# U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

# FORM 10-QSB

|[X] | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|--- | ---------------------------------------------------------------------------------
|    | for the quarterly period ended September 30, 2004                                

|[   ] | Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|----- | ----------------------------------------------------------------------------------
|      | For the transition period from ___________ to _____________                       

Commission file number
000-24099

PEOPLE'S COMMUNITY CAPITAL CORPORATION(Exact Name of Small Business Issuer as Specified in Its Charter)

|SOUTH CAROLINA           |  | 58-2287073                          
|------------------------ |  | ------------------------------------
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)

125 PARK AVENUE, S.W., AIKEN, SOUTH CAROLINA  29801
(Address of Principal Executive Offices)   (Zip Code)

(803) 641-0142(Issuer's Telephone Number, Including Area Code)

NOT APPLICABLE(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Check whether the issuer (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 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

State
the number of shares outstanding of each of the issuers classes of common equity, as
of the latest practicable date: 1,179,237 shares of common stock, par value $.01 per
share, outstanding at November 10, 2004.

Transitional Small Business Disclosure
Format (check one):   Yes    NoX

---

# PART I  FINANCIAL
INFORMATION

# Item 1.   Financial Statements.

# People's Community Capital CorporationConsolidated Balance Sheets

|                                                                             | September 30, | December 31,
|---------------------------------------------------------------------------- | ------------- | ------------
|
|
|Assets                                                                       |               |             
|Cash and due from banks                                                      |               |             
|Federal funds sold                                                           |               |             
|Short-term investments                                                       |               |             
|Investment securities - available for sale                                   |               |             
|Investment securities - held to maturity (fair value of $4,239,328 and       |               |             
|$4,655,929 at September 30, 2004 and December 31, 2003, respectively)        |               |             
|Loans receivable, net                                                        |               |             
|Properties and equipment, net                                                |               |             
|Accrued interest receivable                                                  |               |             
|Other real estate owned                                                      |               |             
|Other assets                                                                 |               |             
|                                                                             |               |             
|Total assets                                                                 |               |             
|                                                                             |               |             
|Liabilities and Shareholders' Equity                                         |               |             
|Liabilities:                                                                 |               |             
|Non-interest bearing deposits                                                |               |             
|Interest bearing deposits                                                    |               |             
|                                                                             |               |             
|Total deposits                                                               |               |             
|Accrued interest payable                                                     |               |             
|Federal Home Loan Bank advances                                              |               |             
|Other borrowings                                                             |               |             
|Accrued expenses and other liabilities                                       |               |             
|                                                                             |               |             
|Total liabilities                                                            |               |             
|                                                                             |               |             
|Shareholders' equity:                                                        |               |             
|Common stock, $.01 par value; 10,000,000 shares authorized, 1,179,237 shares |               |             
|issued at September 30, 2004 and 1,084,130 at December 31, 2003              |               |             
|Additional paid-in-capital                                                   |               |             
|Retained earnings                                                            |               |             
|Accumulated other comprehensive loss                                         |               |             
|                                                                             |               |             
|Total shareholders' equity                                                   |               |             
|                                                                             |               |             
|Total liabilities and shareholders' equity                                   |               |             
|                                                                             |               |             

See accompanying Notes to Consolidated Financial Statements.

2

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# Peoples Community
Capital Corporation Consolidated Statements of Income (Unaudited)

|                                             | For the three months | For the nine months
|-------------------------------------------- | -------------------- | -------------------
|
|
|Interest income:                             |                      |                    
|Loans, including fees                        |                      |                    
|Federal funds sold                           |                      |                    
|Securities, short-term investments, and cash |                      |                    
|                                             |                      |                    
|Total interest income                        |                      |                    
|                                             |                      |                    
|Interest expense:                            |                      |                    
|Deposits                                     |                      |                    
|Other borrowings                             |                      |                    
|                                             |                      |                    
|Total interest expense                       |                      |                    
|                                             |                      |                    
|Net interest income                          |                      |                    
|Provision for loan losses                    |                      |                    
|                                             |                      |                    
|Net interest income after provision          |                      |                    
|for loan losses                              |                      |                    
|                                             |                      |                    
|Non-interest income:                         |                      |                    
|Service charges on deposit accounts          |                      |                    
|Realized net gains on sales of securities    |                      |                    
|Insurance and brokerage commissions          |                      |                    
|Mortgage origination fees                    |                      |                    
|Other                                        |                      |                    
|                                             |                      |                    
|Total non-interest income                    |                      |                    
|                                             |                      |                    
|Non-interest expenses:                       |                      |                    
|Salaries and employee benefits               |                      |                    
|Occupancy and equipment                      |                      |                    
|Consulting and professional fees             |                      |                    
|Customer related                             |                      |                    
|General operating                            |                      |                    
|Data processing                              |                      |                    
|Merger-related expenses                      |                      |                    
|Other                                        |                      |                    
|                                             |                      |                    
|Total non-interest expenses                  |                      |                    
|                                             |                      |                    
|Income before income taxes                   |                      |                    
|Income tax provision                         |                      |                    
|                                             |                      |                    
|Net income                                   |                      |                    
|                                             |                      |                    
|Earnings per share:                          |                      |                    
|Basic                                        |                      |                    
|Diluted                                      |                      |                    

See accompanying Notes to Consolidated Financial Statements.

3

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# People's Community Capital Corporation
Statement of Changes in Shareholders' Equity and Comprehensive Income
For the Nine Months ended September 30, 2003 and September 30, 2004
(Unaudited)

|                                     |  |  |  |           | Accumulated |  
|------------------------------------ |  |  |  | --------- | ----------- | -
|
|
|
|Balance, December 31, 2002           |  |  |  | 1,046,193 |             | $
|Comprehensive Income:                |  | 
|                                     |  | 
|Net income                           |  |  |  | -         |             |  
|                                     |  | 
|Accumulated other comprehensive      |  | 
|loss net of income tax benefit       |  | 
|of $82,041                           |  |  |  | -         |             |  
|                                     |  |  |  |           |             |  
|Total comprehensive income           |  |  |  | -         |             |  
|                                     |  |  |  |           |             |  
|Stock dividend (5%)                  |  |  |  | 52,090    |             |  
|                                     |  | 
|Cash paid in lieu of stock dividends |  |  |  | -         |             |  
|                                     |  | 
|Stock options exercised              |  |  |  | 2,300     |             |  
|                                     |  |  |  |           |             |  
|Balance, September 30, 2003          |  |  |  | 1,100,583 |             |  
|                                     |  |  |  |           |             |  
|                                     |  | 
|                                     |  | 
|Balance, December 31, 2003           |  |  |  | 1,084,130 |             |  
|                                     |  | 
|Comprehensive Income:                |  |  |  |           |             |  
|                                     |  | 
|Net income                           |  |  |  | -         |             |  
|                                     |  | 
|Accumulated other comprehensive      |  |  |  |           |             |  
|loss net of income tax benefit       |  |  |  |           |             |  
|of $31,165                           |  |  |  | -         |             |  
|                                     |  |  |  |           |             |  
|Total comprehensive income           |  |  |  | -         |             |  
|                                     |  |  |  |           |             |  
|Stock dividend (5%)                  |  |  |  | 53,843    |             |  
|                                     |  | 
|Cash paid in lieu of stock dividends |  |  |  | -         |             |  
|                                     |  | 
|Stock options exercised              |  |  |  | 41,264    |             |  
|                                     |  |  |  |           |             |  
|Balance, September 30, 2004          |  |  |  | 1,179,237 |             | $
|                                     |  |  |  |           |             |  

See accompanying Notes to Consolidated Financial
Statements.

4

---

# People's Community Capital CorporationConsolidated Statements of Cash Flows
(Unaudited)

|                                                                        | For the nine months
|----------------------------------------------------------------------- | -------------------
|
|
|Operating activities:                                                   |                    
|Net income                                                              |                    
|Adjustments to reconcile net income to net cash provided by             |                    
|operating activities:                                                   |                    
|Depreciation and amortization                                           |                    
|Provision for loan losses                                               |                    
|Amortization of held to maturity investments                            |                    
|Changes in deferred and accrued amounts:                                |                    
|Other assets and accrued interest receivable                            |                    
|Accrued expenses and other liabilities                                  |                    
|                                                                        |                    
|Net cash provided by operating activities                               |                    
|                                                                        |                    
|Investing activities:                                                   |                    
|Activity in securities available for sale:                              |                    
|Sales                                                                   |                    
|Purchases                                                               |                    
|Maturities and calls                                                    |                    
|Maturities and calls in held to maturity securities                     |                    
|Net decrease (increase) in short-term investments                       |                    
|Purchase of property and equipment                                      |                    
|Loan originations and principal collections - net                       |                    
|Net decrease (increase) in federal funds sold                           |                    
|Sale of other real estate owned                                         |                    
|                                                                        |                    
|Net cash used for investing activities                                  |                    
|                                                                        |                    
|Financing activities:                                                   |                    
|Exercise of stock options                                               |                    
|Net increase in deposits                                                |                    
|Net increase (decrease) in other borrowings                             |                    
|Payment of cash dividends in lieu of stock for fractional shares        |                    
|                                                                        |                    
|Net cash provided by financing activities                               |                    
|                                                                        |                    
|Net increase (decrease) in cash and due from banks                      |                    
|Cash and due from banks at  beginning of period                         |                    
|                                                                        |                    
|Cash and due from banks at end of period                                |                    
|                                                                        |                    
|Supplemental disclosure:                                                |                    
|Cash paid during the period for interest                                |                    
|                                                                        |                    
|Income taxes paid                                                       |                    
|                                                                        |                    
|Unrealized net loss on securities available for sale, net of income tax |                    
|                                                                        |                    

See accompanying
Notes to Consolidated Financial Statements.

5

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# Peoples Community
Capital Corporation Notes to Consolidated Financial Statements (Unaudited)

# Note 1.   Acquisition

On
October 18, 2004 Peoples Community Capital Corporation, (the Company),
Peoples Community Bank of South Carolina, a South Carolina state bank and
wholly-owned subsidiary of the Company (the Bank), and First Citizens Bank and
Trust Company, Inc., a South Carolina state bank (First Citizens), entered
into a merger agreement, under which the Company and the Bank will be merged with and into
First Citizens, with First Citizens continuing after the merger as the surviving
corporation.

Under
the merger agreement, the Companys shareholders will receive $30.00 per share for
the Companys common stock. In exchange for signing an option release, holders of the
Companys stock options will receive for each share that may be acquired pursuant to
their options, a cash payment equal to the spread between $30.00 per share and the
exercise price per share of the Companys stock covered by the option.

The
boards of directors of both the Company and First Citizens have approved the merger
agreement, and the merger agreement and the transactions contemplated by the merger
agreement are subject to the approval of the shareholders of the Company, regulatory
approvals, and other customary closing conditions.

# Note 2.   Basis of
Presentation

The
accompanying unaudited consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B of the Securities and Exchange Commission. Accordingly, they do not include
all of the information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. However, in the opinion
of management, all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the nine
months ended September 30, 2004 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2004. For further information, please refer to
the consolidated financial statements and footnotes thereto for the Companys fiscal
year ended December 31, 2003, included in the Companys Form 10-KSB for the year
ended December 31, 2003.

# Note 3.   Summary of
organization

Peoples
Community Capital Corporation was incorporated in South Carolina on February 26, 1997 for
the purpose of operating as a bank holding company. Our wholly-owned subsidiary,
Peoples Community Bank of South Carolina, commenced business on September 22, 1997
and is primarily engaged in the business of accepting savings and demand deposits and
providing mortgage, consumer and commercial loans to the general public. Our bank operates
two banking centers located in Aiken and one located in North Augusta, South Carolina. In
December 1999, our bank formed a subsidiary, Peoples Financial Services, Inc., that
provides comprehensive financial planning services in addition to full service brokerage,
including stocks, bonds, mutual funds, and insurance products. In June 2003, we opened a
loan production office in rented space in Charleston, South Carolina. The purpose of this
office is to solicit loans, primarily in the real estate construction market.

6

---

# Note 4.   Earnings per share

The
following reconciles the numerator and denominator of the basic and diluted earnings per
share computation:

|                                                   | Three months ended Sept. 30, | Nine months ended Sept. 30,
|-------------------------------------------------- | ---------------------------- | ---------------------------
|
|Numerator:                                         |                              |                            
|(included in basic and diluted earnings per share) |                              |                            
|                                                   |                              |                            
|Denominator:                                       |                              |                            
|Weighted average common shares outstanding for:    |                              |                            
|Basic earnings per share                           |                              |                            
|Dilutive securities:                               |                              |                            
|Stock options - Treasury stock method              |                              |                            
|                                                   |                              |                            
|Diluted earnings per share                         |                              |                            
|                                                   |                              |                            
|The average market price used in calculating       |                              |                            
|assumed number of shares                           |                              |                            
|                                                   |                              |                            

# Note 5.   Stock option plan

SFAS
No. 123, Accounting for Stock-Based Compensation, encourages all entities to
adopt a fair value based method of accounting for employee stock compensation plans,
whereby compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period. However,
it also allows an entity to continue to measure compensation cost for those plans using
the intrinsic value based method of accounting prescribed by Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees, whereby
compensation cost is the excess, if any, of the quoted market price of the stock at the
grant date (or other measurement date) over the amount an employee must pay to acquire the
stock. Stock options issued under our stock option plan have no intrinsic value at the
grant date, and under Opinion No. 25, no compensation cost is recognized.

The
Company sponsors a stock option plan (the Plan) for the benefit of the directors, officers
and employees. The Board may grant up to 303,876 options (adjusted for 5% stock dividends
issued March 2001, January 2002, January 2003, and January 2004). During the first nine
months of 2004, no stock options were granted. During the first quarter of 2003, the Board
granted 15,000 stock options at an exercise price of $12.90 that vest over two years and
expire in 2013. During the second quarter of 2003, the Board granted 1,500 stock options
at an exercise price of $15.00 which vest over three years and expire in 2013. The Company
has adopted the disclosure-only provisions of SFAS No. 123, Accounting for
Stock-Based Compensation. Accordingly, no compensation cost has been recognized for
the stock option plan. Had compensation cost been determined based on the fair value at
the grant date for the above stock option awards consistent with the provisions of SFAS
No. 123, the Companys net income and earnings per share would have been adjusted to
the proforma amounts indicated below:

7

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|                                 | For the three months ended | For the nine months ended
|-------------------------------- | -------------------------- | -------------------------
|
|
|Net income as reported           |                            |                          
|Net income - Proforma            |                            |                          
|                                 |                            |                          
|Earnings per share - As reported |                            |                          
|Basic                            |                            |                          
|Diluted                          |                            |                          
|Earnings per share - Proforma    |                            |                          
|Basic                            |                            |                          
|Diluted                          |                            |                          

The
fair value of the option grant is estimated on the date of grant using the Black-Scholes
option pricing model. The risk free interest rate used was 4.77%, the expected option life
was ten years, the assumed dividend rate was zero and the expected volatility was 8.0%.

# Note 6.   Recently issued
accounting standards

The
following is a summary of recent authoritative pronouncements that affect accounting,
reporting, and disclosure of financial information by the Company:

In
November 2003, the Emerging Issues Task Force (EITF) reached a consensus that
certain quantitative and qualitative disclosures should be required for debt and
marketable equity securities classified as available for sale or held to maturity under
SFAS No. 115 and SFAS No. 124 that are impaired at the balance sheet date but for which
other-than-temporary impairment has not been recognized. Accordingly EITF issued EITF No.
03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments. This issue addresses the meaning of other-than-temporary impairment and
its application to investments classified as either available for sale or held to maturity
under SFAS No. 115 and provides guidance determining the amount of impairment and
additional quantitative and qualitative disclosures. The guidance for determining the
amount of impairment was scheduled to be effective for periods ending after June 15, 2004,
but has been delayed indefinitely pending implementation guidance by the FASB. The
disclosure provisions of EITF No. 03-1 were effective for fiscal years ending after
December 15, 2003. Adopting the disclosure provisions of EITF No. 03-1 did not have any
impact on the Companys financial position or results of operations.

In
March 2004, the FASB issued an exposure draft on Share-Based Payment. The
proposed Statement addresses the accounting for transactions in which an enterprise
receives employee services in exchange for (a) equity instruments of the enterprise or (b)
liabilities that are based on the fair value of the enterprises equity instruments
or that may be settled by the issuance of such equity instruments. This proposed Statement
would eliminate the ability to account for share-based compensation transactions using APB
Opinion No. 25, Accounting for Stock Issued to Employees, and generally would
require instead that such transactions be accounted for using a fair-value-based method.
This Statement, if approved, was scheduled to be effective for awards that are granted,
modified, or settled in fiscal years beginning after a) December 15, 2004 for public
entities and nonpublic entities that used the fair-value-based method of accounting under
the original provisions of Statement 123 for recognition or pro forma disclosure purposes
and b) December 15, 2005 for all other nonpublic entities. On October 16, 2004, the FASB
delayed the effective date of this proposal by six months and anticipates it will be
effective for by the third quarter of 2005. Retrospective application of this Statement is

8

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not permitted. The adoption of this
Statement, if approved, could have an impact on the Companys financial position or
results of operations.

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.

# Item 2.   Management's Discussion and Analysis or Plan of Operation.

The
following is our discussion and analysis of certain significant factors that have affected
our financial position and operating results during the periods included in the
accompanying financial statements. This commentary should be read in conjunction with the
financial statements and the related notes and the other statistical information included
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
management, as well as assumptions made by and information currently available to
management. The words may, will, anticipate,
should, would, believe, contemplate,
expect, estimate, continue, and intend, as
well as other similar words and expressions of the future, are intended to identify
forward-looking statements. Our actual results may differ materially from the results
discussed in the forward-looking statements, and our operating performance each quarter is
subject to various risks and uncertainties that are discussed in detail in our filings
with the Securities and Exchange Commission, including without limitation:

| | o | significant increases in competitive pressure in the banking and financial services industries;
| | - | -----------------------------------------------------------------------------------------------

| | o | changes in the interest rate environment which could reduce anticipated or actual margins;
| | - | ------------------------------------------------------------------------------------------

| | o | changes in political conditions or the legislative or regulatory environment;
| | - | -----------------------------------------------------------------------------

| | o | general economic conditions, either nationally or regionally and especially in our primary
service area, becoming less favorable than expected resulting in, among other things, a
deterioration in credit quality;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | changes occurring in business conditions and inflation;
| | - | -------------------------------------------------------

| | o | changes in technology;
| | - | ----------------------

| | o | changes in monetary and tax policies;
| | - | -------------------------------------

| | o | loss of consumer confidence and economic disruptions resulting from terrorist activities;
| | - | -----------------------------------------------------------------------------------------

| | o | the level of allowance for loan loss;
| | - | -------------------------------------

| | o | the rate of delinquencies and amounts of charge-offs;
| | - | -----------------------------------------------------

| | o | the rates of loan growth;
| | - | -------------------------

9

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| | o | adverse changes in asset quality and resulting credit risk-related losses and expenses;
| | - | ---------------------------------------------------------------------------------------

| | o | changes in the securities markets;
| | - | ----------------------------------

| | o | changes resulting from the announcement of our planned merger with First Citizens, including the potential loss
of customers or employees;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------

| | o | the incurrence of costs associated with the planned merger with First Citizens; and
| | - | -----------------------------------------------------------------------------------

| | o | other risks and uncertainties detailed from time to time in our filings with the
Securities and Exchange Commission.
| | - | --------------------------------------------------------------------------------------------------------------------

CRITICAL ACCOUNTING POLICY

We
have adopted various accounting policies which govern the application of accounting
principles generally accepted in the United States of America in the preparation of our
financial statements. The significant accounting policies of the company are described in
the footnotes to the consolidated financial statements at December 31, 2003 as filed on
our 10-KSB for that date.

Certain
accounting policies involve significant judgments and assumptions by management which have
a material impact on the carrying value of certain assets and liabilities; management
considers such accounting policies to be critical accounting policies. The judgments and
assumptions used by management are based on historical experience and other factors, which
are believed to be reasonable under the circumstances. Because of the nature of the
judgments and assumptions made by management, actual results could differ from these
judgments and estimates which could have a material impact on the carrying values of
assets and liabilities and the results of operations of our company.

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. Some of the more critical judgments supporting the amount of our allowance for
loan losses include judgments about the credit worthiness of borrowers, the estimated
value of the underlying collateral, the assumptions about cash flow, determination of loss
factors for estimating credit losses, the impact of current events, and conditions, and
other factors impacting the level of probable inherent losses. Under different conditions
or using different assumptions, the actual amount of credit losses incurred by us may be
different from managements estimates provided in our consolidated financial
statements. Refer to the discussion under Allowance for Loan Losses section of this report
for a detailed description of our estimation process and methodology related to the
allowance for loan losses.

OVERVIEW

The
following discussion describes our results of operations for the quarter ended September
30, 2004 as compared to the quarter ended September 30, 2003 as well as results for the
nine months ended September 30, 2004 and 2003, and also analyzes our financial condition
as of September 30, 2004 as compared to December 31, 2003. Like most community banks, we
derive most of our income from interest we receive on our loans and investments. Our
primary source of funds for making these loans and investments is our deposits, on which
we pay interest. Consequently, one of the key measures of our success is our amount of net
interest income, or the difference between the income on our interest-earning assets, such
as loans and investments, and the expense on

10

---

our interest-bearing liabilities,
such as deposits. Another key measure is the spread between the yield we earn on these
interest-earning assets and the rate we pay on our interest-bearing liabilities.

We
have included a number of tables to assist in our description of these measures. For
example, the Average Balances table shows the average balance for the three
and nine months ended September 30, 2004 and 2003 of each category of our assets and
liabilities, as well as the yield we earned or the rate we paid with respect to each
category. A review of this table shows that our loans typically provide higher interest
yields than do other types of interest-earning assets, which is why we intend to direct a
substantial percentage of our earning assets into our loan portfolio. We have also
included a table that provides detail about our loans.

Of
course, there are risks inherent in all loans, so we maintain an allowance for loan losses
to absorb probable losses on existing loans that may become uncollectible. We establish
and maintain this allowance by charging a provision for loan losses against our operating
earnings. In the following section we have included a detailed discussion of this process.

In
addition to earning interest on our loans and investments, we earn income through fees and
other expenses we charge to our customers. We describe the various components of this
non-interest income, as well as our non-interest expense, in the following discussion.

The
following discussion and analysis also identifies significant factors that have affected
our financial position and operating results during the periods included in the
accompanying financial statements. We encourage you to read this discussion and analysis
in conjunction with the financial statements and the related notes and the other
statistical information also included in this report.

FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

EARNINGS REVIEW  Comparison of
the three months ended September 30, 2004 to the three months ended September 30, 2003

Our
net income for the third quarter of 2004 was $354,386 compared to $292,694 for the same
period last year, an increase of 21%. The basic income per share was $0.30 per share
compared to $0.25 per share for the three months ended September 30, 2003. The improvement
in earnings resulted from growth in the level of earning assets and an increase in
interest rates on earning assets. Interest rates have moved upward as the prime rate has
increased three times since July 1, 2004 after a long period of declining rates. The level
of average earning assets was $118.2 million for the three months ended September 30, 2004
compared to $101.5 million for the three months ended September 30, 2003.

Net
interest income represents the difference between interest received or accrued on
interest-earning assets and interest paid or accrued on interest-bearing liabilities. The
following presents, in a tabular form, average balance sheets that highlight the main
components of interest-earning assets and interest-bearing liabilities, on an annualized
basis, for the three month periods ended September 30, 2004 and 2003. Yields are derived
by dividing income or expense by the average balance of the corresponding assets or
liabilities. Average balances have been derived from daily averages.

11

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|                                | Three months ended September 30, 2004 | Three months ended September 30, 2003
|------------------------------- | ------------------------------------- | -------------------------------------
|
|
|ASSETS                          |                                       |                                      
|Federal funds sold              |                                       |                                      
|Cash and short-term investments |                                       |                                      
|Securities                      |                                       |                                      
|Loans                           |                                       |                                      
|                                |                                       |                                      
|Total earnings assets           |                                       |                                      
|                                |                                       |                                      
|Cash and due from banks         |                                       |                                      
|Premises and equipment          |                                       |                                      
|Other assets                    |                                       |                                      
|Allowance for loan losses       |                                       |                                      
|                                |                                       |                                      
|Total assets                    |                                       |                                      
|                                |                                       |                                      
|LIABILITIES & EQUITY            |                                       |                                      
|Interest-bearing deposits:      |                                       |                                      
|Transaction accounts            |                                       |                                      
|Money market accounts           |                                       |                                      
|Savings deposits                |                                       |                                      
|Time deposits                   |                                       |                                      
|                                |                                       |                                      
|Total interest bearing          |                                       |                                      
|deposits                        |                                       |                                      
|Interest-bearing borrowings     |                                       |                                      
|                                |                                       |                                      
|Total interest bearing          |                                       |                                      
|liabilities                     |                                       |                                      
|                                |                                       |                                      
|Demand deposits                 |                                       |                                      
|Other liabilities               |                                       |                                      
|Shareholders' equity            |                                       |                                      
|                                |                                       |                                      
|Total liabilities &             |                                       |                                      
|shareholders' equity            |                                       |                                      
|                                |                                       |                                      
|Net interest spread             |                                       |                                      
|Net interest income/margin      |                                       |                                      

Net
interest income was $1,263,239 for the three months ended September 30, 2004 compared to
$908,085 for the three months ended September 30, 2003, representing a 39% increase. The
net interest margin (net interest income divided by average earning assets) was 4.27% for
the three months ended September 30, 2004 compared to the net interest margin of 3.58% for
the three months ended September 30, 2003. Net yields were higher in the third quarter
this year as yields on earning assets have increased as mentioned above, and rates paid on
deposits have lagged behind the increase on earning assets.

Interest
income for the third quarter of 2004 was $1,583,211 compared to $1,215,575 for the same
period in 2003. The volume of total average earning assets increased by approximately
$16.7 million between the two periods, and the average rate earned on assets increased
from 4.79% to 5.35%. The rate increase is due to the general increase in rates as already
mentioned, but also due to an increase on the yield in our securities portfolio pursuant
to a lengthening of maturities. The largest component of interest income was interest and
fees on loans amounting to $1,205,035 for the quarter ended September 30, 2004 compared to
$974,909 for the comparable prior year period. Average loan balances increased by $13.6
million. The overall rate on the loan portfolio increased from 6.32% for the three months
ended September 30, 2003 to 6.41% for the three-month period ended September 30, 2004.
Interest earned on federal funds sold decreased from $15,759 for the third quarter of 2003
to $322 for the third quarter of 2004 as the average balance of federal funds sold
decreased by

12

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$6.6 million, and the yield increased
from 0.94% to 1.25%. Federal funds sold were decreased in order to fund investments in
securities and to fund loan growth. The securities portfolio earned $363,107 for the third
quarter of 2004 with a yield of 3.56%. For the third quarter of 2003, the portfolio earned
$203,403 with a yield of 2.68%. The portfolio was increased by $10.5 million and the yield
increased primarily as a result of the extension of the maturity of the investment
portfolio. For the third quarter of 2003, the average maturity was 2.84 years, and in the
third quarter of 2004, the average maturity was 4.50 years.

Interest
expense increased from $307,490 for the three months ended September 30, 2003 to $319,972
for the three months ended September 30, 2004. The increase was the result of an increase
in average interest-bearing deposits of $11.0 million and an increase in interest-bearing
borrowings of $3.2 million. Rates paid on deposits and other liabilities actually
decreased from an average of 1.53% for the third quarter last year to an average rate of
1.35% for the third quarter this year. We have been able to realize decreases in the price
of our deposits due to the low interest rate environment in the general economy and in the
local market. However, we do not expect this trend will continue and in fact anticipate
that rates will begin to increase now that the general trend in interest rates has begun
to reverse.

Non-interest Income

Non-interest
income for the three-month period ended September 30, 2004 was $183,162 compared to
$273,310 for the same period in 2003. Service charges on deposit accounts decreased by
$43,367, or 25%, due to a decrease in commercial NSF fees and a decrease in our authorized
overdraft product between the two periods under comparison. There were $2,108 in security
gains in the third quarter of 2004 compared to none in 2003. Brokered mortgage fee income
declined from $65,508 for the third quarter of 2003 to $16,292 in the third quarter of
2004. This type of fee income is extremely interest rate sensitive, and we have seen a
decline in refinancing activity from last years levels. We expect this trend may
continue as the Federal Reserve reversed its rate-cutting policy and has cumulatively
increased the federal funds rate by 75 basis points since the second quarter of this year.

Non-interest Expenses

Non-interest
expenses for the quarters ended September 30, 2004 and 2003 were $873,274 and $723,445,
respectively, an increase of $149,829, or 21%. The largest component of non-interest
expense was salaries and employee benefits which increased from $410,170 to $492,565. This
increase was due to merit increases in salaries and benefits and in bonuses accrued.
Occupancy and equipment expenses declined from $90,733 to $82,692 due to certain assets
within the company becoming fully depreciated since the same quarter last year.
Merger-related expenses of $45,000 were accrued in the third quarter in connection with
our proposed merger with First Citizens Bank and Trust Company, Inc. that was announced on
October 18, 2004. Other expenses increased from $43,060 to $69,165 primarily due to
increased advertising expenditures.

EARNINGS REVIEW  Comparison of
the nine months ended September 30, 2004 to the nine months ended September 30, 2003

Our
net income for the nine months ended September 30, 2004 was $1,039,620 compared to
$821,366 for the same period last year, an increase of 27%. The basic income per share
increased to $.90 compared to $.72 for the same period in 2003, as adjusted for the stock
dividends paid in 2003 and 2004. This improvement in earnings is the net result of
increased interest income due to growing loan and securities portfolios and lower interest
expense due to rate declines. These factors more than offset higher amounts added to the
loan loss provision, a decline in non-interest income, and an increase in non-interest
expense. The level of average

13

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earning assets was $113.4 million for
the nine months ended September 30, 2004 compared to $99.8 million for the nine months
ended September 30, 2003. The average yield on earning assets increased from 4.93% to
5.17% primarily due to increases in the securities portfolio associated with lengthened
maturities as discussed above.

The
following presents, in a tabular form, yield and rate data for interest-bearing balance
sheet components during the nine month periods ended September 30, 2004 and 2003, along
with average balances and the related interest income and interest expense amounts.

|                                   | Nine months ended September 30, 2004 | Nine months ended September 30, 2003
|---------------------------------- | ------------------------------------ | ------------------------------------
|
|
|ASSETS                             |                                      |                                     
|Federal funds sold                 |                                      |                                     
|Cash and short-term investments    |                                      |                                     
|Securities                         |                                      |                                     
|Loans                              |                                      |                                     
|                                   |                                      |                                     
|Total earning assets               |                                      |                                     
|                                   |                                      |                                     
|Cash and due from banks            |                                      |                                     
|Premises and equipment             |                                      |                                     
|Other assets                       |                                      |                                     
|Allowance for loan losses          |                                      |                                     
|                                   |                                      |                                     
|Total assets                       |                                      |                                     
|                                   |                                      |                                     
|LIABILITIES & EQUITY               |                                      |                                     
|Interest-bearing deposits:         |                                      |                                     
|Transaction accounts               |                                      |                                     
|Money market accounts              |                                      |                                     
|Savings deposits                   |                                      |                                     
|Time deposits                      |                                      |                                     
|                                   |                                      |                                     
|Total interest bearing deposits    |                                      |                                     
|Interest-bearing borrowings        |                                      |                                     
|                                   |                                      |                                     
|Total interest-bearing liabilities |                                      |                                     
|Demand deposits                    |                                      |                                     
|Other liabilities                  |                                      |                                     
|Shareholders' equity               |                                      |                                     
|                                   |                                      |                                     
|Total liabilities &                |                                      |                                     
|shareholders equity                |                                      |                                     
|                                   |                                      |                                     
|Net interest spread                |                                      |                                     
|Net interest income/margin         |                                      |                                     
|                                   |                                      |                                     

Net
interest income was $3,534,233 for the nine months ended September 30, 2004 compared to
$2,666,243 for the nine months ended September 30, 2003. The net interest margin (net
interest income divided by average earning assets) was 4.15% for the nine months ended
September 30, 2004 compared to the net interest margin of 3.56% for the nine months ended
September 30, 2003.

Interest
income for the first nine months of 2004 was $4,395,484 compared to $3,685,432 for the
same period in 2003. The volume of total average earning assets increased from $99.8
million at September 30, 2003 to $113.4 million at September 30, 2004, and the average
rate earned on assets increased from 4.93% to 5.17%. The largest component of interest
income was interest and fees on loans amounting to $3,327,391 for the nine

14

---

months ended September 30, 2004
compared to $2,986,056 for the comparable prior year period. The overall rate on the loan
portfolio decreased from 6.51% for the nine months ended September 30, 2003 to 6.22% for
the nine month period ended September 30, 2004 as interest rates in the general economy
had been lower between the two periods under comparison. Average loan balances, however,
increased by approximately $10.2 million. The average balance in federal funds sold
decreased by approximately $5.9 million as the funds were deployed into the loan and
securities portfolios, and the average yield fell from 1.10% to 0.92% resulting in a
decrease of interest earned on federal funds sold from $64,096 to $13,002. Interest income
on securities increased between the two periods from $569,409 to $1,014,367 as the average
balances were higher by about $10.3 million, and the yield increased from 2.72% to 3.54%
largely due to lengthened maturities within the portfolio.

Interest
expense decreased from $1,019,189 for the nine months ended September 30, 2003 to $861,251
for the nine months ended September 30, 2004 due to a decrease in average rates paid on
liabilities from 1.71% to 1.27%. This decrease occurred even though the size of average
interest-bearing liabilities, primarily deposits, increased from $79.6 million to $90.5
million, an increase of 14%.

Non-interest Income

Non-interest
income for the nine month period ended September 30, 2004 was $607,741 compared to
$836,166 for the same period in 2003. Of this total, $392,987 represented service charges
on deposit accounts for the nine months ended September 30, 2004 compared to $455,332 for
the comparable period in 2003. The decrease in income from deposit service charges is
largely due to a decrease in the volume of NSF income on certain commercial accounts as
well as a decline in fees on our authorized overdraft product. We had a gain on sale of
securities of $13,563 during the nine months ended September 30, 2004 compared to a gain
of $67,994 during the same period last year. Fees generated from our financial
services subsidiary declined from $54,680 for the nine months ended September 30,
2003 to $33,842 for the nine months ended September 30, 2004. Low interest rates had a
direct bearing on the sale of annuity products. Brokered mortgage fees decreased from
$152,847 to $72,516 as refinancing activity slowed. It is anticipated that refinancing
activity will not reach previous levels again in the near future as the Federal Reserve
reversed its rate-cutting policy and has cumulatively increased the federal funds rate 75
basis points since the end of the second quarter. The remaining $94,833 of other
non-interest income for the nine months ended September 30, 2004 consisted of income
generated from other fees charged such as check cashing fees, internet fees, and
commissions on sale of checks to customers. The comparable amount for last year was
$105,313. The decline can be attributed to the waiver of internet fees to certain
customers and to certain other income recognized on a one-time basis in 2003.

Non-interest Expenses

Non-interest
expenses for the nine month periods ended September 30, 2004 and 2003 were $2,407,257 and
$2,194,912 respectively, a 10% increase. The largest component of non-interest expense,
salaries and employee benefits, increased 11% from $1,256,380 for the nine months ended
September 30, 2003 to $1,388,733 for the nine months ended September 30, 2004. The
increase was due to general merit increases in salaries and benefits and to increased
bonus accruals. Occupancy and equipment expense decreased from $264,279 to $239,306 due to
certain assets becoming fully depreciated. Merger-related expenses of $45,000 were accrued
in the third quarter in connection with our proposed merger with First Citizens Bank and
Trust Company, Inc. that was announced on October 18, 2004. Other increases in
non-interest expenses were primarily due to the continued growth of the bank along with
increased expenditures for advertising-related purposes.

15

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Provision for Loan Losses

We attempt to maintain the allowance
at a level that will be adequate to provide for potential losses in our loan portfolio. To
maintain the allowance at an adequate level, we periodically make additions to the
allowance by charging an expense to the provision for loan losses on our statement of
income. The provision for loan losses was $151,179 and $78,258 for the nine months ended
September 30, 2004 and 2003, bringing the total reserve balance to $1,065,000 and $915,000
at September 30, 2004 and 2003, respectively. This amount represents 1.35% of gross loans
at September 30, 2004 and 1.48% at September 30, 2003. It reflects our estimate of the
amounts necessary to maintain the allowance for loan losses at a level believed to be
adequate in relation to the current size, mix and quality of the loan portfolio. The
reserve has specifically been increased in relation to gross loans due to the uncertainty
that may exist in our portfolio with respect to current economic conditions existing in
our market. See the description of the allowance for loan losses below. However, our
judgment as to the adequacy of the allowance is based upon a number of assumptions in
accordance with managements evaluation that we believe to be reasonable, but which
may or may not prove to be accurate. Because of the inherent uncertainty of assumptions
made during the evaluation process, there can be no assurance that charge-offs in future
periods will not exceed the allowance for loan losses or that additional increases in the
loan loss allowance will not be required. We had no loans that were classified as
non-accrual at September 30, 2004, compared to $10,483 in non-accrual loans at September
30, 2003. There were net charge-offs of $26,179 for the nine months ended September 30,
2004 and net charge-offs of $3,258 for the nine months ended September 30, 2003.

BALANCE SHEET REVIEW

Total
consolidated assets grew by $16.6 million from $109,128,048 at December 31, 2003 to
$125,719,988 at September 30, 2004. The increase was generated primarily through deposit
growth of $10.2 million as well as through borrowings from the FHLB of $4.0 million. The
funds were invested in our loan portfolio which increased by a net amount of $12.6 million
and in our available for sale investment securities, which increased by $4.7 million.

Loans

Outstanding
net loans represent the largest component of earning assets as of September 30, 2004 at
$77,875,674, or approximately 65% of total earning assets. Net loans increased
$12,574,363, or 19%, since December 31, 2003.

The
interest rates charged on loans vary with the degree of risk, maturity and amount of the
loan. Competitive pressures, money market rates, availability of funds, and government
regulations also influence interest rates. The average yield on our loans for the nine
months ended September 30, 2004 was 6.22% as compared to a yield of 6.45% for the year
ended December 31, 2003.

The
principal components of our loan portfolio at September 30, 2004 and December 31, 2003
consisted of real estate loans, comprising approximately 85.0% and 87.9% of total loans,
respectively. Real estate loan means any loan secured by real estate, regardless of the
purpose of the loan. It is common practice for financial institutions in our market area
to 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 portfolio
component. The following table shows the composition of the loan portfolio by category.

16

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|                                   | September 30, 2004 | December 31, 2003
|---------------------------------- | ------------------ | -----------------
|
|Commercial and industrial          |                    |                  
|Real estate mortgage - residential |                    |                  
|Real estate mortgage - commercial  |                    |                  
|Real estate mortgage - other       |                    |                  
|Consumer and other                 |                    |                  
|                                   |                    |                  
|Total loans                        |                    |                  
|Allowance for loan losses          |                    |                  
|Unearned fees                      |                    |                  
|                                   |                    |                  
|Total net loans                    |                    |                  
|                                   |                    |                  

Allowance for Loan Losses

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. To address these risks, we have developed policies and procedures to evaluate
the overall quality of our credit portfolio and the timely identification of potential
problem loans. We maintain an allowance for possible loan losses which we establish
through charges in the form of a provision for loan losses. We charge loan losses and
credit recoveries directly to this allowance. The allowance for loan losses at September
30, 2004 was $1,065,000, or 1.35% of loans outstanding, compared to an allowance of
$940,000, or 1.42% of loans outstanding, at December 31, 2003. The allowance for loan
losses is based upon our continuing evaluation of the collectibility of loans based
somewhat on historical loan loss experience, but primarily on current economic conditions
affecting the ability of borrowers to repay, the volume of loans, the quality of
collateral securing non-performing and problem loans, and other factors deserving
recognition. The banks policy has been to review the allowance for loan losses using
a reserve factor for each type of loan since there have been few delinquencies and little
charge-off activity since the banks inception. The overall objective is to apply
percentages to the loans based on managements assessment of the relative inherent
risk for that loan type and grade. Reserve factors are based on peer group data,
information from regulatory agencies, and the experience of our banks lenders. The
reserve factors will change depending on trends in national and local economic conditions,
the depth of experience of our banks lenders, delinquency trends, and other factors.
The banks general strategy is to maintain a minimum coverage of a certain percentage
of gross loans until it has sufficient historical data and trends available. Our
evaluation of the allowance for loan losses is inherently subjective as it requires
estimates that are susceptible to significant change. Our losses will undoubtedly vary
from our estimates, and there is a possibility that charge-offs in future periods will
exceed the allowance for loan losses as estimated at any point in time.

Federal Funds Sold,
Short-Term Investments and Securities

As
opposed to being in a federal funds sold position at the end of September, we were in a
federal funds purchased position. See the Deposits and Other Borrowings section below for
more comments. Short-term investments and securities represented approximately 34% of
earning assets at September 30, 2004, or $41,554,984. This represented an increase of $3.9
million from the December 31, 2003 balance of $37,636,874. The combined yield on invested
federal funds sold, cash and short-term investments, and securities was 3.38% for the nine
months ended September 30, 2004 compared to 2.59% for the year ended December 31, 2003.
Short-term investments at September 30, 2004 and at December 31, 2003 consisted of
commercial paper in another financial institution with balances of $1,991,750 and
$1,720,652, respectively. Included in available-for-sale securities is $325,000 of stock
purchased in the Federal Home Loan Bank of Atlanta (FHLB), of which

17

---

$15,600 and $35,200 were purchased in
the first and third quarters of 2004, respectively. These purchases were a requirement
from the FHLB as a condition of membership and borrowing capabilities.

Other Real Estate Owned

In
November 2002, we foreclosed on certain property in Richmond County, Georgia. The carrying
value of the property was $100,180 at September 30, 2004 and $378,880 at December 31,
2003. In the third quarter of 2004, we sold a portion of the property leaving a balance of
$100,180. We believe that the remaining carrying value is not impaired and that any future
sale of the remaining property would be in an amount sufficient to realize its carrying
value.

Deposits and Other Borrowings

Our
primary source of funds for loans and investments is deposits. Deposits grew $10,178,822,
or 11%, since year-end 2003 for a total of $103,416,395 at September 30, 2004. The average
rates paid on interest-bearing deposits were 1.19% and 1.75% at September 30, 2004 and
December 31, 2003, respectively. In pricing deposits, we consider our liquidity needs, the
direction and levels of interest rates, and local market conditions. We have been able to
realize decreases in the price of our deposits due to the low interest rate environment in
the general economy and in the local market. It is anticipated that rates will begin to
increase now that the general trend in interest rates has begun to reverse.

In
April 2002, we secured an advance of $2,500,000 with the FHLB at a rate of 3.65%. The loan
has a five year maturity with early conversion options that began as of April 2004 and
continue each quarter thereafter. If the FHLB exercises its conversion option, the advance
will be converted to a floating rate or can be repaid without penalty. If the FHLB does
not exercise its option, the advance will continue at the original rate. Thus far, the
FHLB has not exercised its conversion option.

In
August 2004, we secured two fixed rate advances from the FHLB totaling $4,000,000. One
advance was for $2,000,000 at a rate of 2.41% with a maturity date of August 22, 2005. The
other advance was for $2,000,000 at a rate of 2.70% with a maturity date of February 21,
2006. These advances were used for short-term liquidity and loan purposes. We purchased
additional stock in the FHLB in the amount of $35,200 as a prerequisite to the advances.

In
addition, we were in a net federal funds purchased position as of September 30, 2004 with
a balance of $867,000. As noted above, federal funds sold were decreased in order to fund
investments in securities and to fund loan growth. The balance on our Treasury, Tax and
Loan demand note with the Federal Reserve Bank of Richmond was $878,374 at September 30,
2004 for a total amount of other borrowings, aside from the FHLB, of $1,745,374. The
average rate paid on all borrowings was 2.94% for the nine months ended September 30, 2004
compared to 3.41% for the nine months ended September 30, 2003.

Shareholders Equity

Shareholders
equity was $13.7 million and $12.4 million as of September 30, 2004 and December 31, 2003,
respectively. The Board of Directors declared a 5% stock dividend which was paid on
January 29, 2004 to shareholders of record on January 15, 2004. The number of shares
issued was 53,843 with a market value of $16.09 for a total decrease in retained earnings
of $866,334. Cash paid in lieu of stock for fractional shares totaled $5,850.

18

---

During
the first nine months of 2004, employees exercised stock options for which 41,264 shares
of stock have been issued. Our Board of Directors authorized in the first quarter the
repurchase of up to 100,000 shares of the outstanding shares of stock in the company. No
purchases have been made since that authorization.

Liquidity and Sources of
Capital

At
September 30, 2004, our liquid assets, consisting of cash and due from banks, amounted to
$2,365,657, representing 1.9% of total assets. Short-term investments (which carry terms
of less than 90 days and could be considered a cash equivalent) and available for sale
securities equaled $37,443,708, or 29.8% of total assets. These securities provide a
secondary source of liquidity because they can be converted into cash in a timely manner.
Our ability to maintain and expand our deposit base and borrowing capabilities also serves
as a source of liquidity. For the nine months ended September 30, 2004, total deposits
increased by $10,178,822, representing an increase of 11%, or 15% on an annualized basis.
Growth for the year thus far is not necessarily indicative of expected growth for the
remainder of the year. 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 demand.

We
plan to meet future cash needs through the liquidation of temporary investments,
maturities of loans and investment securities, and generation of deposits. In addition,
the bank maintains two unsecured federal funds purchased lines of credit from
correspondent banks, one in the amount of $4,670,000 and another for $1,800,000. Of these
amounts, $867,000 was outstanding as of September 30, 2004. The bank is also a member of
the FHLB, from which additional applications may be made for borrowing capabilities, if
needed, upon the pledging of additional collateral and the purchase of additional stock in
the FHLB.

The
bank currently maintains a level of capitalization in excess of the minimum capital
requirements set by the regulatory agencies. Despite anticipated asset growth, we expect
capital ratios to continue to be adequate for the next two to three years. However, no
assurances can be given in this regard, as rapid growth, deterioration in loan quality,
and operating losses, or a combination of these factors, could change our capital position
in a relatively short period of time.

Below
is a table that reflects the leverage and risk-based regulatory capital ratios of the bank
at September 30, 2004:

|                      |  | Well-Capitalized | Minimum
|--------------------- |  | ---------------- | -------
|
|Tier 1 capital        |  |                  |        
|Total capital         |  |                  |        
|Tier 1 leverage ratio |  |                  |        

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 issued commitments to extend credit of
$28,280,000 through various types of commercial lending arrangements and we had $4,000 in
standby letters of credit issued, the fair value of which is insignificant. We evaluate
each customers credit worthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by

19

---

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. We manage the credit risk on these commitments by subjecting them to normal
underwriting and risk management processes.

# Item 3.   Internal Controls
and Procedures

As
of the end of the period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures as defined in Exchange Act Rule 13a-15(e). Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer have concluded that our current
disclosure controls and procedures are effective as of September 30, 2004. There have been
no significant changes in our internal controls over financial reporting during the fiscal
quarter ended September 30, 2004 that have materially affected, or are reasonably likely
to materially affect, our internal controls over financial reporting.

The
design of any system of controls and procedures is based in part upon certain assumptions
about the likelihood of future events. There can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions, regardless of
how remote.

20

---

# PART II  OTHER
INFORMATION

# Item 1.   Legal Proceedings

Not Applicable

# Item 2.   Unregistered Sales
of Equity Securities and Use of Proceeds

# SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

|                       |  |  |  | (d) Maximum Number
|---------------------- |  |  |  | ------------------
|
|
|
|
|
|
|July 1 - 31, 2004      |  |  |  | 0                 
|August 1 - 31, 2004    |  |  |  | 0                 
|September 1 - 30, 2004 |  |  |  | 0                 
|TOTAL                  |  |  |  | 0                 

# Item 3.   Defaults Upon
Senior Securities

Not Applicable

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

None

# Item 5.   Other Information

None

# Item 6.   Exhibits

Exhibit          Description

10.1          Amended 1998 Stock Incentive Plan.

31.1          Rule 13a-14(a) Certification of the Chief Executive Officer.

31.2          Rule 13a-14(a) Certification of the Chief Financial Officer.

32      
      Section 1350 Certifications.

21

---

SIGNATURES

In
accordance with the requirements of the Exchange Act, the registrant caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

| |  | People's Community Capital Corporation(Registrant)
| |  | --------------------------------------------------

|Date:  November 10, 2004 |  | By:    /s/ Tommy B. Wessinger
Tommy B. WessingerChief Executive Officer
|------------------------ |  | -----------------------------------------------------------------------

|Date:  November 10, 2004 |  | By:    /s/ Jean H. Covington
Jean H. CovingtonPrincipal Accounting and Chief Financial Officer
|------------------------ |  | ----------------------------------------------------------------------------------------------

22

---

INDEX TO EXHIBITS

ExhibitNumber                  Description

10.1          Amended 1998 Stock Incentive Plan.

31.1          Rule 13a-14(a) Certification of the Chief Executive Officer.

31.2          Rule 13a-14(a) Certification of the Chief Financial Officer.

32      
      Section 1350 Certifications.

23