# 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 March 31, 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
333-25179

PEOPLE'S COMMUNITY CAPITAL CORPORATION(Exact name of registrant 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(Telephone Number)

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: 1,176,937 shares of common stock,  par value $.01 per share, outstanding as of May 10, 2004.

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

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PART I  FINANCIAL
INFORMATION

Item 1.   Financial Statements.

People's Community Capital Corporation
Consolidated Balance Sheets

|                                                                             | March 31, | 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 $4,549,490           |           |             
|and $4,655,929 at March 31, 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 advance                                               |           |             
|Other borrowings                                                             |           |             
|Accrued expenses and other liabilities                                       |           |             
|                                                                             |           |             
|Total liabilities                                                            |           |             
|                                                                             |           |             
|Shareholders' equity:                                                        |           |             
|Common stock, $.01 par value; 10,000,000 shares authorized, 1,157,973 shares |           |             
|issued at March 31, 2004 and 1,084,130 at December 31, 2003                  |           |             
|Additional paid-in-capital                                                   |           |             
|Retained earnings                                                            |           |             
|Accumulated other comprehensive income                                       |           |             
|                                                                             |           |             
|Total shareholders' equity                                                   |           |             
|                                                                             |           |             
|Total liabilities and shareholders' equity                                   |           |             
|                                                                             |           |             

See accompanying Notes
to Consolidated Financial Statements.

2

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Peoples Community
Capital CorporationConsolidated Statements of Income(Unaudited)

|                                             | For the three 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                              |                      | 
|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 Three Months
ended March 31, 2003 and March 31, 2004(Unaudited)

|                                     |  |  |  |           | Accumulated |   |       
|------------------------------------ |  |  |  | --------- | ----------- | - | ------
|
|
|
|Balance, December 31, 2002           |  |  |  | 1,046,193 |             | $ | 10,462
|Comprehensive Income:                |  | 
|Net income                           |  |  |  | -         |             |   | -     
|                                     |  |  |  |           |             |   |       
|Accumulated other comprehensive      |  | 
|loss net of income tax of $442       |  |  |  | -         |             |   | -     
|                                     |  |  |  |           |             |   |       
|Total comprehensive income           |  |  |  | -         |             |   | -     
|Stock dividend (5%)                  |  |  |  | 52,090    |             |   | 521   
|Cash paid in lieu of stock dividends |  |  |  | -         |             |   | -     
|Stock options exercised              |  |  |  | -         |             |   | -     
|                                     |  |  |  |           |             |   |       
|Balance, March 31, 2003              |  |  |  | 1,098,283 |             |   | 10,983
|                                     |  |  |  |           |             |   |       
|Balance, December 31, 2003           |  |  |  | 1,084,130 |             |   | 10,841
|Comprehensive Income:                |  | 
|Net income                           |  |  |  | -         |             |   | -     
|Accumulated other comprehensive      |  | 
|income net of income tax of          |  | 
|$70,173                              |  |  |  | -         |             |   | -     
|                                     |  |  |  |           |             |   |       
|Total comprehensive income           |  |  |  | -         |             |   | -     
|                                     |  |  |  |           |             |   |       
|Stock dividend (5%)                  |  |  |  | 53,843    |             |   | 538   
|Cash paid in lieu of stock dividends |  |  |  | -         |             |   | -     
|Stock options exercised              |  |  |  | 20,000    |             |   | 200   
|                                     |  |  |  |           |             |   |       
|Balance, March 31, 2004              |  |  |  | 1,157,973 |             | $ | 11,579
|                                     |  |  |  |           |             |   |       

See accompanying Notes
to Consolidated Financial Statements.

4

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

|                                                                               | For the three months | 
|------------------------------------------------------------------------------ | -------------------- | 
|
|
|Operating activities:                                                          |                      | 
|Net income                                                                     |                      | 
|Adjustments to reconcile net income to net cash provided by operating          |                      | 
|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 in held to maturity investments                                     |                      | 
|Net increase in short-term investments                                         |                      | 
|Purchase of property and equipment                                             |                      | 
|Loan originations and principal collections - net                              |                      | 
|Net increase in federal funds sold                                             |                      | 
|                                                                               |                      | 
|Net cash used for investing activities                                         |                      | 
|                                                                               |                      | 
|Financing activities:                                                          |                      | 
|Exercise of stock options                                                      |                      | 
|Net increase in deposits                                                       |                      | 
|Net 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 gain (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. 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 three
months ended March 31, 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 2. 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.

Note 3. Earnings per share

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

|                                                   | Three months ended March 31, | 
|-------------------------------------------------- | ---------------------------- | 
|
|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                           |                              | 
|                                                   |                              | 

6

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Note 4. 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 quarter
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 the next two
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:

For
the three months ended

|                                 | For the three 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 5. 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
April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities, which amends and clarifies accounting and
reporting for derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and loan commitments that relate
to the origination of mortgage loans held for sale, and for hedging activities under SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS
No. 149 clarifies under what circumstances a contract with an initial net investment meets
the characteristics of a

7

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derivative, clarifies when a derivative contains a financing
component, amends the definition of an underlying to conform it to language used in FIN
45, and amends certain other existing pronouncements. The pronouncement was generally
effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS
No. 149 did not have any impact on the financial condition or operating results of the
Company.

In
May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity, which establishes standards for
how an issuer classifies and measures certain financial instruments with characteristics
of both liabilities and equity. SFAS 150 requires an issuer to classify certain financial
instruments that include certain obligations, such as mandatory redemption, repurchase of
the issuers equity, or settlement by issuing equity, previously classified as
equity, as liabilities or assets in come circumstances. SFAS No. 150 was generally
effective for financial instruments entered into or modified after May 31, 2003, and
otherwise was effective at the beginning of the first interim period beginning after June
15, 2003. The adoption of SFAS No. 150 did not have any impact on the financial condition
or operating results of the Company.

In
November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 elaborates on the disclosure
to be made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees and warranties that it has issued. FIN 45 requires a
company, at the time it issues a guarantee, to recognize an initial liability for the fair
value of obligations assumed under the guarantee. The initial recognition requirements of
FIN 45 were effective for guarantees issued or modified after December 31, 2002. The
disclosure requirements were effective for financial statements for periods ending after
December 15, 2002. The adoption of FIN 45 did not have any impact on the Companys
financial position or results of operations.

In
January 2003, the FASB issued Interpretation No. 46, (FIN 46),
Consolidation of Variable Interest Entities, which addresses consolidation by
business enterprises of variable interest entities. FIN 46 requires a variable interest
entity to be consolidated by a company if that company is subject to a majority of the
risk of loss from the variable interest entitys activities or entitled to receive a
majority of the entitys residual returns, or both. FIN 46 also requires disclosures
about variable interest entities that a company is not required to consolidate, but in
which it has a significant variable interest. FIN 46 provides guidance for determining
whether an entity qualifies as a variable interest entity by considering, among other
considerations, whether the entity lacks sufficient equity or its equity holders lack
adequate decision-making ability. The consolidation requirements of FIN 46 applied
immediately to variable interest entities created after January 31, 2003. The
consolidation requirements applied to existing entities in the first fiscal year or
interim period beginning after June 15, 2003. Certain of the disclosure requirements
applied to all financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The adoption of FIN 46 did not have any impact
on the Companys financial position or results of operations.

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 the 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 on quantitative and qualitative
disclosures. EITF No. 03-1 was effective for fiscal years ending after

8

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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, will 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. Earlier application is encouraged
provided that financial statements for those earlier years have not yet been issued.
Retrospective application of this Statement is not permitted. The adoption of this
Statement, if approved, is not expected to have any significant 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.

9

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

This
discussion and analysis is intended to assist the reader in understanding our financial
condition and results of operations.

This
Report contains statements which constitute forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and the Securities Exchange Act of 1934.
These statements are based on many assumptions and estimates and are not guarantees of
future performance. Our actual results may differ materially from those projected in any
forward-looking statements, as they will depend on many factors about which we are unsure,
including many factors which are beyond our control. The words may,
would, could, will, expect,
anticipate, believe, intend, plan, and
estimate, as well as similar expressions, are meant to identify such
forward-looking statements. Potential risks and uncertainties include, but are not limited
to:

| | 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 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;
| | - | -------------------------

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

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

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

10

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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. 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 three months ended March
31, 2004 as compared to the three months ended March 31, 2003 and also analyzes our
financial condition as of March 31, 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 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 during the three
months ended March 31, 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 channel 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.

11

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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 March 31, 2004 to the three months ended March 31, 2003

Our
net income for the first quarter of 2004 was $318,495 compared to $232,178 for the same
period last year, an increase of 37%. The basic income per share was $0.28 per share
compared to $0.20 per share for the three months ended March 31, 2003. The improvement in
earnings resulted primarily from growth in the level of earning assets and reductions in
interest expense paid on deposits. The level of average earning assets was $106.4 million
for the three months ended March 31, 2004 as compared to $96.3 million for the three
months ended March 31, 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 March 31, 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.

|                            | Three months ended March 31, 2004 | Three months ended March 31, 2003
|--------------------------- | --------------------------------- | ---------------------------------
|
|
|ASSETSFederal funds sold    |                                   |                                  
|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           |                                   |                                  
|Shareholdes' equity         |                                   |                                  
|                            |                                   |                                  
|Total liabilities           |                                   |                                  
|& shareholders' equity      |                                   |                                  
|                            |                                   |                                  
|Net interest spread         |                                   |                                  
|Net interest income/margin  |                                   |                                  

12

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Net
interest income was $1,092,522 for the three months ended March 31, 2004 as compared to
$851,646 for the three months ended March 31, 2003, representing a 28% increase. The net
interest margin (net interest income divided by average earning assets) was 4.11% for the
three months ended March 31, 2004 compared to the net interest margin of 3.59% for the
three months ended March 31, 2003. Net yields were higher in the first quarter this year
as yields on earning assets have remained fairly constant overall, but we were able to
lower the cost of funds by reducing rates paid on deposits.

Interest
income for the first quarter of 2004 was $1,351,351 compared to $1,212,047 for the same
period in 2003. The volume of total earning assets increased by approximately $10 million
between the two periods, and the average rate earned on assets remained fairly constant at
5.08% compared to 5.10%. The largest component of interest income was interest and fees on
loans amounting to $1,044,302 for the quarter ended March 31, 2004 compared to $999,298
for the comparable prior year period. Average loan balances increased by $7.9 million. The
overall rate on the loan portfolio decreased from 6.73% for the three months ended March
31, 2003 to 6.14% for the three-month period ended March 31, 2004. Interest earned on
federal funds sold decreased from $23,232 for the first quarter of 2003 to $8,617 for the
first quarter of 2004. The average balances of federal funds sold decreased $4.2 million,
and the yield fell from 1.18% to 0.92%. The securities portfolio earned $286,293 for the
first quarter of 2004 with a yield of 3.48%. For the first quarter of 2003, the portfolio
earned $167,532 with a yield of 2.69%. The yield increased primarily as a result of the
extension of the duration of the investment portfolio. For the first quarter of 2003, the
average duration was 2.84 years, and in the first quarter of 2004, the average duration
was 4.18 years. The average balance outstanding in the portfolio increased $7.6 million.

Interest
expense decreased from $360,401 for the three months ended March 31, 2003 to $258,829 for
the three months ended March 31, 2004. The decrease was the direct result of the decrease
in rates paid on deposits and other liabilities, from an average of 1.89% for the first
quarter last year to an average rate of 1.23% for the first quarter this year. Average
interest-bearing liabilities, primarily deposits, increased by $7.0 million, or 9%. Other
interest-bearing borrowings did not change significantly.

Non-interest Income

Non-interest
income for the three-month period ended March 31, 2004 was $208,543 compared to $286,310
for the same period in 2003. Service charges on deposit accounts decreased by $11,235, or
8%, primarily due to a decrease in commercial NSF fees between the two periods under
comparison. Included in net income for the first quarter of 2003 were net gains on sale of
securities in the amount of $26,712. There were no security sales in the first quarter of
2004. Gross income from the sale of non deposit products was down $18,049 for the period
as low interest rates had a significant effect on annuity product sales. Brokered mortgage
fee income declined in the first quarter from 2003 levels to produce $28,009 in income for
the first quarter of 2004 compared to $43,904 for the same quarter last year. This type of
fee income is extremely interest rate sensitive, and we have seen a decline in refinancing
activity from last years levels. Other non-interest income, primarily fees,
decreased from $46,268 to $40,392. This is partially due to the fact that we have begun
providing free internet banking to certain of our deposit customers.

13

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Non-interest Expenses

Non-interest
expenses for the quarters ended March 31, 2004 and 2003 were $762,057 and $771,695,
respectively, a decrease of $9,638, or 1%. The decrease is primarily due to a decrease in
salaries associated with a severance agreement paid in 2003 that is partially offset by
general increases in salaries and benefits. Consulting and professional fees declined from
$67,278 to $57,782 primarily due to legal services performed in 2003 in connection with a
real estate foreclosure. General operating expenses increased from $35,385 to $47,267 due
to increased expenditures relating to forms and supplies.

Provision for Loan Losses

The
provision for loan losses was $55,569 and $30,000 for the three months ended March 31,
2004 and 2003, bringing the total reserve balance to $1,025,000 and $870,000 at March 31,
2004 and 2003, respectively. This amount represents 1.45% of gross loans at March 31,
2004, compared to 1.41% at March 31, 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 $57,947 in loans that were classified as
non-accrual at March 31, 2004 compared to $100 in non-accrual loans at March 31, 2003.
There were net recoveries of $29,431 for the three months ended March 31, 2004 and no net
charge-offs for the three months ended March 31, 2003.

BALANCE SHEET REVIEW

Total
consolidated assets grew by $12.7 million from $109,128,048 at December 31, 2003 to
$121,817,065 at March 31, 2004. The increase was generated primarily through deposit
growth of $12.0 million. The funds were invested in our loan portfolio which increased by
a net amount of $4.3 million, in federal funds sold, which increased $6.5 million, and in
our available for sale investment securities, which increased by $1.4 million.

Loans

Outstanding
net loans represent the largest component of earning assets as of March 31, 2004 at
$69,618,697, or approximately 61% of total earning assets. Net loans increased $4,317,386,
or 7%, 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 three
months ended March 31, 2004 was 6.14% as compared to a yield of 6.45% for the year ended
December 31, 2003.

The
principal components of our loan portfolio at March 31, 2004 and December 31, 2003,
consisted of real estate loans, comprising approximately 86.1% and 87.9% of total loans,
respectively. Real estate loan

14

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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.

|                                   | March 31, 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

The
allowance for loan losses at March 31, 2004 was $1,025,000, or 1.45% 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 current downward trend in economic conditions that
could potentially affect our borrowers and their ability to pay are of particular concern
at present and our reserve reflects this concern. 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 on
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.

Federal Funds Sold,
Short-Term Investments and Securities

Federal
funds sold (cash invested in overnight funds), short-term investments, and securities
represented approximately 40% of earning assets at March 31, 2004, or $45,384,156. This
represented an increase of $7.7 million from the December 31, 2003 balance of $37,636,874.
The combined yield on invested federal funds sold, short-term investments and securities
was 3.20% for the three months ended March 31, 2004 compared to 2.59% for the year ended
December 31, 2003. Short-term investments at March 31, 2004 and at December 31, 2003
consisted of commercial paper in another financial institution with balances of $1,754,922
and $1,720,652, respectively. Included in available-for-sale securities is $289,800 of
stock purchased in the Federal Home Loan Bank of Atlanta (FHLB), of which $15,600 was
purchased in the first quarter of 2004. This purchase was a requirement from the FHLB as a
condition of membership and borrowing capabilities.

15

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Other Real Estate Owned

In
November 2002, we foreclosed on certain property in Richmond County, Georgia pursuant to a
customers loans that were in default. We believe that the carrying value of $378,880
is not impaired as of this date and that any future sale of the property would be in an
amount sufficient to realize its book value.

Deposits and Other
Borrowings

Our
primary source of funds for loans and investments is deposits. Deposits grew $11,968,407,
or 13%, since year-end 2003 for a total of $105,205,980 at March 31, 2004. The average
rates paid on interest-bearing deposits were 1.15% and 1.55% at March 31, 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.

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 an early conversion option as of April 2004 and 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.

Shareholders Equity

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.

During
the first quarter, employees exercised stock options for which 20,000 shares of stock have
been issued. Since first quarter, another 18,964 stock options have been exercised by
employees. 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
March 31, 2004, our liquid assets, consisting of cash and due from banks and Federal funds
sold, amounted to $9,953,133, representing 8.2% of total assets. Short-term investments
(which carry terms of less than 90 days and could be considered a cash equivalent) and
securities equaled $38,267,156, or 31.4% 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 three months ended March 31, 2004, total deposits
increased by $11,968,407, representing an increase of 13%, or 51% 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 lines of

16

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credit from correspondent banks, one in the
amount of $3,500,000 and another for $1,800,000. The bank is also a member of the FHLB,
from which additional applications may be made for borrowing capabilities, if needed.

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 March 31, 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 March 31, 2004, we had issued commitments to extend credit of
$22,903,000 through various types of commercial lending arrangements and we had $834,000
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 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 March 31, 2004.

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.

17

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PART II  OTHER
INFORMATION

Item 1. Legal Proceedings

Not Applicable

Item 2. Changes in
Securities and Use of Proceeds

SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

|                      |  |  |  | (d) Maximum
|--------------------- |  |  |  | -----------
|
|
|
|
|
|
|
|January 1 - 31, 2004  |  |  |  | 0          
|February 1 - 29, 2004 |  |  |  | 0          
|March 1 - 31, 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

18

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Item 6. Exhibits and Report on Form
8-K

(a)
Exhibits:

Exhibit   Description

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.

(b)       
          Reports on Form 8-K 

The
following reports were filed on Form 8-K during the quarter ended March 31, 2004:

| | The
Company filed a Form 8-K on January 21, 2004 to disclose the issuance of a press release
announcing its financial results for the year ended December 31, 2003.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

19

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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)By:    /s/ Tommy B. Wessinger
          Tommy B. Wessinger          Chief Executive Officer
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------

Date:  May 10, 2004

| |  | By:    /s/ Jean H. Covington
          Jean H. Covington          Principal Accounting and Chief Financial Officer
| |  | ------------------------------------------------------------------------------------------------------------------

Date:  May 10, 2004

20

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INDEX TO EXHIBITS

ExhibitNumber           Description

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