##### Table of Contents

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U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-QSB



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(Mark One)

|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------



For the Quarterly Period Ended September 30, 2004



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
|- | ----------------------------------------------------------------------------------------------------------



For the Transition Period from
 to



Commission File Number 33-76644



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COMMUNITYCORP

(Exact name of registrant as specified in its charter)



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|                                               |  |                                     
|---------------------------------------------- |  | ------------------------------------
|South Carolina                                 |  | 57-1019001                          
|(State or other jurisdiction of incorporation) |  | (I.R.S. Employer Identification No.)



1100 N. Jefferies
Boulevard

Walterboro, SC 29488

(Address of principal executive offices, including zip code)



(843) 549-2265

(Registrants telephone number, including area code)



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



Indicate the number of shares outstanding of each of the issuers classes of common stock as of the date of this filing.



247,105 shares of common stock, $5 par value, as of November 11, 2004



Transitional Small Business Disclosure Format (Check
one):    Yes ̈No  x



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##### Table of Contents

COMMUNITYCORP



Index



|                              |  |                                                                                                                                               |  |         
|----------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|                              |  |                                                                                                                                               |  | Page No.
|PART I. FINANCIAL INFORMATION |  |                                                                                                                                              
|                              |  |                                                                                                                                              
|Item 1.                       |  | Financial Statements (Unaudited)                                                                                                              |  |         
|                              |  |                                                                                                                                              
|                              |  | Condensed Consolidated Balance Sheets - September 30, 2004 and December 31, 2003                                                              |  | 3       
|                              |  |                                                                                                                                              
|                              |  | Condensed Consolidated Statements of Income -Nine months ended September 30, 2004 and 2003 and Three months ended September 30, 2004 and 2003 |  | 4       
|                              |  |                                                                                                                                              
|                              |  | Condensed Consolidated Statements of Shareholders Equity and Comprehensive Income - Nine months ended September 30, 2004 and 2003            |  | 5       
|                              |  |                                                                                                                                              
|                              |  | Condensed Consolidated Statements of Cash Flows - Nine months ended September 30, 2004 and 2003                                               |  | 6       
|                              |  |                                                                                                                                              
|                              |  | Notes to Condensed Consolidated Financial Statements                                                                                          |  | 7       
|                              |  |                                                                                                                                              
|Item 2.                       |  | Managements Discussion and Analysis or Plan of Operations                                                                                    |  | 8-14    
|                              |  |                                                                                                                                              
|Item 3.                       |  | Controls and Procedures                                                                                                                       |  | 14      
|                              | 
|PART II.
OTHER INFORMATION    |  |                                                                                                                                              
|                              |  |                                                                                                                                              
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                                                              |  | 15      
|                              |  |                                                                                                                                              
|                              |  | (a) Exhibits                                                                                                                                  |  | 15      
|                              |  |                                                                                                                                              
|                              |  | (b) Reports on Form 8-K                                                                                                                       |  | 15      
|                              | 
|Signature                     |  | 15                                                                                                                                           
|                              | 
|Index to Exhibits             |  | 16                                                                                                                                           



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##### Table of Contents

COMMUNITYCORP



Condensed
Consolidated Balance Sheets



|                                                                                                                                            |  |                   |             |   |                  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                                                            |  | September 30,2004 |             |   | December 31,2003 |  
|                                                                                                                                            |  | (Unaudited)       |             |   | (Audited)        |  
|Assets:                                                                                                                                     |  |                   |             |   |                  |   |             |  
|Cash and cash equivalents:                                                                                                                  |  |                   |             |   |                  |   |             |  
|Cash and due from banks                                                                                                                     |  | $                 | 6,640,526   |   |                  | $ | 4,862,983   |  
|Federal funds sold and securities purchased under agreements to resell                                                                      |  |                   | 16,843,000  |   |                  |   | 16,367,000  |  
|                                                                                                                                            |  |                   |             |   |                  |   |             |  
|Total cash and cash equivalents                                                                                                             |  |                   | 23,483,526  |   |                  |   | 21,229,983  |  
|                                                                                                                                            |  |                   |             |   |                  |   |             |  
|Time deposits with other banks                                                                                                              |  |                   | 499,000     |   |                  |   | 499,000     |  
|                                                                                                                                            |  |                  
|Investment securities:                                                                                                                      |  |                   |             |   |                  |   |             |  
|Securities available-for-sale                                                                                                               |  |                   | 23,536,265  |   |                  |   | 16,494,638  |  
|Nonmarketable equity securities                                                                                                             |  |                   | 197,375     |   |                  |   | 214,375     |  
|Securities held-to-maturity (estimated market value of $2,282,720 and $2,764,762 at September 30, 2004 and December 31, 2003,
respectively) |  |                   | 2,183,440   |   |                  |   | 2,644,498   |  
|                                                                                                                                            |  |                   |             |   |                  |   |             |  
|Total investment securities                                                                                                                 |  |                   | 25,917,080  |   |                  |   | 19,353,511  |  
|                                                                                                                                            |  |                   |             |   |                  |   |             |  
|Loans receivable                                                                                                                            |  |                   | 79,359,541  |   |                  |   | 80,169,314  |  
|Less allowance for loan losses                                                                                                              |  |                   | (1,391,768  | ) |                  |   | (1,270,062  | )
|                                                                                                                                            |  |                   |             |   |                  |   |             |  
|Loans, net                                                                                                                                  |  |                   | 77,967,773  |   |                  |   | 78,899,252  |  
|Accrued interest receivable                                                                                                                 |  |                   | 824,665     |   |                  |   | 817,309     |  
|Premises, furniture & equipment, net                                                                                                        |  |                   | 3,047,955   |   |                  |   | 2,517,479   |  
|Other real estate owned                                                                                                                     |  |                   | 697,835     |   |                  |   | 725,035     |  
|Other assets                                                                                                                                |  |                   | 762,804     |   |                  |   | 596,372     |  
|                                                                                                                                            |  |                   |             |   |                  |   |             |  
|Total assets                                                                                                                                |  | $                 | 133,200,638 |   |                  | $ | 124,637,941 |  
|                                                                                                                                            |  |                   |             |   |                  |   |             |  
|Liabilities and Shareholders Equity:                                                                                                       |  |                   |             |   |                  |   |             |  
|Liabilities:                                                                                                                                |  |                   |             |   |                  |   |             |  
|Deposits:                                                                                                                                   |  |                   |             |   |                  |   |             |  
|Noninterest-bearing                                                                                                                         |  | $                 | 17,652,182  |   |                  | $ | 13,952,334  |  
|Interest-bearing                                                                                                                            |  |                   | 102,458,233 |   |                  |   | 98,631,492  |  
|                                                                                                                                            |  |                   |             |   |                  |   |             |  
|                                                                                                                                            |  |                   | 120,110,415 |   |                  |   | 112,583,826 |  
|                                                                                                                                            |  |                  
|Short-term borrowings                                                                                                                       |  |                   | 270,000     |   |                  |   | 450,000     |  
|Accrued interest payable                                                                                                                    |  |                   | 302,250     |   |                  |   | 295,934     |  
|Other liabilities                                                                                                                           |  |                   | 225,945     |   |                  |   | 67,958      |  
|                                                                                                                                            |  |                   |             |   |                  |   |             |  
|Total liabilities                                                                                                                           |  |                   | 120,908,610 |   |                  |   | 113,397,718 |  
|                                                                                                                                            |  |                   |             |   |                  |   |             |  
|Shareholders Equity:                                                                                                                       |  |                   |             |   |                  |   |             |  
|Preferred stock, $5 par value, 3,000,000 shares authorized and unissued                                                                     |  |                   |            |   |                  |   |            |  
|Common stock, $5 par value, 3,000,000 shares authorized, 300,000 shares issued and outstanding                                              |  |                   | 1,500,000   |   |                  |   | 1,500,000   |  
|Capital surplus                                                                                                                             |  |                   | 1,721,023   |   |                  |   | 1,731,708   |  
|Accumulated other comprehensive income (loss)                                                                                               |  |                   | 62,059      |   |                  |   | 64,545      |  
|Retained earnings                                                                                                                           |  |                   | 12,308,302  |   |                  |   | 11,239,046  |  
|Treasury stock (52,895 shares in 2004 and 52,664 shares in 2003)                                                                            |  |                   | (3,299,356  | ) |                  |   | (3,295,076  | )
|                                                                                                                                            |  |                   |             |   |                  |   |             |  
|Total shareholders equity                                                                                                                  |  |                   | 12,292,028  |   |                  |   | 11,240,223  |  
|                                                                                                                                            |  |                   |             |   |                  |   |             |  
|Total liabilities and shareholders equity                                                                                                  |  | $                 | 133,200,638 |   |                  | $ | 124,637,941 |  
|                                                                                                                                            |  |                   |             |   |                  |   |             |  



See notes to
condensed consolidated financial statements



3



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##### Table of Contents

COMMUNITYCORP



Condensed
Consolidated Statements of Income

(Unaudited)



|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|--------------------------------------------------- |  | ------------------------------ | --------- | ------------------------------- | - | --------- |  | ---- | --------- |  | - | ---------
|                                                    |  | Nine Months EndedSeptember 30, |           | Three Months EndedSeptember 30,
|                                                    |  | 2004                           |           | 2003                            |   | 2004      |  | 2003
|Interest income:                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Loans, including fees                               |  | $                              | 4,437,737 |                                 | $ | 4,336,968 |  | $    | 1,544,307 |  | $ | 1,438,306
|Securities                                          |  |                                | 511,832   |                                 |   | 430,423   |  |      | 203,332   |  |   | 113,217  
|Other interest income                               |  |                                | 147,521   |                                 |   | 176,002   |  |      | 49,572    |  |   | 59,249   
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Total                                               |  |                                | 5,097,090 |                                 |   | 4,943,393 |  |      | 1,797,211 |  |   | 1,610,772
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Interest expense:                                   |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Deposit accounts                                    |  |                                | 1,165,496 |                                 |   | 1,493,024 |  |      | 402,333   |  |   | 437,543  
|Other interest expense                              |  |                                | 684       |                                 |   | 704       |  |      | 514       |  |   | 127      
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|                                                    |  |                                | 1,166,180 |                                 |   | 1,493,728 |  |      | 402,847   |  |   | 437,670  
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Net interest income                                 |  |                                | 3,930,910 |                                 |   | 3,449,665 |  |      | 1,394,364 |  |   | 1,173,102
|                                                    |  |                                |           |                                
|Provision for loan losses                           |  |                                | 355,951   |                                 |   | 210,000   |  |      | 135,000   |  |   | 50,000   
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Net interest income after provision for loan losses |  |                                | 3,574,959 |                                 |   | 3,239,665 |  |      | 1,259,364 |  |   | 1,123,102
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Noninterest income:                                 |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Service charges                                     |  |                                | 324,522   |                                 |   | 309,366   |  |      | 116,770   |  |   | 112,477  
|Other income                                        |  |                                | 88,935    |                                 |   | 103,467   |  |      | 34,902    |  |   | 24,945   
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Total                                               |  |                                | 413,457   |                                 |   | 412,833   |  |      | 151,672   |  |   | 137,422  
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Noninterest expenses:                               |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Salaries and benefits                               |  |                                | 1,159,773 |                                 |   | 1,057,165 |  |      | 411,476   |  |   | 360,499  
|Net occupancy expense                               |  |                                | 141,251   |                                 |   | 92,171    |  |      | 46,107    |  |   | 31,415   
|Equipment expense                                   |  |                                | 220,605   |                                 |   | 246,423   |  |      | 67,967    |  |   | 92,560   
|Other operating expenses                            |  |                                | 614,112   |                                 |   | 614,866   |  |      | 175,390   |  |   | 223,779  
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Total                                               |  |                                | 2,135,741 |                                 |   | 2,010,625 |  |      | 700,940   |  |   | 708,253  
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Income before taxes                                 |  |                                | 1,852,675 |                                 |   | 1,641,873 |  |      | 710,096   |  |   | 552,271  
|                                                    |  |                                |           |                                
|Income tax provision                                |  |                                | 605,000   |                                 |   | 520,000   |  |      | 246,000   |  |   | 180,000  
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Net income                                          |  | $                              | 1,247,675 |                                 | $ | 1,121,873 |  | $    | 464,096   |  | $ | 372,271  
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Earnings per share:                                 |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Weighted average common shares outstanding          |  |                                | 247,615   |                                 |   | 265,900   |  |      | 247,497   |  |   | 247,385  
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          
|Net income per common share                         |  | $                              | 5.04      |                                 | $ | 4.22      |  | $    | 1.88      |  | $ | 1.50     
|                                                    |  |                                |           |                                 |   |           |  |      |           |  |   |          



See notes to
condensed consolidated financial statements



4



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##### Table of Contents

COMMUNITYCORP



Condensed
Consolidated Statement of Shareholders Equity and Comprehensive Income

for the nine months ended September 30, 2004 and 2003

(Unaudited)



|                                                        |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   |            |   |  |   |            |  
|------------------------------------------------------- |  | ------------ |  | --------------- | --------- |  | ------------------------------------ | --------- | - | ----------------- | - | ------- | -------------- |  | - | ---------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                        |  | Common Stock |  | Capital Surplus |           |  | Accumulated OtherComprehensiveIncome |           |   | Retained Earnings |   |         | Treasury Stock |  |   | Total      |  
|                                                        |  | Shares       |  | Amount          |           |  |                                      |           |  
|Balance, December 31, 2002                              |  | 300,000      |  | $               | 1,500,000 |  | $                                    | 1,731,708 |   |                   | $ | 128,119 |                |  | $ | 9,993,521  |   |  | $ | (1,104,171 | ) |  | $ | 12,249,177 |  
|                                                        |  |              |  |                 |           |  |                                     
|Cash dividends declared  $.65 per share                |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   | (179,516   | ) |  |   |            |   |  |   | (179,516   | )
|                                                        |  |              |  |                 |           |  |                                     
|Net income for the period                               |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   | 1,121,873  |   |  |   |            |   |  |   | 1,121,873  |  
|                                                        |  |              |  |                 |           |  |                                     
|Other comprehensive loss, net of tax benefit of $36,336 |  |              |  |                 |           |  |                                      |           |   |                   |   | (69,047 | )              |  |   |            |   |  |   |            |   |  |   | (69,047    | )
|                                                        |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   |            |   |  |   |            |  
|Comprehensive income                                    |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   |            |   |  |   | 1,052,826  |  
|                                                        |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   |            |   |  |   |            |  
|Sale of treasury stock                                  |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   | 167,715    |   |  |   | 167,715    |  
|                                                        |  |              |  |                 |           |  |                                     
|Purchase of treasury stock                              |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   | (2,358,620 | ) |  |   | (2,358,620 | )
|                                                        |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   |            |   |  |   |            |  
|Balance, September 30, 2003                             |  | 300,000      |  | $               | 1,500,000 |  | $                                    | 1,731,708 |   |                   | $ | 59,072  |                |  | $ | 10,935,878 |   |  | $ | (3,295,076 | ) |  | $ | 10,931,582 |  
|                                                        |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   |            |   |  |   |            |  
|Balance, December 31, 2003                              |  | 300,000      |  | $               | 1,500,000 |  | $                                    | 1,731,708 |   |                   | $ | 64,545  |                |  |   | 11,239,046 |   |  | $ | (3,295,076 | ) |  | $ | 11,240,223 |  
|                                                        |  |              |  |                 |           |  |                                     
|Cash dividends declared  $.72 per share                |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   | (178,419   | ) |  |   |            |   |  |   | (178,419   | )
|                                                        |  |              |  |                 |           |  |                                     
|Net income for the period                               |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   | 1,247,675  |   |  |   |            |   |  |   | 1,247,675  |  
|                                                        |  |              |  |                 |           |  |                                     
|Other comprehensive loss, net of tax benefit of $ 1,161 |  |              |  |                 |           |  |                                      |           |   |                   |   | (2,486  | )              |  |   |            |   |  |   |            |   |  |   | (2,486     | )
|                                                        |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   |            |   |  |   |            |  
|Comprehensive income                                    |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   |            |   |  |   | 1,245,189  |  
|                                                        |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   |            |   |  |   |            |  
|Sale of treasury stock                                  |  |              |  |                 |           |  |                                      | (10,685   | ) |                   |   |         |                |  |   |            |   |  |   | 53,285     |   |  |   | 42,600     |  
|                                                        |  |              |  |                 |           |  |                                     
|Purchase of treasury stock                              |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   | (57,565    | ) |  |   | (57,565    | )
|                                                        |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   |            |   |  |   |            |  
|Balance, September 30, 2004                             |  | 300,000      |  | $               | 1,500,000 |  | $                                    | 1,721,023 |   |                   | $ | 62,059  |                |  | $ | 12,308,302 |   |  | $ | (3,299,356 | ) |  | $ | 12,292,028 |  
|                                                        |  |              |  |                 |           |  |                                      |           |   |                   |   |         |                |  |   |            |   |  |   |            |   |  |   |            |  



See notes to
condensed consolidated financial statements



5



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##### Table of Contents

COMMUNITYCORP



Condensed
Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                  |  |                                 |             |   |      |   |             |  
|--------------------------------------------------------------------------------- |  | ------------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                  |  | Nine Months Ended September 30, |            
|                                                                                  |  | 2004                            |             |   | 2003 |  
|Cash flows from operating activities:                                             |  |                                 |             |   |      |   |             |  
|Net income                                                                        |  | $                               | 1,247,675   |   |      | $ | 1,121,873   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                 |             |   |      |   |             |  
|Depreciation                                                                      |  |                                 | 152,541     |   |      |   | 159,186     |  
|Provision for possible loan losses                                                |  |                                 | 355,951     |   |      |   | 210,000     |  
|Amortization less accretion on investments                                        |  |                                 | 132,843     |   |      |   | 45,882      |  
|(Increase) decrease in interest receivable                                        |  |                                 | (7,356      | ) |      |   | 74,290      |  
|Increase (decrease) in interest payable                                           |  |                                 | 6,316       |   |      |   | (59,901     | )
|Proceeds from sale of OREO property                                               |  |                                 | 27,200      |   |      |   |            |  
|Increase in other assets                                                          |  |                                 | (167,444    | ) |      |   | (528,267    | )
|Increase in other liabilities                                                     |  |                                 | 159,148     |   |      |   | 82,703      |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|Net cash provided by operating activities                                         |  |                                 | 1,906,874   |   |      |   | 1,105,766   |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|Cash flows from investing activities:                                             |  |                                 |             |   |      |   |             |  
|Net (increase) decrease in loans to customers                                     |  |                                 | 576,540     |   |      |   | (2,878,474  | )
|Purchases of securities available-for-sale                                        |  |                                 | (16,193,931 | ) |      |   | (15,826,418 | )
|Maturities of securities available-for-sale                                       |  |                                 | 9,015,978   |   |      |   | 13,718,855  |  
|Maturities of securities held-to-maturity                                         |  |                                 | 460,894     |   |      |   | 399,783     |  
|Decrease in nonmarketable equity securities                                       |  |                                 | 17,000      |   |      |   | 125,000     |  
|Increase in time deposits with other banks                                        |  |                                 |            |   |      |   | (200,000    | )
|Purchases of premises and equipment                                               |  |                                 | (683,017    | ) |      |   | (165,293    | )
|                                                                                  |  |                                 |             |   |      |   |             |  
|Net cash used by investing activities                                             |  |                                 | (6,806,536  | ) |      |   | (4,826,547  | )
|                                                                                  |  |                                 |             |   |      |   |             |  
|Cash flows from financing activities:                                             |  |                                 |             |   |      |   |             |  
|Net increase in deposit accounts                                                  |  |                                 | 7,526,589   |   |      |   | 6,345,541   |  
|Decrease in short-term borrowings                                                 |  |                                 | (180,000    | ) |      |   | (100,000    | )
|Dividends paid                                                                    |  |                                 | (178,419    | ) |      |   | (179,516    | )
|Sale of treasury stock                                                            |  |                                 | 42,600      |   |      |   | 167,715     |  
|Purchase of treasury stock                                                        |  |                                 | (57,565     | ) |      |   | (2,358,620  | )
|                                                                                  |  |                                 |             |   |      |   |             |  
|Net cash provided by financing activities                                         |  |                                 | 7,153,205   |   |      |   | 3,875,120   |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|Net increase (decrease) in cash and cash equivalents                              |  |                                 | 2,253,543   |   |      |   | 154,339     |  
|                                                                                  |  |                                
|Cash and cash equivalents, beginning of period                                    |  |                                 | 21,229,983  |   |      |   | 21,824,998  |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|Cash and cash equivalents, end of period                                          |  | $                               | 23,483,526  |   |      | $ | 21,979,337  |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|Cash paid during the period for:                                                  |  |                                 |             |   |      |   |             |  
|Income taxes                                                                      |  | $                               | 677,500     |   |      | $ | 652,445     |  
|Interest                                                                          |  | $                               | 1,159,864   |   |      | $ | 1,553,629   |  



See notes to
condensed consolidated financial statements



6



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##### Table of Contents

COMMUNITYCORP



NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 1 - BASIS OF PRESENTATION



The accompanying condensed consolidated financial statements have been prepared in accordance with the requirements for interim financial statements and, accordingly,
they are condensed and omit disclosures, which would substantially duplicate those contained in the most recent annual report to shareholders. The condensed consolidated financial statements as of September 30, 2004 and for the interim periods ended
September 30, 2004 and 2003 are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. The financial information as of December 31, 2003 has been
derived from the audited consolidated financial statements as of that date. For further information, refer to the consolidated financial statements and the related notes included in Communitycorps 2003 Annual Report.



NOTE 2 - COMPREHENSIVE INCOME



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



|                                                                    |  |               |          |   |                  |   |                   |  |   |          |  
|------------------------------------------------------------------- |  | ------------- | -------- | - | ---------------- | - | ----------------- |  | - | -------- | -
|                                                                    |  | Pre-taxAmount |          |   | (Expense)Benefit |   | Net-of-tax Amount | 
|For the Nine Months Ended September 30, 2004:                       |  |               |          |   |                  |   |                   |  |   |          |  
|Unrealized losses on securities available-for-sale                  |  | $             | (3,647   | ) |                  | $ | 1,161             |  | $ | (2,486   | )
|Plus: reclassification adjustment for losses realized in net income |  |               |         |   |                  |   |                  |  |   |         |  
|                                                                    |  |               |          |   |                  |   |                   |  |   |          |  
|Net unrealized losses on securities                                 |  |               | (3,647   | ) |                  |   | 1,161             |  |   | (2,486   | )
|                                                                    |  |               |          |   |                  |   |                   |  |   |          |  
|Other comprehensive income (loss)                                   |  | $             | (3,647   | ) |                  | $ | 1,161             |  | $ | (2,486   | )
|                                                                    |  |               |          |   |                  |   |                   |  |   |          |  
|For the Nine Months Ended September 30, 2003:                       |  |               |          |   |                  |   |                   |  |   |          |  
|Unrealized losses on securities available-for-sale                  |  | $             | (105,383 | ) |                  | $ | 36,336            |  | $ | (69,047  | )
|Plus: reclassification adjustment for losses realized in net income |  |               |         |   |                  |   |                  |  |   |         |  
|                                                                    |  |               |          |   |                  |   |                   |  |   |          |  
|Net unrealized losses on securities                                 |  |               | (105,383 | ) |                  |   | 36,336            |  |   | (69,047  | )
|                                                                    |  |               |          |   |                  |   |                   |  |   |          |  
|Other comprehensive income (loss)                                   |  | $             | (105,383 | ) |                  | $ | 36,336            |  | $ | (69,047  | )
|                                                                    |  |               |          |   |                  |   |                   |  |   |          |  
|For the Three Months Ended September 30, 2004:                      |  |               |          |   |                  |   |                   |  |   |          |  
|Unrealized losses on securities available-for-sale                  |  | $             | (375,332 | ) |                  | $ | 129,586           |  | $ | (245,746 | )
|Plus: reclassification adjustment for gains realized in net income  |  |               |         |   |                  |   |                  |  |   |         |  
|                                                                    |  |               |          |   |                  |   |                   |  |   |          |  
|Net unrealized losses on securities                                 |  |               | (375,332 | ) |                  |   | 129,586           |  |   | (245,746 | )
|                                                                    |  |               |          |   |                  |   |                   |  |   |          |  
|Other comprehensive loss                                            |  | $             | (375,332 | ) |                  | $ | 129,586           |  | $ | (245,746 | )
|                                                                    |  |               |          |   |                  |   |                   |  |   |          |  
|For the Three Months Ended September 30, 2003:                      |  |               |          |   |                  |   |                   |  |   |          |  
|Unrealized losses on securities available-for-sale                  |  | $             | (169,263 | ) |                  | $ | 58,396            |  | $ | (110,867 | )
|Plus: reclassification adjustment for losses realized in net income |  |               |         |   |                  |   |                  |  |   |         |  
|                                                                    |  |               |          |   |                  |   |                   |  |   |          |  
|Net unrealized losses on securities                                 |  |               | (169,263 | ) |                  |   | 58,396            |  |   | (110,867 | )
|                                                                    |  |               |          |   |                  |   |                   |  |   |          |  
|Other comprehensive income (losses)                                 |  | $             | (169,263 | ) |                  | $ | 58,396            |  | $ | (110,867 | )
|                                                                    |  |               |          |   |                  |   |                   |  |   |          |  



Accumulated other comprehensive income
consists solely of the unrealized gain on securities available for sale, net of the deferred tax effects.



7



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##### Table of Contents

COMMUNITYCORP



Item 2 - Managements Discussion and Analysis or Plan of Operations



The following is a discussion of the Companys financial condition as of September 30, 2004 compared to December 31, 2003, and the results of operations for the three and nine months ended September 30, 2004
compared to the three and nine months ended September 30, 2003. These comments should be read in conjunction with the Companys condensed consolidated financial statements and accompanying footnotes appearing in this report. This report
contains forward-looking statements relating to, without limitation, future economic performance, plans and objectives of management for future operations, and projections of revenues and other financial items that are based on the
beliefs of the Companys management, as well assumptions made by and information currently available to the Companys management. The words expect, estimate, anticipate and believe, as well
as similar expressions, are intended to identify forward-looking statements. The Companys actual results may differ materially from the results discussed in the forward-looking statements, and the Companys operating performance each
quarter is subject to various risks and uncertainties that are discussed in detail in the Companys filings with the Securities and Exchange Commission.



Results of Operations



Net Interest Income



The largest component of total income is net interest income, the difference between the income earned on assets and the interest accrued or paid on deposits and
borrowings used to support such assets. The volume and mix of assets and liabilities and their sensitivity to interest rate movement determine changes in net interest income. Net interest margin is determined by dividing annualized net interest
income by average earning assets. Net interest spread is derived from determining the weighted-average rate of interest paid on deposits and borrowings and subtracting it from the weighted-average yield on earning assets.



Net interest income for the nine months ended September 30, 2004, was $3,930,910 compared to
$3,449,665 for the same period last year, an increase of 13.95%. For the quarter ended September 30, 2004, net interest income was $1,394,364, compared to $1,173,102 for the quarter ended September 30, 2003 an increase of 18.86%. The increase in
income in both periods was significantly impacted by the collection of $86,911 of non accruing interest related to non accrual loans that were paid off in the third quarter of 2004. Additionally, the increase in income was partially attributable to
the increase in balances of our earning assets and the impact of lower interest rates on our interest-bearing liabilities.



For the nine months ended September 30, 2004, average earning assets totaled $119,449,163 with an annualized average yield of 5.71%, compared to $114,417,754 and 5.78%,
respectively, for the same period last year. Average interest-bearing liabilities totaled $100,291,001 with an annualized average cost of 1.55% for the nine months ended September 30, 2004, compared to $96,766,709 and 2.06%, respectively, for the
same period last year. For the quarter ended September 30, 2004, average earning assets totaled $118,766,887 with an annualized average yield of 6.00%, compared to $114,463,465 and 5.58%, respectively, for the same period last year. Average
interest-bearing liabilities totaled $99,801,536 with an annualized average cost of 1.60% for the quarter ended September 30, 2004, compared to $96,678,603 and 1.80%, respectively, for the same period last year. Adjusting for the $86,911 of interest
collected on non accruing loans during the third quarter of 2004, our annualized yield on earning assets would have been 5.61% and 5.42% for the nine months and three months ended September 30, 2004, respectively.



Net interest margin was 4.40% and 4.04% for the nine months ended September 30, 2004 and
2003, respectively. For the quarter ended September 30, 2004 and 2003, net interest margin was 4.66% and 4.07%, respectively. Adjusting for the $86,911 of interest collected on non-accruing loans during the third quarter of 2004, our net interest
margin would have been 4.30% and 4.08% for the nine months and three months ended September 30, 2004, respectively.



Our annualized yield on earning assets declined 7 basis points and increased 42 basis points for the nine months and three months ended September 30, 2004, compared to
the same periods in 2003, respectively. Adjusting for the $86,911 of interest collected on non accruing loans during the third quarter of 2004, our annualized yield on earning assets would have declined 17 basis points and 16 basis points for the
nine months and three months ended September 30, 2004, compared to the same periods in 2003, respectively. The reduction in yields, after adjusting for the collection of non-accrued interest in both periods, is reflective of the declining interest
rate environment. The change in both periods were more than offset by the decline of 51 and 20 basis points in the annualized average cost of our interest-bearing liabilities during the nine months and quarter ended September 30, 2004, respectively,
from the annualized average cost of our interest-bearing liabilities for the same periods last year.



Details of certain components of our earning assets and interest-bearing liabilities are discussed in the following paragraphs.



8



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##### Table of Contents

COMMUNITYCORP



Item 2 - Managements Discussion and Analysis or Plan of Operations continued



Net Interest Income (continued)



Because loans often provide a higher yield than other types of earning
assets, one of our goals is to maintain our loan portfolio as the largest component of total earning assets. Loans comprised approximately 66.59% and 67.67% of average earning assets for the nine months ended September 30, 2004 and 2003,
respectively, and 66.89%, and 67.44% for the quarter ended September 30, 2004 and 2003, respectively. Loan interest income for the nine months and three months ended September 30, 2004 totaled $4,437,737 and $1,544,307, respectively, including
$86,911 of interest collected on non accruing loans, compared to $4,336,968 and $1,438,306, respectively for the same periods in 2003. The annualized average yield on loans was 7.46% and 7.71% for the nine months and three months ended September 30,
2004, respectively. Adjusting for the interest collected on non accruing loans our annualized average yield on loans would have been 7.31% and 6.84%, respectively. For the nine months and three months ended September 30, 2003, our annualized average
yield on loans was 7.49% and 7.39%, respectively. Average balances of loans increased to $79,545,932 during the nine months ended September 30, 2004, an increase of $2,122,317 over the average of $77,423,615 during the comparable period in 2003. For
the quarter ended September 30, 2004, the average balances of loans increased by $2,253,827 over the average balances of loans of $77,194,736 for the quarter ended September 30, 2003.



Investment securities averaged $22,125,173, or 18.52% of average earning assets, for the nine
months ended September 30, 2004, compared to $16,650,582 or 14.55% of average earning assets, for the same period in 2003. For the quarter ended September 30, 2004, investment securities averaged $21,070,054, or 17.74%, of average earnings assets
compared to $16,732,679 or 14.62% of average earnings assets for the three months ended September 30, 2003. Interest earned on investment securities amounted to $511,832 for the nine months ended September 30, 2004, compared to $430,423 for the same
period last year. For the quarter ended September 30, 2004, interest earned on investment securities amounted to $203,332 compared to $113,217 for the same period last year. Investment securities yielded 3.09% and 3.46% for the nine months ended
September 30, 2004 and 2003, respectively. For the quarter ended September 30, 2004 and 2003, the yields on investment securities were 3.83% and 2.68%, respectively.



Total interest expense for the nine months ended September 30, 2004 and 2003 was $1,166,180 and $1,493,728, respectively. For the quarter
ended September 30, 2004 and 2003, interest expense was $402,847 and $437,670, respectively. The largest component of interest expense is interest on deposit accounts. Interest expense on deposit accounts was $1,165,496 and $1,493,024, for the nine
months ended September 30, 2004 and 2003, respectively. The average balance of deposits increased to $99,945,764 during the nine months ended September 30, 2004 from $96,410,189 during the same period last year. During the quarter ended September
30, 2004 the average balances of deposits increased to $99,465,772 from $96,333,685 for the same period last year. The annualized average cost of deposits was 1.56% for the nine months ended September 30, 2004, compared to 2.07% for the same period
in 2003. For the quarter ended September 30, 2004 and 2003, the annualized average cost of deposits was 1.60% and 1.80%, respectively. The decrease in the average cost of deposits in both periods was due to the decline in market interest rates,
which has impacted the rates we offer to our depositors.



For the nine months
ended September 30, 2004 and 2003, the total annualized average cost of funds was 1.55% and 2.06%, respectively. The overall cost of funds was 1.60% and 1.80% for the quarter ended September 30, 2004, and 2003, respectively.



Provision and Allowance for Loan Losses



The provision for loan losses is the charge to operating earnings that management believes
is necessary to maintain the allowance for possible loan losses at an adequate level. For the nine months ended September 30, 2004, the provision charged to expense was $355,951, as compared to $210,000 for the same period in 2003. For the quarters
ended September 30, 2004 and 2003, the provision charged to expense was $135,000 and $50,000 respectively. There are risks inherent in making all loans, including risks with respect to the period of time over which loans may be repaid, risks
resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers, and, in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral. We maintain an
allowance for loan losses based on, among other things, historical experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality. Our judgment about the adequacy of the allowance is based upon a
number of assumptions about future events, which we believe to be reasonable, but which may not prove to be accurate. Thus, there is a risk that charge-offs in future periods could exceed the allowance for loan losses or that substantial additional
increases in the allowance for loan losses could be required. Additions to the allowance for loan losses would result in a decrease of our net income and, possibly, our capital.



We believe that the allowance for loan losses is adequate to absorb all estimated future risk of loss inherent in the loan portfolio as of
September 30, 2004.



9



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##### Table of Contents

COMMUNITYCORP



Item 2 - Managements Discussion and Analysis or Plan of Operations continued



Noninterest Income



Noninterest income during the nine months ended September 30, 2004 was $413,457, an increase
of $624 or 0.15% from the comparable period in 2003. Service charges on deposit accounts increased $15,156 from the period ended September 30, 2003 to $324,522 for the period ended September 30, 2004. The increase is mainly attributable to the
increase in demand deposit accounts. Other income decreased 14.05% to $88,935 for the nine months ended September 30, 2004 when compared to the same period ended September 30, 2003. The decrease in other income was mainly due to a refund of
overpayment of property taxes in prior years of approximately $20,000, which was received in the first quarter of 2003. This decrease in other income was reduced by the collection of approximately $9,000 of collection costs associated with certain
non-accruing loans that were paid during the quarter ended September 30, 2004.



For the quarter ended September 30, 2004, noninterest income increased $14,250 or 10.37% over the same period in 2003. This increase is primarily due to other income, which increased $9,957 from the quarter ended September 30, 2003 to
$34,902 for the quarter ended September 30, 2004. Service charges increased $4,293 or 3.82% from the quarter ended September 30, 2003 to $116,770 for the quarter ended September 30, 2004. The increase in other income is primarily related to the
collection of approximately $9,000 of collection costs associated with certain non-accruing loans that were paid during the three months ended September 30, 2004.



Noninterest Expense



Total noninterest expense for the nine months ended September 30, 2004 increased $125,116 or 6.22% over the same period in 2003. Salaries and employee benefits increased
$102,608 from the nine months ended September 30, 2003 to $1,159,773 for the nine months ended September 30, 2004. This increase is primarily attributable to the addition of a branch manager and a mortgage loan processor plus normal salary
increases. Net occupancy and equipment expense increased $23,262 or 6.87% to $361,856 for the nine months ended September 30, 2004 when compared to the same period in 2003. The increase is mainly attributable to depreciation expense on new equipment
and costs associated with the implementation of internet banking during 2003. Other operating expenses decreased $754 for the nine months ended September 30, 2004 to $614,112.



For the quarter ended September 30, 2004, noninterest expense decreased $7,313 or 1.03% over the same period in 2003. Salaries and employee
benefits increased $50,977 from the three months ended September 30, 2003 to $411,476 for the three months ended September 30, 2004. This increase is primarily attributable to the addition of a branch manager and a mortgage loan processor plus
normal salary increases. The increase in salaries and employee benefits expense was reduced by the decrease in net occupancy and equipment expense of $9,901 and the decrease of $48,389 in other operating expenses. The reduction of other operating
expenses for the quarter ended September 30, 2004 compared to the same quarter in 2003, is mainly attributable to approximately $40,000 for miscellaneous check fraud losses and write down of other real estate own that were incurred in the third
quarter of 2003. Additionally, we were able to save approximately $3,000 per month in postage on bank statements because we began imaging customers checks in instead of returning in the mail.



Income Taxes



The income tax provision for the nine months ended September 30, 2004 was $605,000 as compared to $520,000 for the same period in 2003. This
increase was primarily a result of the increase in income before taxes. The effective tax rates were 32.66% and 31.67% for the nine months ended September 30, 2004 and September 30, 2003, respectively. The effective tax rates were 34.64% and 32.59%
for the quarter ended September 30, 2004 and September 30, 2003, respectively.



Net Income



The combination of the above factors resulted in
net income for the nine months ended September 30, 2004 of $1,247,675 as compared to $1,121,873 for the same period in 2003. This represents an increase of $125,802 or 11.21% over the same period in 2003. Net income for the quarter ended September
30, 2004 increased $91,825 or 24.67% over the same period in 2003.



10



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##### Table of Contents

COMMUNITYCORP



Item 2 - Managements Discussion and Analysis or Plan of Operations continued



Assets and Liabilities



During the first nine months of 2004, total assets increased $8,562,697, or 6.87%, when
compared to December 31, 2003. This increase was primarily a result of an increase in investments of $6,563,569, or 33.91% from the corresponding amount for December 31, 2003. This increase was reduced by the reduction in net loans of $931,479 or
1.18% from December 31, 2003 to $77,967,773 at September 30, 2004, as discussed below.



Total deposits increased by 6.69%, or $7,526,589, from December 31, 2003 to $120,110,415 at September 30, 2004. Noninterest-bearing deposits increased $3,699,848 or 26.52% to $17,652,182 at September 30, 2004 and interest-bearing deposits
increased $3,826,741 or 3.88% to $102,458,233 at September 30, 2004. The increase in deposits was the result of the continual growth of the Bank.



For more analysis of the components of the changes in asset and liabilities, see the following discussion of major balance sheet categories and the Consolidated
Statements of Cash Flows included in Item 1. Financial Statements.



We closely monitor and seek to maintain appropriate levels of interest-earning assets and interest-bearing liabilities so that maturities of assets are such that adequate funds are provided to meet customer withdrawals and loan demands.



Loans



Our loan portfolio during the nine months ended September 30, 2004 decreased slightly due to payoff of several large commercial loans and
the payoff of approximately $1,372,000 of non-accruing loans during the quarter ended September 30, 2004. Gross loans decreased $809,773 or 1.01% during the period. Balances within the major loans receivable categories as of September 30, 2004 and
December 31, 2003 are as follows:



|                           |  |                   |            |                   |   |           
|-------------------------- |  | ----------------- | ---------- | ----------------- | - | ----------
|                           |  | September 30,2004 |            | December 31, 2003
|Real estate  construction |  | $                 | 2,832,909  |                   | $ | 2,011,177 
|Real estate  mortgage     |  |                   | 38,090,228 |                   |   | 36,813,674
|Commercial and industrial  |  |                   | 27,220,249 |                   |   | 30,668,580
|Consumer and other         |  |                   | 11,216,155 |                   |   | 10,675,883
|                           |  |                   |            |                   |   |           
|                           |  | $                 | 79,359,541 |                   | $ | 80,169,314
|                           |  |                   |            |                   |   |           



Risk Elements in the Loan Portfolio



The following is a summary of risk elements in the loan portfolio:



|                                                   |  |               |           |      |   |          
|-------------------------------------------------- |  | ------------- | --------- | ---- | - | ---------
|                                                   |  | September 30,
|                                                   |  | 2004          |           | 2003
|Nonaccrual loans                                   |  | $             | 951,887   |      | $ | 2,674,045
|                                                   |  |              
|Accruing loans more than 90 days past due          |  | $             | 3,589     |      | $ | 1,101    
|                                                   |  |              
|Loans identified by the internal review mechanism: |  |               |           |      |   |          
|Criticized                                         |  | $             | 688,027   |      | $ | 195,430  
|Classified                                         |  | $             | 2,309,603 |      | $ | 2,559,639



Criticized loans have potential
weaknesses that deserve close attention and could, if uncorrected, result in deterioration of the prospects for repayment or our credit position at a future date. Classified loans are inadequately protected by the sound worth and paying capacity of
the borrower or any collateral and there is a distinct possibility or probability that we will sustain a loss if the deficiencies are not corrected.



At September 30, 2004, real estate or other collateral secured the majority of the loans that were criticized and classified. We believe that in the event of foreclosure
on these loans we will not incur a significant loss on those loans because of the estimated market value of the related collateral. However, there can be no assurance that in the case of liquidation the collateral can be sold for its estimated fair
market value or even for an amount at least equal to or greater than the loan amount.



11



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##### Table of Contents

COMMUNITYCORP



Item 2 - Managements Discussion and Analysis or Plan of Operations continued



Risk Elements in the Loan Portfolio
continued



The results of this internal review process
are the primary determining factor in managements assessment of the adequacy of the allowance for loan losses.



Activity in the Allowance for Loan Losses is as follows:



|                                                 |  |               |            |   |      |   |            |  
|------------------------------------------------ |  | ------------- | ---------- | - | ---- | - | ---------- | -
|                                                 |  | September 30, |           
|                                                 |  | 2004          |            |   | 2003 |  
|Balance, January 1,                              |  | $             | 1,270,062  |   |      | $ | 1,319,202  |  
|Provision for loan losses for the period         |  |               | 355,951    |   |      |   | 210,000    |  
|Net loans (charged-off) recovered for the period |  |               | (234,245   | ) |      |   | (230,729   | )
|                                                 |  |               |            |   |      |   |            |  
|Balance, end of period                           |  | $             | 1,391,768  |   |      | $ | 1,298,473  |  
|                                                 |  |               |            |   |      |   |            |  
|Gross loans outstanding, end of period           |  | $             | 79,359,541 |   |      | $ | 77,822,867 |  
|Allowance for loan losses to loans outstanding   |  |               | 1.75       | % |      |   | 1.67       | %



Deposits



Total deposits increased $7,526,589 or 6.69% from December 31, 2003. The largest dollar
change was an increase in interest-bearing deposits. Interest-bearing deposits increased $3,826,741 to $102,458,233 at September 30, 2004. Non interest-bearing deposits increased $3,699,848 to $17,652,182 at September 30, 2004. Expressed in
percentages, noninterest-bearing deposits increased 26.52%, and interest-bearing deposits increased 3.88%. The increases were attributable to normal growth of the Bank.



Balances within the major deposit categories are as follows:



|                                    |  |                   |             |                  |   |            
|----------------------------------- |  | ----------------- | ----------- | ---------------- | - | -----------
|                                    |  | September 30,2004 |             | December 31,2003
|Noninterest-bearing demand deposits |  | $                 | 17,652,182  |                  | $ | 13,952,334 
|Interest-bearing demand deposits    |  |                   | 22,248,314  |                  |   | 22,836,817 
|Savings deposits                    |  |                   | 24,109,798  |                  |   | 21,945,671 
|Certificates of deposits            |  |                   | 56,100,121  |                  |   | 53,849,004 
|                                    |  |                   |             |                  |   |            
|                                    |  | $                 | 120,110,415 |                  | $ | 112,583,826
|                                    |  |                   |             |                  |   |            



Liquidity



Liquidity needs are met by us through scheduled maturities of loans and investments on the
asset side and through pricing policies on the liability side for demand deposit accounts. One measure of liquidity is measured by the loan-to-total funds ratio, which was at 65.92% at September 30, 2004 and 70.93% at December 31, 2003.



Asset liquidity is provided from several sources, including amounts due from banks and
federal funds sold. Available for sale securities, particularly those maturing within one year, provide a secondary source of liquidity. In addition, funds from maturing loans are a source of liquidity.



At September 30, 2004 we had available an unused short-term line of credit to purchase up to
$3,800,000 of federal funds from an unrelated correspondent institution. We also have a credit availability agreement with the Federal Home Loan Bank totaling 15 percent of the Banks assets as of any quarter end. As of September 30, 2004, the
available credit totaled $19,980,095, and there were no draws on this line.



12



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##### Table of Contents

COMMUNITYCORP



Item 2 - Managements Discussion and Analysis or Plan of Operations continued



Interest Rate Sensitivity



Interest rate sensitivity is defined as the exposure to variability in net interest income
resulting from changes in market-based interest rates. Asset/liability management is the process by which we monitor and control the mix, maturities, and interest sensitivity of our assets and liabilities. Asset/liability management seeks to ensure
adequate liquidity and to maintain an appropriate balance between interest-sensitive assets and liabilities to minimize potentially adverse impacts on earnings from changes in market interest rates. 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. We believe that interest rate risk management becomes
increasingly important in an interest rate environment and economy such as the one that we are currently experiencing.



We monitor interest rate sensitivity by measuring our interest sensitivity through a gap analysis, which is the positive or negative dollar difference between
assets and liabilities that are subject to interest rate repricing within a given time period. However, since interest rates and yields on various interest sensitive assets and liabilities do not all adjust in the same degree when there is a change
in prevailing interest rates (such as prime rate), the traditional gap analysis is only a general indicator of rate sensitivity and net interest income volatility. As stated in Results of Operations for the Nine Months Ended September 30, 2004
Compared to the Nine Months Ended September 30, 2003  Net Interest Income, our net interest margin has increased during the current year. If net interest margin were to decline, net income will likely decline also.



Capital Resources



Total shareholders equity increased from $11,240,223 at December 31, 2003 to $12,292,028 at September 30, 2004. The net increase of
$1,051,805 is attributable to earnings for the period of $1,247,675 before the payment of $178,419 in cash dividends, the net decrease for the period of $2,486 in the fair value of securities available-for-sale and the net decrease of $14,965 from
the sales and purchases of treasury stock.



Bank holding companies, such as
ours, and their banking subsidiaries are required by banking regulators to meet certain minimum levels of capital adequacy, which are expressed in the form of certain ratios. Capital is separated into Tier 1 capital (essentially common
shareholders equity less intangible assets) and Tier 2 capital (essentially the allowance for loan losses limited to 1.25% of risk-weighted assets). The first two ratios, which are based on the degree of credit risk in our assets, provide the
weighting of assets based on assigned risk factors and include off-balance sheet items such as loan commitments and stand-by letters of credit. The ratio of Tier 1 capital to risk-weighted assets must be at least 4.0% and the ratio of total capital
(Tier 1 capital plus Tier 2 capital) to risk-weighted assets must be at least 8.0%. The capital leverage ratio supplements the risk-based capital guidelines. Banks and bank holding companies are required to maintain a minimum ratio of Tier 1 capital
to adjusted quarterly average total assets of 3.0%.



The following table
summarizes the Banks risk-based capital at September 30, 2004:



|                                             |  |   |            |  
|-------------------------------------------- |  | - | ---------- | -
|Shareholders equity                         |  | $ | 12,121,571 |  
|Less: intangibles                            |  |   |           |  
|                                             |  |   |            |  
|Tier 1 capital                               |  |   | 12,121,571 |  
|Plus: allowance for loan losses (1)          |  |   | 1,118,975  |  
|                                             |  |   |            |  
|Total capital                                |  | $ | 13,240,546 |  
|                                             |  |   |            |  
|Net risk-weighted assets                     |  | $ | 89,518,000 |  
|                                             |  |   |            |  
|Risk-based capital ratios                    |  |   |            |  
|Tier 1 capital (to risk-weighted assets)     |  |   | 13.54      | %
|Total capital (to risk-weighted assets)      |  |   | 14.79      | %
|Tier 1 capital (to quarterly average assets) |  |   | 9.33       | %
|                                             |  |   |            |  

---

|(1) | limited to 1.25% of gross risk-weighted assets
|--- | ----------------------------------------------



The Federal Reserve Board has similar requirements for bank holding companies. The Company is currently not subject to these requirements because the Federal Reserve
guidelines contain an exemption for bank holding companies of less than $150,000,000 in consolidated assets.



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Item 2 - Managements Discussion and Analysis or Plan of Operations continued



Off-Balance Sheet Risk



Through the operations of our Bank, we have made contractual commitments to extend credit in
the ordinary course of our business activities. These commitments are legally binding agreements to lend money to our customers at predetermined interest rates for a specified period of time. At September 30, 2004, we had unused commitments to
extend credit of $7,819,000 and standby letters of credit of $1,095,000 through various types of commercial lending arrangements. We evaluate each customers credit worthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by us upon extension of credit, is based on our credit evaluation of the borrower. Collateral varies but may include accounts receivable, inventory, property, plant and equipment, commercial and residential real estate.



Regulatory Matters



We are not aware of any current recommendations by regulatory authorities which, if they were to be implemented, would have a material
effect on liquidity, capital resources or operations.



Critical
Accounting Policies



We have adopted various accounting policies which
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 notes to the consolidated financial statements at
December 31, 2003 as filed in our annual report on Form 10-KSB. Certain accounting policies involve significant judgments and assumptions by us, which 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 which 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.



Recently Issued Accounting
Standards



Accounting standards which have been issued or proposed by the
Financial Accounting Standards Board that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.



Item - 3 - Controls and Procedures.



Within 90
days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information
required to be included in our periodic SEC reports. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how remote.



In addition, we reviewed our internal controls, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.



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PART II - OTHER INFORMATION



Item 6 - Exhibits and Reports on Form 8-K



Exhibits  The following exhibits are filed with this report.



| | 31.1 | Rule 15d-14(a) Certifications
| | ---- | -----------------------------



| | 31.2 | Rule 15d-14(a) Certifications
| | ---- | -----------------------------



| | 32 | Section 1350 Certifications
| | -- | ---------------------------



(b) Reports on Form 8-K  There were no reports on form 8-K filed during the period.



Items 1, 2, 4, and 5 are not applicable.



SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



COMMUNITYCORP





|                      |  |     |  |                                    
|--------------------- |  | --- |  | -----------------------------------
|                      |  | By: |  | /s/ W. ROGER CROOK                 
|                      |  |     |  | W. Roger Crook                     
|                      |  |     |  | President & Chief Executive Officer
|                      |  |    
|Date November11, 2004 |  | By: |  | /s/ GWEN P. BUNTON                 
|                      |  |     |  | Gwen P. Bunton                     
|                      |  |     |  | Chief Financial Officer            



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Index to Exhibits



|            |  |                              
|----------- |  | -----------------------------
|Exhibit No. |  | Description                  
|31.1        |  | Rule 15d-14(a) Certifications
|            | 
|31.2        |  | Rule 15d-14(a) Certifications
|            | 
|32          |  | Section 1350 Certifications  



16