# 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 June 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 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: 1,179,237 shares of common stock,  par value $.01 per share, outstanding as of August 9, 2004.

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

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PART I  FINANCIAL
INFORMATIONItem 1.   Financial Statements.

People's Community Capital Corporation
Consolidated Balance Sheets

|                                                                             | June 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 $4,212,522           |          |             
|and $4,655,929 at June 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 advance                                               |          |              |  
|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 June 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 six 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 CorporationStatement of Changes in Shareholders Equity and Comprehensive Income For the Six Months
ended June 30, 2003 and June 30, 2004 (Unaudited)

|                                     |  |  |  |           | Accumulated |   |       
|------------------------------------ |  |  |  | --------- | ----------- | - | ------
|
|
|
|Balance, December 31, 2002           |  |  |  | 1,046,193 |             | $ | 10,462
|Comprehensive Income:                |  | 
|Net income                           |  |  |  | -         |             |   | -     
|Accumulated other comprehensive      |  | 
|income net of income tax of $99,069  |  |  |  | -         |             |   | -     
|Total comprehensive income           |  |  |  | -         |             |   | -     
|Stock dividend (5%)                  |  |  |  | 52,090    |             |   | 521   
|Cash paid in lieu of stock dividends |  |  |  | -         |             |   | -     
|Stock options exercised              |  |  |  | -         |             |   | -     
|                                     |  |  |  |           |             |   |       
|Balance, June 30, 2003               |  |  |  | 1,098,283 |             |   | 10,983
|                                     |  |  |  |           |             |   |       
|Balance, December 31, 2003           |  |  |  | 1,084,130 |             |   | 10,841
|Comprehensive Income:                |  | 
|Net income                           |  |  |  | -         |             |   | -     
|Accumulated other comprehensive      |  | 
|loss net of income tax benefit       |  | 
|of $456,836                          |  |  |  | -         |             |   | -     
|                                     |  |  |  |           |             |   |       
|Total comprehensive income           |  |  |  | -         |             |   | -     
|                                     |  |  |  |           |             |   |       
|Stock dividend (5%)                  |  |  |  | 53,843    |             |   | 538   
|Cash paid in lieu of stock dividends |  |  |  | -         |             |   | -     
|Stock options exercised              |  |  |  | 41,264    |             |   | 413   
|                                     |  |  |  |           |             |   |       
|Balance, June 30, 2004               |  |  |  | 1,179,237 |             | $ | 11,792
|                                     |  |  |  |           |             |   |       

See accompanying Notes
to Consolidated Financial Statements.

4

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

|                                                                               | For the six 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 in held to maturity investments                                     |                   
|Net increase in short-term investments                                         |                   
|Purchase of property and equipment                                             |                   
|Loan originations and principal collections - net                              |                   
|Net decrease in federal funds sold                                             |                   
|                                                                               |                   
|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 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) gain 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 six months
ended June 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 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 June 30, | Six months ended June |  
|-------------------------------------------------- | --------------------------- | --------------------- | -
|
|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 two
quarters 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. 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:

|                                 | 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

7

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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 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

8

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guidance on quantitative and qualitative disclosures. EITF No. 03-1 was 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, 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.

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

9

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

| | 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.
| | - | --------------------------------------------------------------------------------------------------------------------

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.

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OVERVIEW

The
following discussion describes our results of operations for the quarter ended June 30,
2004 as compared to the quarter ended June 30, 2003 as well as results for the six months
ended June 30, 2004 and 2003, and also analyzes our financial condition as of June 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 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 six months ended June 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 June 30, 2004 to the three months ended June 30, 2003

Our
net income for the second quarter of 2004 was $366,739 compared to $296,494 for the same
period last year, an increase of 24%. The basic income per share was $0.31 per share
compared to $0.26 per share for the three months ended June 30, 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 $115.4 million
for the three months ended June 30, 2004 compared to $101.4 million for the three months
ended June 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

11

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liabilities, on an annualized
basis, for the three month periods ended June 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.

|                            | Three months ended June 30, 2004 | Three months ended June 30, 2003
|--------------------------- | -------------------------------- | --------------------------------
|
|
|ASSETS                      |                                  |                                 
|Federal 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           |                                  |                                 
|Shareholders' equity        |                                  |                                 
|                            |                                  |                                 
|Total liabilities &         |                                  |                                 
|shareholders' equity        |                                  |                                 
|                            |                                  |                                 
|Net interest spread         |                                  |                                 
|Net interest income/margin  |                                  |                                 

Net
interest income was $1,178,472 for the three months ended June 30, 2004 compared to
$906,512 for the three months ended June 30, 2003, representing a 30% increase. The net
interest margin (net interest income divided by average earning assets) was 4.08% for the
three months ended June 30, 2004 compared to the net interest margin of 3.59% for the
three months ended June 30, 2003. Net yields were higher in the second quarter this year
as yields on earning assets have remained fairly constant overall, however we were able to
lower the cost of funds by reducing rates paid on deposits.

Interest
income for the second quarter of 2004 was $1,460,922 compared to $1,257,810 for the same
period in 2003. The volume of total average earning assets increased by approximately
$14.0 million between the two periods, and the average rate earned on assets increased
slightly from 4.98% to 5.06% primarily due to an increase on the yield in our securities
portfolio. The largest component of interest income was interest and fees on loans
amounting to $1,078,054 for the quarter ended June 30, 2004 compared to $1,011,849 for the

12

---

comparable prior year period. Average loan balances increased by $8.9 million.
The overall rate on the loan portfolio decreased from 6.58% for the three months ended June 30, 2003
to 6.11% for the three-month period ended June 30, 2004. Interest earned on federal funds
sold decreased from $25,105 for the second quarter of 2003 to $4,063 for the second
quarter of 2004 as the average balance of federal funds sold decreased by $6.9 million,
and the yield fell from 1.16% to 0.91%. Federal funds sold were decreased in order to fund
investments in securities and to fund loan growth. The securities portfolio earned
$364,967 for the second quarter of 2004 with a yield of 3.55%. For the second quarter of
2003, the portfolio earned $198,474 with a yield of 2.83%. The portfolio was increased by
$12.9 million and the yield increased primarily as a result of the extension of the
maturity of the investment portfolio. For the second quarter of 2003, the average maturity
was 2.84 years, and in the second quarter of 2004, the average maturity was 4.75 years.

Interest
expense decreased from $351,298 for the three months ended June 30, 2003 to $282,450 for
the three months ended June 30, 2004. The decrease was the result of the decrease in rates
paid on deposits and other liabilities, from an average of 1.74% for the second quarter
last year to an average rate of 1.22% for the second quarter this year. Average
interest-bearing liabilities, primarily deposits, increased by $11.6 million, or 14%.

Non-interest Income

Non-interest
income for the three-month period ended June 30, 2004 was $216,036 compared to $276,546
for the same period in 2003. Service charges on deposit accounts decreased by $7,743, or
5%, primarily due to a decrease in commercial NSF fees between the two periods under
comparison. Included in net income for the second quarter of 2003 were net gains on sale
of securities in the amount of $41,282. There were $11,455 in security gains in the second
quarter of 2004. Brokered mortgage fee income declined $15,220 in the second quarter from
2003 levels to produce $28,215 in income for the second quarter of 2004 compared to
$43,435 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. We expect this trend may continue as the Federal Reserve reversed its rate-cutting
policy and increased the federal funds rate by 25 basis points in the second quarter.
Other non-interest income, primarily fees, decreased from $31,870 to $24,781. This is
partially due to the fact that we have begun providing free internet banking to certain of
our deposit customers.

Non-interest Expenses

Non-interest
expenses for the quarters ended June 30, 2004 and 2003 were $771,926 and $699,772,
respectively, an increase of $72,154, or 10%. The largest component of non-interest
expense was salaries and employee benefits which increased from $396,430 to $466,826. This
increase was primarily due to general merit increases in salaries and benefits and the
fact that an officer position was temporarily unfilled during the second quarter of 2003.
Occupancy and equipment expenses declined from $91,205 to $79,141 due to certain assets
within the company becoming fully depreciated since the same quarter last year. Other
expenses increased from $51,414 to $65,140 primarily due to increased advertising
expenditures.

EARNINGS REVIEW  Comparison of
the six months ended June 30, 2004 to the six months ended June 30, 2003

Our
net income for the six months ended June 30, 2004 was $685,234 compared to $528,672 for
the same period last year, an increase of 30%. The basic income per share increased to
$.59 compared to $.46 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 that more

13

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than offset a higher loan loss provision, increased non-interest
expense and decreased non-interest income. The level of average earning assets was $111.0 million for the six months ended
June 30, 2004 compared to $98.9 million for the six months ended June 30, 2003. The
average yield on earning assets stayed roughly the same, increasing only slightly from
5.04% to 5.07% between the two periods.

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

|                                   | Six months ended June 30, 2004 | Six months ended June 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                       |                                |                               
|                                   |                                |                               
|IABILITIES &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 $2,270,994 for the six months ended June 30, 2004 compared to
$1,758,158 for the six months ended June 30, 2003. The net interest margin (net interest
income divided by average earning assets) was 4.09% for the six months ended June 30, 2004
compared to the net interest margin of 3.59% for the six months ended June 30, 2003.

Interest
income for the first six months of 2004 was $2,812,273 compared to $2,469,857 for the same
period in 2003. The volume of total average earning assets increased from $98.9 million at
June 30, 2003 to $111.0 million at June 30, 2004, and the average rate earned on assets
was comparable with a slight net increase

14

---

from 5.04% to 5.07%. The largest component of
interest income was interest and fees on loans amounting to $2,122,356 for the six months
ended June 30, 2004 compared to $2,011,147 for the comparable prior year period. The
overall rate on the loan portfolio decreased from 6.66% for the six months ended June 30,
2003 to 6.12% for the six month period ended June 30, 2004 as interest rates continued to
decline in the economy. Average loan balances, however, increased by approximately $8.4
million. The average balance in federal funds sold decreased by approximately $5.5 million
as the funds were deployed into the loan and securities portfolios, and the average yield
fell from 1.17% to 0.91% resulting in a decrease of interest earned on federal funds sold
from $48,337 to $12,680. Interest income on securities increased between the two periods
from $366,007 to $651,260 as the average balances were higher by about $10.3 million, and
the yield increased from 2.76% to 3.52% largely due to lengthened maturities within the
portfolio.

Interest
expense decreased from $711,699 for the six months ended June 30, 2003 to $541,279 for the
six months ended June 30, 2004 due to a decrease in average rates paid on liabilities from
1.81% to 1.23%. This decrease occurred even though the size of average interest-bearing
liabilities, primarily deposits, increased from $79.2 million to $88.3 million, an
increase of 12%.

Non-interest Income

Non-interest
income for the six month period ended June 30, 2004 was $424,579 compared to $562,856 for
the same period in 2003. Of this total, $265,949 represented service charges on deposit
accounts for the six months ended June 30, 2004 compared to $284,927 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. We had a gain on sale
of securities of $11,455 during the six months ended June 30, 2004 compared to a gain of
$67,994 during the same period last year. Fees generated from our financial services
subsidiary declined from $44,458 for the first half of 2003 to $25,778 for the first half
of 2004. Low interest rates had a direct bearing on the sale of annuity products. Brokered
mortgage fees decreased from $87,339 to $56,224 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 increased the federal
funds rate 25 basis points in the second quarter. The remaining $65,173 of other
non-interest income for the first half of 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 $78,138. 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 six month periods ended June 30, 2004 and 2003 were $1,533,983 and
$1,471,467, respectively, a 4% increase. The largest component of non-interest expense,
salaries and employee benefits, increased 6% from $846,210 for the six months ended June
30, 2003 to $896,167 for the six months ended June 30, 2004. Occupancy and equipment
expense decreased due to certain assets becoming fully depreciated. Other changes in
non-interest expenses were primarily due to the continued growth of the bank.

Provision for Loan Losses

The
provision for loan losses was $118,121 and $59,197 for the six months ended June 30, 2004
and 2003, bringing the total reserve balance to $1,030,000 and $900,000 at June 30, 2004
and 2003, respectively. This amount represents 1.42% of gross loans at June 30, 2004 and
at June 30, 2003. It reflects our estimate of

15

---

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 June 30, 2004 compared to $1,861 in
non-accrual loans at June 30, 2003. There were net charge-offs of $28,121 for the six
months ended June 30, 2004 and net recoveries of $802 for the six months ended June 30,
2003.

BALANCE SHEET REVIEW

Total
consolidated assets grew by $12.3 million from $109,128,048 at December 31, 2003 to
$121,459,522 at June 30, 2004. The increase was generated primarily through deposit growth
of $11.9 million. The funds were invested in our loan portfolio which increased by a net
amount of $5.9 million and in our available for sale investment securities, which
increased by $6.3 million.

Loans

Outstanding
net loans represent the largest component of earning assets as of June 30, 2004 at
$71,178,713, or approximately 62% of total earning assets. Net loans increased $5,877,402,
or 9%, 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 six
months ended June 30, 2004 was 6.12% as compared to a yield of 6.45% for the year ended
December 31, 2003.

The
principal components of our loan portfolio at June 30, 2004 and December 31, 2003
consisted of real estate loans, comprising approximately 85.6% 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.

|                                   | June 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                    |               |                  
|                                   |               |                  

16

---

Allowance for Loan Losses

The
allowance for loan losses at June 30, 2004 was $1,030,000, or 1.42% 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.

Federal Funds Sold,
Short-Term Investments and Securities

Federal
funds sold (cash invested in overnight funds), short-term investments, and securities
represented approximately 38% of earning assets at June 30, 2004, or $43,310,614. This
represented an increase of $5.7 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 3.31% for the six months ended June 30, 2004 compared to 2.59% for the year
ended December 31, 2003. Short-term investments at June 30, 2004 and at December 31, 2003
consisted of commercial paper in another financial institution with balances of $2,096,150
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.

Other Real Estate Owned

In
November 2002, we foreclosed on certain property in Richmond County, Georgia. The carrying
value of the property was $378,880 at June 30, 2004 and December 31, 2003. Since quarter
end, we have sold a portion of the property leaving a balance of approximately $100,000.
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 $11,873,823,
or 13%, since year-end 2003 for a total of $105,111,396 at June 30, 2004. The average
rates paid on interest-bearing deposits were 1.15% and 1.75% at June 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.

17

---

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.

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 six 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
June 30, 2004, our liquid assets, consisting of cash and due from banks and Federal funds
sold, amounted to $2,507,674, representing 2.1% 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 $39,150,410, or 32.2% 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 six months ended June 30, 2004,
total deposits increased by $11,873,823, representing an increase of 13%, or 25% 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 credit from correspondent banks, one in the
amount of $4,670,000 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 June 30, 2004:

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

18

---

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 June 30, 2004, we had issued commitments to extend credit of
$28,373,000 through various types of commercial lending arrangements and we had $803,000
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 June 30, 2004. There have been no
significant changes in our internal controls over financial reporting during the fiscal
quarter ended June 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.

19

---

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

|                   |  |  |  |  
|------------------ |  |  |  | -
|
|
|
|
|
|
|April 1 - 30, 2004 |  |  |  | 0
|May 1 - 31, 2004   |  |  |  | 0
|June 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

The annual meeting of shareholders
was held on April 30, 2004 for which there were two matters submitted to a vote of
security holders. The following describes the matters voted upon at the annual meeting and
sets forth the number of votes cast for, against or withheld and the number of abstentions
as to each such matter (except as provided below, there were no broker non-votes).

The first matter submitted for a vote
of security holders was the election of certain directors. Our board of directors is
divided into three classes with each class to be as nearly equal in number as possible.
The three classes of directors have staggered terms, so that the terms of only
approximately one-third of the board members expire at each annual meeting of
shareholders. The current Class II directors are Raymond D. Brown and Anthony E. Jones.
The current Class III directors are Thomas H. Lyles, James D. McNair, Russell D. Phelon,
and Tommy B. Wessinger. The current Class I directors are Margaret Holley-Taylor, Clark D.
Moore, M.D., Donald W. Thompson, and John B. Tomarchio, M.D. The current terms of the
Class II directors expired at this years annual meeting held April 30, 2004
therefore leaving the Class II directors up for reelection for a three year term. The
number of votes for the election of the Class II directors was as follows: There were
971,947 votes for the reelection of Raymond D. Brown and 0 votes withheld from voting on
Mr. Browns reelection. There were 971,099 votes for the reelection of Anthony E.
Jones and 848 votes withheld on Mr.

20

---

Jones reelection. The terms of the Class III
directors will expire at the 2005 Annual Meeting of Shareholders, and the terms of the
Class I directors will expire at the 2006 Annual Meeting of Shareholders.

The second matter submitted for a
vote to security holders was the ratification of Elliott Davis, LLC as our independent
public accountants. There were 965,454 votes for the ratification of Elliott Davis, LLC,
4,063 votes withheld, and 2,430 votes against their ratification.

Both of the above matters were
approved and recorded in the Companys minute book from the annual meeting of
shareholders. There were no other matters voted on by the Companys shareholders at
our annual meeting held on April 30, 2004.

Item 5. Other Information

None

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 June 30, 2004:

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

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

Date:  August 9, 2004

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

Date: August 9, 2004

22

---

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.

23