013     192,471    345,484
                                             --------    --------    --------    --------    --------   --------

Liabilities                                                                                                     
Interest-bearing liabilities                                                                                    
   Interest-bearing deposits:                                                                                   
      Demand deposits                         102,416          --          --     102,416          --    102,416
      Savings deposits                         27,948          --          --      27,948          --     27,948
      Time deposits                            13,911      21,126      50,716      85,753      31,022    116,775
                                             --------    --------    --------    --------    --------   --------

         Total interest-bearing deposits      144,275      21,126      50,716     216,117      31,022    247,139

   Other short-term borrowings                 25,850          --          --      25,850          --     25,850

   Federal Home Loan Bank advances                 --      10,015          --      10,015      21,125     31,140

   Obligations under capital leases                18          37         173         228         505        733
                                             --------    --------    --------    --------    --------   --------

         Total interest-bearing liabilities   170,043      31,178      50,889     252,210      52,652    304,862
                                             --------    --------    --------    --------    --------   --------

Period gap                                   $(79,413)   $(16,854)   $ (2,930)   $(99,197)   $139,819           
                                             ========    ========    ========    ========    ========           

Cumulative gap                               $(79,413)   $(96,267)   $(99,197)   $(99,197)   $ 40,622           
                                             ========    ========    ========    ========    ========           

Ratio of cumulative gap to total earnings                                                                       
   assets                                      (22.99)%    (27.86)%    (28.71)%    (28.71)%     11.76%          

/(1)/ Excludes nonaccrual loans and includes loans held for sale.               

The above table reflects the balances of interest-earning assets and            
interest-bearing liabilities at the earlier of their repricing or maturity      
dates. Overnight federal funds are reflected at the earliest pricing interval   
due to the immediately available nature of the instruments. Debt securities are 
reflected at each instrument's ultimate maturity date. Scheduled payment amounts
of fixed rate amortizing loans are reflected at each scheduled payment date.    
Scheduled payment amounts of variable rate amortizing loans are reflected at    
each scheduled payment date until the loan may be repriced contractually; the   
unamortized balance is reflected at that point. Interest-bearing liabilities    
with no contractual maturity, such as savings deposits and interest-bearing     
transaction accounts, are reflected in the earliest repricing period due to     
contractual arrangements that give us the opportunity to vary the rates paid on 
those deposits within a thirty-day or shorter period. Fixed rate time deposits, 
principally certificates of deposit, are reflected at their contractual maturity
date. Other short-term borrowings consist of federal funds purchased and        
securities sold under agreements to repurchase. Federal funds purchased are     
reflected at the earliest pricing interval because funds can be repriced daily. 
Securities sold under agreements to repurchase are reflected at the maturity    
date of each repurchase agreement that generally matures within one day.        
Advances from the Federal Home Loan Bank are reflected at their contractual     
maturity dates. Obligations under capital leases are reflected at each payment  
date.                                                                           

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 Net Interest Income (continued)

We generally would benefit from increasing market rates of interest when we have
an asset-sensitive gap position and generally would benefit from decreasing     
market rates of interest when we are liability sensitive. We are liability      
sensitive within the one year period. However, our gap analysis is not a precise
indicator of our interest sensitivity position. The analysis presents only a    
static view of the timing of maturities and repricing opportunities, without    
taking into consideration that changes in interest rates do not affect all      
assets and liabilities equally. For example, rates paid on a substantial portion
of core deposits may change contractually within a relatively short time frame, 
but those rates are viewed by us as significantly less interest-sensitive than  
market-based rates such as those paid on non-core deposits. Accordingly, we     
believe a liability-sensitive gap position is not as indicative of our true     
interest sensitivity as it would be for an organization that depends to a       
greater extent on purchased funds to support earning assets. Net interest income
may be impacted by other significant factors in a given interest rate           
environment, including changes in the volume and mix of earning assets and      
interest-bearing liabilities.                                                   

 Provision and Allowance for Loan Losses

General. We have developed policies and procedures for evaluating the overall   
quality of our credit portfolio and the timely identification of potential      
problem credits. On a quarterly basis, the Board of Directors reviews and       
approves the appropriate level for CapitalBank's allowance for loan losses based
upon our recommendations, the results of the internal monitoring and reporting  
system, analysis of economic conditions in its markets, and a review of         
historical statistical data for both us and other financial institutions.       

Additions to the allowance for loan losses, which are expensed as the provision 
for loan losses on our income statement, are made periodically to maintain the  
allowance at an appropriate level based on our analysis of the potential risk in
the loan portfolio. Loan losses and recoveries are charged or credited directly 
to the allowance. The amount of the provision is a function of the level of     
loans outstanding, the level of nonperforming loans, historical loan loss       
experience, the amount of loan losses actually charged against the reserve      
during a given period, and current and anticipated economic conditions.         

Our allowance for loan losses is based upon judgments and assumptions of risk   
elements in the portfolio, future economic conditions, and other factors        
affecting borrowers. The process includes identification and analysis of loss   
potential in various portfolio segments utilizing a credit risk grading process 
and specific reviews and evaluations of significant problem credits. In         
addition, we monitor the overall portfolio quality through observable trends in 
delinquency, charge offs, and general and economic conditions in the service    
area. The adequacy of the allowance for loan losses and the effectiveness of our
monitoring and analysis system are also reviewed periodically by the banking    
regulators and our independent auditors.                                        

Based on present information and an ongoing evaluation, we consider the         
allowance for loan losses to be adequate to meet presently known and inherent   
risks in the loan portfolio. Our judgment as to the adequacy of the allowance is
based upon a number of assumptions about future events that we believe to be    
reasonable but that may or may not be valid. Thus, we have no assurance that    
charge offs in future periods will not exceed the allowance for loan losses or  
that additional increases in the allowance for loan losses will not be required.
We do not allocate the allowance for loan losses to specific categories of loans
but evaluates the adequacy on an overall portfolio basis utilizing a risk       
grading system.                                                                 

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 Provision and Allowance for Loan Losses (continued)

The following table sets forth certain information with respect to our allowance
for loan losses and the composition of charge offs and recoveries for each of   
the last five years.                                                            

                                                        [Enlarge/Download Table]

Allowance for Loan Losses                                                                           
Year Ended December 31,                                                                             

(Dollars in thousands)                           2002       2001       2000       1999       1998   
                                               --------   --------   --------   --------   -------- 
                                                                                                    
Total loans outstanding at end of year         $288,842   $248,390   $280,506   $219,054   $172,545 
                                               ========   ========   ========   ========   ======== 
Average loans outstanding                      $274,365   $259,661   $254,064   $188,672   $161,695 
                                               ========   ========   ========   ========   ======== 
Balance of allowance for loan losses                                                                
   at beginning of period                      $  4,103   $  3,060   $  2,557   $  2,399   $  1,531 

Allowance for loan losses from acquisitions          --         --        335         --         38 
Loan losses:                                                                                        
   Commercial and industrial                        337        406        113        287        135 
   Real estate - mortgage                           131        160        122        306         43 
   Consumer                                         255        409        305        449        885 
                                               --------   --------   --------   --------   -------- 
      Total loan losses                             723        975        540      1,042      1,063 
                                               --------   --------   --------   --------   -------- 
Recoveries of previous loan losses:                                                                 
   Commercial and industrial                         45          8         73         --         -- 
   Real estate - mortgage                            15         16         14         17         -- 
   Consumer                                          69         74        150        146         57 
                                               --------   --------   --------   --------   -------- 
      Total recoveries                              129         98        237        163         57 
                                               --------   --------   --------   --------   -------- 
Net loan losses                                     594        877        303        879      1,006 

Provision for loan losses                           773      1,920        471      1,037      1,836 
                                               --------   --------   --------   --------   -------- 
Balance of allowance for loan losses                                                                
   at end of period                            $  4,282   $  4,103   $  3,060   $  2,557   $  2,399 
                                               ========   ========   ========   ========   ======== 
Allowance for loan losses to period end loans      1.48%      1.65%      1.09%      1.17%      1.39%
Net charge offs to average loans                   0.22       0.34       0.12       0.47       0.62 

Nonperforming Assets. The following table sets forth our nonperforming assets   
for the dates indicated.                                                        

Nonperforming Assets                                                            

                                                                [Download Table]

                                                        December 31,               
                                          ---------------------------------------- 
(Dollars in thousands)                     2002     2001    2000    1999     1998  
                                          ------   ------   ----   ------   ------ 
                                                                                   
Nonaccrual loans                          $1,893   $1,567   $637   $1,223   $1,348 
Restructured or impaired loans                --       --     --       --       -- 
                                          ------   ------   ----   ------   ------ 
   Total nonperforming loans               1,893    1,567    637    1,223    1,348 
Other real estate owned                      150      148     58       --       -- 
                                          ------   ------   ----   ------   ------ 
   Total nonperforming assets             $2,043   $1,715   $695   $1,223   $1,348 
                                          ======   ======   ====   ======   ====== 
Loans 90 days or more past due and                                                 
   still accruing interest                $  128   $   --   $164   $  109   $  112 
Nonperforming assets to period end loans    0.71%    0.69%  0.25%    0.56%    0.78%

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 Provision and Allowance for Loan Losses (continued)

Accrual of interest is discontinued on a loan when we believe, after considering
economic and business conditions and collection efforts, that the borrower's    
financial condition is such that the collection of interest is doubtful. A      
delinquent loan is generally placed in nonaccrual status when it becomes 90 days
or more past due. When a loan is placed in nonaccrual status, all interest that 
has been accrued on the loan but remains unpaid is reversed and deducted from   
current earnings as a reduction of reported interest income. No additional      
interest is accrued on the loan balance until the collection of both principal  
and interest becomes reasonably certain. When a problem loan is finally         
resolved, we may ultimately write-down or charge off of the principal balance of
the loan that would necessitate additional charges to earnings. For all periods 
presented, the additional interest income, which would have been recognized into
earnings if our nonaccrual loans had been current in accordance with their      
original terms, is immaterial.                                                  

Total nonperforming assets increased to $2.0 million at December 31, 2002, from 
$1.7 million at December 31, 2001. This amount consists primarily of nonaccrual 
loans that totaled $1.9 million at December 31, 2002. Nonperforming assets were 
0.70% of total loans at December 31, 2002. The allowance for loan losses to     
period end nonperforming assets was 209.6% at December 31, 2002.                

Potential Problem Loans. At December 31, 2002, through our internal review      
mechanisms, we had identified $3.4 million of criticized loans and $9.4 million 
of classified loans. The results of this internal review process are the primary
determining factor in our assessment of the adequacy of the allowance for loan  
losses.                                                                         

Our criticized loans decreased from $9.2 million at December 31, 2001 to $3.4   
million at December 31, 2002. The decrease was due to the improvement in credit 
quality of several large loans that allowed us to upgrade these loans. Total    
classified loans decreased from $10.5 million at December 31, 2001 to $9.4      
million at December 31, 2002. We are committed to addressing potential problem  
loans.                                                                          

Noninterest Income and Expense

Noninterest Income. Noninterest income decreased $5.6 million, or 55.12%, to    
$4.5 million in 2002 from $10.1 million in 2001, which was primarily            
attributable to the gain recognized on the sale of the five branches to         
Enterprise Bank in 2001. The premium on this sale totaled $5.8 million. We had  
$106,000 in gains on the sale of securities available for sale, whereas in 2001 
we realized a gain of $290,000 on the sales of nonmarketable equity securities. 
Residential mortgage origination fees decreased $96,000, or 11.68% to $726,000  
in 2002 from $822,000 in 2001. Mortgage originations have declined as rates     
leveled off and as fewer customers are refinancing their mortgages. Income from 
fiduciary activities increased $150,000, or 114.50% to $281,000 in 2002 from    
$131,000 in 2001. Commissions on the sale of mutual funds increased $74,000, or 
231.25% to $106,000 in 2002 compared to $32,000 in 2001.                        

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Noninterest Income and Expense (continued)

The following table sets forth, for the periods indicated, the principal        
components of noninterest income:                                               

Noninterest Income                                                              

                                                     Year Ended December 31,
                                                     -------------------------
(Dollars in thousands)                                 2002      2001     2000  
                                                     ------   -------   ------
Service charges on deposit accounts                   $2,578   $ 2,128   $1,706 
Residential mortgage origination fees                    726       822      503 
Gains on sales of securities available-for-sale          106        --       -- 
Gains on sales of nonmarketable equity securities         --       290       -- 
Commissions from sales of mutual funds                   106        32      105 
Income from fiduciary activities                         281       131      129 
Gain on sale of branches                                  --     5,791       -- 
Gain on sale of Community Trust Company                   --        --      150 
Other income                                             742       920      710 
                                                     ------   -------   ------
  Total noninterest income                           $4,539   $10,114   $3,303
                                                     ======   =======   ======

Noninterest Expense. Noninterest expense decreased $3.2 million, or 21.26%, to  
$11.9 million in 2002 from $15.1 million in 2001. The primary component of      
noninterest expense was salaries and benefits, which decreased $104,000, or     
1.59%, to $6.4 million in 2002 from $6.5 million in 2001. Many of the categories
of expenses decreased in 2002 compared to 2001 because of the sale of the       
branches to Enterprise Bank in 2001. Net occupancy expense was $697,000 in 2002 
compared to $749,000 in 2001, and furniture and equipment expenses was $1.0     
million in 2002 compared to $1.4 million in 2001. Another significant decrease  
in noninterest expense was in the amortization of intangible assets. Total      
amortization of intangible assets was $346,000 in 2002, as compared to $2.4     
million in 2001. We recorded amortization of intangible assets related to the   
sale of branches to Enterprise Bank of $1.9 million in 2001. Our efficiency     
ratio was 61.45% in 2002 compared to 72.71% in 2001.                            

The following table sets forth, for the periods indicated, the primary          
components of noninterest expense:                                              

Noninterest Expense                                                             

                                                   Year Ended December 31,
                                                   ---------------------------
(Dollars in thousands)                                2002      2001      2000  
                                                   -------   -------   -------
Salaries and employee benefits                      $ 6,418   $ 6,522   $ 6,787 
Net occupancy expense                                   697       749       880 
Furniture and equipment expense                       1,050     1,440     1,631 
Amortization of intangible assets                       346     2,440       612 
Director and committee fees                             167       130       202 
Data processing and supplies                            578       410       361 
Mortgage loan department expenses                       122       278       130 
Banking assessments                                      45        57       131 
Professional fees and services                          287       404       476 
Postage and freight                                     205       339       380 
Supplies                                                283       424       419 
Credit card expenses                                     36       188       201 
Telephone expenses                                      268       288       402 
Other                                                 1,390     1,433     1,364 
                                                   -------   -------   -------
  Total noninterest expense                        $11,892   $15,102   $13,976
                                                   =======   =======   =======
Efficiency ratio                                      61.45%    72.71%    81.75%

Income Taxes. Our income tax expense was $1.7 million, a decrease of $217,000   
from the 2001 amount of $1.9 million. The slight decrease was partially due to  
the decrease in income before taxes.                                            

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Earning Assets

Loans. Loans are the largest category of earning assets and typically provide   
higher yields than the other types of earning assets. Associated with the higher
yields are the inherent credit and liquidity risks that we attempt to control   
and counterbalance. Loans averaged $274.4 million in 2002 compared to $259.6    
million in 2001, an increase of $14.8 million, or 5.7%. At December 31, 2002,   
total loans were $288.8 million compared to $248.3 million at December 31, 2001.
The following table sets forth the composition of the loan portfolio by category
at the dates indicated and highlights our general emphasis on mortgage lending. 

Composition of Loan Portfolio                                                   

                                                        [Enlarge/Download Table]


December 31,                 2002                 2001                 2000                 1999                 1998        
                      ------------------   ------------------   ------------------   ------------------   ------------------ 
                                 Percent              Percent              Percent              Percent              Percent 
(Dollars in                        of                   of                   of                   of                   of    
thousands)             Amount     Total     Amount     Total     Amount     Total     Amount     Total     Amount     Total  
                      --------   -------   --------   -------   --------   -------   --------   -------   --------   ------- 
                                                                                                                             
Commercial                                                                                                                   
 and industrial       $ 30,092     10.42%  $ 33,395     13.26%  $ 52,005     18.54%  $ 29,740     13.58%  $ 28,991     16.80%
Real estate                                                                                                                  
   Construction         13,049      4.52     13,252      5.26     20,393      7.27     28,664     13.09     23,665     13.72 
   Mortgage -                                                                                                                
      residential      154,257     53.41    124,091     49.25    111,897     39.89     66,092     30.17     52,635     30.51 
   Mortgage-                                                                                                                 
      nonresidential    73,610     25.48     59,417     23.58     60,159     21.45     58,419     26.67     36,017     20.87 
Consumer and                                                                                                                 
   other                17,834      6.17     18,235      8.65     36,052     12.85     36,139     16.49     31,237     18.10 
                      --------    ------   --------    ------   --------    ------   --------    ------   --------    ------ 
   Total loans         288,842    100.00%   248,390    100.00%   280,506    100.00%   219,054    100.00%   172,545    100.00%
                                  ======               ======               ======               ======               ====== 
Allowance for                                                                                                                
   loan losses          (4,282)              (4,103)              (3,060)              (2,557)              (2,399)          
                      --------             --------             --------             --------             --------           
Net loans             $284,560             $244,287             $277,446             $216,497             $170,146           
                      ========             ========             ========             ========             ========           

The principal component of our loan portfolio is real estate mortgage loans. At 
December 31, 2002, this category totaled $227.9 million and represented 78.2% of
the total loan portfolio, compared to $183.5 million, or 72.8%, at December 31, 
2001.                                                                           

In the context of this discussion, a "real estate mortgage loan" is defined as  
any loan, other than loans for construction purposes, secured by real estate,   
regardless of the purpose of the loan. Financial institutions in our market     
areas typically obtain a security interest in real estate, whenever possible, in
addition to any other available collateral. This collateral is taken to         
reinforce the likelihood of the ultimate repayment of the loan and tends to     
increase the magnitude of the real estate loan portfolio component.             

Real estate construction loans decreased $203,000, or 1.53%, to $13.0 million at
December 31, 2002, from $13.3 million at December 31, 2001. Residential mortgage
loans, which is the largest category of our loans, increased $30.2 million, or  
24.31%, to $154.3 million at December 31, 2002, from $124.1 million at December 
31, 2001. Residential real estate loans consist of first and second mortgages on
single or multi-family residential dwellings. Nonresidential mortgage loans,    
which include commercial loans and other loans secured by multi-family          
properties and farmland, increased $14.2 million or 23.89%, to $73.6 million at 
December 31, 2002 from $59.4 million at December 31, 2001. The overall increase 
in real estate lending was attributable to the continued demand for residential 
and commercial real estate loans in our markets. CapitalBank has been able to   
compete favorably for residential mortgage loans with other financial           
institutions by offering fixed rate products having three and five year call    
provisions.                                                                     

Commercial and industrial loans decreased $2.8 million, or 8.52%, to $30.6      
million at December 31, 2002, from $33.4 million at December 31, 2001.          

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Earning Assets (continued)

Consumer and other loans decreased $401,000, or 2.20%, to $17.8 million at      
December 31, 2002, from $18.2 million at December 31, 2001.                     

Our loan portfolio reflects the diversity of our markets. Our thirteen branches 
are located from the northern Midlands of South Carolina through the Upstate.   
Primary market areas include Anderson, Belton, Clemson, Greenwood, Newberry and 
Saluda. The economies of these markets are varied and represent different       
industries including medium and light manufacturing, higher education, regional 
health care, and distribution facilities. These areas are expected to remain    
stable with continual growth. The diversity of the economy creates opportunities
for all types of lending. We do not engage in foreign lending.                  

The repayment of loans in the loan portfolio as they mature is also a source of 
our liquidity. The following table sets forth our loans maturing within         
specified intervals at December 31, 2002.                                       

Loan Maturity Schedule and Sensitivity to Changes in Interest Rates             

                                                                [Download Table]

                                                  Over                        
                                                One Year                      
December 31, 2002                    One Year    Through   Over Five          
(Dollars in thousands)               or Less   Five Years    Years     Total  
                                     --------  ----------  ---------  --------
                                                                              
Commercial and industrial            $ 17,374   $ 13,445    $ 1,250   $ 32,069
Real estate                            89,574    127,383     23,960    240,917
Consumer and other                      5,215     10,253        388     15,856
                                     --------   --------    -------   --------
                                     $112,163   $151,081    $25,598   $288,842
                                     ========   ========    =======   ========
Loans maturing after one year with:                                           
   Fixed interest rates                                               $176,213
   Floating interest rates                                                 466
                                                                      --------
                                                                      $176,679
                                                                      ========

The information presented in the above table is based on the cont ractual       
maturities of the individual loans, including loans which may be subject to     
renewal at their contractual maturity. Renewal of such loans is s ubject to     
review and credit approval as well as modification of terms upon their maturity.
Consequently, we believe this treatment presents fairly the maturity and        
repricing structure of the loan portfolio shown in the above table.             

Investment Securities. The investment securities portfolio is a significant     
component of our total earning assets. Total securities averaged $57.2 million  
in 2002, compared to $83.8 million in 2001 and $110.2 million in 2000. At       
December 31, 2002, the total securities portfolio was $55.8 million. Securities 
designated as available-for-sale totaled $50.1 million and were recorded at     
estimated fair value. Securities designated as held-to-maturity totaled $550,000
and were recorded at amortized cost. The securities portfolio also includes     
nonmarketable equity securities totaling $5.2 million which are carried at cost 
because they are not readily marketable or have no quoted market value. These   
include investments in Federal Reserve Bank stock, Federal Home Loan Bank stock,
the stock of four unrelated financial institutions, and the stock of a financial
services company that offers internet banking.                                  

The following table sets forth the book value of the securities held by us at   
the dates indicated.                                                            

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Book Value of Securities                                                        

December 31,                                                    2002      2001  
                                                               -------   -------
(Dollars in thousands)                                                          
U.S. Government agencies and corporations                      $13,756   $13,148
State, county, and municipal securities                         26,283    25,338
Other (trust preferred securities)                                 750       750
                                                               -------   -------
                                                                40,789    39,236
Mortgage-backed securities                                       9,857    18,165
Nonmarketable equity securities                                  5,166     5,405
                                                               -------   -------
   Total securities                                            $55,812   $62,806
                                                               =======   =======

The following table sets forth the scheduled maturities a  nd average yields of 
securities held at December 31, 2002.                                           

Investment Securities Maturity Distribution and Yields                          

                                                        [Enlarge/Download Table]

                                              After One But     After Five But                  
December 31, 2002          Within One Year  Within Five Years  Within Ten Years  Over Ten Years 
                           ---------------  -----------------  ----------------  ---------------
(Dollars in thousands)     Amount   Yield    Amount   Yield     Amount   Yield   Amount    Yield
                           ------   -----    ------   -----     ------   -----   -------   -----
                                                                                                
U.S. Government agencies   $7,747    5.44%   $6,009    3.65     $   --      --   $    --      --
Obligations of state and                                                                        
   local governments/(2)/     999    6.57       447    6.69      7,196    7.09    18,391    6.85
                           ------            ------             ------           -------        
   Total securities/(1)/   $8,746    5.57    $6,456    3.86     $7,196    7.09   $18,391    6.85
                           ======            ======             ======           =======        

/(1)/Excludes  mortgage-backed  securities totaling $9.9 million with a yield of
6.13% and nonmarketable equity securities.                            
/(2)/The yield on state and local  governments  is presented on a tax equivalent
basis using a federal income tax rate of 34%.                         

Other attributes of the securities portfolio, including yields and maturities,  
are discussed above in "--Net Interest Income-- Interest Sensitivity."          

Short-Term Investments. Short-term investments, which consist primarily of      
federal funds sold and interest-bearing deposits with other banks, averaged     
$261,000 in 2002, compared to $2.1 million in 2001 and $87,000 in 2000. At      
December 31, 2002, short-term investments totaled $39,000. These funds are a    
source of our liquidity. Federal funds are generally invested in an earning     
capacity on an overnight basis.                                                 

 Deposits and Other Interest-Bearing Liabilities

Average interest-bearing liabilities decreased $18.5 million, or 6.03%, to      
$288.4 million in 2002, from $306.9 million in 2001. Average interest-bearing   
deposits decreased $25.1 million, or 9.57%, to $237.1 million in 2002, from     
$262.2 million in 2001.                                                         

Deposits. Average total deposits decreased $24.3 million, or 8.42%, to $264.1   
million during 2001, from $288.4 million during 2001. At December 31, 2002,     
total deposits were $276.6 million compared to $258.3 million a year earlier, an
increase of 7.06%.                                                              

The following table sets forth the deposits by category at the dates indicated. 

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Deposits                                                                        

                                                        [Enlarge/Download Table]

December 31,              2002                 2001                 2000                 1999                 1998       
                  -------------------  -------------------  -------------------  -------------------  -------------------
                             Percent              Percent              Percent              Percent              Percent 
Dollars in                     of                    of                   of                   of                   of   
thousands)         Amount    Deposits   Amount    Deposits   Amount    Deposits   Amount    Deposits   Amount    Deposits
                  --------   --------  --------   --------  --------   --------  --------   --------  --------   --------
                                                                                                                         
Demand deposit                                                                                                           
   accounts       $ 29,422     10.64%  $ 25,083      9.70%  $ 32,197      9.67%  $ 27,422     10.66%  $ 23,491      9.03%
NOW accounts        36,121     13.06     32,504     12.58     53,959     16.20     45,560     17.71     45,854     17.63 
Money market                                                                                                             
   accounts         66,295     23.97     61,863     23.95     55,007     16.52     38,419     14.93     30,161     11.60 
Savings accounts    27,948     10.11     26,653     10.32     30,543      9.17     26,642     10.36     25,202      9.69 
Time deposits                                                                                                            
   less than                                                                                                             
   $100,000         74,763     27.03     72,636     28.12    114,454     34.38     91,671     35.64    104,491     40.17 
Time deposits                                                                                                            
   of $100,000                                                                                                           
   or over          42,012     15.19     39,591     15.33     46,826     14.06     27,533     10.70     30,921     11.88 
                  --------    ------   --------    ------   --------    ------   --------    ------   --------    ------ 
  Total deposits  $276,561    100.00%  $258,330    100.00%  $332,986    100.00%  $257,247    100.00%  $260,120    100.00%
                  ========    ======   ========    ======   ========    ======   ========    ======   ========    ====== 

Core deposits, which exclude certificates of deposit of $100,000 or more,       
provide a relatively stable funding source for our loan portfolio and other     
earning assets. Our core deposits increased $15.8 million to $234.5 million at  
December 31, 2002.                                                              

Deposits, and particularly core deposits, have historically been our primary    
source of funding and have enabled us to meet successfully both our short-term  
and long-term liquidity needs. We anticipate that such deposits will continue to
be our primary source of funding in the future. Our loan-to-deposit ratio was   
105.41% at December 31, 2002, and 97.53% at the end of 2001. The maturity       
distribution of our time deposits of $100,000 or more at December 31, 2002 is   
set forth in the following table.                                               

Maturities of Certificates of Deposit of $100,000 or More                       

                                 After Six
                   Within   After Three    Through     After
                   Three    Through Six     Twelve    Twelve
(Dollars in thousands)       Months     Months        Months     Months   Total 
                            -------   -----------   ---------   ------   -------
Certificates of deposit                                                         
  of $100,000 or more       $13,514      $8,049      $10,511    $9,938   $42,012

Approximately 32.2% of our time deposits of $100,000 or more had scheduled      
maturities within three months and 51.3% had maturities within six months. Large
certificate of deposit customers tend to be extremely sensitive to interest rate
levels, making these deposits less reliable sources of funding for liquidity    
planning purposes than core deposits. Some financial institutions partially fund
their balance sheets using large certificates of deposit obtained through       
brokers. These brokered deposits are generally expensive and are unreliable as  
long-term funding sources. Accordingly, we do not solicit brokered deposits.    

Borrowed Funds. Borrowed funds consist of short-term borrowings and advances    
from the Federal Home Loan Bank. Short-term borrowings are primarily federal    
funds purchased from correspondent banks and securities sold under agreements to
repurchase.                                                                     

Average short-term borrowings were $19.2 million in 2002, an increase of $9.1   
million from 2001. Federal funds purchased from correspondent banks averaged    
$13.9 million in 2002. At December 31, 2002, federal funds purchased totaled    
$21.2 million. Securities sold under agreements to repurchase averaged $5.3     
million in 2002. At December 31, 2002, securities sold under agreements to      
repurchase totaled $4.61 million.                                               

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Average Federal Home Loan Bank advances during 2002 were $31.2 million compared 
to $31.4 million during 2001, a decrease of $200,000. Advances from the Federal 
Home Loan Bank are collateralized by one-to-four family residential mortgage    
loans and our investment in Federal Home Loan Bank stock. At December 31, 2002, 

borrowings from the Federal Home Loan Bank were $31.1 million compared to $31.3 
million a year earlier. Although we expect to continue using short-term         
borrowing and Federal Home Loan Bank advances as secondary funding sources, core
deposits will continue to be our primary funding source. Of the $31.1 million   
advances from the Federal Home Loan Bank outstanding at December 31, 2002,      
$10,015,000 mature in 2003, $8,000,000 mature in 2005, $1,500,000 mature in     
2008, $625,000 in 2009, and $11,000,000 in 2010.                                

 Capital

The Federal Reserve Board and bank regulatory agencies require bank holding     
companies and financial institutions to maintain capital at adequate levels     
based on a percentage of assets and off-balance-sheet exposures, adjusted for   
risk weights ranging from 0% to 100%. Under the risk-based standard, capital is 
classified into two tiers. Our Tier 1 capital consists of common shareholders'  
equity, excluding the unrealized gain (loss) on available-for-sale securities,  
minus intangible assets. Our Tier 2 capital consists of the allowance for loan  
losses subject to certain limitations. A bank holding company's qualifying      
capital base for purposes of its risk-based capital ratio consists of the sum of
its Tier 1 and Tier 2 capital. The regulatory minimum requirements are 4% for   
Tier 1 and 8% for total risk-based capital.                                     

We and CapitalBank are also required to maintain capital at a minimum level     
based on average total assets (as defined), which is known as the leverage      
ratio. Only the strongest bank holding companies and banks are allowed to       
maintain capital at the minimum requirement of 3%. All others are subject to    
maintaining ratios 1% to 2% above the minimum.                                  

We and CapitalBank exceeded the Federal Reserve's fully phased-in regulatory    
capital ratios at December 31, 2002, 2001, and 2000, as set forth in the        
following table.                                                                

Analysis of Capital                                                             

                                        2002       2001       2000
                                        --------   --------   --------
Tier 1 capital                               $ 39,427   $ 34,767   $ 28,943     
Tier 2 capital                                  3,490      3,101      3,060     
                                        --------   --------   --------
Total qualifying capital                     $ 42,917   $ 37,868   $ 32,003     
                                        ========   ========   ========
Risk-adjusted total assets                                                      
(including off-balance-sheet exposures)   $278,430   $241,202   $287,856  
                                        ========   ========   ========
Tier 1 risk-based capital ratio                 14.16%     14.26%     10.05%    
Total risk-based capital ratio                  15.41%     15.53%     11.12%    
Tier 1 leverage ratio                           10.59%     10.21%      7.02%    

                                            Tier 1      Total       Tier 1
                                          Risk-Based   Risk-Based   Leverage
                                          ----------   ----------   --------
CapitalBank's capital ratios at                                                 
December 31, 2002 were:                     12.75%      14.00%       9.51%

Liquidity Management and Capital Resources

Liquidity management involves monitoring our sources and uses of funds in order 
to meet our day-to-day cash flow requirements while maximizing profits.         
Liquidity represents the ability of a company to convert assets into cash or    
cash equivalents without significant loss and to raise additional funds by      
increasing liabilities. Without proper                                          

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liquidity management, we would not be able to perform the primary function of a 
financial intermediary and would, therefore, not be able to meet the needs of   
the communities we serve.                                                       

Liquidity management is made more complex because different balance sheet       
components are subject to varying degrees of management control. For example,   
the timing of maturities of the investment portfolio is very predictable and    
subject to a high degree of control at the time investment decisions are made.  
However, net deposit inflows and outflows are far less predictable and are not  
subject to nearly the same degree of control.                                   

Our loans-to-assets ratio and loans-to-funds ratio increased from 2001 to 2002. 
The loans-to-assets ratio at December 31, 2002 was 76.56% compared to 73.95% at 
December 31, 2001, and the loans-to-funds ratio at December 31, 2002 was 87.40% 
compared to 84.81% at December 31, 2001. The amount of advances from the Federal
Home Loan Bank were approximately $31.1 million at December 31, 2002 compared to
$31.3 million at December 31, 2001. We expect to continue using these advances  
as a source of funding. Additionally, we had approximately $35.8 million of     
unused lines of credit for federal funds purchases and $50.1 million of         
securities available-for-sale at December 31, 2002 as sources of liquidity. We  
also have the ability to receive an additional $29.4 million in advances under  
the term of our agreement with the Federal Home Loan Bank.                      

We depend on dividends from CapitalBank as our primary source of liquidity. The 
ability of CapitalBank to pay dividends is subject to general regulatory        
restrictions that may, but are not expected to, have a material impact on the   
liquidity available to us. We paid stock dividends in September 1998, June 2000,
and May 2001 and may do so in the future. We have paid cash dividends on a      
quarterly basis since September 2001and anticipate continuing to do so.         

Critical Accounting Policies

We have adopted various accounting policies that govern the application of      
accounting principles generally accepted in the United States in the preparation
of our financial statements. Our significant accounting policies are described  
in the footnotes to the consolidated financial statements at December 31, 2002  
as filed on our annual report on Form 10-K. Certain accounting policies involve 
significant judgments and assumptions by us that have a material impact on the  
carrying value of certain assets and liabilities. We consider these accounting  
policies to be critical accounting policies. The judgments and assumptions we   
use are based on historical experience and other factors, which we believe to be
reasonable under the circumstances. Because of the nature of the judgments and  
assumptions we make, actual results could differ from these judgments and       
estimates that could have a material impact on our carrying values of assets and
liabilities and our results of operations.                                      

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

 Impact of Inflation

Unlike most industrial companies, the assets and liabilities of financial       
institutions such as ours and our subsidiary are primarily monetary in nature.  
Therefore, interest rates have a more significant effect on our performance than
do the effects of changes in the general rate of inflation and change in prices.
In addition, interest rates do not necessarily move in the same direction or in 
the same magnitude as the prices of goods and services. As discussed previously,
we seek to manage the relationships between interest sensitive assets and       
liabilities in order to protect against wide interest rate fluctuations,        
including those resulting from inflation.                                       

 Impact of Off-Balance Sheet Instruments

We are a party to financial instruments with off-balance-sheet risk in the      
normal course of business to meet the financing needs of our customers. These   
financial instruments consist of commitments to extend credit and standby       
letters of credit. Commitments to extend credit are legally binding agreements  
to lend to a customer at                                                        

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predetermined interest rates 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. A commitment     
involves, to varying degrees, elements of credit and interest rate risk in      
excess of the amount recognized in the balance sheets. The exposure to credit   
loss in the event of nonperformance by the other party to the instrument is     
represented by the contractual amount of the instrument. Because certain        
commitments are expected to expire without being drawn upon, the total          
commitment amounts do not necessarily represent future cash requirements.       
Letters of credit are conditional commitments issued to guarantee a customer's  
performance to a third party and have essentially the same credit risk as other 
lending facilities. Standby letters of credit often expire without being used.  

We use the same credit underwriting procedures for commitments to extend credit 
and standby letters of credit as we do for our on-balance sheet instruments. The
credit worthiness of each borrower is evaluated and the amount of collateral, if
deemed necessary, is based on the credit evaluation. Collateral held for        
commitments to extend credit and standby letters of credit varies but may       
include accounts receivable, inventory, property, plant, equipment, and         
income-producing commercial properties.                                         

We are not involved in off-balance sheet contractual relationships, other than  
those disclosed in this report, that could result in liquidity needs or other   
commitments or that could significantly impact earnings.                        

As of December 31, 2002 our commitments to extend credit totaled $47,218,000,   
and our standby letters of credit totaled $1,102,000. We believe that through   
various sources of liquidity, we have the necessary resources to meet           
obligations arising from these financial commitments. Our experience has been   
that a significant portion of these commitments often expire without being used.

Through its operations, CapitalBank was made contractual commitments to extend  
credit in the ordinary course of its business activities. These commitments are 
legally binding agreements to lend money to CapitalBank's customers at          
predetermined interest rates for a specified period of time. At December 31,    
2002, CapitalBank had issued commitments to extend credit of $50,199,000 and    
standby letters of credit of $1,102,000 through various types of commercial     
lending arrangements. Approximately $20,155,000 of these commitments to extend  
credit had variable rates.                                                      

The following table sets forth the length of time until maturity for unused     
commitments to extend credit and standby letters of credit at December 31, 2002.

                                                        [Enlarge/Download Table]

                                                 After One  After Three                               
                                                  Through     Through                Greater          
                                     Within One    Three       Twelve    Within One    Than           
(Dollars in thousands)                  Month      Months      Months       Year     One Year   Total 
                                     ----------  ---------  -----------  ----------  --------  -------
                                                                                                      
Unused commitments to extend credit    $1,175      $2,014     $19,758      $22,947    $27,252  $50,199
Standby letters of credit                  --          96       1,006        1,102         --    1,102
                                       ------      ------     -------      -------    -------  -------

Totals                                 $1,175      $2,110     $20,764      $24,049    $27,252  $51,301
                                       ======      ======     =======      =======    =======  =======

CapitalBank evaluates each customer's credit worthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Bank upon         
extension of credit, is based on its credit evaluation of the borrower.         
Collateral varies but may include accounts receivable, inventory, property,     
plants, equipment and commercial and residential real estate.                   

 Industry Developments

On November 4, 1999, the U.S. Senate and House of Representatives each passed   
the Gramm-Leach-Bliley Act, previously known as the Financial Services          
Modernization Act of 2000. The Act was signed into law by President Clinton in  
November 1999. Among other things, the Act repeals the restrictions on banks    
affiliating with securities firms contained in Sections 20 and 32 of the        
Glass-Steagall Act. The Act also creates a new "financial holding company" under
the Bank Holding Company Act, which will permit holding companies to engage in a
statutorily provided list of financial activities, including insurance and      
securities underwriting and agency activities, merchant                         

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banking, and insurance company portfolio investment activities. The Act also    
authorizes activities that are "complementary" to financial activities. The Act 
is intended to grant to community banks certain powers as a matter of right that
larger institutions have accumulated on an ad hoc basis. Nevertheless, the Act  
may have the result of increasing the amount of competition that we face from   
larger institutions and other types of companies. We cannot predict the full    
effect that the Act will have on us.                                            

From time to time, various bills are introduced in the United States Congress   
with respect to the regulation of financial institutions. Certain of these      
proposals, if adopted, could significantly change the regulation of banks and   
the financial services industry. We cannot predict whether any of these         
proposals will be adopted or, if adopted, how these proposals would affect us.  

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.            

Market risk is the risk of loss from adverse changes in market prices and rates.
Our market risk arises principally from interest rate risk inherent in our      
lending, deposit, and borrowing activities. Management actively monitors and    
manages its interest rate risk exposure. In addition to other risks which we    
manage in the normal course of business, such as credit quality and liquidity,  
management considers interest rate risk to be a significant market risk that    
could potentially have a material effect on our financial condition and results 
of operations. The information contained in the section captioned "Management's 
Discussion and Analysis of Financial Condition and Results of Operations - Net  
Interest Income" is incorporated herein by reference. Other types of market     
risks, such as foreign currency risk and commodity price risk, do not arise in  
the normal course of our business activities.                                   

Item 8. Financial Statements and Supplementary Data.                            

The financial statements identified in Item 15 of this Report on Form 10-K are  
included herein beginning on page F-1.                                          

Item 9. Changes in and Disagreements with Accountants on Accounting and         
Financial Disclosure.                                           

Legislation and Securities Exchange Commission rules adopted in 2002 have       
significantly increased, and will continue to increase, the regulatory burdens  
on audit firms that audit the financial statements of companies that are subject
to the reporting requirements of the Securities Exchange Act of 1934.           
Consequently, many smaller audit firms are deciding to limit their audit        
practice to companies that are not subject to the 1934 Act. Tourville, Simpson &
Caskey, L.L.P., which served as our principal independent accountant since our  
inception, is one such firm. Accordingly, effective January 2, 2003, Tourville, 
Simpson & Caskey, L.L.P. resigned as our principal independent public           
accountant. The Board of Directors, upon recommendation of the Audit Committee, 
engaged Elliott Davis, LLC on January 2, 2003 to audit financial statements for 
the year ended December 31, 2002 and for the year ending December 31, 2003. We  
have not consulted Elliott Davis, LLC regarding any of the matters set forth in 
Item 304(a)(2)(i) or (ii) of Regulation S-K.                                    

Tourville, Simpson & Caskey, L.L.P.'s reports on our financial statements for   
each of the years ended December 31, 2001 and 2000 did not contain an adverse   
opinion or disclaimer of opinion and were not qualified or modified as to       
uncertainty, audit scope, or accounting principles. We had no disagreements with
Tourville, Simpson & Caskey, L.L.P. on any matter of accounting principles or   
practices, financial statement disclosure, or auditing scope or procedure,      
which, if not resolved to Tourville, Simpson & Caskey, L.L.P.'s satisfaction,   
would have caused it to make reference to the subject matter of the disagreement
in its reports.                                                                 

PART III

Information called for by PART III (Items 10, 11, 12 and 13) of this Report on  
Form 10-K has been omitted as we intend to file with the Securities and Exchange
Commission not later than 120 days after the close of our fiscal year ended     
December 31, 2002 a definitive Proxy Statement pursuant to Regulation 14A       
promulgated under the Securities Exchange Act of 1934. Such information will be 
set forth in such Proxy Statement.                                              

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Item 10. Directors and Executive Officers of the Company.                       

Item 11. Executive Compensation.                                                

Item 12. Security Ownership of Certain Beneficial Owners and Management.        

Item 13. Certain Relationships and Related Transactions.                        

Item 14. Controls and Procedures                                                

Annual Evaluation of Our Disclosure Controls and Internal Controls. Within the  
90 days prior to the date of this Annual Report on Form 10-K, we evaluated the  
effectiveness of the design and operation of our "disclosure controls and       
procedures" (Disclosure Controls), and our "internal controls and procedures for
financial reporting" (Internal Controls). This controls evaluation was done     
under the supervision and with the participation of management, including our   
Chief Executive Officer and Chief Financial Officer. Rules adopted by the SEC   
require that in this section of the Annual Report we present the conclusions of 
our Chief Executive Officer and Chief Financial Officer about the effectiveness 
of our Disclosure Controls and Internal Controls based on and as of the date of 
the controls evaluation.                                                        

Certifications. A form of certification appears immediately following the       
signatures section of this Annual Report. The form of certification is required 
in accord with Section 302 of the Sarbanes-Oxley Act of 2002. This section of   
the Annual Report that you are currently reading is the information concerning  
the controls evaluation referred to in such certifications, and this information
should be read in conjunction with such certifications for a more complete      
understanding of the topics presented.                                          

Disclosure Controls and Internal Controls. Disclosure Controls are procedures   
that are designed with the objective of ensuring that information required to be
disclosed in our reports filed under the Securities Exchange Act of 1934, such  
as this Annual Report, is recorded, processed, summarized, and reported within  
the time periods specified in the SEC's rules and forms. Disclosure Controls are
also designed with the objective of ensuring that such information is           
accumulated and communicated to our management, including our Chief Executive   
Officer and Chief Financial Officer, as appropriate to allow timely decisions   
regarding required disclosure. Internal Controls are procedures that are        
designed with the objective of providing reasonable assurance that (1) our      
transactions are properly authorized; (2) our assets are safeguarded against    
unauthorized or improper use; and (3) our transactions are properly recorded and
reported, all to permit the preparation of our financial statements in          
conformity with generally accepted accounting principles.                       

Limitations on the Effectiveness of Controls. Our management, including our     
Chief Executive Officer and Chief Financial Officer, does not expect that our   
Disclosure Controls or our Internal Controls will prevent all error and all     
fraud. A control system, no matter how well conceived and operated, can provide 
only reasonable, not absolute, assurance that the objectives of the control     
system are met. Further, the design of a control system must reflect the fact   
that there are resource constraints, and the benefits of controls must be       
considered relative to their costs. Because of the inherent limitations in all  
control systems, no evaluation of controls can provide absolute assurance that  
all control issues and instances of fraud, if any, within our company have been 
detected. These inherent limitations include the realities that judgments in    
decision-making can be faulty and that breakdowns can occur because of simple   
error or mistake. Additionally, controls can be circumvented by the individual  
acts of some persons, by collusion of two or more people, or by management      
override of the control. The design of any system of controls also is based in  
part upon certain assumptions about the likelihood of future events, and we have
no assurance that any design will succeed in achieving its stated goals under   
all potential future conditions. Over time, control may become inadequate       
because of changes in conditions, or the degree of compliance with the policies 
or procedures may deteriorate. Because of the inherent limitations in a         
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.                                                                

Scope of the Controls Evaluation. The Chief Executive Officer/Chief Financial   
Officer evaluation of our Disclosure Controls and our Internal Controls included
a review of the controls' objectives and design, the controls' implementation by
us and the effect of the controls on the information generated for use in this  
Annual Report. In the course of the controls evaluation, we sought to identify  
data errors, controls problems, or acts of fraud and to confirm that appropriate
corrective action, including process improvements, were being undertaken. This  
type of evaluation will be done on a quarterly basis so that the conclusions    
concerning controls effectiveness can be reported in our Quarterly Reports on   
Form 10-Q and Annual Report on Form 10-K. Our Internal Controls are also        
evaluated on an ongoing basis by other personnel in our company and by our      
independent auditors in connection with their audit and review activities. The  
overall goals of these various evaluation activities are to monitor our         
Disclosure Controls and our Internal Controls and to make                       

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modifications as necessary. Our intent in this regard is that the Disclosure    
Controls and the Internal Controls will be maintained as dynamic systems that   
change (including with improvements and corrections) as conditions warrant.     

Among other matters, we sought in our evaluation to determine whether any       
"significant deficiencies" or "material weaknesses" exist in our Internal       
Controls or whether we had identified any acts of fraud involving personnel who 
have a significant role in our Internal Controls. This information was important
both for the controls evaluation generally and because items 5 and 6 in the     
certifications of our Chief Executive Officer and Chief Financial Officer       
require that our Chief Executive Officer and Chief Financial Officer disclose   
that information to our Board's Audit Committee and to our independent auditors 
and to report on related matters in this section of the Annual Report. In the   
professional auditing literature, "significant deficiencies" are referred to as 
"reportable conditions." These are control issues that could have a significant 
adverse effect on the ability to record, process, summarize, and report         
financial data in the financial statements. A "material weakness" is defined in 
the auditing literature as a particularly serious reportable condition where the
internal control does not reduce to a relatively low level the risk that        
misstatements caused by error or fraud may occur in amounts that would be       
material in relation to the financial statements and not be detected within a   
timely period by employees in the normal course of performing their assigned    
functions. We also sought to deal with other controls matters in the controls   
evaluation, and in each case if a problem was identified, we considered what    
revision, improvement, and/or correction to make in accord with our on-going    
procedures.                                                                     

In accordance with SEC requirements, our Chief Executive Officer and Chief      
Financial Officer note that, since the date of the controls evaluation to the   
date of this Annual Report, we have not made any significant changes in Internal
Controls or in other factors that could significantly affect Internal Controls, 
including any corrective actions with regard to significant deficiencies and    
material weaknesses.                                                            

Conclusions. Based upon the Controls Evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that, subject to the limitations noted   
above, our Disclosure Controls are effective to ensure that material information
relating to us is made known to management, including our Chief Executive       
Officer and Chief Financial Officer, particularly during the period when our    
periodic reports are being prepared, and that our Internal Controls are         
effective to provide reasonable assurance that our financial statements are     
fairly presented in conformity with generally accepted accounting principles.   

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.      

(a)(1)-(2) Financial Statements and Schedules:                                  

Our consolidated financial statements and schedules identified in the           
accompanying Index to Financial Statements at page F-1 herein are filed as part 
of this Report on Form 10-K.                                                    

(3)  Exhibits:                                                        

The accompanying Exhibit Index on page E-1 sets forth the exhibits that are     
filed as part of this Report on Form 10-K.                                      

(b) Reports on Form 8-K:                                                        

        On November 25, 2002, we filed a Form 8-K relating to a News Release
issued on November 20, 2002 announcing that our Board of Directors has approved 
a stock buyback program contemplating Rule 10b5-1 of the Securities Exchange Act
of 1934.                                                                        

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange  
Act of 1934, the registrant, Community Capital Corporation, has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

 COMMUNITY CAPITAL CORPORATION

Dated: March 27, 2003                     By: /s/ William G. Stevens            
                                              ----------------------------------
                      William G. Stevens
                                         President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and  
in the capacities and on the dates indicated.                                   

                                                        [Enlarge/Download Table]

Signature                       Title                                   Date          
------------------------------  --------------------------------------  --------------

                                                                                      
/s/ William G. Stevens          President, Chief Executive Officer,     March 27, 2003
------------------------------  and Director                                          
William G.  Stevens                                                                   

/s/ R. Wesley Brewer            Chief Financial Officer, Executive      March 27, 2003
------------------------------  Vice President, and Secretary                         
R. Wesley Brewer                                                                      

            *                   Assistant Secretary and Director        March 27, 2003
------------------------------                                                        
Patricia C. Edmonds                                                                   

             *                  Director                                March 27, 2003
------------------------------                                                        
David P. Allred                                                                       

             *                  Director                                March 27, 2003
------------------------------                                                        
Harold Clinkscales, Jr.                                                               

             *                  Director                                March 27, 2003
------------------------------                                                        
Wayne Q. Justesen, Jr.                                                                

             *                  Director                                March 27, 2003
------------------------------                                                        
B. Marshall Keys                                                                      

             *                  Director                                March 27, 2003
------------------------------                                                        
Clinton C. Lemon, Jr.                                                                 

             *                  Director                                March 27, 2003
------------------------------                                                        
Miles Loadholt                                                                        

             *                  Director                                March 27, 2003
------------------------------                                                        
Thomas C. Lynch, Jr.                                                                  

             *                  Director                                March 27, 2003
------------------------------                                                        
H. Edward Munnerlyn                                                                   

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                                                                [Download Table]
                                                          

             *                   Director   March 27, 2003
------------------------------                            
George B. Park                                            

             *                   Director   March 27, 2003
------------------------------                            
George D. Rodgers                                         

             *                   Director   March 27, 2003
------------------------------                            
Charles J. Rogers                                         

             *                   Director   March 27, 2003
-----------------------------                             
Thomas E. Skelton                                         

             *                   Director   March 27, 2003
-----------------------------                             
Lex D. Walters                                            

*By: /s/ William G.  Stevens               March 27, 2003 
     --------------------------                           
  (William G.  Stevens)                                   
  (As Attorney-in-Fact for each                           
   of the persons indicated)                              

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 CERTIFICATION

I, William G. Stevens, certify that:                        

1.   I have reviewed this annual report on Form 10-K of Community Capital       
Corporation;                                                          

2.   Based on my knowledge, this annual report does not contain any untrue      
    statement of a material fact or omit to state a material fact necessary to
  make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
this annual report;                                                   

3.   Based on my knowledge, the financial statements, and other financial       
    information included in this annual report, fairly present in all material
   respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for       
     establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: 

        a)   Designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
             consolidated subsidiaries, is made known to us by others within
          those entities, particularly during the period in which this
annual report is being prepared;                  

   b)   Evaluated the effectiveness of the registrant's disclosure
              controls and procedures as of a date within 90 days prior to the
            filing date of this annual report (the "Evaluation Date"); and

  c)   Presented in this annual report our conclusions about the
              effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;         

5.   The registrant's other certifying officers and I have disclosed, based on  
our most recent evaluation, to the registrant's auditors and the audit
 committee of registrant's board of directors (or persons performing the
equivalent function):                                                 

   a)   All significant deficiencies in the design or operation of
             internal controls which could adversely affect the registrant's
             ability to record, process, summarize and report financial data
            and have identified for the registrant's auditors any material
weaknesses in internal controls; and              

        b)   Any fraud, whether or not material, that involves management or
             other employees who have a significant role in the registrant's
internal controls; and                            

6.   The registrant's other certifying officers and I have indicated in this    
 annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal 
  controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
weaknesses.                                                           

Date:  March 27, 2003                     /S/ WILLIAM G. STEVENS                
                                       -----------------------------------
                      William G. Stevens
                                       President & Chief Executive Officer

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 CERTIFICATION

I, R. Wesley Brewer, certify that:                          

1.   I have reviewed this annual report on Form 10-K of Community Capital       
Corporation;                                                          

2.   Based on my knowledge, this annual report does not contain any untrue      
    statement of a material fact or omit to state a material fact necessary to
  make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
this annual report;                                                   

3.   Based on my knowledge, the financial statements, and other financial       
    information included in this annual report, fairly present in all material
   respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for       
     establishing and maintaining disclosure controls and procedures (as defined
  in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

        a)   Designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
             consolidated subsidiaries, is made known to us by others within
          those entities, particularly during the period in which this
annual report is being prepared;                  

   b)   Evaluated the effectiveness of the registrant's disclosure
              controls and procedures as of a date within 90 days prior to the
            filing date of this annual report (the "Evaluation Date"); and

  c)   Presented in this annual report our conclusions about the
              effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;         

6.   The registrant's other certifying officers and I have disclosed, based on  
our most recent evaluation, to the registrant's auditors and the audit
 committee of registrant's board of directors (or persons performing the
equivalent function):                                                 

   a)   All significant deficiencies in the design or operation of
             internal controls which could adversely affect the registrant's
             ability to record, process, summarize and report financial data
            and have identified for the registrant's auditors any material
weaknesses in internal controls; and              

        b)   Any fraud, whether or not material, that involves management or
             other employees who have a significant role in the registrant's
internal controls; and                            

6.   The registrant's other certifying officers and I have indicated in this    
 annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal 
  controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
weaknesses.                                                           

Date: March 27, 2003                      S/ R. WESLEY BREWER                   
                              --------------------------
                    R. Wesley Brewer
                                      Chief Financial Officer, Executive
                              Vice President & Secretary

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 COMMUNITY CAPITAL CORPORATION AND

EMPLOYEE STOCK OWNERSHIP PLAN WITH 401(K) PROVISIONS

                                                        [Enlarge/Download Table]
                                                                                                         
Independent Accountants' Reports......................................................................F-2

Consolidated Balance Sheets at December 31, 2001 and 2000.............................................F-4

Consolidated Statements of Operations for the Years Ended December 31, 2002, 2001, 2000, and 1999.....F-5

Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income                      
   For the Years Ended December 31, 2002, 2001, 2000, and 1999........................................F-6

Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001, 2000, and 1999.....F-7

Notes to Consolidated Financial Statements............................................................F-8

Independent Accountants' Reports Re: Employee Stock Ownership Plan with 401(k) Provisions............F-28

Statements of Net Assets Available for Benefits .....................................................F-29

Statement of Changes in Net Assets Available for Benefits............................................F-30

Notes to Consolidated Financial Statements...........................................................F-31

F-1 

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INDEPENDENT AUDITORS' REPORT

The Board of Directors                                                          
Community Capital Corporation                                                   
Greenwood, South Carolina                                                       

We have audited the accompanying consolidated balance sheet of Community Capital
Corporation as of December 31, 2002, and the related consolidated statement of  
operations, changes in shareholders' equity and comprehensive income, and cash  
flows for the year then ended. 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 audit. The financial statements of      
Community Capital Corporation as of December 31, 2001, were audited by other    
auditors whose report dated January 18, 2002, expressed an unqualified opinion  
on those statements.                                                            

We conducted our audit 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 
the significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audit provides a          
reasonable basis for our opinion.                                               

In our opinion, the financial statements present fairly, in all material        
respects, the consolidated financial position of Community Capital Corporation  
as of December 31, 2002, and the consolidated results of their operations and   
their cash flows for the year then ended, in conformity with accounting         
principles generally accepted in the United States of America.                  

Elliott Davis, LLC                                                              
Columbia, South Carolina                                                        
January 24, 2003                                                                

F-2 

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INDEPENDENT AUDITORS' REPORT

The Board of Directors                                                          
Community Capital Corporation                                                   
Greenwood, South Carolina                                                       

We have audited the accompanying consolidated balance sheets of Community       
Capital Corporation as of December 31, 2001 and 2000, and the related           
consolidated statements of income, changes in shareholders' equity and          
comprehensive income, and cash flows for each of the years in the two year      
period ended December 31, 2001. These financial statements are the              
responsibility of the Company's management. Our responsibility is to express an 
opinion on these consolidated 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 audits 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 
the 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 financial statements referred to above present fairly, in   
all material respects, the consolidated financial position of Community Capital 
Corporation as of December 31, 2001 and 2000, and the consolidated results of   
their operations and their cash flows for each of the two years in the period   
ended December 31, 2001, in conformity with accounting principles generally     
accepted in the United States of America.                                       

Tourville, Simpson & Caskey, L.L.P.                                             
Columbia, South Carolina                                                        
January 18, 2002                                                                

The above report of Tourville, Simpson & Caskey, L.L.P. is a copy of the        
previously issued report, and the report has not been reissued by Tourville,    
Simpson & Caskey, L.L.P.                                                        

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Consolidated Balance Sheets                                                     

                                                        [Enlarge/Download Table]

                                                                                   December 31,    
                                                                               ------------------- 
(Dollars in thousands, except share information)                                 2002       2001   
                                                                               --------   -------- 
                                                                                                   
Assets:                                                                                            
   Cash and cash equivalents:                                                                      
      Cash and due from banks                                                  $  9,648   $  9,275 
      Interest-bearing deposit accounts                                              39         16 
                                                                               --------   -------- 
         Total cash and cash equivalents                                          9,687      9,291 
                                                                               --------   -------- 
   Investment securities:                                                                          
      Securities available-for-sale                                              50,096     56,851 
      Securities held-to-maturity (estimated fair value of $550                                    
         at December 31, 2002 and 2001)                                             550        550 
      Nonmarketable equity securities                                             5,166      5,405 
                                                                               --------   -------- 
         Total investment securities                                             55,812     62,806 
                                                                               --------   -------- 
   Loans held for sale                                                            2,684      3,557 
   Loans receivable                                                             288,842    248,390 
      Less allowance for loan losses                                             (4,282)    (4,103)
                                                                               --------   -------- 
         Loans, net                                                             284,560    244,287 
      Premises and equipment, net                                                 9,850     10,372 
      Accrued interest receivable                                                 1,907      2,008 
      Intangible assets                                                           3,992      4,338 
      Cash surrender value of life insurance                                     10,289      2,212 
      Other assets                                                                1,984      1,811 
                                                                               --------   -------- 
         Total assets                                                          $380,765   $340,682 
                                                                               ========   ======== 
Liabilities:                                                                                       
   Deposits:                                                                                       
      Noninterest-bearing transaction accounts                                 $ 29,422   $ 25,083 
      Interest-bearing transaction accounts                                     247,139    233,247 
                                                                               --------   -------- 
         Total deposits                                                         276,561    258,330 
                                                                               --------   -------- 
   Federal funds purchased and securities sold under agreements to repurchase    25,850      7,464 
   Advances from the Federal Home Loan Bank                                      31,140     31,270 
   Obligations under capital leases                                                 733        940 
   Accrued interest payable                                                         649      1,052 
   Other liabilities                                                              1,424      2,353 
                                                                               --------   -------- 
         Total liabilities                                                      336,357    301,409 
                                                                               --------   -------- 
Commitments and contingencies - Notes 5, 12, and 16                                                

Shareholders' equity:                                                                              
   Common stock, $1.00 par value; 10,000,000 shares authorized; 3,860,790 and                      
      3,559,309 shares issued and outstanding at December 31, 2002 and 2001,                       
      respectively                                                                3,861      3,559 
   Capital surplus                                                               34,754     32,548 
   Accumulated other comprehensive income                                           989        168 
   Retained earnings                                                              8,947      4,933 
   Treasury stock, at cost (2002 - 367,875 shares, 2001 - 189,024 shares)        (4,143)    (1,935)
                                                                               --------   -------- 
         Total shareholders' equity                                              44,408     39,273 
                                                                               --------   -------- 
         Total liabilities and shareholders' equity                            $380,765   $340,682 
                                                                               ========   ======== 

The accompanying notes are an integral part of the consolidated financial       
statements.                                                                     

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 Consolidated Statements of Income

                                                        [Enlarge/Download Table]

                                                      For the years ended December 31,
(Dollars in thousands,                                --------------------------------
   except for per share data amounts)                     2002      2001      2000    
                                                        -------   -------   -------   
                                                                                      
Interest income:                                                                      
   Loans, including fees                                $19,296   $22,356   $23,501   
   Investment securities:                                                             
      Taxable                                             1,494     3,053     4,593   
      Tax-exempt                                          1,222     1,251     1,314   
      Nonmarketable equity securities                       188       226       308   
   Federal funds sold and other                               4        75         6   
                                                        -------   -------   -------   
         Total interest income                           22,204    26,961    29,722   
                                                        -------   -------   -------   
Interest expense:                                                                     
   Deposits                                               5,418    11,046    12,527   
   Advances from the Federal Home Loan Bank               1,947     1,958     1,931   
   Federal funds purchased and securities sold under                                  
      agreements to repurchase                              344       411     1,772   
   Long-term debt                                            --       156       286   
   Obligations under capital leases                          84       104       120   
                                                        -------   -------   -------   
         Total interest expense                           7,793    13,675    16,636   
                                                        -------   -------   -------   
Net interest income                                      14,411    13,286    13,086   
Provision for loan losses                                   773     1,920       471   
                                                        -------   -------   -------   
Net interest income after provision for loan losses      13,638    11,366    12,615   
                                                        -------   -------   -------   
Noninterest income:                                                                   
   Service charges on deposit accounts                    2,578     2,128     1,706   
   Gain on sale of nonmarketable equity securities           --       290        --   
   Gain on sales of securities available-for-sale           106        --        --   
   Residential mortgage origination fees                    726       822       503   
   Commissions from sales of mutual funds                   106        32       105   
   Income from fiduciary activities                         281       131       129   
   Gain on sale of branches                                  --     5,791        --   
   Gain on sale of Community Trust Company                   --        --       150   
   Gain on sale of premises and equipment                    --        37        --   
   Other operating income                                   742       883       710   
                                                        -------   -------   -------   
         Total noninterest income                         4,539    10,114     3,303   
                                                        -------   -------   -------   
Noninterest expenses:                                                                 
   Salaries and employee benefits                         6,418     6,522     6,787   
   Net occupancy                                            697       749       880   
   Amortization of intangible assets                        346     2,440       612   
   Furniture and equipment                                1,050     1,440     1,631   
   Other operating expenses                               3,381     3,951     4,066   
                                                        -------   -------   -------   
         Total noninterest expenses                      11,892    15,102    13,976   
                                                        -------   -------   -------   
Income before income taxes                                6,285     6,378     1,942   
Income tax expense                                        1,683     1,900       290   
                                                        -------   -------   -------   
Net income                                              $ 4,602   $ 4,478   $ 1,652   
                                                        =======   =======   =======   
Earnings per share:                                                                   
Basic earnings per share                                $  1.34   $  1.31   $  0.48   
                                                        =======   =======   =======   
Diluted earnings per share                              $  1.26   $  1.26   $  0.48   
                                                        =======   =======   =======   

The accompanying notes are an integral part of the consolidated financial       
statements.                                                                     

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Consolidated Statements of Changes in Shareholders' Equity and Comprehensive
Income for the years ended December 31, 2002, 2001, and 2000

                                                        [Enlarge/Download Table]

                                                                     Accumulated                               
                                          Common stock                  other                                  
(Dollars in thousands,                ------------------  Capital   comprehensive  Retained  Treasury          
except share data)                     Shares     Amount  surplus   income (loss)  earnings   stock     Total  
------------------------------------  ---------   ------  --------  -------------  --------  --------  ------- 
                                                                                                               
Balance, December 31, 1999            3,122,811   $3,123   $29,846     $(2,802)     $1,336   $  (285)  $31,218 

Net income                                                                           1,652               1,652 

Other comprehensive income, net of                                                                             
   tax effects                                                           2,224                           2,224 
                                                                                                       ------- 
Comprehensive income                                                                                     3,876 

Sales of stock to ESOP                   21,447       21       122                                         143 

5% stock dividend and cash paid in                                                                             
   lieu of fractional shares            156,137      156       858                  (1,004)      (14)       (4)

Purchase of treasury stock (12,238                                                                             
   shares)                                                                                       (89)      (89)
                                      ---------   ------   -------     -------      ------   -------   ------- 
Balance, December 31, 2000            3,300,395    3,300    30,826        (578)      1,984      (388)   35,144 

Net income                                                                           4,478               4,478 

Other comprehensive income, net of                                                                             
   tax effects                                                             746                             746 
                                                                                                       ------- 

Comprehensive income                                                                                     5,224 

Dividends paid ($0.06 per share)                                                      (209)               (209)

Stock options exercised                  94,526       95       555                                         650 

5% stock dividend and cash paid in                                                                             
   lieu of fractional shares            164,388      165     1,167                  (1,320)      (18)       (7)

Purchase of treasury stock (143,265                                                                            
   shares)                                                                                    (1,529)   (1,529)
                                      ---------   ------   -------     -------      ------   -------   ------- 

Balance, December 31, 2001            3,559,309    3,559    32,548         168       4,933    (1,935)   39,273 

Net income                                                                           4,602               4,602 

Other comprehensive income, net of                                                                             
   tax effects                                                             821                             821 
                                                                                                       ------- 

Comprehensive income                                                                                     5,423 

Dividends paid ($0.17 per share)                                                      (588)               (588)

Stock options exercised                 301,481      302     2,206                                       2,508 

Purchase of treasury stock (178,851                                                                            
   shares)                                                                                    (2,208)   (2,208)
                                      ---------   ------   -------     -------      ------   -------   ------- 
Balance, December 31, 2002            3,860,790   $3,861   $34,754     $   989      $8,947   $(4,143)  $44,408 
                                      =========   ======   =======     =======      ======   =======   ======= 

The accompanying notes are an integral part of the consolidated financial       
statements.                                                                     

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Consolidated Statements of Cash Flows                                           

                                                        [Enlarge/Download Table]

                                                                      For the years ended December 31,
                                                                      --------------------------------
(Dollars in thousands)                                                   2002       2001       2000   
                                                                       --------   --------   -------- 
                                                                                                      
Cash flows from operating activities:                                                                 
   Net income                                                          $  4,602   $  4,478   $  1,652 
   Adjustments to reconcile net income to net cash provided (used)                                    
      by operating activities:                                                                        
      Depreciation and amortization                                       1,101      1,476      1,638 
      Provision for loan losses                                             773      1,920        471 
      Deferred income tax benefit                                           562       (404)      (180)
      Amortization of intangible assets                                     346      2,440        612 
      Premium amortization less discount accretion on securities                                      
         available-for-sale                                                  38        164        152 
      Amortization of deferred loan costs and fees, net                       2        155       (163)
      Net gain on sales or calls of securities available-for-sale          (106)        --         -- 
      Net gain on sales of nonmarketable equity securities                   --       (290)        -- 
      Proceeds of sales of residential mortgages                         28,375     27,140     15,567 
      Disbursements for residential mortgages held-for-sale             (27,365)   (29,323)   (16,425)
      (Increase) decrease in interest receivable                            101      1,134       (563)
      Increase (decrease) in interest payable                              (403)    (1,102)       727 
      Gain on sale of premises and equipment                                 --        (37)        -- 
      (Gain) loss on sale of other real estate                               90         --         (2)
      (Increase) decrease in other assets                                (1,319)       382         62 
      Increase (decrease) in other liabilities                           (1,136)     1,069      1,132 
                                                                       --------   --------   -------- 
         Net cash provided (used) by operating activities                 5,661      9,202      4,680 
                                                                       --------   --------   -------- 
Cash flows from investing activities:                                                                 
   Net increase in loans made to customers                              (41,671)   (19,372)   (39,013)
   Proceeds from sales of securities available-for-sale                   5,147         --         -- 
   Proceeds from maturities of securities available-for-sale             13,650     44,816      6,638 
   Purchases of securities available-for-sale                           (10,730)      (750)        -- 
   Proceeds from maturities of securities held-to-maturity                   --         40         30 
   Proceeds from sales of nonmarketable equity securities                   239        385         16 
   Purchase of nonmarketable equity securities                               --         --       (581)
   Purchase of premises and equipment                                      (573)      (309)    (3,146)
   Proceeds from sales of premises and equipment                            157        128        363 
   Proceeds from sales of other real estate                                 394         58        574 
   Purchase of cash surrender value of life insurance                    (8,077)      (411)      (380)
   Proceeds from the sale of Community Trust Company                         --         --        150 
   Acquisition of branches                                                   --         --     13,570 
   Net cash outflow from sale of branches                                    --    (14,196)        -- 
                                                                       --------   --------   -------- 
         Net cash provided (used) by investing activities               (41,464)    10,389    (21,779)
                                                                       --------   --------   -------- 
Cash flows from financing activities:                                                                 
   Net increase in demand and savings accounts                           13,683     18,826     20,226 
   Net increase (decrease) in time deposits                               4,548    (26,683)    19,773 
   Net increase (decrease) in federal funds purchased and securities                                  
      sold under agreements to repurchase                                18,386     (4,709)   (37,277)
   Proceeds from advances from the Federal Home Loan Bank                    --         --     37,600 
   Repayments of advances from the Federal Home Loan Bank                  (130)    (1,129)   (25,930)
   Proceeds from advances from long-term debt                                --        300      7,770 
   Repayments of advances from long-term debt                                --     (5,145)    (4,500)
   Dividends paid                                                          (588)      (209)        -- 
   Proceeds from exercise of stock options                                2,508        650         -- 
   Proceeds from stock sales to ESOP                                         --         --        142 
   Cash paid in lieu of fractional shares                                    --         (7)        (3)
   Purchase of treasury stock                                            (2,208)    (1,529)       (89)
                                                                       --------   --------   -------- 
         Net cash provided (used) by financing activities                36,199    (19,635)    17,712 
                                                                       --------   --------   -------- 

Net increase (decrease) in cash and cash equivalents                        396        (44)       613 

Cash and cash equivalents, beginning of year                              9,291      9,335      8,722 
                                                                       --------   --------   -------- 
Cash and cash equivalents, end of year                                 $  9,687   $  9,291   $  9,335 
                                                                       ========   ========   ======== 

The accompanying notes are an integral part of the consolidated financial       
statements.                                                                     

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                             

Basis of Presentation - Community Capital Corporation (the Company) serves as a 
bank holding company for CapitalBank (the Bank). The Bank was formed on January 
1, 2001, during a restructuring that consolidated the Company's operations into 
a single subsidiary. CapitalBank operates thirteen branches throughout South    
Carolina. The Bank offers a full range of banking services, including a wealth  
management group featuring a wide array of financial services, with personalized
attention, local decision making and strong emphasis on the needs of individuals
and small to medium-sized businesses.                                           

The Company was formed in 1988 to serve as a holding company for Greenwood      
National Bank, which later changed its name to Greenwood Bank & Trust. In 1994  
the Company made the decision to expand beyond Greenwood County by creating an  
organization of independent banks in four additional markets. In June 1995, the 
Company opened Clemson Bank and Trust in Clemson, South Carolina. In 1996 and   
1997, the Company opened Community Bank and Trust, TheBank, and Mid State Bank. 
The restructuring on January 1, 2001 consolidated these banks into and under    
CapitalBank. The Company formed a separate trust organization in 1997 known as  
Community Trust Company. In May 2000, Community Trust Company was sold.         

The accounting and reporting policies of the Company reflect industry practices 
and conform to generally accepted accounting principles in all material         
respects. The consolidated financial statements include the accounts of the     
Company and the Bank. All significant intercompany accounts and transactions    
have been eliminated.                                                           

Use of Estimates - In preparing the consolidated financial statements,          
management is required to make estimates and assumptions that affect the        
reported amounts of assets and liabilities as of the balance sheet date and     
income and expenses for the period. Actual results could differ significantly   
from those estimates.                                                           

Material estimates that are particularly susceptible to significant change      
relate to the determination of the allowance for loan losses, including         
valuation allowances for impaired loans, the carrying amount of real estate     
acquired in connection with foreclosures or in satisfaction of loans, and the   
assumptions used in computing the fair value of stock options granted and the   
pro forma disclosures required by Statement of Financial Accounting Standards   
(SFAS) No. 123. Management must also make estimates in determining the estimated
useful lives and methods for depreciating premises and equipment.               

While management uses available information to recognize losses on loans and    
foreclosed real estate, future additions to the allowance may be necessary based
on changes in local economic conditions. In addition, regulatory agencies, as an
integral part of their examination process, periodically review the Company's   
allowances for losses on loans and foreclosed real estate. Such agencies may    
require the Company to recognize additions to the allowances based on their     
judgments about information available to them at the time of their examination. 
Because of these factors, it is reasonably possible that the allowances for     
losses on loans and foreclosed real estate may change materially in the near    
term.                                                                           

Securities Available-for-sale - Securities available-for-sale by the Company are
carried at amortized cost and adjusted to estimated fair value by recording the 
aggregate unrealized gain or loss in a valuation account. Management does not   
actively trade securities classified as available-for-sale. Reductions in fair  
value considered by management to be other than temporary are reported as a     
realized loss and a reduction in the cost basis in the security. Generally,     
amortization of premiums and accretion of discounts are charged or credited to  
earnings on a straight-line basis over the life of the securities. The adjusted 
cost basis of securities available-for-sale is determined by specific           
identification and is used in computing the gain or loss from a sales           
transaction.                                                                    

Securities Held-To-Maturity - Securities held-to-maturity are those securities  
which management has the intent and the Company has the ability to hold until   
maturity. Securities held-to-maturity are carried at cost and adjusted for      
amortization of premiums and accretion of discounts, both computed by the       
straight-line method. Reductions in fair value considered by management to be   
other than temporary are reported as a realized loss and a reduction in the cost
basis of the security.                                                          

Nonmarketable Equity Securities - Nonmarketable equity securities include the   
costs of the Company's investments in the stock of the Federal Reserve Bank and 
the Federal Home Loan Bank. The stocks have no quoted market value and no ready 
market exists. Investment in Federal Reserve Bank stock is required for         
state-chartered member banks. Investment in Federal Home Loan Bank stock is a   
condition of borrowing from the Federal Home Loan Bank, and the stock is pledged
to secure the borrowings. At both December 31, 2002 and 2001, the investment in 
Federal Reserve Bank stock was $1,037,150. At December 31, 2002 and 2001, the   
investment in Federal Home Loan Bank stock was $1,808,300 and $2,047,700,       
respectively.                                                                   

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)                 

The Company has invested in the stock of several unrelated financial            
institutions. The Company owns less than five percent of the outstanding shares 
of each institution, and the stocks either have no quoted market value or are   
not readily marketable. At December 31, 2002 and 2001, the investments in the   
stock of the unrelated financial institutions, at cost, were $1,820,144. The    
Company also invested in a financial services company that offers internet      
banking. The Company's investment in the stock of this institution was $500,000 
at December 31, 2002 and 2001.                                                  

Loans receivable - Loans are recorded at their unpaid principal balance. Direct 
loan origination costs and loan origination fees are deferred and amortized over
the lives of the loans as an adjustment to yield. Unamortized net deferred loans
costs included in loans at December 31, 2002 and 2001 were $136,053 and         
$134,008, respectively.                                                         

Impaired loans are measured based on the present value of discounted expected   
cash flows. When it is determined that a loan is impaired, a direct charge to   
bad debt expense is made for the difference between the net present value of    
expected future cash flows based on the contractual rate and the Company's      
recorded investment in the related loan. The corresponding entry is to a related
valuation account. Interest is discontinued on impaired loans when management   
determines that a borrower may be unable to meet payments as they become due.   

Interest income is computed using the simple interest method and is recorded in 
the period earned. When serious doubt exists as to the collectibility of a loan 
or a loan is 90 days past due, the accrual of interest income is generally      
discontinued unless the estimated net realizable value of the collateral is     
sufficient to assure collection of the principal balance and accrued interest.  
When interest accruals are discontinued, unpaid accrued interest is reversed and
charged against current year income.                                            

Allowance for Loan Losses - Management provides for losses on loans through     
specific and general charges to operations and credits such charges to the      
allowance for loan losses. Specific provision for losses is determined for      
identified loans based upon estimates of the excess of the loan's carrying value
over the net realizable value of the underlying collateral. General provision   
for loan losses is estimated by management based upon factors including industry
loss experience for similar lending categories, actual loss experience,         
delinquency trends, as well as prevailing and anticipated economic conditions.  
While management uses the best information available to make evaluations, future
adjustment to the allowance may be necessary if economic conditions differ      
substantially from the assumptions used in making the evaluation. Delinquent    
loans are charged against the allowance at the time they are determined to be   
uncollectible. Recoveries are added to the allowance.                           

Residential Mortgages Held-For-Sale - The Company's mortgage activities are     
comprised of accepting residential mortgage loan applications, qualifying       
borrowers to standards established by investors, funding residential mortgages  
and selling mortgages to investors under pre-existing commitments. Funded       
residential mortgages held temporarily for sale to investors are recorded at    
cost which approximates the market value. Application and origination fees      
collected by the Company are recognized as income upon sale to the investor.    

Premises and Equipment - Premises and equipment are stated at cost, less        
accumulated depreciation. Gain or loss on retirement of premises and equipment  
is recognized in the statements of operations when incurred. Expenditures for   
maintenance and repairs are charged to expense; betterments and improvements are
capitalized. Depreciation charges are computed principally on the straight-line 
method over the estimated useful lives as follows: building and improvements -  
40 years; furniture, fixtures and equipment - 3 to 15 years.                    

Other Real Estate Owned - Other real estate owned includes real estate acquired 
through foreclosure. Other real estate owned is carried at the lower of cost    
(principal balance at the date of foreclosure) or fair value minus estimated    
costs to sell. Any write-downs at the date of foreclosure are charged to the    
allowance for loan losses. Expenses to maintain such assets, subsequent changes 
in the valuation allowance, and gains and losses on disposal are included in    
other expenses.                                                                 

Intangible Assets - Intangible assets consist of goodwill and core deposit      
premiums resulting from the Company's acquisitions. The core deposit premiums   
are being amortized over fifteen years using the straight-line method. Goodwill 
is being evaluated for impairment on annual basis in accordance with SFAS No.   
147.                                                                            

Stock-Based Compensation - The Company has a stock-based employee compensation  
plan which is further described in Note 14. The Company accounts for the plan   
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 stock options granted under these plans had an exercise price    
equal to the market value of the underlying common stock on the date of grant.  
The following table illustrates the effect on net income and earnings per share 
as if the Company had applied the fair                                          

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)                 

value recognition provisions of Financial Accounting Standards Board ("FASB")   
SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee  
compensation.                                                                   

(Dollars in thousands,                                Year ended December 31,   
except for per share data)                            ------------------------  
                                                    2002     2001     2000
                                                    ------   -----    ------
Net income, as reported                               $4,602   $4,478   $1,652  
Deduct: Total stock-based employee                                              
compensation expense determined                                             
under fair value based method                                               
for all awards, net of related tax effects             301      452      378
                                                    ------   ------   ------

Pro forma net income                                  $4,301   $4,026   $1,274  
                                                    ======   ======   ======

Earnings per share:                                                             
Basic - as reported                                 $ 1.34   $ 1.31   $ 0.48
                                                    ======   ======   ======
Basic - pro forma                                   $ 1.25   $ 1.18   $ 0.39
                                                    ======   ======   ======

Diluted - as reported                               $ 1.26   $ 1.26   $ 0.48
                                                    ======   ======   ======
Diluted - pro forma                                 $ 1.18   $ 1.13   $ 0.39
                                                    ======   ======   ======

Income Taxes - The income tax provision is the sum of amounts currently payable 
to taxing authorities and the net changes in income taxes payable or refundable 
in future years. Income taxes deferred to future years are determined utilizing 
a liability approach. This method gives consideration to the future tax         
consequences associated with differences between the financial accounting and   
tax bases of certain assets and liabilities, principally the allowance for loan 
losses and depreciable premises and equipment.                                  

Cash Flow Information - For purposes of reporting cash flows, the Company       
considers certain highly liquid debt instruments purchased with a maturity of   
three months or less to be cash equivalents. Cash equivalents include amounts   
due from depository institutions, interest-bearing deposit accounts, and federal
funds sold. Generally, federal funds are sold for one-day periods.              

The following summarizes supplemental cash flow information:                    

(Dollars in thousands)                                  Year ended December 31, 
                                                      --------------------------
                                                     2002     2001      2000
                                                      ------   -------   -------
Cash paid for interest                                $8,196   $15,088   $15,469
Cash paid for income taxes                             3,404       690       346

Supplemental noncash investing and financing                                    
activities:                                                                   
 Foreclosures on loans                                   486       148       577

Transfer from retained earnings to common stock and                             
 capital surplus to record stock dividends                --     1,331     1,014

Change in unrealized gain or loss on securities                                 
 available-for sale, net of tax                          821       746     2,224

Concentrations of Credit Risk - Financial instruments, which potentially subject
the Company to concentrations of credit risk, consist principally of loans      
receivable, securities, federal funds sold and amounts due from banks.          
Management is not aware of any concentrations of loans to classes of borrowers  
or industries that would be similarly affected by economic conditions. Although 
the Company's loan portfolio is diversified, a substantial portion of its       
borrowers' ability to honor the terms of their loans is dependent on business   
and economic conditions in the upstate region of South Carolina. Management does
not believe credit risk is associated with obligations of the United States, its
agencies or its corporations. The Company places its deposits and correspondent 
accounts with and sells its federal funds to high credit quality institutions.  
By policy, time deposits are limited to amounts insured by the Federal Deposit  
Insurance Corporation. Management believes credit risk associated with          
correspondent accounts is not significant.                                      

Per-Share Data - Basic earnings per share is computed by dividing net income by 
the weighted-average number of shares outstanding for the period. Diluted       
earnings per share is similar to the computation of basic earnings per share    
except that the denominator is increased to include the number of additional    
common shares that would have been outstanding if the dilutive potential common 
shares had been issued using the treasury stock method.                         

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)                 

Share and per-share data have been restated to reflect the 5% stock dividends   
issued in May 2001 and June 2000.                                               

Comprehensive Income - Accounting principles generally require that recognized  
income, 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.                                             

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

                                                     Year ended December 31,
                                                     -------------------------
(Dollars in thousands)                                 2002     2001     2000   
                                                     ------   ------   -------
Unrealized holding gains (losses) on available-for-                             
sale securities                                      $1,350   $1,130   $ 3,370
Reclassification adjustment for (gains) losses                                  
realized in income                                     (106)      --        --
                                                     ------   ------   -------
Net unrealized gains on securities                     1,244    1,130     3,370 

Tax effect                                              (423)    (384)   (1,146)
                                                     ------   ------   -------
  Net-of-tax amount                                  $  821   $  746   $ 2,224
                                                     ======   ======   =======

Common Stock Owned by the Employee Stock Ownership Plan (ESOP) - ESOP purchases 
and redemptions of the Company's common stock are at estimated fair value.      
Dividends on ESOP shares are charged to retained earnings. All shares held by   
the ESOP are treated as outstanding for purposes of computing earnings per      
share.                                                                          

Off-Balance-Sheet Financial Instruments - In the ordinary course of business,   
the Company enters into off-balance-sheet financial instruments consisting of   
commitments to extend credit and letters of credit. These financial instruments 
are recorded in the financial statements when they become payable by the        
customer.                                                                       

Recent Accounting Pronouncements - In October 2002, the FASB issued SFAS No.    
147, Acquisitions of Certain Financial Institutions - an amendment of FASB      
Statements No. 72 and 144 and FASB Interpretation No. 9, which brings all       
business combinations involving financial institutions, except mutual financial 
institutions, into the scope of SFAS No. 141, Business Combinations. This       
statement requires that all acquisitions of financial institutions that meet the
definition of a business, including acquisitions of part of a financial         
institution that meet the definition of a business, must be accounted for in    
accordance with SFAS No. 141 and the related intangibles accounted for in       
accordance with SFAS No. 142. SFAS No. 147 removes such acquisitions from the   
scope of SFAS No. 72, Accounting for Certain Acquisitions of Banking or Thrift  
Institutions. SFAS No. 147 also amends SFAS No. 144 to include in its scope     
long-term customer relationship intangibles of financial institutions. SFAS No. 
147 was effective upon issuance and had no material impact on the Company's     
financial statements.                                                           

In December 2002, the FASB issued SFAS No. 148 Accounting for Stock-Based       
Compensation--Transition and Disclosure--an amendment of FASB Statement No. 123.
This Statement amends FASB Statement No. 123, Accounting for Stock-Based        
Compensation, to provide alternative methods of transition for a voluntary      
change to the fair value based method of accounting for stock-based employee    
compensation. In addition, this 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 employee    
compensation and the effect of the method used on reported results. The Company 
adopted this standard effective December 31, 2002 and has included the required 
disclosures in the footnotes to the financials. The Company has not elected the 
fair value treatment of stock-based compensation and the adoption of this       
standard had no impact on its financial position.                               

Other accounting standards that have been issued or proposed by the FASB or     
other standards-setting bodies that do not require adoption until a future date 
are not expected to have a material impact on the consolidated financial        
statements upon adoption.                                                       

Reclassifications - Certain captions and amounts in the 2001 and 2000 financial 
statements were reclassified to conform with the 2002 presentation.             

Accounting for Transfers of Financial Assets - A sale is recognized when the    
Company relinquishes control over a financial asset and is compensated for such 
asset. The difference between the net proceeds received and the carrying amount 
of the financial asset being sold or securitized is recognized as a gain or loss
on the sale.                                                                    

NOTE 2 - SALE OF BRANCHES                                                       

On January 29, 2001, CapitalBank entered into a Purchase and Assumption         
Agreement to sell certain assets and deposits of five of its branches to        
Enterprise Bank of South Carolina. The branches included in the transaction were
Barnwell, Blackville,                                                           

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Springfield, Salley, and Williston. As of May 14, 2001, CapitalBank sold the    
five branches, which had approximately $67,100,000 in deposits.                 

At the closing, and subject to the terms of the Purchase and Assumption         
Agreement, CapitalBank received from Enterprise Bank a premium of 8.63% on the  
deposits.                                                                       

The principal assets and liabilities disposed of in the sale are summarized as  
follows:                                                                        

(Dollars in thousands)                                                          
Deposits, including accrued interest payable less premium              $(61,309)

Premises and equipment                                                    3,568 

Loans, including accrued interest receivable                             49,346 

Other, net                                                                  (11)
                                                                      --------
Cash paid for net liabilities sold                                     $ (8,406)
                                                                      ========

The gain recognized on the sale of the branches totaled $5,791,000 for the year 
ended December 31, 2001.                                                        

NOTE 3 - RESTRICTIONS ON CASH AND DUE FROM BANKS                                

The Company is required to maintain average reserve balances computed as a      
percentage of deposits. At December 31, 2002, the required cash reserves were   
satisfied by vault cash on hand and amounts due from correspondent banks.       

NOTE 4 - INVESTMENT SECURITIES                                                  

Securities available-for-sale at December 31, 2002 and 2001 consisted of the    
following:                                                                      

                                                                [Download Table]

                                                       Gross Unrealized            
                                            Amortized  ----------------  Estimated 
(Dollars in thousands)                        Cost      Gains    Losses  Fair Value
                                            ---------   ------   ------  ----------
                                                                                   
December 31, 2002                                                                  
U.S. Government agencies and corporations    $13,540    $  216    $ --     $13,756 
Obligations of state and local governments    24,774       959      --      25,733 
Obligations of corporations                      750        --      --         750 
                                             -------    ------    ----     ------- 
                                              39,064     1,175      --      40,239 
Mortgage-backed securities                     9,534       323      --       9,857 
                                             -------    ------    ----     ------- 
   Total                                     $48,598    $1,498    $ --     $50,096 
                                             =======    ======    ====     ======= 

December 31, 2001                                                                  
U.S. Government agencies and corporations    $12,770    $  378    $ --     $13,148 
Obligations of state and local governments    24,965       314     491      24,788 
Obligations of corporations                      750        --      --         750 
                                             -------    ------    ----     ------- 
                                              38,485       692     491      38,686 
Mortgage-backed securities                    18,112       142      89      18,165 
                                             -------    ------    ----     ------- 
   Total                                     $56,597    $  834    $580     $56,851 
                                             =======    ======    ====     ======= 

Securities held-to-maturity as of December 31, 2002 and 2001 consisted of the   
following:                                                                      

                                                                [Download Table]

                                                       Gross Unrealized            
                                            Amortized  ----------------  Estimated 
(Dollars in thousands)                        Cost      Gains    Losses  Fair Value
                                            ---------   ------   ------  ----------
                                                                                   
December 31, 2002                                                                  
Obligations of state and local governments     $550      $--       $--      $550   
                                               ====      ===       ===      ====   

December 31, 2001                                                                  
Obligations of state and local governments     $550      $--       $--      $550   
                                               ====      ===       ===      ====   

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NOTE 4 - INVESTMENT SECURITIES (continued)                                      

The following table summarizes the maturities of securities available-for-sale  
and held-to-maturity as of December 31, 2002, based on the contractual          
maturities. Actual maturities may differ from the contractual maturities because
borrowers may have the right to call or prepay obligations with or without      
penalty.                                                                        

                                                        [Enlarge/Download Table]

                                                 Securities              Securities      
                                             Available-For-Sale       Held-To-Maturity   
                                           ----------------------  ----------------------
                                           Amortized   Estimated   Amortized   Estimated 
(Dollars in thousands)                       Cost      Fair Value    Cost      Fair Value
                                           ---------   ----------  ---------   ----------
                                                                                         
Due in one year or less                     $ 8,531     $ 8,746      $ --         $ --   
Due after one year but within five years      6,423       6,456        --           --   
Due after five years but within ten years     6,233       6,646       550          550   
Due after ten years                          17,877      18,391        --           --   
                                            -------     -------      ----         ----   
                                             39,064      40,239       550          550   
Mortgage-backed securities                    9,534       9,857        --           --   
                                            -------     -------      ----         ----   
   Total                                    $48,598     $50,096      $550         $550   
                                            =======     =======      ====         ====   

Proceeds from sales of securities available-for-sale during 2002 were           
$5,147,372, resulting in gross realized gains of $105,814. There were no sales  
of securities available-for-sale in 2001 or 2000. There were no sales of        
securities held-to-maturity in 2002, 2001, or 2000.                             

At December 31, 2002 and 2001, securities having amortized costs of             
approximately $46,403,207 and $51,234,360, respectively, and estimated fair     
values of $47,849,745 and $51,967,647, respectively, were pledged as collateral 
for short-term borrowings, to secure public and trust deposits, and for other   
purposes as required and permitted by law.                                      

NOTE 5 - LOANS RECEIVABLE                                                       

Loans receivable are summarized as follows:                                     

                                                            December 31,
(Dollars in thousands)                                        2002       2001   
                                                             --------   --------
Commercial and industrial                                    $ 30,092   $ 33,395
Real estate                                                   219,821    177,821
Home equity                                                    21,095     18,939
Consumer - installment                                         16,323     16,923
Consumer - credit card and checking                             1,511      1,312
                                                             --------   --------
   Total gross loans                                         $288,842   $248,390
                                                             ========   ========

At December 31, 2002 and 2001, the Company had sold participations in loans     
aggregating $14,425,000 and $9,518,000, respectively, to other financial        
institutions on a nonrecourse basis. Collections on loan participations and     
remittances to participating institutions conform to customary banking          
practices.                                                                      

The Bank accepts residential mortgage loan applications and fund loans of       
qualified borrowers (see Note 1). Funded loans are sold without recourse to     
investors at face value under the terms of pre-existing commitments. The Company
does not sell residential mortgages having market or interest rate risk. The    
Company does not service residential mortgage loans for the benefit of others.  

At December 31, 2002 and 2001, the Company had pledged approximately $83,489,000
and $41,693,000, respectively, of loans on residential real estate as collateral
for advances from the Federal Home Loan Bank (see Note 10).                     

Loans are defined as impaired when "based on current information and events, it 
is probable that a creditor will be unable to collect all amounts due according 
to the contractual terms of the loan agreement." All loans are subject to this  
criteria except for: "smaller-balance homogeneous loans that are collectively   
evaluated for impairment" and loans "measured at fair value or at the lower of  
cost or fair value." The Company considers its consumer installment portfolio,  
credit cards, and home equity lines as meeting this criteria. Therefore, the    
real estate and commercial loan portfolios are primarily subject to possible    
impairment.                                                                     

The Company identifies impaired loans through its normal internal loan review   
process. Loans on the Company's problem loan watch list are considered          
potentially impaired loans. These loans are evaluated in determining whether    

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NOTE 5 - LOANS RECEIVABLE (continued)                                           

all outstanding principal and interest are expected to be collected. Loans are  
not considered impaired if a minimal delay occurs and all amounts due including 
accrued interest at the contractual interest rate for the period of delay are   
expected to be collected. At December 31, 2002 and 2001, management reviewed its
problem loan watch list and determined that no impairment on loans existed. At  
December 31, 2002 and 2001, the Company had nonaccrual loans of approximately   
$1,893,000 and $1,567,000, respectively, for which impairment had not been      
recognized.                                                                     

An analysis of the allowance for loan losses for the years ended December 31,   
2002, 2001, and 2000, is as follows:                                            

(Dollars in thousands)                                 2002     2001      2000  
                                                    ------   ------   ------
Balance, beginning of year                            $4,103   $3,060   $2,557  
Provision charged to operations                          773    1,920      471  
Recoveries on loans previously charged-off               129       98      237  
Loans charged-off                                       (723)    (975)    (540) 
Reserves related to acquisitions                          --       --      335  
                                                    ------   ------   ------
 Balance, end of year                               $4,282   $4,103   $3,060
                                                    ======   ======   ======

In the normal course of business, the Company is a party to financial           
instruments with off-balance-sheet risk. These financial instruments are        
commitments to extend credit, commitments under credit card arrangements and    
letters of credit and have elements of risk in excess of the amount recognized  
in the balance sheet. 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. A commitment involves, to varying     
degrees, elements of credit and interest rate risk in excess of the amount      
recognized in the consolidated balance sheets. The Company's exposure to credit 
loss in the event of nonperformance by the other party to the instrument is     
represented by the contractual notional amount of the instrument. Since certain 
commitments are expected to expire without being drawn upon, the total          
commitment amounts do not necessarily represent future cash requirements.       
Letters of credit are conditional commitments issued to guarantee a customer's  
performance to a third party and have essentially the same credit risk as other 
lending facilities. The Company uses the same credit policies in making         
commitments to extend credit as it does for on-balance-sheet instruments.       

At December 31, 2002 and 2001, the Company had unfunded commitments, including  
standby letters of credit, of $52,403,000 and $45,676,000, of which $7,704,331  
and $2,348,000, respectively, were unsecured. At December 31, 2002, the Company 
was not committed to lend additional funds to borrowers having loans in         
nonaccrual status.                                                              

Loans sold with limited recourse are 1-4 family residential mortgages originated
by the Company and sold to various other financial institutions. Various        
recourse agreements exist, ranging from forty-five days to twelve months. The   
Company's exposure to credit loss in the event of nonperformance by the other   
party to the loan is represented by the contractual notional amount of the loan.
Since none of the loans sold have ever been returned to the Company, the total  
loans sold with limited recourse amount does not necessarily represent future   
cash requirements. The Company uses the same credit policies in making loans    
held for sale as it does for on-balance-sheet instruments. Total loans sold with
limited recourse in 2002 was $38,613,000.                                       

NOTE 6- PREMISES AND EQUIPMENT                                                  

Premises and equipment consisted of the following:                              

                                                              December 31,
                                                            ------------------
(Dollars in thousands)                                        2002        2001  
                                                            -------    -------
Land                                                         $ 2,111    $ 2,132 
Building and land improvements                                 6,986      6,844 
Furniture and equipment                                        6,145      5,862 
                                                            -------    -------
  Total                                                      15,242     14,838
Less, accumulated depreciation                                (5,392)    (4,466)
                                                            -------    -------
  Premises and equipment, net                               $ 9,850    $10,372
                                                            =======    =======

Depreciation and amortization expense was $1,101,000, $1,476,000 and $1,638,000 
for the years ended December 31, 2002, 2001 and 2000, respectively.             

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NOTE 7 - INTANGIBLE ASSETS                                                      

Intangible assets, net of accumulated amortization are summarized as follows:   

                                                                December 31,
                                                                 ---------------
(Dollars in thousands)                                            2002     2001 
                                                                 ------   ------
Core deposit premium                                             $3,939   $4,285
Goodwill                                                             53       53
                                                                 ------   ------

                                                                 $3,992   $4,338
                                                                 ======   ======

In accordance with SFAS No. 147, the Company evaluated its goodwill and         
determined that no impairment existed at December 31, 2002 and 2001. Therefore, 
there was no amortization of goodwill for the year ended December 31, 2002.     
Amortization expense related to the core deposit premium was $346,000,          
$2,440,000 and $612,000, for the years ended December 31, 2002, 2001 and 2000,  
respectively.                                                                   

NOTE 8 - DEPOSITS                                                               

The following is a summary of deposit accounts:                                 

                                                              December 31,
                                                             -------------------
(Dollars in thousands)                                         2002       2001  
                                                             --------   --------
Noninterest-bearing demand deposits                          $ 29,422   $ 25,083
Interest-bearing demand deposits                               36,121     32,503
Money market accounts                                          66,295     61,863
Savings                                                        27,948     26,653
Certificates of deposit and other time deposits               116,775    112,228
                                                             --------   --------
   Total deposits                                            $276,561   $258,330
                                                             ========   ========

At December 31, 2002 and 2001, certificates of deposit of $100,000 or more      
totaled approximately $42,012,000 and $39,592,000, respectively. Interest       
expense on these deposits was approximately $1,259,000, $2,231,000, and         
$2,133,000 in 2002, 2001 and 2000, respectively.                                

Scheduled maturities of certificates of deposit and other time deposits as of   
December 31, 2002 were as follows:                                              

(Dollars in thousands)                                                          
Maturing in                                                              Amount 
-----------                                                             --------
   2003                                                                 $ 85,753
   2004                                                                   14,668
   2005                                                                   16,338
   2006                                                                       16
                                                                        --------
   Total                                                                $116,775
                                                                        ========

NOTE 9 - FEDERAL FUND PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO         
REPURCHASE                                                                      

The Company had federal funds purchased and securities sold under agreements to 
repurchase which generally mature within one day. At December 31, 2002 and 2001,
the securities sold under agreements to repurchase totaled $4,645,000 and       
$5,062,000, respectively. At December 31, 2002 and 2001, the amortized costs of 
securities pledged to collateralize the repurchase agreements were $5,283,000   
and $6,755,000, respectively, and estimated fair values were $5,457,000 and     
$6,849,000, respectively. The securities underlying the agreements are held by a
third-party custodian. At December 31, 2002 and 2001, federal funds purchased   
were $21,205,000 and $2,402,000, respectively.                                  

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NOTE 10 - ADVANCES FROM THE FEDERAL HOME LOAN BANK                              

Advances from the Federal Home Loan Bank consisted of the following:            

(Dollars in thousands)                                            December 31,  
                                                               -----------------
Description                                    Interest Rate     2002      2001 
-----------                                    -------------   -------   -------
Fixed rate advances maturing:                                                   

   February 3, 2003                                5.97%       $    15   $    45
   March 17, 2003                                  6.41         10,000    10,000
   March 17, 2005                                  6.60          5,000     5,000
   October 13, 2005                                5.84          3,000     3,000
   March 26, 2008                                  5.51          1,500     1,500
   February 2, 2009                                4.95            625       725
   March 17, 2010                                  5.92          5,000     5,000
   March 30, 2010                                  6.02          2,000     2,000
   March 30, 2010                                  6.02          4,000     4,000
                                                               -------   -------
                                                               $31,140   $31,270
                                                               =======   =======

Scheduled principal reductions of Federal Home Loan Bank advances are as        
follows:                                                                        

(Dollars in thousands)                          Amount                          
                     -------
2003                                        $10,015                       
2004                                             --                       
2005                                          8,000                       
2006                                             --                       
After five years                             13,125                       
                     -------
Total                                    $31,140                    
                     =======

As collateral, the Company had pledged first mortgage loans on one to four      
family residential loans aggregating $83,489,000 (see Note 5) at December 31,   
2002. In addition, the Company's Federal Home Loan Bank stock is pledged to     
secure the borrowings. Certain advances are subject to prepayment penalties.    

NOTE 11 - SHAREHOLDERS' EQUITY                                                  

The Company declared a 5% stock dividend for shareholders of record on May 30,  
2001, June 30, 2000, and September 30, 1998. Amounts equal to the estimated fair
value of the additional shares issued have been charged to retained earnings and
credited to common stock and capital surplus. Dividends representing fractional 
shares were paid in cash. Earnings per share, average shares outstanding,       
treasury shares, employee stock ownership plan shares, and stock option plan    
shares have been adjusted to reflect the stock dividends for all periods        
presented.                                                                      

As of December 31, 2002, the Board of Directors had approved a stock repurchase 
plan whereby the Company could repurchase up to $5,500,000 of its outstanding   
shares of common stock. As of December 31, 2002, the Company had purchased      
367,875 shares at a cost of $4,111,000.                                         

At December 31, 2002 and 2001, the Company had authorized 2,000,000 shares of a 
special class of stock, par value $1.00 per share, the rights and preferences of
which were to be designated as the Board of Directors should determine. At      
December 31, 2002 and 2001, no shares of the undesignated stock had been issued 
or were outstanding.                                                            

NOTE 12 - LEASES                                                                

The Company leases part of a building and land as a branch banking location from
a former director. The operating lease has an initial ten-year term, which      
expires July 31, 2006, and is renewable, at the Company's option, for four      
five-year terms at an increased monthly rental. The lease requires monthly      
payments of $3,500 with an increase to $3,850 per month during the last five    
years of the initial lease term. The initial lease term ends on July 31, 2006.  
The monthly payments upon renewal are $4,235. Rental expense under this         
operating lease agreement was $46,200, $44,100, and $42,000 for the years ended 
December 31, 2002, 2001 and 2000, respectively.                                 

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NOTE 12 - LEASES (continued)                                                    

The Company also leases a building for its Greenville branch location. The      
operating lease which originated on October 1, 2002 has an initial three year   
term. The lease is renewable at the Company's option for three one-year terms at
an increased monthly rental. The lease term requires monthly payments of $3,500 
per month. The initial lease term ends on September 30, 2005. Rental expense for
the year ended December 31, 2002 totaled $10,500.                               

Future obligations over the primary terms of the remaining long-term leases as  
of December 31, 2002 are as follows:                                            

(Dollars in thousands)                         Amount                           
                    ------
2003                                         $ 88                         
2004                                           88                         
2005                                           88                         
2006                                           27                         
2007                                           --                         
                    ----
Total                                     $291                      
                    ====

Both leases contain options to renew. The cost of such rentals is not included  
above.                                                                          

In 2000, the Company restructured two lease agreements for certain data         
processing equipment. Both rental terms are for sixty months and provide for the
lessee to pay certain maintenance costs.                                        

Assets recorded under capital leases and included in premises and equipment were
as follows at December 31, 2002:                                                

(Dollars in thousands)                         Amount                           
                    ------
Equipment                                   $1,159                        
Less, accumulated depreciation                 444                        
                    ------
Net assets under capital leases          $  715                     
                    ======

The future minimum capital lease payments were as follows at December 31, 2002: 

(Dollars in thousands)                         Amount                           
                    ------
2003                                        $  382                        
2004                                           382                        
2005                                           384                        
                    ------
Total payments                         1,148                  
                    ------
Less, amount representing interest          124                     
Less, amount representing maintenance       291                     
                    ------
Total obligations under capital leases   $  733                     
                    ======

NOTE 13 - CAPITAL REQUIREMENTS AND REGULATORY MATTERS                           

The Company and the Bank 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 material  
effect on the Company's financial statements. Under capital adequacy guidelines 
and the regulatory framework for prompt corrective action, the Company and the  
Bank must meet specific capital guidelines that involve quantitative measures of
the Company's and the Bank's assets, liabilities, and certain off-balance-sheet 
items as calculated under regulatory accounting practices. The Company's and the
Bank's capital amounts and classifications 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 Bank to maintain minimum ratios (set forth in the   
table below) of Tier 1 and total capital as a percentage of assets and          
off-balance-sheet exposures, adjusted for risk-weights ranging from 0% to 100%. 
Tier 1 capital of the Company and the Bank consists of common shareholders'     
equity, excluding the unrealized gain or loss on securities available-for-sale, 
minus certain intangible assets. Tier 2 capital consists of the allowance for   
loan losses subject to certain limitations. Total capital for purposes of       
computing the capital ratios consists of the sum of Tier 1 and Tier 2 capital.  

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NOTE 13 - CAPITAL REQUIREMENTS AND REGULATORY MATTERS (continued)               

The Company and the Bank are also required to maintain capital at a minimum     
level based on average assets (as defined), which is known as the leverage      
ratio. Only the strongest institutions are allowed to maintain capital at the   
minimum requirement of 3%. All others are subject to maintaining ratios 1% to 2%
above the minimum.                                                              

As of the most recent regulatory examination, the Bank was deemed               
well-capitalized under the regulatory framework for prompt corrective action. To
be categorized well capitalized, the Bank must maintain total risk-based, Tier 1
risk-based, and Tier 1 leverage ratios as set forth in the table below. There   
are no conditions or events that management believes have changed the Bank's    
categories.                                                                     

The following tables summarize the capital ratios and the regulatory minimum    
requirements of the Company and the Bank at December 31, 2002 and 2001.         

                                                        [Enlarge/Download Table]

                                                                                     To Be Well-   
                                                                                  Capitalized Under
                                                                  For Capital     Prompt Corrective
                                                  Actual       Adequacy Purposes  Action Provisions
                                             ---------------   -----------------  -----------------
(Dollars in thousands)                        Amount   Ratio     Amount   Ratio    Amount    Ratio 
                                             -------   -----    -------   -----   -------   -------
                                                                                                   
December 31, 2002                                                                                  
The Company                                                                                        
   Total capital (to risk-weighted assets)   $42,917   15.41%   $22,274    8.00%  $    --      N/A 
   Tier 1 capital (to risk-weighted assets)   39,427   14.16     11,137    4.00        --      N/A 
   Tier 1 capital (to average assets)         39,427   10.59     14,898    4.00        --      N/A 

CapitalBank                                                                                        
   Total capital (to risk-weighted assets)    38,760   14.00%    22,150    8.00%  $27,687    10.00%
   Tier 1 capital (to risk-weighted assets)   35,289   12.75     11,075    4.00    16,612     6.00 
   Tier 1 capital (to average assets)         35,289    9.51     14,839    4.00    18,549     5.00 

December 31, 2001                                                                                  
The Company                                                                                        
   Total capital (to risk-weighted assets)   $37,868   15.53%   $19,502    8.00%  $    --      N/A 
   Tier 1 capital (to risk-weighted assets)   34,767   14.26      9,751    4.00        --      N/A 
   Tier 1 capital (to average assets)         34,767   10.21     13,621    4.00        --      N/A 

CapitalBank                                                                                        
   Total capital (to risk-weighted assets)   $34,737   14.30%   $19,436    8.00%  $24,294    10.00%
   Tier 1 capital (to risk-weighted assets)   31,646   13.03      9,718    4.00    14,577     6.00 
   Tier 1 capital (to average assets)         31,646    9.33     13,565    4.00    16,957     5.00 

NOTE 14 - STOCK COMPENSATION PLANS                                              

On May 27, 1998, the Company terminated its Employee Incentive Stock Option Plan
and its Incentive and Nonstatutory Stock Option Plan (the "Plans"). These Plans 
were replaced by the 1997 Stock Incentive Plan effective January 1, 1998.       
Outstanding options issued under the former Plans will be honored in accordance 
with the terms and conditions in effect at the time they were granted, except   
that they are not subject to reissuance. At December 31, 2002, there were       
164,408 options outstanding that had been issued under the terminated Plans.    

The 1997 Stock Incentive Plan provides for the granting of statutory incentive  
stock options within the meaning of Section 422 of the Internal Revenue Code as 
well as nonstatutory stock options, stock appreciation rights, or restricted    
stock of up to 600,000 shares (as amended January 27, 1999), adjusted for stock 
dividends of the Company's common stock, to officers, employees, and directors  
of and consultants for the Company. The Board voted to amend the number of      
shares available for grant from 2,100,000 to 600,000 in January 1999. Awards may
be granted for a term of up to ten years from the effective date of grant. Under
this Plan, the Company's Board of Directors has sole discretion as to the       
exercise date of any awards granted. The per-share exercise price of incentive  
stock options may not be less than the fair value of a share of common stock on 
the date the option is granted. The per-share exercise price of nonqualified    
stock options may not be less than 50% of the fair value of a share on the      
effective date of grant. Any options that expire unexercised or are canceled    
become available for issuance. No awards may be made after January 27, 2008.    

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NOTE 14 - STOCK COMPENSATION PLANS (continued)                                  

During 2002, the Company granted 60,250 options pursuant to the terms of the    
Company's 1997 Stock Incentive Plan. The options are exercisable one year from  
the date of grant at prices ranging between $12.50 and $14.10 per-share and     
expire during 2007. As of December 31, 2002, there were 111,807 options         
available for issuance under this Plan.                                         

In calculating the pro forma disclosures, the fair value of options granted is  
estimated as of the date granted using the Black-Scholes option pricing model   
with the following weighted-average assumptions used for grants:                

                                                    2002      2001      2000
                                                   -------   -------   -------
   Dividend yield                                      1.36%     0.78%     0.00%
   Expected volatility                                22.87%    62.28%    22.20%
   Risk-free interest rate                             4.78%     4.49%     6.71%
  Expected life                                    5 years   5 years   5 years

The weighted-average fair value of options, calculated using the Black-Scholes  
option-pricing model, granted during 2002, 2001, and 2000 is $3.21, $4.18, and  
$2.03, respectively.                                                            

A summary of the status of the Company's stock option plans as of December 31,  
2002, 2001, and 2000 and changes during the years ended on those dates is       
presented below:                                                                

                                                        [Enlarge/Download Table]

                                          2002                  2001                 2000        
                                  --------------------  --------------------  -------------------
                                             Weighted-             Weighted-            Weighted-
                                              Average               Average              Average 
(Dollars in thousands, except                Exercise              Exercise             Exercise 
  per share data)                  Shares      Price     Shares      Price     Shares     Price  
                                  --------   ---------  --------   ---------  -------   ---------
                                                                                                 
Outstanding at beginning of year   804,483     $ 8.76    944,202     $ 9.10   810,491     $9.78  
Granted                             60,250      12.54    137,241       7.71   166,643      5.90  
Exercised                         (301,025)      8.32    (93,414)      6.86        --        --  
Cancelled                          (14,856)     10.74   (183,546)     10.65   (32,932)     9.81  
                                  --------              --------              -------            

Outstanding at end of year         548,852       9.34    804,483       8.76   944,202      9.10  
                                  ========              ========              =======            

Options exercisable at December 31, 2002, 2001, and 2000 were 490,402, 675,281, 
and 784,390, respectively.                                                      

The following table summarizes information about the stock options outstanding  
under the Company's plans at December 31, 2002:                                 

                                              Weighted Average
                                           -------------------------------------
                                             Options      Remaining     Exercise
Range of Exercise Prices                   Outstanding   Life (years)    Price  
------------------------                   -----------   ------------   --------
Exercisable:                                                                    
$5.90 to $7.71                               293,339         2.33         7.17  
$8.62 to $9.42                               106,268         1.97         9.29  
$14.36                                        90,795          .48        14.36  
                 -------
Total exercisable                         490,402                         

Not Exercisable:                                                                
$12.50 to $14.10                              58,450         4.23        12.55  
                 -------
 Total outstanding                         548,852         2.16         9.34
                 =======

NOTE 15 - RELATED PARTY TRANSACTIONS                                            

Certain parties (primarily certain directors and executive officers, their      
immediate families and business interests) were loan customers and had other    
transactions in the normal course of business with the Company. Related party   
loans are made on substantially the same terms, including interest rates and    
collateral, as those prevailing at the time for comparable transactions with    
unrelated persons and generally do not involve more than normal risk of         
collectibility. Total loans and commitments outstanding to related parties at   
December 31, 2002, 2001 and 2000, were $9,704,027,                              

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NOTE 15 - RELATED PARTY TRANSACTIONS (continued)                                

$9,232,569 and $7,946,301, respectively. During 2002, $1,334,671 of new loans   
were made to related parties and repayments totaled $863,213. During 2001,      
$7,854,068 of new loans were made to related parties and repayments totaled     
$6,567,800.                                                                     

The Company purchases various types of insurance from agencies that belong to   
several directors. Amounts paid for insurance premiums were $139,000, $65,000,  
and $75,000 in 2002, 2001, and 2000, respectively.                              

NOTE 16 - COMMITMENTS AND CONTINGENCIES                                         

In the ordinary course of business, the Company has various outstanding         
commitments and contingent liabilities that are not reflected in the            
accompanying consolidated financial statements. In addition, the Company is a   
defendant in certain claims and legal actions arising in the ordinary course of 
business. In the opinion of management, after consultation with legal counsel,  
the ultimate disposition of these matters is not expected to have a material    
adverse effect on the consolidated financial condition of the Company.          

NOTE 17 - RESTRICTION ON SUBSIDIARY DIVIDENDS                                   

The ability of the Company to pay cash dividends to shareholders is dependent   
upon receiving cash in the form of dividends from the Bank. However, certain    
restrictions exist regarding the ability of the Bank to transfer funds in the   
form of cash dividends, loans, or advances to the Company. Dividends are payable
only from the retained earnings of the Bank.                                    

NOTE 18 - EARNINGS PER-SHARE                                                    

Earnings per share - basic is computed by dividing net income by the            
weighted-average number of common shares outstanding. Earnings per share -      
diluted is computed by dividing net income by the weighted-average number of    
common shares outstanding and dilutive common share equivalents using the       
treasury stock method.                                                          

                                                        [Enlarge/Download Table]

                                                       Year ended December 31,       
                                              ---------------------------------------
(Dollars in thousands, except share data)        2002           2001          2000   
                                              ----------     ----------    ----------
                                                                                     
Basic earnings per share:                                                            

Net income available to common shareholders   $    4,602     $    4,478    $    1,652
                                              ==========     ==========    ==========
Average basic common shares outstanding        3,447,395      3,423,131     3,407,899
                                              ==========     ==========    ==========
Basic earnings per share                      $     1.34     $     1.31    $     0.48
                                              ==========     ==========    ==========
Diluted earnings per share:                                                          

Net income available to common shareholders   $    4,602     $    4,478    $    1,652
                                              ==========     ==========    ==========
Average common shares outstanding - basic      3,447,395      3,423,131     3,407,899

Incremental shares from assumed conversions:                                         
  Stock options                                  200,905        136,364         6,614
                                              ----------     ----------    ----------
Average diluted common shares outstanding      3,648,300      3,559,495     3,414,513
                                              ==========     ==========    ==========
Diluted earnings per share                    $     1.26     $     1.26    $     0.48
                                              ==========     ==========    ==========

The above computation of diluted earnings per share does not include the        
following options that were outstanding at year-end since their exercise price  
was greater than the average market price of the common shares:                 

                                                  2002       2001       2000
                                                  --------   --------   --------
Number of options                                 $162,552   $146,773   $784,390
Weighted-average of these options outstanding                                   
  during the year                                   95,978    204,491    773,891
Weighted-average exercise price                   $  14.35   $  12.71   $   9.75

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NOTE 19 - INCOME TAXES                                                          

Income tax expense consisted of the following:                                  

                                                         Year ended December 31,
                                                        ------------------------
(Dollars in thousands)                                   2002     2001     2000 
                                                        ------   ------   ------
Currently payable:                                                              
   Federal                                              $1,333   $1,964   $  385
   State                                                   211      300       85
                                                        ------   ------   ------
      Total current                                      1,544    2,264      470
                                                        ------   ------   ------
Change in deferred income taxes:                                                
   Federal                                                 435      (22)     859
   State                                                   127       42      107
                                                        ------   ------   ------
      Total deferred                                       562       20      966
                                                        ------   ------   ------
Income tax expense                                      $2,106   $2,284   $1,436
                                                        ======   ======   ======
Income tax expense is allocated as follows:                                     
   To continuing operations                             $1,683   $1,900   $  290
   To shareholders' equity                                 423      384    1,146
                                                        ------   ------   ------
      Income tax expense                                $2,106   $2,284   $1,436
                                                        ======   ======   ======

The gross amounts of deferred tax assets and deferred tax liabilities were as   
follows:                                                                        

                                                                  December 31,
                                                                 ---------------
(Dollars in thousands)                                            2002     2001 
                                                                 ------   ------
Deferred tax assets:                                                            
   Allowance for loan losses                                     $1,204   $1,352
   Net operating loss carryforward - state                          108      108
   Deferred compensation                                            149      139
   Nonaccrual of interest                                            40       34
   Other real estate owned                                           21        2
                                                                 ------   ------
      Total deferred tax assets                                   1,522    1,635
                                                                 ------   ------
Deferred tax liabilities:                                                       
   Accumulated depreciation                                          97       64
   Available-for-sale securities                                    509       86
   Loans fees and costs                                              46       51
   Federal Home Loan Bank stock dividends                            16       18
                                                                 ------   ------
      Total deferred tax liabilities                                668      219
                                                                 ------   ------
      Net deferred tax asset recognized                          $  854   $1,416
                                                                 ======   ======

Deferred tax assets represent the future tax benefit of deductible differences  
and, if it is more likely than not that a tax asset will not be realized, a     
valuation allowance is required to reduce the recorded deferred tax assets to   
net realizable value. Management has determined that it is more likely than not 
that the entire deferred tax asset at December 31, 2002 will be realized, and   
accordingly, has not established a valuation allowance. Net deferred tax assets 
are included in other assets.                                                   

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NOTE 19 - INCOME TAXES (continued)                                              

A reconciliation of the income tax provision and the amount computed by applying
the Federal statutory rate of 34% to income before income taxes follows:        

                                                       Year ended December 31,
                                                       -----------------------
(Dollars in thousands)                                   2002     2001     2000 
                                                       ------   ------   -----
Income tax at the statutory rate                        $2,137   $2,168   $ 661 
State income tax, net of federal income tax benefit        116      246      51 
Tax-exempt interest income                                (440)    (452)   (474)
Disallowed interest expense                                 49       82      96 
Stock option compensation                                 (110)     (60)     -- 
Other, net                                                 (69)     (84)    (44)
                                                       -------  ------   -----
  Income tax expense                                   $1,683   $1,900   $ 290
                                                       ======   ======   =====

NOTE 20 - OTHER OPERATING EXPENSES                                              

Other operating expenses are summarized below:                                  

                                                         Year ended December 31,
                                                        ------------------------
(Dollars in thousands)                                   2002     2001     2000 
                                                        ------   ------   ------
Banking and ATM supplies                                $  416   $  613   $  630
Directors' fees                                            167      130      202
Mortgage loan department expenses                          122      278      130
Data processing and supplies                               578      410      361
Postage and freight                                        321      339      380
Professional fees                                          287      404      476
Credit card expenses                                        36      188      201
Telephone expenses                                         268      288      402
Other                                                    1,186    1,301    1,284
                                                        ------   ------   ------
   Total                                                $3,381   $3,951   $4,066
                                                        ======   ======   ======

NOTE 21 - RETIREMENT AND BENEFIT PLANS                                          

The Company sponsors a voluntary nonleveraged employee stock ownership plan     
(ESOP) as part of a 401(k) savings plan covering substantially all full-time    
employees. The Company matches 75 cents per dollar, up to a maximum of 6% of    
employee compensation. Company contributions to the savings plan were $187,000, 
$195,000 and $185,000 in 2002, 2001, and 2000, respectively. The Company's      
policy is to fund amounts approved by the Board of Directors. At December 31,   
2002 and 2001, the savings plan owned 141,559 and 124,544 shares of the         
Company's common stock purchased at an average cost of $12.62 and $8.66 per     
share, respectively, adjusted for the effects of stock dividends. The estimated 
value of shares held at December 31, 2002 and 2001 was $2,010,138 and           
$1,382,181, respectively.                                                       

The Company had an Incentive Plan for 2002 which provided incentive pay for     
outstanding accomplishments of officers and employees of the Company. Cash      
awards were based upon various performance measures, but primarily net income.  
Incentive payments accrued at December 31, 2002 totaled $336,984. Incentive     
payments accrued for the year ended December 31, 2001 totaled $193,012.         

The Company has an Executive Supplemental Compensation Plan that provides       
certain officers with salary continuation benefits upon retirement. The plan    
also provides for benefits in the event of early retirement, death, or          
substantial change of control of the Company. In connection with the Executive  
Supplemental Compensation Plan, life insurance contracts were purchased on the  
officers. No insurance premiums were paid in the years ended December 31, 2002, 
2001, or 2000.                                                                  

During 1999, certain officers opted out of the Executive Supplemental           
Compensation Plan. Under a new agreement, split-dollar life insurance policies  
were obtained on the lives of these officers. The officers are entitled to all  
of the                                                                          

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NOTE 21 - RETIREMENT AND BENEFIT PLANS (continued)                              

benefits of these policies, with the exception of the premiums paid by the      
Company. There was no expense associated with this plan in 2002, 2001, or 2000. 
Insurance premiums of $318,000 were paid in each of the years ended December 31,
2002 2001, and 2000, and are included in other assets.                          

In 2002, the Company purchased Bank Owned Life Insurance (BOLI) Policies on     
certain key officers of the Company. The cash values of such policies will be   
used to fund retirement benefits of these officers. The total amount of premiums
paid on the policies during the year ended December 31, 2002 totaled $7,500,000.
The policies increased their cash values by $136,352 during 2002, resulting in  
December 31, 2002 cash values totaling $7,636,352.                              

NOTE 22 - UNUSED LINES OF CREDIT                                                

As of December 31, 2002, the subsidiary bank had unused lines of credit to      
purchase federal funds from unrelated banks totaling $29,524,000. These lines of
credit are available on a one to fourteen day basis for general corporate       
purposes. The lenders have reserved the right not to renew their respective     
lines. The Company also has a line of credit to borrow funds from the Federal   
Home Loan Bank up to 15% of the Bank's total assets which provided total        
availability of $35,800,000 at December 31, 2002. As of December 31, 2002, the  
Bank had borrowed $31,140,000 on this line.                                     

NOTE 23 - FAIR VALUE OF FINANCIAL INSTRUMENTS                                   

The fair value of a financial instrument is the amount at which an asset or     
obligation could be exchanged in a current transaction between willing parties, 
other than in a forced or liquidation sale. Fair value estimates are made at a  
specific point in time based on relevant market information and information     
about the financial instruments. Because no market value exists for a           
significant portion of the financial instruments, fair value estimates are based
on judgments regarding future expected loss experience, current economic        
conditions, risk characteristics of various financial instruments, and other    
factors.                                                                        

The following methods and assumptions were used to estimate the fair value of   
significant financial instruments:                                              

Cash and Due from Banks and Interest-Bearing Deposit Accounts - The carrying    
amount is a reasonable estimate of fair value.                                  

Investment Securities - The fair values of securities held-to-maturity are based
on quoted market prices or dealer quotes. For securities available-for-sale,    
fair value equals the carrying amount which is the quoted market price. If      
quoted market prices are not available, fair values are based on quoted market  
prices of comparable securities.                                                

Nonmarketable Equity Securities - Cost is a reasonable estimate of fair value   
for nonmarketable equity securities because no quoted market prices are         
available and the securities are not readily marketable. The carrying amount is 
adjusted for any permanent declines in value.                                   

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

Cash Surrender Value of Life Insurance - The carrying amount is a reasonable    
estimate of fair value.                                                         

Accrued Interest Receivable and Payable - The carrying value of these           
instruments is a reasonable estimate of fair value.                             

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

Federal Funds Purchased and Securities Sold Under Agreements to Repurchase - The
carrying amount is a reasonable estimate of fair value because these instruments
typically have terms of one day.                                                

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NOTE 23 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)                       

Advances from the Federal Home Loan Bank - The carrying amounts of variable rate
borrowings are reasonable estimates of fair value because they can be repriced  
frequently. The fair values of fixed rate borrowings are estimated using a      
discounted cash flow calculation that applies the Company's current borrowing   
rate from the Federal Home Loan Bank.                                           

Off-Balance-Sheet Financial Instruments - The contractual amount is a reasonable
estimate of fair value for the instruments because commitments to extend credit 
and standby letters of credit are issued on a short-term or floating rate basis.
Commitments to extend credit include commitments under credit card arrangements.

The carrying values and estimated fair values of the Company's financial        
instruments are as follows:                                                     

                                                        [Enlarge/Download Table]

                                                                    December 31,                 
                                                    ---------------------------------------------
                                                            2002                     2001        
                                                    ---------------------   ---------------------
                                                    Carrying   Estimated    Carrying   Estimated 
                                                     Amount    Fair Value    Amount    Fair Value
                                                    --------   ----------   --------   ----------
                                                                                                 
Financial Assets:                                                                                
   Cash and due from banks                          $  9,648    $  9,648    $  9,275    $  9,275 
   Interest-bearing deposit accounts                      39          39          16          16 
   Securities available-for-sale                      50,096      50,096      56,851      56,851 
   Securities held-to-maturity                           550         550         550         550 
   Nonmarketable equity securities                     5,166       5,166       5,405       5,405 
   Cash surrender value of life insurance             10,289      10,289       2,212       2,212 
   Loans receivable                                  291,526     293,681     251,947     249,678 
   Accrued interest receivable                         1,907       1,907       2,008       2,008 

Financial Liabilities:                                                                           
   Demand deposit, interest bearing                                                              
      transaction, and savings accounts             $159,786    $159,786    $146,102    $146,102 
   Certificates of deposit and other time deposits   116,775     117,708     112,228     113,238 
   Federal funds purchased and securities                                                        
      sold under agreements to repurchase             25,850      25,850       7,464       7,464 
   Advances from the Federal Home Loan Bank           31,140      32,259      31,270      31,621 
   Accrued interest payable                              649         649       1,052       1,052 

                                                                [Download Table]

                                          Notional  Estimated   Notional  Estimated 
                                           Amount   Fair Value   Amount   Fair Value
                                          --------  ----------  --------  ----------
                                                                                    
Off-Balance Sheet Financial Instruments:                                            
   Commitments to extend credit            $51,301    $51,301    $45,345    $45,345 
   Standby letters of credit                 1,102      1,102        331        331 

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NOTE 24 - COMMUNITY CAPITAL CORPORATION (PARENT COMPANY ONLY)                   

Condensed financial statements for Community Capital Corporation (Parent Company
Only) follow:                                                                   

Condensed Balance Sheets

                                                                December 31,
                                                             -----------------
(Dollars in thousands)                                          2002      2001  
                                                             -------   -------
Assets                                                                          
  Cash and cash equivalents                                  $ 2,823   $ 2,129
  Investment in banking subsidiary                            40,270    36,152
  Nonmarketable equity securities                              1,346     1,346
  Premises and equipment, net                                  1,513     1,670
  Other assets                                                   793       439
                                                             -------   -------
     Total assets                                            $46,745   $41,736
                                                             =======   =======
Liabilities and Shareholders' Equity                                            
  Notes payable to subsidiary                                $ 1,977   $ 2,137
  Other liabilities                                              360       326
                                                             -------   -------
     Total liabilities                                         2,337     2,463
                                                             -------   -------
  Common stock                                                 3,861     3,559
  Capital surplus                                             34,754    32,548
  Retained earnings                                            8,947     4,933
  Accumulated other comprehensive income                         989       168
   Treasury stock                                              (4,143)   (1,935)
                                                             -------   -------
     Total shareholders' equity                               44,408    39,273
                                                             -------   -------
     Total liabilities and shareholders' equity              $46,745   $41,736
                                                             =======   =======

Condensed Statements of Income                                                  

                                                        [Enlarge/Download Table]

                                                              For the years ended December 31,
                                                              --------------------------------
  (Dollars in thousands)                                          2002      2001     2000     
                                                                 ------   -------   -----     
                                                                                              
Income:                                                                                       
   Dividend income from subsidiary                               $1,400   $ 7,635   $2,275    
   Dividend income from equity securities                            20        27       31    
   Data processing and other fees from subsidiary                    --        --    3,695    
   Net gain on sale of nonmarketable equity securities               --       290       --    
   Other interest income                                             49        18       11    
   Other income                                                     241       357       --    
                                                                 ------   -------   ------    
      Total income                                                1,710     8,327    6,012    
                                                                 ------   -------   ------    
Expenses:                                                                                     
   Salaries                                                          20        22    1,729    
   Net occupancy expense                                            128       130       80    
   Furniture and equipment expense                                  113       366      784    
   Interest expense                                                 104       318      645    
   Other operating expenses                                         299       477    1,567    
                                                                 ------   -------   ------    
      Total expense                                                 664     1,313    4,805    
                                                                 ------   -------   ------    
Income before income taxes and equity in undistributed                                        
   earnings of subsidiary                                         1,046     7,014    1,207    
Income tax expense (benefit)                                       (258)      234     (370)   
                                                                 ------   -------   ------    
Income before equity in undistributed earnings of subsidiary      1,304     6,780    1,577    
Equity in undistributed earnings and (losses) of subsidiary       3,298    (2,302)      75    
                                                                 ------   -------   ------    
Net income                                                       $4,602   $ 4,478   $1,652    
                                                                 ======   =======   ======    

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NOTE 24 - COMMUNITY CAPITAL CORPORATION (PARENT COMPANY ONLY) (continued)       

Condensed Statements of Cash Flows                                              

                                                        [Enlarge/Download Table]

                                                           For the years ended December 31,
                                                           --------------------------------
  (Dollars in thousands)                                        2002      2001      2000   
                                                              -------   -------   -------  
                                                                                           
Operating activities:                                                                      
   Net income                                                 $ 4,602   $ 4,478   $ 1,652  
   Adjustments to reconcile net income to net cash                                         
      provided by operating activities:                                                    
   Equity in undistributed earnings of banking subsidiary      (3,297)    2,769       (66) 
   Depreciation and amortization expense                          279       447       684  
   Deferred taxes                                                  43       (65)      (66) 
   Gain on sale of nonmarketable equity securities                 --      (290)       --  
   Increase (decrease) in other liabilities                        34    (1,085)      486  
   (Increase) decrease in other assets                           (501)      194        32  
                                                              -------   -------   -------  
         Net cash provided by operating activities              1,160     6,448     2,722  
                                                              -------   -------   -------  
Investing activities:                                                                      
   Purchase of premises and equipment                             (18)      (39)   (1,371) 
   Proceeds from sales of premises and equipment                   --     1,218       121  
   Net investment in subsidiary                                    --        --    (4,554) 
   Proceeds from sales on nonmarketable equity securities          --       596        --  
                                                              -------   -------   -------  
         Net cash provided (used) by investing activities         (18)    1,775    (5,804) 
                                                              -------   -------   -------  
Financing activities:                                                                      
   Dividends paid                                                (588)     (209)       --  
   Proceeds from exercise of stock options                      2,508       650        --  
   Proceeds from stock sales to employee benefit plan              --        --       143  
   Cash paid in lieu of fractional shares                          --        (7)       (4) 
   Proceeds of borrowings from subsidiary                          --        --         1  
   Repayments on borrowings from subsidiary                      (160)     (175)     (218) 
   Proceeds from advances from long-term debt                      --       300     7,770  
   Repayments of advances from long-term debt                      --    (5,145)   (4,500) 
   Purchase of treasury stock                                  (2,208)   (1,529)      (89) 
                                                              -------   -------   -------  
         Net cash provided (used) by financing activities        (448)   (6,115)    3,103  
                                                              -------   -------   -------  
Net increase in cash and cash equivalents                         694     2,108        21  
Cash and cash equivalents, beginning of year                    2,129        21        --  
                                                              -------   -------   -------  
Cash and cash equivalents, end of year                        $ 2,823   $ 2,129   $    21  
                                                              =======   =======   =======  

Supplemental schedule of noncash investing and financing activities: In 2001 and
2000, the Company declared 5% stock dividends. For the 2001 stock dividend, the 
Company transferred $1,313,000 from retained earnings and $18,000 from treasury 
stock to common stock and capital surplus in the amounts of $164,000 and        
$1,167,000, respectively. In 2000, the Company transferred $1,000,000 from      
retained earnings and $14,000 from treasury stock to common stock and capital   
surplus in the amounts of $156,000 and $858,000, respectively. No stock         
dividends were paid during 2002.                                                

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NOTE 25 - QUARTERLY DATA (UNAUDITED)                                            

                                                        [Enlarge/Download Table]

                                                               December 31,                                
                              -----------------------------------------------------------------------------
                                               2002                                    2001                
                              -------------------------------------   -------------------------------------
(Dollars in thousands          Fourth    Third     Second    First    Fourth     Third    Second     First 
except per share)             Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter
                              -------   -------   -------   -------   -------   -------   -------   -------
                                                                                                           
Interest income                $5,476    $5,629    $5,546    $5,553    $5,824    $6,231    $7,025    $7,881
Interest expense                1,909     1,985     1,912     1,987     2,432     3,019     3,759     4,465
                               ------    ------    ------    ------    ------    ------    ------    ------

Net interest income             3,567     3,644     3,634     3,566     3,392     3,212     3,266     3,416

Provision for loan losses         110       340       213       110       820       600       400       100
                               ------    ------    ------    ------    ------    ------    ------    ------

Net interest income after                                                                                  
   provision for loan losses    3,457     3,304     3,421     3,456     2,572     2,612     2,866     3,316
Noninterest income              1,335     1,102     1,005     1,097     1,341     1,215     6,666       892
Noninterest expenses            3,086     3,000     2,869     2,937     3,131     2,941     5,522     3,508
                               ------    ------    ------    ------    ------    ------    ------    ------

Income before taxes             1,706     1,406     1,557     1,616       782       886     4,010       700
Income tax expense                433       380       408       462       182       220     1,348       150
                               ------    ------    ------    ------    ------    ------    ------    ------

Net income                     $1,273    $1,026    $1,149    $1,154    $  600    $  666    $2,662    $  550
                               ======    ======    ======    ======    ======    ======    ======    ======

Earnings per share:                                                                                        
   Basic                         0.36      0.29      0.34      0.35      0.18      0.19      0.77      0.17
   Diluted                       0.35      0.28      0.31      0.32      0.17      0.18      0.74      0.17

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INDEPENDENT AUDITORS' REPORT                                                    

Community Capital Corporation                                                   
Employee Stock Ownership Plan with 401(k) Provisions                            
Greenwood, South Carolina                                                       

 We have audited the accompanying statements of net assets available for
benefits of Community Capital Corporation Employee Stock Ownership Plan with    
401(k) Provisions as of December 31, 2002 and 2001, and the related statement of
changes in net assets available for benefits for the year ended December 31,    
2002. These financial statements are the responsibility of the Plan'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 financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of Community    
Capital Corporation Employee Stock Ownership Plan with 401(k) Provisions as of  
December 31, 2002 and 2001, and the changes in net assets available for benefits
for the year ended December 31, 2002 in conformity with accounting principles   
generally accepted in the United States of America.                             

Elliott Davis, LLC                                                              
Greenville, South Carolina                                                      
March 20, 2003                                                                  

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Employee Stock Ownership Plan with 401(k) Provisions
 Statements of Net Assets Available for Benefits

                                                            DECEMBER 31,
                                                         -----------------------
                                                        2002          2001
                                                         ----------   ----------

Assets:                                                                         
Receivables                                                               
      Employer's contribution                            $    6,775   $       --
      Employees' contribution                                11,630           --
      Accrued income                                             --          106
      Other receivable                                           --        3,783
                                                         ----------   ----------
      Total receivables                                      18,405        3,889
                                                         ----------   ----------
Investments, at fair value                                                
      Community Capital Corporation common stock          2,010,135    1,370,160
      Mutual Funds                                          924,444      965,392
      Participant loans                                       7,781           --
                                                         ----------   ----------
      Total investments                                   2,942,360    2,335,552
                                                         ----------   ----------
      Total assets                                        2,960,765    2,339,441

Liabilities:                                                                    
      Accounts payable                                           --       15,622
                                                         ----------   ----------
Net Assets Available for Benefits                        $2,960,765   $2,323,819
                                                         ==========   ==========

The accompanying notes are an integral part of the financial statements.

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Employee Stock Ownership Plan with 401(k) Provisions
 Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 2002

Additions to Net Assets Attributed to:                                          
   Employer contributions                                             $  210,760
   Employee contributions                                                298,204
   Other                                                                  16,653
                                                                      ----------
      Total contributions                                                525,617

   Net earnings and appreciation in fair value of investments            313,086
                                                                      ----------
      Total additions                                                    838,703
                                                                      ----------

Deductions from Net Assets Attributed to:                                       
   Distributions paid to participants                                    187,917
   Refund of excess contributions                                          4,627
   Administrative expenses                                                 9,213
                                                                      ----------
      Total deductions                                                   201,757
                                                                      ----------
      Net increase                                                       636,946

Net Assets Available for Benefits:                                              
   Beginning of year                                                   2,323,819
                                                                      ----------

   End of year                                                        $2,960,765
                                                                      ==========

The accompanying notes are an integral part of the financial statements.

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Employee Stock Ownership Plan with 401(k) Provisions
 Notes to Financial Statements

NOTE 1 - DESCRIPTION OF THE PLAN                                                

Community Capital Corporation (the Company) established the Community Capital   
Corporation Employee Stock Ownership Plan with 401(k) Provisions (the Plan)     
effective as of January 1, 1991. The Plan operates as a leveraged employee stock
ownership plan (ESOP) that allows for salary-deferral contributions by the      
Company's employees in accordance with the provisions of Section 401(k) of the  
Internal Revenue Code. The Plan is designed to comply with Section 4975(e)(7)   
and the regulations thereunder of the Internal Revenue Code and is subject to   
the applicable provisions of the Employee Retirement Income Security Act of     
1974, as amended (ERISA). The following description of Community Capital        
Corporation Employee Stock Ownership Plan with 401(k) Provisions provides only  
general information. Participants should refer to the Plan agreement for a more 
complete description of the Plan's provisions.                                  

General - The Plan is a defined contribution plan covering all full-time        
employees of the Company. Employees can enter the Plan at the beginning of the  
month following start of employment.                                            

Contributions - The Company may make three types of contributions to the Plan:  
Basic Contributions (discretionary contributions made for all non-highly        
compensated participants to satisfy the nondiscrimination requirements of the   
Internal Revenue Code); Matching Contributions (Company matches 75 percent of   
the Salary Reduction Contributions made by a participant, limited to 6 percent  
of the participant's eligible compensation); and Optional Contributions         
(additional discretionary contributions made to the Plan as determined by the   
Board of Directors). These contributions may be accrued during the Plan year to 
which the contribution is attributed. Participants may contribute up to 20      
percent of pre tax annual compensation as defined in the Plan. In addition,     
participants may contribute amounts representing rollovers from other qualified 
retirement plans. Contributions are subject to certain limitations.             

Participant Accounts - Each Participant's account is credited with the          
participant's contribution, allocations of the Company's contribution, Plan     
earnings, and forfeitures of terminated participants' nonvested accounts.       
Allocation of Company Basic and Optional contributions is based on participants'
compensation, while allocation of Company Matching Contributions is based upon  
participants' salary reduction contribution. A participant must be employed by  
the Company on the last day of the Plan year and complete 1,000 hours to be     
eligible to receive an allocation of Company Basic or Optional contributions.   

Vesting - Participants are immediately vested in their contributions plus actual
earnings thereon. Vesting in the Company's Contribution portion of their        
accounts plus actual earnings thereon is based on years of service. Vesting     
commences after one year of credited service and a participant is 100 percent   
vested after five years of credited service. Upon retirement, death, or total   
disability, a participant is 100 percent vested.                                

Investment Options -The Plan currently offers twelve mutual funds and the       
Company's common stock as investment options for participants. The matching     
Company contribution is invested directly in Community Capital common stock.    

Participant Loans - Participants may borrow from their fund accounts, with      
certain restrictions, a minimum of $1,000 up to a maximum equal to the lesser of
$50,000 or 50 percent of their vested account balance, whichever is less. The   
loans are secured by the balance in the participant's account and bear interest 
rates at prime plus 1 percent at the time of the loan.                          

Payment of Benefits - On termination of service due to death, disability or     
retirement, a participant may elect to receive either a lump-sum amount equal to
the value of the participant's vested interest in his or her account or annual  
installments. For termination of services due to other reasons, a participant   
may receive the value of the vested interest in his or her account as a lump-sum
distribution.                                                                   

Voting Rights - With respect to any corporate matter which involves the voting  
of Company stock relating to the approval or disapproval of any corporate       
merger, consolidation, or similar matters, each participant is entitled to      
exercise voting rights attributable to shares of the Company's stock allocated  
to his or her account.                                                          

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Employee Stock Ownership Plan with 401(k) Provisions
 Notes to Financial Statements

NOTE 1 - DESCRIPTION OF THE PLAN (continued)                                    

Plan loans - The Plan may incur acquisition loans to finance the acquisition of 
the Company's stock or to repay a prior loan. As of December 31, 2002 and 2001, 
there were no loans outstanding.                                                

Forfeited Accounts - As of December 31, 2002 and 2001, forfeited non-vested     
accounts totaled $93,548 and $26,782, respectively. Forfeitures attributable to 
matching contributions not used by the Plan for payment of Plan expenses will be
allocated to participants eligible to share in the Company's matching           
contribution in the same proportion that their compensation bears to the total  
compensation of all such participants. Forfeitures attributable to the Company's
discretionary contribution will be used to increase the Company's discretionary 
contribution and allocated to participants eligible to share in such            
contribution in the same manner as any such discretionary contribution is       
allocated.                                                                      

Plan Change - During the 2002 plan year, the Company changed third party        
administrators.                                                                 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                             

Basis of Presentation - The Plan's financial statements are prepared using the  
accrual method of accounting, except for the payment of participant benefits    
which are recorded when paid.                                                   

Valuation of Investments - The Plan's investments are stated at fair value.     
Shares of mutual funds are valued at quoted market prices which represent the   
net asset value of shares held by the Plan at year-end. Shares of the Company   
are valued at fair value, which was the closing quoted price of the Company's   
stock as noted by the American Stock Exchange as of the close of business       
December 31, 2002.                                                              

Purchases and sales of securities are recorded on a trade-date basis. Dividends 
are recorded on the ex-dividend date.                                           

Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to make estimates
and assumptions that affect the reported amounts of assets and liabilities and  
changes therein, and disclosure of contingent assets and liabilities.           
Accordingly, actual results may differ from those estimates.                    

Risk Concentration - Financial instruments, which potentially subject the Plan  
to concentrations of credit risk, consist principally of investments in managed 
funds and in stock of the Company. The Trustee diversifies, through             
participants' directions, investments between separate funds in order to limit  
the amount of credit exposure to any one fund. The underlying assets owned by   
that fund collateralize each managed fund.                                      

Payment of Benefits                                                             
Benefits are recorded when paid.                                                

NOTE 3 - PLAN TERMINATION                                                       

Although it has not expressed any intent to do so, the Company has the right    
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,      
participants will become 100% vested in their accounts.                         

NOTE 4 - ADMINISTRATION OF PLAN ASSETS                                          

Investments in the Company's common shares are held and managed by the Trustee  
of the Plan. Mutual funds are held and managed by the Custodian of the Plan.    

Certain administrative functions are performed by officers of the Company. No   
such officer receives compensation from the Plan. The Company pays the          
administrative costs of the Plan with the exception of certain investment and   
custodial fees, which are paid by the Plan.                                     

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Employee Stock Ownership Plan with 401(k) Provisions
 Notes to Financial Statements

NOTE 5 - INVESTMENTS                                                            

At December 31, 2002 and 2001, the market value of the Plan's investments in the
Company's common shares were $2,010,135 and $1,370,160, respectively. Actual    
common shares held of the Company's stock were 141,559 and 121,792,             
respectively. All shares were allocated.                                        

Investments that represent 5% or more of the Plan's net assets at December 31,  
2002 and 2001 are as follows:                                                   

                                                        [Enlarge/Download Table]

                                                                    2002        2001   
                                                                 ----------  ----------
                                                                                       
Investments at fair value as determined by quoted market prices                        
   Community Capital Corporation common shares                   $2,010,135  $1,370,160
   Federated Max-Cap                                                463,593          --
   BGI - Midcap                                                          --     134,290
   BGI - S&P 500 Value Fund                                              --     135,287
   BGI - S&P Growth Fund                                                 --     282,372

During 2002, the Plan's investments (including investments bought, sold, and    
held during the year) appreciated in value as follows:                          

                                                                [Download Table]
                                                                                   
Realized and unrealized gains (losses) including dividends and interest            
   Mutual Funds                                                          $(104,091)
   Community Capital Corporation common stock                              417,177 
                                                                         --------- 
                                                                         $ 313,086 
                                                                         ========= 

NOTE 6 - TAX STATUS                                                             

The Internal Revenue Service has determined and informed the Company by a letter
dated August 9, 2002 that the Plan and related trust are designed in accordance 
with applicable sections of the Internal Revenue Code (IRC). Although the Plan  
has been amended since receiving the determination letter, the Plan             
administrator and the Plan's tax counsel believe that the Plan is designed and  
is currently being operated in compliance with the applicable requirements of   
the IRC.                                                                        

NOTE 7 - PLAN AMENDMENTS                                                        

For the 2002 Plan year the Company's Board of Directors amended the Plan to name
the Compensation Committee as Trustee of the Plan.                              

F-33

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Employee Stock Ownership Plan with 401(k) Provisions
Plan 001
EIN 57-0866395
Item 4i, Schedule H - Schedule of Assets (Held at End of Year)
December 31, 2002                                                               

                                                        [Enlarge/Download Table]

                                                          (c)c                              
     (a)                   (b)                  Description of investment    (d)     (e)    
Identity of        Identity of issue,           including maturity date,                    
   party           borrower, lessor,         rate of interest, collateral,         Current  
  involved          or similar party             par or maturity value      Cost    value   
-----------  ------------------------------  -----------------------------  ----  ----------

                                                                                            
     *       Community Capital Corporation        141,558.828 shares         **   $2,010,135

             Dodge & Cox Stock                        430.053 shares         **       37,866

             Federated Gov't Sec 1-3 Year           3,264.940 shares         **       35,359

             Federated Gov't Ultrashort             2,702.824 shares         **        5,379

             Federated Kaufmann A                     112.286 shares         **          387

             Federated Max-Cap                     26,059.212 shares         **      463,593

             Federated Mid-Cap Index                8,294.672 shares         **      118,282

             Federated Mini-Cap Index               5,600.671 shares         **       51,414

             Federated Prime Obligation SS        133,503.110 shares         **      133,504

             Federated Short-Term Income              578.049 shares         **        4,994

             Federated Total Return Bond IS         3,491,859 shares         **       37,677

             Fidelity Adv Equity Growth                38.084 shares         **        1,286

             Fidelity Low Priced Stock              1,278.726 shares         **       34,703

     *       Participant Loans                          5.75 percent         **        7,781
                                                                                  ----------

                                                                                  $2,942,360
                                                                                  ==========

*    Indicates a party-in-interest to the Plan.                                 

**   Cost information omitted due to participant-directed plan.                 

F-34

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 EXHIBIT INDEX

Exhibit                                                                     
Number                                Description                         
-------                                -----------                          
3.1/1/       Articles of Incorporation of Registrant                        
 3.2/1/       Articles of Amendment to Articles of Incorporation of Registrant
(re: Change of Name)                              
3.3/1/       Bylaws of Registrant                                           
3.4          Amendment to Bylaws dated as of January 16, 2002               
3.5/2/       Amendment to Bylaws dated as of September 18, 2002             
  4.1/3/       Form of Common Stock Certificate. (The rights of security holders
             of the Registrant are set forth in the Registrant's Articles of
             Incorporation and Bylaws included as Exhibits 3.1 through 3.5.)
10.3/1/       Registrant's Executive Supplemental Income Plan (Summary) and   
form of Executive Supplemental Income Agreement   
10.4/1/       Registrant's Management Incentive Compensation Plans (Summary)  
10.5/1/       Lease Agreement dated July 8, 1994 between John W. Drummond and 
the Registrant                                    
10.6/3/       Lease Agreement With Options dated June 11, 1996 between Robert 
C. Coleman and the Registrant                     
10.18/4/      1997 Stock Incentive Plan, as amended                           
10.19/5/      Employment Agreement dated June 30, 2000 between Community      
Capital Corporation and Ralph Wesley Brewer       
10.21/6/      Salary Continuation Agreement between CapitalBank and William G.
Stevens dated October 17, 2002                    
10.22/6/      Salary Continuation Agreement between CapitalBank and Ralph W.  
Brewer dated October 17, 2002                     
10.23/6/      Split Dollar Agreement between CapitalBank and Ralph W. Brewer  
dated October 17, 2002                            
10.24/6/      Salary Continuation Agreement between CapitalBank and Helen A.  
Austin dated October 17, 2002                     
10.25/6/      Split Dollar Agreement between CapitalBank and Helen A. Austin  
dated October 17, 2002                            
10.26/6/      Salary Continuation Agreement between CapitalBank and James A.  
Lollis dated October 17, 2002                     
10.27/6/      Split Dollar Agreement between CapitalBank and James A. Lollis  
dated October 17, 2002                            
10.28/6/      Salary Continuation between CapitalBank and Taylor T. Stokes    
dated October 17, 2002                            
10.29/6/      Split Dollar Agreement CapitalBank and Taylor T. Stokes dated   
October 17, 2002                                  
10.30/6/      Salary Continuation Agreement between CapitalBank and Walter G. 
Stevens dated October 17, 2002                    
10.31/6/      Split Dollar Agreement between CapitalBank and Walter G. Stevens
dated October 17, 2002                            
 10.32/6/      Salary Continuation Agreement between CapitalBank and Sonja Hazel
Hughes dated October 17, 2002                     
10.33/6/      Salary Continuation Agreement between CapitalBank and Steve O.  
White dated October 17, 2002                      
 10.34         Split Dollar Agreement between Greenwood Bank & Trust and William
G. Stevens dated November 16, 1998                
10.35         Split Dollar Agreement between Greenwood Bank & Trust and Steve 
White dated November 16, 1998                     
10.36         Split Dollar Agreement between Greenwood Bank & Trust and S.    
Hazel Hughes dated November 16, 1998              
16.1/7/       Letter re: Change in Certifying Accountant                      
21.1/8/       Subsidiaries of the Registrant                                  
23.1          Consent of Elliott Davis, LLC                                   
24.1          Directors' Powers of Attorney                                   
99.1          Certification Pursuant to 18 U.S.C. Section 1350, as adopted    
       Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2          Certification Pursuant to 18 U.S.C. Section 1350, as adopted    
       Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

E-1           

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----------                                                                      
/1/  Incorporated by reference to the Exhibit of the same number filed in       
connection with the Registrant's Form 10-K for the fiscal year ended  
December 31, 1995                                                     
/2/  Incorporated by reference to Exhibit 3.4 filed in connection with the      
 Registrant's 10-Q for the quarter ended September 30, 2002 and filed on
November 13, 2002                                                     
/3/  Incorporated by reference to the Exhibit of the same number filed in       
connection with the Registrant's Registration Statement on Form S-2   
initially filed on December 20, 1996 (File No. 333-18457)             
/4/  Incorporated by reference to Registrant's Definitive Proxy Statement for   
Annual Meeting of Shareholders held on May 26, 1999                   
/5/  Incorporated by reference to the Exhibit of the same number filed in       
   connection with the Registrant's Form 10-Q for the quarter ended June 30,
2000 and filed on August 14, 2000                                     
/6/  Incorporated by reference to the Exhibit of the same number filed in       
   connection with the Registrant's 10-Q for the quarter ended September 30,
2002 and filed on November 13, 2002                                   
/7/  Incorporated by reference to the Exhibit of the same number filed in       
connection with the Registrant's 8-K filed on January 7, 2003         
/8/  Incorporated by reference to the Exhibit of the same number filed in       
  connection with the Registrant's 10-K for the fiscal year ended December
31, 2001 and filed on March 28, 2002                                  

E-1 

Dates Referenced Herein   and   Documents Incorporated By Reference

				Referenced-On Page
This 10-K Filing		Date		First		Last			Other Filings
		7/8/94		70
		12/31/95		71					10-K/A, 10-K
		6/11/96		70
		12/20/96		71					S-2, 8-A12B
		1/1/98		53
		5/27/98		53					DEF 14A
		9/30/98		51					10-Q
		11/16/98		70					10-Q
		1/27/99		53
		5/26/99		71					DEF 14A
		11/4/99		28
		12/31/99		36					10-K
		3/11/00		8
		6/30/00		51		71			10-Q
		8/14/00		71					10-Q
		12/31/00		13		54			10-K
		1/1/01		3		43			8-K
		1/29/01		12		46			8-K
		5/14/01		12		47			10-Q
		5/30/01		51
		8/31/01		10
		9/17/01		10
		11/19/01		10
		12/10/01		10
		12/31/01		12		71			10-K
		1/16/02		10		70
		1/18/02		37		38
		3/8/02		10
		3/28/02		71					10-K
		4/17/02		10
		6/7/02		10
		7/18/02		10
		7/30/02		9
		8/9/02		68
		9/6/02		10
		9/18/02		70
		9/30/02		71					10-Q
		10/1/02		52
		10/16/02		10
		10/17/02		70
		11/13/02		71					10-Q
		11/20/02		31
		11/25/02		31					8-K
		12/6/02		10
For The Period Ended		12/31/02		1		69			10-K/A
		1/2/03		29					8-K
		1/7/03		71					8-K
		1/24/03		37
		3/20/03		63					8-K
		3/21/03		1		10
		3/27/03		32		35
Filed On / Filed As Of		3/31/03							10-Q
		12/31/03		29					5, 10-K
		9/30/05		52					10-Q
		7/31/06		51
		1/27/08		53
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