Exhibit 13

Providing personal, prompt, efficient service is the goal of Bank of Walterboro. We are committed to the concept of Hometown Banking and hope we can be of service to you. Strong roots  strong branches.



|                                                                                    |  |      
|----------------------------------------------------------------------------------- |  | -----
|Contents:                                                                           |  |      
|Shareholder Letter                                                                  |  | 2    
|Summary of Selected Financial Data                                                  |  | 3    
|Financial Charts                                                                    |  | 4-7  
|Managements Discussion and Analysis                                                |  | 8-24 
|Report of Independent Registered Public Accounting Firm                             |  | 25   
|Consolidated Balance Sheets                                                         |  | 26   
|Consolidated Statements of Income                                                   |  | 27   
|Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income |  | 28   
|Consolidated Statements of Cash Flows                                               |  | 29   
|Notes to Consolidated Financial Statements                                          |  | 30-47
|Directors, Officers and Staff                                                       |  | 48   
|Corporate Data                                                                      |  | 49   
|Services                                                                            |  | 50   

Member FDIC



---

COMMUNITYCORP

Dear Shareholder,

It is a pleasure to
report the progress of Communitycorp and its subsidiary, Bank of Walterboro, during 2005. The Company continued to experience good growth in deposits and loans during the year. More detailed information follows, but we are pleased to report return
on average assets of 1.23%, a sound capital to asset ratio of 9.35%, and an allowance for loan losses of 1.71%.

Deposits at year-end were $127,458,306, an
increase of $2,546,979, or 2.04%, over 2004 year-end. Net loans increased from $81,549,925 to $95,930,351, an increase of $14,380,426, or 14.99%. The allowance for loan losses increased from a December 31, 2004 balance of $1,456,326 to
$1,664,948 or 1.71% of gross loans. Total assets increased from $138,407,723 to a December 31, 2005 total of $142,219,736 an increase of $3,812,013, or 2.75%.

Earnings increased in 2005 for the Company with net income of $1,710,424, an increase of $55,167, or 3.33%, more than 2004 earnings of $1,655,257. Earnings of $6.99 per share increased over $6.69 per share in 2004. Our net interest margin
decreased from 4.32% in 2004 to 4.20% in 2005.

Please read the following financial information so you may become aware of your Companys progress. We
believe the information contained in this Annual Report shows that a local, well-managed, independent bank can compete successfully in a deregulated market against national, regional, and state-wide banking institutions. Our success can be
attributed to the teamwork of our shareholders, directors, officers, and employees. We most importantly want to thank our customers for allowing us to be of service to them.

The Board of Directors, officers, and employees thank you for your past support and solicit your continued support as we continue our efforts to provide prompt, efficient, and courteous service to our customers. We
welcome any suggestions you may have.

We invite and encourage you to attend our Annual Meeting on Monday, April 24,
2006.



|                                  |  |  |  |                                    
|--------------------------------- |  |  |  | -----------------------------------
|Very truly yours,                 |  |  |  |                                    
|                                  |  | 
|/s/ W. Roger Crook W. Roger
Crook |  |  |  | /s/ Peden B. McLeod Peden B.
McLeod
|President and CEO                 |  |  |  | Chairman of the Board              



2



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COMMUNITYCORP

SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data concerning the Company. The
selected financial data has been derived from the consolidated financial statements which should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations.



|                                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|---------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|Year Ended December 31, (Dollars in thousands, except per share) |  | 2005 |         |   | 2004 |   |         | 2003 |  |   | 2002    |   |  | 2001 |        
|Results of Operations:                                           |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Interest income                                                  |  | $    | 7,737   |   |      | $ | 6,831   |      |  | $ | 6,537   |   |  | $    | 7,000   |   |  | $ | 7,897   |  
|Interest expense                                                 |  |      | 2,225   |   |      |   | 1,607   |      |  |   | 1,906   |   |  |      | 2,640   |   |  |   | 4,030   |  
|                                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net interest income                                              |  |      | 5,512   |   |      |   | 5,224   |      |  |   | 4,631   |   |  |      | 4,360   |   |  |   | 3,867   |  
|Provision for loan losses                                        |  |      | 381     |   |      |   | 471     |      |  |   | 405     |   |  |      | 405     |   |  |   | 257     |  
|                                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net interest income after provision for loan losses              |  |      | 5,131   |   |      |   | 4,753   |      |  |   | 4,226   |   |  |      | 3,955   |   |  |   | 3,610   |  
|Other income                                                     |  |      | 599     |   |      |   | 579     |      |  |   | 558     |   |  |      | 492     |   |  |   | 493     |  
|Other expense                                                    |  |      | 3,232   |   |      |   | 2,875   |      |  |   | 2,706   |   |  |      | 2,224   |   |  |   | 2,183   |  
|                                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Income before income taxes                                       |  |      | 2,498   |   |      |   | 2,457   |      |  |   | 2,078   |   |  |      | 2,223   |   |  |   | 1,920   |  
|Income tax expense                                               |  |      | 788     |   |      |   | 802     |      |  |   | 653     |   |  |      | 715     |   |  |   | 617     |  
|                                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income                                                       |  | $    | 1,710   |   |      | $ | 1,655   |      |  | $ | 1,425   |   |  | $    | 1,508   |   |  | $ | 1,303   |  
|                                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Balance Sheet Data:                                              |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Securities available-for-sale                                    |  | $    | 30,856  |   |      | $ | 25,310  |      |  | $ | 16,495  |   |  | $    | 12,661  |   |  | $ | 11,343  |  
|Securities held-to-maturity                                      |  |      | 1,875   |   |      |   | 2,181   |      |  |   | 2,644   |   |  |      | 3,050   |   |  |   | 3,499   |  
|Allowance for loan losses                                        |  |      | 1,665   |   |      |   | 1,456   |      |  |   | 1,270   |   |  |      | 1,319   |   |  |   | 1,231   |  
|Net loans                                                        |  |      | 95,930  |   |      |   | 81,550  |      |  |   | 78,899  |   |  |      | 73,856  |   |  |   | 70,128  |  
|Premises and equipment, net                                      |  |      | 3,266   |   |      |   | 3,441   |      |  |   | 2,517   |   |  |      | 2,169   |   |  |   | 2,013   |  
|Total assets                                                     |  |      | 142,220 |   |      |   | 138,408 |      |  |   | 124,755 |   |  |      | 115,775 |   |  |   | 110,850 |  
|Noninterest-bearing deposits                                     |  |      | 18,021  |   |      |   | 16,532  |      |  |   | 13,952  |   |  |      | 9,304   |   |  |   | 9,230   |  
|Interest-bearing deposits                                        |  |      | 109,437 |   |      |   | 108,379 |      |  |   | 98,631  |   |  |      | 93,316  |   |  |   | 89,190  |  
|Total deposits                                                   |  |      | 127,458 |   |      |   | 124,911 |      |  |   | 112,584 |   |  |      | 102,620 |   |  |   | 98,420  |  
|Short-term borrowings                                            |  |      | 370     |   |      |   | 390     |      |  |   | 450     |   |  |      | 400     |   |  |   | 560     |  
|Total liabilities                                                |  |      | 128,576 |   |      |   | 125,772 |      |  |   | 113,515 |   |  |      | 103,526 |   |  |   | 99,848  |  
|Total shareholders equity                                       |  |      | 13,643  |   |      |   | 12,636  |      |  |   | 11,240  |   |  |      | 12,249  |   |  |   | 11,002  |  
|                                                                 |  |      |         |   |     
|Per Share Data:                                                  |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Weighted-average common shares outstanding                       |  |      | 244,788 |   |      |   | 247,446 |      |  |   | 261,221 |   |  |      | 276,473 |   |  |   | 280,330 |  
|Net income                                                       |  | $    | 6.99    |   |      | $ | 6.69    |      |  | $ | 5.46    |   |  | $    | 5.46    |   |  | $ | 4.65    |  
|Cash dividends paid                                              |  | $    | 0.82    |   |      | $ | 0.72    |      |  | $ | 0.65    |   |  | $    | 0.59    |   |  | $ | 0.55    |  
|Period end book value                                            |  | $    | 56.13   |   |      | $ | 51.26   |      |  | $ | 45.45   |   |  | $    | 44.62   |   |  | $ | 39.52   |  
|                                                                 |  |      |         |   |     
|Return on Equity and Assets:                                     |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Return on average assets                                         |  |      | 1.23    | % |      |   | 1.29    | %    |  |   | 1.18    | % |  |      | 1.31    | % |  |   | 1.18    | %
|Return on average equity                                         |  |      | 13.11   | % |      |   | 14.04   | %    |  |   | 13.08   | % |  |      | 13.04   | % |  |   | 12.45   | %
|Equity to assets ratio                                           |  |      | 9.35    | % |      |   | 9.16    | %    |  |   | 9.02    | % |  |      | 10.04   | % |  |   | 9.46    | %
|Dividend payout ratio                                            |  |      | 11.79   | % |      |   | 10.85   | %    |  |   | 12.52   | % |  |      | 10.86   | % |  |   | 11.89   | %



3



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COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

GENERAL

Communitycorp is a South
Carolina corporation organized on March 13, 1995 to be a bank holding company (the Company). The Companys subsidiary, Bank of Walterboro, (the Bank) is a state-chartered commercial bank with four banking locations. The Banks main
office and operations center is in Walterboro, South Carolina. In addition, the Bank also has branches in Ravenel, and Ridgeland, South Carolina. The Companys primary market area includes Colleton, Jasper and Charleston Counties. Depository
accounts are insured by the Federal Deposit Insurance Corporation up to the maximum amount permitted by law. The Bank, which received its charter on October 11, 1988 and opened for business on May 1, 1989, is dedicated to providing prompt,
efficient, personal service to its customers. The Bank offers a full range of deposit services for individuals and businesses. Deposit products include checking accounts, savings accounts, certificates of deposit, money market accounts, and
IRAs.

The Company primarily is engaged in the business of attracting deposits from the general public and using these deposits together with other
funds to make commercial, consumer, and real estate loans. The Companys operating results depend to a substantial extent on the difference between interest and fees earned on loans, investments, and services, and the Companys interest
expense, consisting principally of interest paid on deposits. Unlike most industrial companies, virtually all of the assets and liabilities of financial institutions are monetary. As a result, interest rates have a greater effect on the financial
institutions performance. In addition to competing with other traditional financial institutions, the Company also competes for savings dollars with nontraditional financial intermediaries such as mutual funds. This has resulted in a highly
competitive market area which demands the type of personal service and attention provided by Bank of Walterboro.

The earnings and growth of the banking
industry and the Company are and will be affected by general conditions of the economy and by the fiscal and monetary policies of the federal government and its agencies, including the Board of Governors of the Federal Reserve System (the Board).
The Board regulates money and credit conditions and, as a result, has a strong influence on interest rates and on general economic conditions. The effect of such policies in the future on the business and earnings of the Company cannot be predicted
with certainty.

As of December 31, 2005, the Company had forty-two full-time employees and seven part time employees
in all offices.

This discussion and analysis is intended to assist the reader in understanding the financial condition and results of operations of
Communitycorp and its subsidiary, Bank of Walterboro. This commentary should be read in conjunction with the consolidated financial statements and the related notes and the other statistical information in this report.

CRITICAL ACCOUNTING POLICY

The Company has adopted
various accounting policies, which govern the application of account principles generally accepted in the United States of America in the preparation of the Companys consolidated financial statements. The significant accounting policies of the
Company are described in the notes to the consolidated financial statements.

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 the Company.

The Company believes the
allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation of its consolidated financial statements. Refer to the section Provision and Allowance for Loan
Losses and Note 1 to the consolidated financial statements for a detailed description of the Companys estimation process and methodology related to the allowance for loan losses.



8



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COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

Statements included in Managements Discussion and Analysis which are not historical in nature are intended to be, and are hereby identified, as forward looking statements for purposes of the safe harbor provided by
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which
are other than statements of historical facts. Such forward-looking statements may be identified, without limitation, by the use of the words anticipates, believes, estimates, expects,
intends, plans, predicts, projects, and similar expressions. The Companys expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable
basis, including without limitation, managements examination of historical operating trends, data contained in the Companys records and other data available from third parties, but there can be no assurance that managements
expectations, beliefs or projections will result or be achieved or accomplished. The Company cautions readers that forward looking statements, including without limitation, those relating to future business prospects, revenues, working capital,
liquidity, capital needs, interest costs, and income, are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward looking statements, due to several important factors herein
identified, among others, and other risks and factors identified from time to time in the Companys reports filed with the Securities and Exchange Commission.

RESULTS OF OPERATIONS

OVERVIEW

Net income for the year ended December 31, 2005 was $1,710,424 or $6.99 per share, compared to $1,655,257, or $6.69 per share, for the year ended December 31, 2004. The increase in net income for 2005
resulted primarily from the increase in interest income of $905,427 over the 2004 amount of $6,831,212. Total interest expense also increased $617,789 over the 2004 amount of $1,606,744. Net interest income increased $287,638 over the 2004 amount of
$5,224,468, while noninterest income increased $20,410 over the 2004 amount of $578,556. For the year ended December 31, 2005 net interest margin decreased from 4.32% in 2004 to 4.20% in 2005.



9



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COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

NET INTEREST INCOME

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

Net interest income for 2005 was $5,512,106 compared to $5,224,468 for 2004, an increase of 5.51%. The increase was mainly attributable to the increase in the average balances of our earning assets, which increased by
8.41% while our interest bearing liabilities increased only 7.12%.

For 2005 average-earning assets totaled approximately $131,123,000 with an annualized
average yield of 5.90% compared to approximately $120,949,000 and 5.65%, respectively, for 2004. Average interest-bearing liabilities totaled approximately $108,819,000 with an annualized average cost of 2.04% for 2005 compared to approximately
$101,590,000 and 1.58%, respectively, for 2004.

Our net interest margin and net interest spread was 4.20% and 3.86% for 2005 compared to 4.32% and 4.07%
respectively for 2004.

Our annualized yield on average earning assets increased 25 basis points for 2005 compared to 2004, while our annualized average
cost of our interest-bearing liabilities also increased 46 basis points for 2005 compared to 2004. These increases were reflective of the increasing interest rate environment during 2005.

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

Because loans often provide a higher yield than other types of earning assets, one of our goals it to maintain our loan portfolio as the largest component of total
earning assets. Loans comprised approximately 66.93% and 66.03% of average earning assets for December 31, 2005 and 2004, respectively. Loan interest income for the years ended December 31, 2005 and 2004 was $6,313,934 and 5,877,205,
respectively. The annualized average yield on loans was 7.19% and 7.36% for 2005 and 2004, respectively. Average balances of loans increased to approximately $87,756,000 during 2005, an increase of approximately $7,891,000 over the average of
approximately $79,865,000 during 2004. The decline in the annualized yield on loans is mainly attributable to the volume of fixed rate loans in the loan portfolio that were made the in the past several years when market interest rates were at their
lowest.

Investment securities averaged approximately $32,052,000 or 24.44% of average earning assets, for December 31, 2005 compared to approximately
$23,151,000 or 19.14% of average earning assets, for 2004. Interest earned on investment securities amounted to $1,090,065 for the year ended December 31, 2005, compared to $717,620 for the same period last year. Investment securities yielded
3.40% and 3.10% for the period ended December 31, 2005 and 2004, respectively.

Total interest expense for the years ended December 31, 2005 and
2004 was $2,224,533 and $1,606,744, respectively. The largest component of interest expense is interest on deposit accounts. Interest expense on deposit accounts was $2,216,939 and $1,605,442, for the years ended December 31, 2005 and 2004,
respectively. The average balance of interest bearing deposits increased to approximately $108,494,000 for the year ended December 31, 2005 from approximately $101,268,000 during the same period last year. The annualized average cost of
deposits was approximately 2.04% for the year ended December 31, 2005 compared to 1.59% for the same period in 2004.

For the year ended
December 31, 2005 and 2004, the total annualized average cost of funds was 2.04% and 1.58%, respectively.



10



---

COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

NET INTEREST INCOME(continued)

Average Balances, Income, Expenses, and Rates. The following table sets forth, for the periods indicated, the weighted average yields earned, the weighted average yields paid, the net interest
spread, and the net interest margin on earning assets. The table also indicates the average monthly balance and the interest income or expense by specific categories.

Average Balances, Income, Expenses, and Rates



|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|------------------------------------------ |  | -------------- | ------- | - | -------------- | - | ---------- |  | ---- | -------------- |  | - | -------------- | - | ---------- | - | ----- |  | ---- | -
|                                           |  | 2005           |         |   | 2004           |  
|(Dollars in thousands)                     |  | AverageBalance |         |   | Income/Expense |   | Yield/Rate |  |      | AverageBalance |  |   | Income/Expense |   | Yield/Rate |  
|Assets:                                    |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Earning assets:                            |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Securities, taxable (1)                    |  | $              | 25,828  |   |                | $ | 835        |  | 3.23 | %              |  | $ | 17,531         |   |            | $ | 499   |  | 2.85 | %
|Securities, tax-exempt (1)                 |  |                | 5,897   |   |                |   | 249        |  | 4.22 |                |  |   | 5,420          |   |            |   | 213   |  | 3.93 |  
|Nonmarketable equity securities            |  |                | 327     |   |                |   | 6          |  | 1.83 |                |  |   | 200            |   |            |   | 5     |  | 2.50 |  
|Federal funds sold                         |  |                | 10,874  |   |                |   | 316        |  | 2.91 |                |  |   | 17,323         |   |            |   | 218   |  | 1.26 |  
|Time deposits with other banks             |  |                | 441     |   |                |   | 17         |  | 3.85 |                |  |   | 610            |   |            |   | 19    |  | 3.11 |  
|Loans (2)                                  |  |                | 87,756  |   |                |   | 6,314      |  | 7.19 |                |  |   | 79,865         |   |            |   | 5,877 |  | 7.36 |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Total earning assets                       |  |                | 131,123 |   |                |   | 7,737      |  | 5.90 |                |  |   | 120,949        |   |            |   | 6,831 |  | 5.65 |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Cash and due from banks                    |  |                | 4,689   |   |                |   |            |  |      |                |  |   | 4,261          |   |            |   |       |  |      |  
|Allowance for loan losses                  |  |                | (1,508  | ) |                |   |            |  |      |                |  |   | (1,366         | ) |            |   |       |  |      |  
|Premises and equipment                     |  |                | 3,362   |   |                |   |            |  |      |                |  |   | 2,778          |   |            |   |       |  |      |  
|Other assets                               |  |                | 1,778   |   |                |   |            |  |      |                |  |   | 2,141          |   |            |   |       |  |      |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Total assets                               |  | $              | 139,444 |   |                |   |            |  |      |                |  | $ | 128,763        |   |            |   |       |  |      |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Liabilities:                               |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Interest-bearing liabilities:              |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Interest-bearing deposits                  |  | $              | 108,494 |   |                |   | 2,217      |  | 2.04 | %              |  | $ | 101,268        |   |            |   | 1,606 |  | 1.59 | %
|Short-term borrowings                      |  |                | 325     |   |                |   | 8          |  | 2.46 |                |  |   | 322            |   |            |   | 1     |  | 0.31 |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Total interest-bearing liabilities         |  |                | 108,819 |   |                |   | 2,225      |  | 2.04 |                |  |   | 101,590        |   |            |   | 1,607 |  | 1.58 |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Noninterest-bearing deposits               |  |                | 16,994  |   |                |   |            |  |      |                |  |   | 14,918         |   |            |   |       |  |      |  
|Accrued interest and other liabilities     |  |                | 587     |   |                |   |            |  |      |                |  |   | 463            |   |            |   |       |  |      |  
|Shareholders equity                       |  |                | 13,044  |   |                |   |            |  |      |                |  |   | 11,792         |   |            |   |       |  |      |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Total liabilities and shareholders equity |  | $              | 139,444 |   |                |   |            |  |      |                |  | $ | 128,763        |   |            |   |       |  |      |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Net interest spread                        |  |                |         |   |                |   |            |  | 3.86 | %              |  |   |                |   |            |   |       |  | 4.07 | %
|Net interest income                        |  |                |         |   |                | $ | 5,512      |  |      |                |  |   |                |   |            | $ | 5,224 |  |      |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Net interest margin                        |  |                |         |   |                |   |            |  | 4.20 | %              |  |   |                |   |            |   |       |  | 4.32 | %

---

|(1) | Averages for securities are stated at historical cost.
|--- | ------------------------------------------------------

|(2) | The effect of loans in nonaccrual status and fees collected is not significant to the computations. All loans and deposits are domestic.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



11



---

COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

NET INTEREST INCOME(continued)

Analysis of Changes in Net Interest Income. Net interest income can also be analyzed in terms of the impact of changing rates and changing volume. The following table describes the extent to which
changes in interest rates and changes in the volume of earning assets and interest-bearing liabilities have affected the Companys interest income and interest expense during the periods indicated. Information on changes in each category
attributable to (i) changes due to volume (change in volume multiplied by prior period rate), (ii) changes due to rates (changes in rates multiplied by prior period volume) and (iii) changes in rate and volume (change in rate
multiplied by the change in volume) is provided as follows:

Analysis of Changes in Net Interest Income



|                                |  |                                         |     |   |                                         |   |      |              |  |   |       |   |  |        |     |   |      |   |     |              |  |   |       |   |  |   |     |   |  |   |      |  
|------------------------------- |  | --------------------------------------- | --- | - | --------------------------------------- | - | ---- | ------------ |  | - | ----- | - |  | ------ | --- | - | ---- | - | --- | ------------ |  | - | ----- | - |  | - | --- | - |  | - | ---- | -
|                                |  | 2005 Compared With 2004 Variance Due to |     |   | 2004 Compared With 2003 Variance Due to |  
|(Dollars in thousands)          |  | Volume                                  |     |   | Rate                                    |   |      | Volume/ Rate |  |   | Total |   |  | Volume |     |   | Rate |   |     | Volume/ Rate |  |   | Total |  
|Earning Assets                  |  |                                         |     |   |                                         |   |      |              |  |   |       |   |  |        |     |   |      |   |     |              |  |   |       |   |  |   |     |   |  |   |      |  
|Securities, taxable             |  | $                                       | 236 |   |                                         | $ | 68   |              |  | $ | 32    |   |  | $      | 336 |   |      | $ | 182 |              |  | $ | (15   | ) |  | $ | (8  | ) |  | $ | 159  |  
|Securities, tax-exempt          |  |                                         | 19  |   |                                         |   | 16   |              |  |   | 1     |   |  |        | 36  |   |      |   | 3   |              |  |   | (11   | ) |  |   |    |   |  |   | (8   | )
|Nonmarketable equity securities |  |                                         | 3   |   |                                         |   | (1   | )            |  |   | (1    | ) |  |        | 1   |   |      |   | (3  | )            |  |   | (4    | ) |  |   | 1   |   |  |   | (6   | )
|Federal funds sold              |  |                                         | (81 | ) |                                         |   | 285  |              |  |   | (106  | ) |  |        | 98  |   |      |   | (24 | )            |  |   | 42    |   |  |   | (5  | ) |  |   | 13   |  
|Time deposits with other banks  |  |                                         | (5  | ) |                                         |   | 5    |              |  |   | (2    | ) |  |        | (2  | ) |      |   | 8   |              |  |   | (4    | ) |  |   | (2  | ) |  |   | 2    |  
|Loans                           |  |                                         | 581 |   |                                         |   | (131 | )            |  |   | (13   | ) |  |        | 437 |   |      |   | 161 |              |  |   | (25   | ) |  |   | (1  | ) |  |   | 135  |  
|                                |  |                                         |     |   |                                         |   |      |              |  |   |       |   |  |        |     |   |      |   |     |              |  |   |       |   |  |   |     |   |  |   |      |  
|Total interest income           |  |                                         | 753 |   |                                         |   | 242  |              |  |   | (89   | ) |  |        | 906 |   |      |   | 327 |              |  |   | (17   | ) |  |   | (15 | ) |  |   | 295  |  
|                                |  |                                         |     |   |                                         |   |      |              |  |   |       |   |  |        |     |   |      |   |     |              |  |   |       |   |  |   |     |   |  |   |      |  
|Interest-Bearing Liabilities    |  |                                         |     |   |                                         |   |      |              |  |   |       |   |  |        |     |   |      |   |     |              |  |   |       |   |  |   |     |   |  |   |      |  
|Interest-bearing deposits       |  |                                         | 115 |   |                                         |   | 463  |              |  |   | 33    |   |  |        | 611 |   |      |   | 89  |              |  |   | (369  | ) |  |   | (18 | ) |  |   | (298 | )
|Short-term borrowings           |  |                                         |    |   |                                         |   | 7    |              |  |   |      |   |  |        | 7   |   |      |   |    |              |  |   |      |   |  |   |    |   |  |   |     |  
|                                |  |                                         |     |   |                                         |   |      |              |  |   |       |   |  |        |     |   |      |   |     |              |  |   |       |   |  |   |     |   |  |   |      |  
|Total interest expense          |  |                                         | 115 |   |                                         |   | 470  |              |  |   | 33    |   |  |        | 618 |   |      |   | 89  |              |  |   | (369  | ) |  |   | (18 | ) |  |   | (298 | )
|                                |  |                                         |     |   |                                         |   |      |              |  |   |       |   |  |        |     |   |      |   |     |              |  |   |       |   |  |   |     |   |  |   |      |  
|Net interest income             |  | $                                       | 638 |   |                                         | $ | (228 | )            |  | $ | (122  | ) |  | $      | 288 |   |      | $ | 238 |              |  | $ | 352   |   |  | $ | 3   |   |  | $ | 593  |  
|                                |  |                                         |     |   |                                         |   |      |              |  |   |       |   |  |        |     |   |      |   |     |              |  |   |       |   |  |   |     |   |  |   |      |  

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



12



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COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

NET INTEREST INCOME(continued)

The following table presents the Companys rate sensitivity at each of the time intervals indicated as of December 31, 2005. The table may not be indicative of the Companys rate sensitivity position at
other points in time.

Interest Sensitivity Analysis



|                                                                       |  |                     |         |    |                                 |   |         |                           |  |   |                                         |   |  |       |        |   |  |   |        
|---------------------------------------------------------------------- |  | ------------------- | ------- | -- | ------------------------------- | - | ------- | ------------------------- |  | - | --------------------------------------- | - |  | ----- | ------ | - |  | - | -------
|(Dollars in thousands)                                                 |  | Within Three Months |         |    | After ThreeThroughTwelve Months |   |         | After OneThroughFiveYears |  |   | Greater ThanFive Years or Non-Sensitive |   |  | Total
|Assets                                                                 |  |                     |         |    |                                 |   |         |                           |  |   |                                         |   |  |       |        |   |  |   |        
|Earning assets:                                                        |  |                     |         |    |                                 |   |         |                           |  |   |                                         |   |  |       |        |   |  |   |        
|Federal funds sold and securities purchased under agreements to resell |  | $                   | 2,773   |    |                                 | $ |        |                           |  | $ |                                        |   |  | $     |       |   |  | $ | 2,773  
|Time deposits with other banks                                         |  |                     | 300     |    |                                 |   |        |                           |  |   |                                        |   |  |       |       |   |  |   | 300    
|Investment securities                                                  |  |                     | 200     |    |                                 |   | 4,350   |                           |  |   | 22,640                                  |   |  |       | 5,881  |   |  |   | 33,071 
|Loans (1)                                                              |  |                     | 16,734  |    |                                 |   | 24,852  |                           |  |   | 55,438                                  |   |  |       | 291    |   |  |   | 97,315 
|                                                                       |  |                     |         |    |                                 |   |         |                           |  |   |                                         |   |  |       |        |   |  |   |        
|Total earning assets                                                   |  |                     | 20,007  |    |                                 |   | 29,202  |                           |  |   | 78,078                                  |   |  |       | 6,172  |   |  |   | 133,459
|                                                                       |  |                     |         |    |                                 |   |         |                           |  |   |                                         |   |  |       |        |   |  |   |        
|Liabilities                                                            |  |                     |         |    |                                 |   |         |                           |  |   |                                         |   |  |       |        |   |  |   |        
|Interest-bearing liabilities:                                          |  |                     |         |    |                                 |   |         |                           |  |   |                                         |   |  |       |        |   |  |   |        
|Interest-bearing deposits:                                             |  |                     |         |    |                                 |   |         |                           |  |   |                                         |   |  |       |        |   |  |   |        
|Demand                                                                 |  |                     | 28,958  |    |                                 |   |        |                           |  |   |                                        |   |  |       |       |   |  |   | 28,958 
|Savings and money market                                               |  |                     | 18,123  |    |                                 |   |        |                           |  |   |                                        |   |  |       |       |   |  |   | 18,123 
|Time                                                                   |  |                     | 16,740  |    |                                 |   | 40,671  |                           |  |   | 4,886                                   |   |  |       | 59     |   |  |   | 62,356 
|                                                                       |  |                     |         |    |                                 |   |         |                           |  |   |                                         |   |  |       |        |   |  |   |        
|Total interest-bearing deposits                                        |  |                     | 63,821  |    |                                 |   | 40,671  |                           |  |   | 4,886                                   |   |  |       | 59     |   |  |   | 109,437
|Short-term borrowings                                                  |  |                     | 370     |    |                                 |   |        |                           |  |   |                                        |   |  |       |       |   |  |   | 370    
|                                                                       |  |                     |         |    |                                 |   |         |                           |  |   |                                         |   |  |       |        |   |  |   |        
|Total interest-bearing deposits                                        |  |                     | 64,191  |    |                                 |   | 40,671  |                           |  |   | 4,886                                   |   |  |       | 59     |   |  |   | 109,807
|                                                                       |  |                     |         |    |                                 |   |         |                           |  |   |                                         |   |  |       |        |   |  |   |        
|Period gap                                                             |  | $                   | (44,184 | )  |                                 | $ | (11,469 | )                         |  | $ | 73,192                                  |   |  | $     | 6,113  |   |  |   |        
|                                                                       |  |                     |         |    |                                 |   |         |                           |  |   |                                         |   |  |       |        |   |  |   |        
|Cumulative gap                                                         |  | $                   | (44,184 | )  |                                 | $ | (55,653 | )                         |  | $ | 17,539                                  |   |  | $     | 23,652 |   |  |   |        
|                                                                       |  |                     |         |    |                                 |   |         |                           |  |   |                                         |   |  |       |        |   |  |   |        
|Ratio of cumulative gap to total earning assets                        |  |                     | (33.11  | )% |                                 |   | (41.70  | )%                        |  |   | 13.14                                   | % |  |       | 17.72  | % |  |   |        

---

|(1) | Excludes nonaccrual loans.
|--- | --------------------------

The above table reflects the balances of
interest-earning assets and interest-bearing liabilities at the earlier of their repricing or maturity dates. Overnight federal funds are reflected at the earliest pricing interval due to the immediately available nature of the instruments.
Scheduled payment amounts of fixed rate amortizing loans are reflected at each scheduled payment date. Scheduled payment amounts of variable rate amortizing loans are reflected at each scheduled payment date until the loan may be repriced
contractually; the unamortized balance is reflected at that point. Interest-bearing liabilities with no contractual maturity, such as savings deposits and interest-bearing transaction accounts, are reflected in the earliest repricing period due to
contractual arrangements which give the Company the opportunity to vary the rates paid on those deposits within a thirty-day or shorter period. Fixed rate time deposits, principally certificates of deposit, are reflected at their contractual
maturity date. Short-term borrowings are reflected in the earliest repricing period since these borrowings mature daily.



13



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COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

NET INTEREST INCOME(continued)

The Company generally would benefit from increasing market rates of interest when it has an asset-sensitive gap and generally would benefit from decreasing market rates of interest when it is liability sensitive. The
Company currently is liability-sensitive over periods with maturity dates of less than twelve months. However, the Companys gap analysis is not a precise indicator of its interest sensitive position. The analysis presents a static view of the
timing of maturities and repricing opportunities, without taking into consideration that changes in interest rates do not affect all assets and liabilities equally. Net interest income is also impacted by other significant factors, including changes
in the volume and mix of earning assets and interest-bearing liabilities.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

We provide for loan losses using the allowance method. Increases to the allowance are charged by recording a provision for loan losses. Loan losses and recoveries are
charged to the allowance. Charge-offs to the allowance are made when all or a portion of the loan is confirmed as a loss based on our review of the loan, through possession of the underlying security, or through a troubled debt restructuring
transaction. Likewise, recoveries offset these increases through credits to the allowance.

The allowance is maintained at a level that we believe is
sufficient to cover losses in the loan portfolio at a specific point in time. Assessing the adequacy of the allowance requires considerable judgment. The adequacy of the allowance is analyzed on a monthly basis using an internal analysis model. For
purposes of this analysis, adequacy is defined as a level sufficient to absorb probable losses in the portfolio. This methodology relies upon our judgment. Our judgments are based on our assessment of various issues, including, but not limited to,
the pace of loan growth, emerging portfolio concentrations, the risk management system relating to lending activities, entry into new markets, new product offerings, loan portfolio quality trends, and uncertainty in current economic and business
conditions. An allowance model is used that takes into account factors including the composition of the loan portfolio such as risk grade classifications, historical asset quality trends including, but not limited to, previous loss experience
ratios, our assessment of current economic conditions, and reviews of specific high risk sectors of the portfolio. Loans are graded at inception and are reviewed on a periodic basis to ensure that assigned risk grades are proper based on the
definition of such classification. The value of underlying collateral is also considered during such analysis. The resulting monthly model and the related conclusions are reviewed and approved by Senior Management. Our analysis of allowance adequacy
includes consideration for loan impairment. While we use the best information available to make evaluations, future adjustments to the allowance may be necessary if results differ substantially from the assumptions used in making the evaluations.

The methodology for assessing the adequacy of the allowance establishes both an allocated and unallocated component of the allowance. The allocated
component is based principally on current loan grades and historical loss rates. The unallocated component is the result of the portion of the assessment that estimates probable losses in the portfolio that are not fully captured in the allocated
allowance. This analysis includes, but is not necessarily limited to, industry concentrations, future market expansions, model imprecision, and the estimated impact of current economic conditions on historical loss rates. On a continual basis, we
monitor trends within the portfolio, both quantitative and qualitative, and assess the reasonableness of the unallocated component.

The allowance is
subject to examination and adequacy testing by regulatory agencies. In addition, such regulatory agencies could require allowance adjustments based on information available to them at the time of their examination.

The allowance for loan losses was 1.71% and 1.75% of total loans on December 31, 2005 and 2004, respectively. While we experienced a significant decline in net
charge-offs, nonperforming loans and potential problem loans in 2005 compared to 2004, the allowance for loan losses at December 31, 2005 is reflective of the results of our allowance model methodology. We monitor and evaluate the adequacy of
the allowance and loss exposure in the loan portfolio by considering the borrowers financial conditions and other factors in the unallocated component of the allowance. Accordingly, we believe the allowance as of December 31, 2005 is
adequate, based on our assessment of probable losses, and available facts and circumstances then prevailing.



14



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COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

PROVISION AND ALLOWANCE FOR LOAN LOSSES(continued)

Allowance for Loan Losses



|                                                            |  |      |            |   |      |   |            |  
|----------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|Year ended December 31,                                     |  | 2005 |            |   | 2004 |  
|Total loans outstanding at end of year                      |  | $    | 97,595,299 |   |      | $ | 83,006,251 |  
|                                                            |  |      |            |   |      |   |            |  
|Average loans outstanding                                   |  | $    | 87,755,999 |   |      | $ | 79,864,534 |  
|                                                            |  |      |            |   |      |   |            |  
|Balance of allowance for loan losses at beginning of period |  | $    | 1,456,326  |   |      | $ | 1,270,062  |  
|Loan losses:                                                |  |      |            |   |      |   |            |  
|Real estate - construction                                  |  |      |           |   |      |   |           |  
|Real estate - mortgage                                      |  |      |           |   |      |   |           |  
|Commercial and industrial                                   |  |      | 174,125    |   |      |   | 215,635    |  
|Consumer                                                    |  |      | 41,267     |   |      |   | 111,811    |  
|                                                            |  |      |            |   |      |   |            |  
|Total loan losses                                           |  |      | 215,392    |   |      |   | 327,446    |  
|                                                            |  |      |            |   |      |   |            |  
|Recoveries of previous loan losses:                         |  |      |            |   |      |   |            |  
|Real estate - construction                                  |  |      |           |   |      |   |           |  
|Real estate - mortgage                                      |  |      |           |   |      |   |           |  
|Commercial and industrial                                   |  |      | 18,427     |   |      |   | 9,944      |  
|Consumer                                                    |  |      | 24,570     |   |      |   | 32,815     |  
|                                                            |  |      |            |   |      |   |            |  
|Total recoveries                                            |  |      | 42,997     |   |      |   | 42,759     |  
|                                                            |  |      |            |   |      |   |            |  
|Net charge-offs                                             |  |      | (172,395   | ) |      |   | (284,687   | )
|Provision charged to operations                             |  |      | 381,017    |   |      |   | 470,951    |  
|                                                            |  |      |            |   |      |   |            |  
|Balance of allowance for loan losses at end of year         |  | $    | 1,664,948  |   |      | $ | 1,456,326  |  
|                                                            |  |      |            |   |      |   |            |  
|Ratios:                                                     |  |      |            |   |      |   |            |  
|Net charge-offs to average loans outstanding                |  |      | 0.20       | % |      |   | 0.36       | %
|Net charge-offs to loans at end of year                     |  |      | 0.18       | % |      |   | 0.34       | %
|Allowance for loan losses to average loans                  |  |      | 1.90       | % |      |   | 1.82       | %
|Allowance for loan losses to loans at end of year           |  |      | 1.71       | % |      |   | 1.75       | %
|Net charge-offs to allowance for loan losses                |  |      | 10.35      | % |      |   | 19.55      | %
|Net charge-offs to provisions for loan losses               |  |      | 45.25      | % |      |   | 60.45      | %

Nonperforming Assets. The following table sets forth the
Companys nonperforming assets at the dates indicated:



|                                                           |  |              |         |   |      |   |           |  
|---------------------------------------------------------- |  | ------------ | ------- | - | ---- | - | --------- | -
|                                                           |  | December 31, |        
|                                                           |  | 2005         |         |   | 2004 |  
|Nonaccrual loans (considered impaired)                     |  | $            | 279,969 |   |      | $ | 764,275   |  
|Loans 90 days or more past due and still accruing interest |  |              | 4,433   |   |      |   | 5,479     |  
|                                                           |  |              |         |   |      |   |           |  
|Total nonperforming loans                                  |  |              | 284,402 |   |      |   | 769,754   |  
|Other real estate owned                                    |  |              |        |   |      |   | 701,880   |  
|                                                           |  |              |         |   |      |   |           |  
|Total nonperforming assets                                 |  | $            | 284,402 |   |      | $ | 1,471,634 |  
|                                                           |  |              |         |   |      |   |           |  
|Nonperforming assets to year end loans                     |  |              | .30     | % |      |   | 1.77      | %

Loans on the Companys problem loan watch list are considered potentially impaired loans. These loans are
evaluated in determining whether all outstanding principal and interest are expected to be collected. All of the nonaccrual loans at December 31, 2005 and 2004 were considered to be impaired and were appropriately provided for in the related
computation of the allowance of loan losses as of those dates. No other loans were identified as being impaired at December 31, 2005 and 2004.



15



---

COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

PROVISION AND ALLOWANCE FOR LOAN LOSSES(continued)

Potential Problem Loans. The following is a summary of potential problems loans at December 31, 2005 and 2004, which were identified through our internal review mechanisms.



|                 |  |              |           |      |   |          
|---------------- |  | ------------ | --------- | ---- | - | ---------
|                 |  | December 31,
|                 |  | 2005         |           | 2004
|Criticized loans |  | $            | 21,978    |      | $ | 118,348  
|Classified loans |  |              | 1,353,249 |      |   | 2,611,306

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

At December 31, 2005 real estate or other
collateral secured practically all of the loans that were criticized and classified. In the event of foreclosure on these loans, there can be no assurance that in liquidation, the collateral can be sold for its estimated fair market value or even
for an amount at least equal to or greater than the loan amount.

The results of this internal review process and applying the allowance model methodology
are the primary determining factors in managements assessment of the adequacy of the allowance for loan losses.

NONINTEREST INCOME
AND EXPENSE

Noninterest Income. Noninterest income for the year ended December 31, 2005 was $598,966, an increase of $20,410 or
3.53% from the comparable period in 2004. Service charges on deposit accounts decreased $7,320 or 1.68% from the year ended December 31, 2004 to $427,534 for the comparable period in 2005. The decrease is mainly attributable to the closing of
problem accounts and being more selective in opening new accounts that could potentially be problematic. All other categories of noninterest income increased 19.30% to $171,432 for the year ended December 31, 2005 when compared to the year
ended December 31, 2004.

Noninterest Expense.Total noninterest expenses for the year ended December 31, 2005 was $3,232,131, an
increase of $357,315 or 12.43%, higher when compared to total noninterest expenses of $2,874,816 for the year ended December 31, 2004. Salaries and employee benefits increased 14.68% from $1,565,587 for the year ended December 31, 2004 to
$1,795,361 for the year ended December 31, 2005. This increase is primarily attributable to normal salary increases plus the staff for the new Ridgeland branch, which became fully operational during the first quarter of 2005. Net occupancy and
equipment expense increased 15.23% from $467,402 for the year ended December 31, 2004 to $538,576 for the year ended December 31, 2005. Other operating expenses increased $56,367 from the year ended December 31, 2004 to $898,194 for
the year ended December 31, 2005. The opening of the new Ridgeland branch was primarily attributable for the increase in all expense categories.



16



---

COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

NONINTEREST INCOME AND EXPENSE-(continued)

Income Taxes. The Companys income tax expense for 2005 was $787,500, a decrease of $14,500 over the 2004 expense of $802,000. The Companys effective tax rates for the years ended
December 31, 2005 and 2004 were 31.53% and 32.64%, respectively.

Net Income.The combination of the above factors
resulted in net income for the year ended December 31, 2005 of $1,710,424 as compared to $1,655,257 for the same period in 2004. This represents an increase of $55,167 or 3.33% over the same period in 2004.

EARNING ASSETS

Loans. Loans are the
largest category of earning assets and typically provide higher yields than other types of earning assets. Associated with the higher loan yields are the inherent credit and liquidity risks which management attempts to control and counterbalance.
Loans averaged $87,755,999 in 2005 compared to $79,864,534 in 2004, an increase of $7,891,465, or 9.88%. Total loans were $97,595,299 and $83,006,251 at December 31, 2005 and 2004, respectively. Fixed rates loans comprised approximately 95% of
our loan portfolio at the end of both years.

The Companys ratio of loans to deposits was 75.26% at December 31, 2005 as compared to 66.45% at
December 31, 2004. The loan to deposit ratio is used to monitor a financial institutions potential profitability and efficiency of asset distribution and utilization. Generally, a higher loan to deposit ratio is indicative of higher
interest income since loans yield a higher return than alternative investment vehicles. Management has concentrated on maintaining quality in the loan portfolio while continuing to increase the deposit base.

The Company extends credit primarily to consumers and small businesses in Walterboro, Ravenel and Ridgeland, South Carolina, and to customers in surrounding areas. The
Companys service area is mixed in nature. Walterboro is a regional business center whose economy contains elements of medium and light manufacturing, higher education, regional health care, and distribution facilities. Outside the incorporated
city limits of Walterboro, the economy includes manufacturing, agriculture, timber, and recreational activities. Loan growth in the Ravenel and Ridgeland area is expected to come primarily from consumer loans and small businesses in neighboring
Charleston and Jasper Counties. No particular category or segment of the economies previously described is expected to grow or contract disproportionately in 2005. Management believes that the loan portfolio is adequately diversified. There are no
significant concentrations of loans in any particular individuals, industry, or group of related individuals or industries. The loan demand remains strong in the Companys market area.

The Company considers a loan to be impaired when, based upon current information and events, Management believes it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan agreement. The Companys impaired loans include loans identified as impaired through review of the nonhomogeneous portfolio and troubled debt restructurings. Specific
allowances are established on impaired loans, if deemed necessary, for the difference between the loan amount and the fair market value less estimated selling costs. Impaired loans may be left on accrual status during the period the Company is
pursuing repayment of the loan. Impairment losses are recognized through an increase in the allowance for loan losses and a corresponding charge to the provision for loan losses. Adjustments to impairment losses due to changes in the fair market
value of the collateral properties for impaired loans are also recognized through an increase in the allowance for loan losses and a corresponding charge to the provision for loan losses. When an impaired loan is sold, transferred to other real
estate owned, or written-down, any specific allowance is charged-off.



17



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COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

EARNING ASSETS(continued)

The following table sets forth the composition of the loan portfolio by category at December 31, 2005 and 2004 and highlights our general emphasis on commercial and mortgage lending.

Loan Portfolio Composition



|                          |  |        |            |   |                 |        |   |        |   |            |                 |  |        |  
|------------------------- |  | ------ | ---------- | - | --------------- | ------ | - | ------ | - | ---------- | --------------- |  | ------ | -
|                          |  | 2005   |            |   | 2004            |       
|                          |  | Amount |            |   | Percentof Total |        |   | Amount |   |            | Percentof Total | 
|Commercial and industrial |  | $      | 42,727,235 |   |                 | 43.78  | % |        | $ | 27,991,611 |                 |  | 33.72  | %
|Real estate               |  |        |            |   |                 |        |   |        |   |            |                 |  |        |  
|Construction              |  |        | 4,453,312  |   |                 | 4.56   |   |        |   | 4,695,143  |                 |  | 5.66   |  
|Mortgage                  |  |        | 37,478,906 |   |                 | 38.40  |   |        |   | 39,203,590 |                 |  | 47.23  |  
|Consumer and other loans  |  |        | 12,935,846 |   |                 | 13.26  |   |        |   | 11,115,907 |                 |  | 13.39  |  
|                          |  |        |            |   |                 |        |   |        |   |            |                 |  |        |  
|Total loans               |  |        | 97,595,299 |   |                 | 100.00 | % |        |   | 83,006,251 |                 |  | 100.00 | %
|                          |  |        |            |   |                 |        |   |        |   |            |                 |  |        |  
|Allowance for loan losses |  |        | (1,664,948 | ) |                 |        |   |        |   | (1,456,326 | )               |  |        |  
|                          |  |        |            |   |                 |        |   |        |   |            |                 |  |        |  
|Net loans                 |  | $      | 95,930,351 |   |                 |        |   |        | $ | 81,549,925 |                 |  |        |  
|                          |  |        |            |   |                 |        |   |        |   |            |                 |  |        |  

Commercial and industrial loans increased $14,735,624 or 52.60% from $27,991,611 at December 31, 2004. Real
estate loans, including construction and mortgage loans, decreased $1,966,515 or 4.48% to $41,932,218 at December 31, 2005. Consumer and all other loans increased $1,819,939 or 16.37% to $12,935,846 at December 31, 2005.

Maturities and Sensitivity of Loans to Changes in Interest Rates

The
following table summarizes the loan maturity distribution, by type, at December 31, 2005 and related interest rate characteristics:



|                                    |  |                 |            |                                 |   |                |  |       |           |  |   |           
|----------------------------------- |  | --------------- | ---------- | ------------------------------- | - | -------------- |  | ----- | --------- |  | - | ----------
|                                    |  | One Year orLess |            | Over One YearThrough Five Years |   | Over FiveYears |  | Total
|Real estate - construction          |  | $               | 3,479,842  |                                 | $ | 973,470        |  | $     |          |  | $ | 4,453,312 
|Real estate  mortgage              |  |                 | 11,441,107 |                                 |   | 24,498,415     |  |       | 1,539,384 |  |   | 37,478,906
|Commercial and industrial           |  |                 | 14,199,057 |                                 |   | 27,138,588     |  |       | 1,389,590 |  |   | 42,727,235
|Consumer and other                  |  |                 | 4,078,808  |                                 |   | 8,549,025      |  |       | 308,013   |  |   | 12,935,846
|                                    |  |                 |            |                                 |   |                |  |       |           |  |   |           
|                                    |  | $               | 33,198,814 |                                 | $ | 61,159,498     |  | $     | 3,236,987 |  | $ | 97,595,299
|                                    |  |                 |            |                                 |   |                |  |       |           |  |   |           
|Loans maturing after one year with: |  |                 |            |                                 |   |                |  |       |           |  |   |           
|Fixed interest rates                |  |                 |            |                                 |   |                |  |       |           |  | $ | 63,052,117
|Floating interest rates             |  |                 |            |                                 |   |                |  |       |           |  |   | 1,344,368 
|                                    |  |                 |            |                                 |   |                |  |       |           |  |   |           
|                                    |  |                 |            |                                 |   |                |  |       |           |  | $ | 64,396,485
|                                    |  |                 |            |                                 |   |                |  |       |           |  |   |           



18



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COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

EARNING ASSETS(continued)

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

Short-Term Investments. Short-term investments, which consist of federal funds sold averaged $10,873,975 in 2005, compared to $17,323,163 in 2004.
At December 31, 2005, short-term investments totaled $2,773,000. These funds are a primary source of the Companys liquidity and are generally invested in an earning capacity on an overnight basis. Also included are time deposits with
other banks, which averaged $440,663 in 2005. The total of these time deposits was $300,000 at December 31, 2005.

Investment
Securities. The investment securities portfolio is a significant component of the Companys total earning assets. Total investment securities, stated at historical cost, averaged $32,052,076 in 2005, compared to $23,151,357 in
2004. At December 31, 2005, the carrying value of the securities portfolio was $33,070,550. Securities designated as available for sale totaled $30,855,760 and were recorded at estimated fair value. Securities designated as held to maturity
totaled $1,875,133 and were recorded at amortized cost. Securities designated as nonmarketable equity securities totaled $339,657 at December 31, 2005. The investment objectives of the Company include maintaining and investing in a portfolio of
high quality and highly liquid investments with competitive returns. Based on these objectives, the Companys investments primarily consist of obligations of U.S. government agencies and corporations.

Investment Portfolio. The following tables summarize the carrying value of investment securities at December 31, 2005 and 2004 and the weighted
average yields of those securities at December 31, 2005.

Investment Securities Portfolio Composition



|                                            |  |      |            |      |   |           
|------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                            |  | 2005 |            | 2004
|Available-for-Sale (1)                      |  |      |            |      |   |           
|U.S. government agencies and corporations   |  | $    | 22,932,331 |      | $ | 18,442,019
|Obligations of states and local governments |  |      | 4,836,251  |      |   | 3,475,297 
|Other                                       |  |      | 200,000    |      |   | 200,000   
|                                            |  |      |            |      |   |           
|                                            |  |      | 27,968,582 |      |   | 22,117,316
|Mortgage-backed securities                  |  |      | 2,887,178  |      |   | 3,192,414 
|                                            |  |      |            |      |   |           
|Total available-for-sale securities         |  | $    | 30,855,760 |      | $ | 25,309,730
|                                            |  |      |            |      |   |           
|Held-to-Maturity (1)                        |  |      |            |      |   |           
|Obligations of states and local governments |  | $    | 1,873,966  |      | $ | 2,173,836 
|Mortgage-backed securities                  |  |      | 1,167      |      |   | 6,892     
|                                            |  |      |            |      |   |           
|Total held-to-maturity securities           |  | $    | 1,875,133  |      | $ | 2,180,728 
|                                            |  |      |            |      |   |           

---

|(1) | Held-to-maturity securities are stated at amortized cost and available-for-sale securities are stated at estimated fair value.
|--- | ------------------------------------------------------------------------------------------------------------------------------



19



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COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

EARNING ASSETS(continued)

Investment Securities Maturity Distribution and Yields

Available-for-Sale



|                                            |        |                 |           |  |                                 |        |  |                                 |        |  |                |   |           |   |       |        |      |           |  |   |       |  |      |  
|------------------------------------------- | ------ | --------------- | --------- |  | ------------------------------- | ------ |  | ------------------------------- | ------ |  | -------------- | - | --------- | - | ----- | ------ | ---- | --------- |  | - | ----- |  | ---- | -
|December 31, 2005 (Dollars in thousands)    |        | Within One Year |           |  | After One But Within Five Years |        |  | After Five But Within Ten Years |        |  | Over Ten Years |  
|                                            | Amount |                 | Yield (1) |  |                                 | Amount |  | Yield (1)                       |        |  | Amount         |   | Yield (1) |   |       | Amount |      | Yield (1) | 
|U.S. government agencies (3)                |        | $               | 3,076     |  | 3.36                            | %      |  | $                               | 19,397 |  | 3.40           | % |           | $ | 461   |        | 4.00 | %         |  | $ |      |  |     | %
|Obligations of states and local governments |        |                 |          |  |                                | %      |  |                                 | 2,704  |  | 5.23           | % |           |   | 748   |        | 4.74 | %         |  |   | 1,383 |  | 5.62 | %
|Other                                       |        |                 |          |  |                                | %      |  |                                 |       |  |               | % |           |   | 200   |        | 6.25 | %         |  |   |      |  |     | %
|                                            |        |                 |           |  |                                 |        |  |                                 |        |  |                |   |           |   |       |        |      |           |  |   |       |  |      |  
|Total available-for-sale securities         |        | $               | 3,076     |  | 3.36                            | %      |  | $                               | 22,101 |  | 3.62           | % |           | $ | 1,409 |        | 4.71 | %         |  | $ | 1,383 |  | 5.62 | %
|                                            |        |                 |           |  |                                 |        |  |                                 |        |  |                |   |           |   |       |        |      |           |  |   |       |  |      |  
|                                            |        |                 |           |  |                                 |        |  |                                
|Held-to-Maturity                            |        |                 |           |  |                                 |        |  |                                 |        |  |                |   |           |   |       |        |      |           |  |   |       |  |      |  
|                                            |        |                 |           | 
|December 31, 2005 (Dollars in thousands)    |        | Within One Year |           |  | After One But Within Five Years |        |  | After Five But Within Ten Years |        |  | Over Ten Years |  
|                                            | Amount |                 | Yield (1) |  |                                 | Amount |  | Yield (1)                       |        |  | Amount         |   | Yield (1) |   |       | Amount |      | Yield (1) | 
|U.S. government agencies (2)                |        | $               |          |  |                                 | %      |  | $                               |       |  |                | % |           | $ |      |        |      | %         |  | $ |      |  |      | %
|Obligations of states and local governments |        |                 | 200       |  | 5.30                            | %      |  |                                 | 1,274  |  | 6.01           | % |           |   | 200   |        | 6.17 | %         |  |   | 200   |  | 5.68 | %
|                                            |        |                 |           |  |                                 |        |  |                                 |        |  |                |   |           |   |       |        |      |           |  |   |       |  |      |  
|Total held-to-maturity                      |        | $               | 200       |  | 5.30                            | %      |  | $                               | 1,274  |  | 6.01           | % |           | $ | 200   |        | 6.17 | %         |  | $ | 200   |  | 5.68 | %
|                                            |        |                 |           |  |                                 |        |  |                                 |        |  |                |   |           |   |       |        |      |           |  |   |       |  |      |  

---

|(1) | Tax equivalent yield has been calculated using an incremental rate of 34%.
|--- | --------------------------------------------------------------------------

|(2) | Excludes mortgage-backed securities totaling $2,887,178 with a yield of 3.77%.
|--- | ------------------------------------------------------------------------------

|(3) | Excludes mortgage-backed securities totaling $1,167 with a yield of 7.09%.
|--- | --------------------------------------------------------------------------

DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES

Deposits. Deposits account for practically all of our
interest bearing liabilities. Total average deposits increased from $116,186,380 in 2004 to $125,487,263 in 2005. This represents an increase of $9,300,883 or 8.01% over the 2004 amount.

The following table summarizes the Companys deposits for the years ended December 31, 2005 and 2004.



|                                  |  |        |             |                    |        |   |        |   |                    |  |        |  
|--------------------------------- |  | ------ | ----------- | ------------------ | ------ | - | ------ | - | ------------------ |  | ------ | -
|                                  |  | 2005   |             |                    | 2004   |  
|                                  |  | Amount |             | Percent ofDeposits |        |   | Amount |   | Percent ofDeposits | 
|Noninterest bearing demand        |  | $      | 18,020,633  |                    | 14.14  | % |        | $ | 16,531,784         |  | 13.23  | %
|Interest-bearing demand           |  |        | 28,958,482  |                    | 22.72  |   |        |   | 27,151,995         |  | 21.74  |  
|Savings accounts                  |  |        | 18,123,425  |                    | 14.22  |   |        |   | 24,075,836         |  | 19.27  |  
|Time deposits of $100,000 or over |  |        | 34,253,375  |                    | 26.87  |   |        |   | 28,598,107         |  | 22.89  |  
|Other time deposits               |  |        | 28,102,391  |                    | 22.05  |   |        |   | 28,553,605         |  | 22.87  |  
|                                  |  |        |             |                    |        |   |        |   |                    |  |        |  
|Total deposits                    |  | $      | 127,458,306 |                    | 100.00 | % |        | $ | 124,911,327        |  | 100.00 | %
|                                  |  |        |             |                    |        |   |        |   |                    |  |        |  



20



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COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES (continued)

Core deposits, which exclude certificates of deposit of $100,000 or more, provide a relatively stable funding source for the Companys loan portfolio and other earning assets. The Companys core deposits
were $93,204,931 and $96,313,220 at December 31, 2005 and 2004, respectively. A stable base of deposits is expected to be the Companys primary source of funding to meet both its short-term and long-term liquidity needs in the future.

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

The maturity distribution of the Companys time deposits of $100,000 or more at December 31, 2005, is shown in the following table.



|                                            |  |                    |           |                              |   |                              |  |                    |            |       |   |           |  |   |           
|------------------------------------------- |  | ------------------ | --------- | ---------------------------- | - | ---------------------------- |  | ------------------ | ---------- | ----- | - | --------- |  | - | ----------
|                                            |  | Within ThreeMonths |           | After ThreeThrough SixMonths |   | After SixThroughTwelveMonths |  | After TwelveMonths |            | Total
|Certificates of deposit of $100,000 or more |  | $                  | 9,714,351 |                              | $ | 11,711,807                   |  | $                  | 10,206,923 |       | $ | 2,620,294 |  | $ | 34,253,375

Large certificate of deposit customers tend to be extremely sensitive to interest rate levels, making these
deposits less reliable sources of funding for liquidity planning purposes than core deposits. During 2005 and 2004, the Company did not have any certificates of deposits that were obtained through brokers.

Short-term Borrowings. At December 31, 2005 and 2004, the Company had securities sold under agreements to repurchase, which are classified as
secured borrowings and generally mature within one to seven day periods. Either party may cancel the arrangement without penalty. Information concerning securities sold under agreements to repurchase is summarized as follows:



|                                          |  |                          |         |   |      |   |         |  
|----------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                          |  | Years ended December 31, |        
|                                          |  | 2005                     |         |   | 2004 |  
|Average balance during the year           |  | $                        | 324,917 |   |      | $ | 322,227 |  
|Average interest rate during the year     |  |                          | 2.33    | % |      |   | 0.43    | %
|Maximum month-end balance during the year |  | $                        | 620,000 |   |      | $ | 390,000 |  

CAPITAL

Total shareholders equity increased by $1,007,245 from $12,636,128 at December 31, 2004 to $13,643,373 at December 31, 2005. The increase is attributable to the sale of treasury stock of $42,650 and
net income of $1,710,424. The increase was offset by the purchase of treasury stock during the period of $246,920, the payment of dividends of $201,709 and the increase in other comprehensive loss of $297,200.



21



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COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

CAPITAL(continued)

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the Banks financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines
that involve quantitative measures of the Banks assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Banks capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum ratios of Tier 1 and total capital as a percentage of assets and off-balance-sheet exposures, adjusted for risk weights ranging from 0% to 100%. Tier 1 capital consists of common shareholders
equity, excluding the unrealized gain or loss on securities available for sale, minus certain intangible assets. Tier 2 capital consists of the allowance for loan losses subject to certain limitations. Total capital for purposes of computing the
capital ratios consists of the sum of Tier 1 and Tier 2 capital. Total regulatory minimum requirements are 4% for Tier 1 and 8% for total risk-based capital.

As of December 31, 2005, the most recent notification from the Banks primary regulator categorized the Bank as well-capitalized under the regulatory framework for prompt-corrective action. There are no conditions or events that
management believes have changed the Banks category.

The following table summarizes the capital amounts and ratios
of the Bank and the regulatory minimum requirements.



|                                         |  |        |            |       |                                      |   |        |                                                                          |           |  |      |        |  |       |            |  |       |  
|---------------------------------------- |  | ------ | ---------- | ----- | ------------------------------------ | - | ------ | ------------------------------------------------------------------------ | --------- |  | ---- | ------ |  | ----- | ---------- |  | ----- | -
|                                         |  | Actual |            |       | For Capital Adequacy PurposesMinimum |   |        | To Be Well- Capitalized Under Prompt
Corrective Action ProvisionsMinimum |          
|                                         |  | Amount |            | Ratio |                                      |   | Amount |                                                                          | Ratio     |  |      | Amount |  | Ratio |           
|December 31, 2005                        |  |        |            |       |                                      |   |        |                                                                          |           |  |      |        |  |       |            |  |       |  
|Total capital (to risk-weighted assets)  |  | $      | 15,138,528 |       | 14.61                                | % |        | $                                                                        | 8,287,840 |  | 8.00 | %      |  | $     | 10,359,800 |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |        | 13,843,553 |       | 13.36                                |   |        |                                                                          | 4,143,920 |  | 4.00 |        |  |       | 6,215,880  |  | 6.00  |  
|Tier 1 capital (to average assets)       |  |        | 13,843,553 |       | 9.80                                 |   |        |                                                                          | 5,647,960 |  | 4.00 |        |  |       | 7,059,950  |  | 5.00  |  
|                                         |  |        |            |       |                                      |  
|December 31, 2004                        |  |        |            |       |                                      |   |        |                                                                          |           |  |      |        |  |       |            |  |       |  
|Total capital (to risk-weighted assets)  |  | $      | 13,710,543 |       | 14.51                                | % |        | $                                                                        | 7,561,040 |  | 8.00 | %      |  | $     | 9,451,300  |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |        | 12,529,130 |       | 13.26                                |   |        |                                                                          | 3,780,520 |  | 4.00 |        |  |       | 5,670,780  |  | 6.00  |  
|Tier 1 capital (to average assets)       |  |        | 12,529,130 |       | 9.38                                 |   |        |                                                                          | 5,344,800 |  | 4.00 |        |  |       | 6,681,000  |  | 5.00  |  

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

LIQUIDITY MANAGEMENT

Liquidity is the ability to meet current and future obligations through liquidation or
maturity of existing assets or the acquisition of additional liabilities. Adequate liquidity is necessary to meet the requirements of customers for loans and deposit withdrawals in the most timely and economical manner. Some liquidity is ensured by
maintaining assets, which may be immediately converted into cash at minimal cost (amounts due from banks and federal funds sold). However, the most manageable sources of liquidity are composed of liabilities, with the primary focus of



22



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COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

LIQUIDITY MANAGEMENT (continued)

liquidity management being on the ability to obtain deposits within the Companys market area. Core deposits (total deposits, less time deposits of $100,000 and over) provide a relatively stable funding base. At
December 31, 2005 and 2004 core deposits represented 72.65% and 77.11%, respectively of total deposits.

The Bank had available at the end of 2005 an
unused short-term line of credit to purchase up to $3,800,000 of federal funds from an unrelated correspondent institution. The Bank also has a credit availability agreement with the Federal Home Loan Bank totaling 15 percent of the Banks
assets as of any quarter end. As of December 31, 2005, the available credit totaled approximately $20,999,000 and there were no borrowings outstanding. Any borrowings from the FHLB will be secured by a blanket lien on all of the Banks 1-4
family residential first lien mortgage loans and or investment securities.

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

The Companys ability to meet its cash obligations or to pay any possible future cash dividends to shareholders is dependent primarily on the successful operation
of the bank and its ability to pay cash dividends to the Company. Any of the Banks cash dividends in an amount exceeding current year-to-date earnings are subject to the prior approval of the South Carolina Commissioner of Banking and are
generally allowable only from its undivided profits. In addition, dividends paid by the Bank to the Company would be prohibited if such payment would cause the Banks capital to be reduced below applicable minimum regulatory requirements. At
December 31, 2005, the Banks available undivided profits totaled $8,901,422. Under Federal Reserve Board regulations, the amounts of loans or advances from the Bank to the Company are also restricted.

Management believes that the overall liquidity sources of both the Company the Bank are adequate to meet their operating needs in the ordinary course of business.

IMPACT OF OFF-BALANCE-SHEET INSTRUMENTS

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments consist of commitments to extend credit and standby
letters of credit. Commitments to extend credit are legally binding agreements to lend to a customer at predetermined interest rates as long as there is no violation of any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee. A commitment involves, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. Our exposure to credit loss
in the event of nonperformance by the other party to the instrument is represented by the contractual notional amount of the instrument. Since certain commitments are expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. Letters of credit are conditional commitments issued to guarantee a customers performance to a third party and have essentially the same credit risk as other lending facilities. Standby letters
of credit often expire without being used. Management believes that through various sources of liquidity, they have the necessary resources to meet obligations arising from these financial instruments.

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

There are no off-balance-sheet contractual relationships, other than
those disclosed in this report, that could result in liquidity needs or other commitments or that could significantly impact earnings.



23



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COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations

IMPACT OF OFF-BALANCE-SHEET INSTRUMENTS (continued)

Through its operations, the Bank has made contractual commitments to extend credit in the ordinary course of its business activities. These commitments are legally binding agreements to lend money to the Banks
customers at predetermined interest rates for a specified period of time. At December 31, 2005, the Bank had issued commitments to extend credit of $10,960,770 and standby letters of credit of $844,803 through various types of commercial
lending arrangements. Approximately $412,206 of these commitments to extend credit had variable rates.

The following table sets forth the length of time
until maturity for unused commitments to extend credit and standby letters of credit at December 31, 2005.



|                                    |  |                  |           |                                |   |                                   |  |                 |           |                       |   |           |  |   |           |  |   |           
|----------------------------------- |  | ---------------- | --------- | ------------------------------ | - | --------------------------------- |  | --------------- | --------- | --------------------- | - | --------- |  | - | --------- |  | - | ----------
|                                    |  | Within One Month |           | After One Through Three Months |   | After Three Through Twelve Months |  | Within One Year |           | Greater Than One Year |   | Total    
|Unused commitments to extend credit |  | $                | 798,657   |                                | $ | 1,479,890                         |  | $               | 6,405,186 |                       | $ | 8,683,733 |  | $ | 2,277,037 |  | $ | 10,960,770
|Standby letters of credit           |  |                  | 310,000   |                                |   | 48,500                            |  |                 | 486,303   |                       |   | 844,803   |  |   |          |  |   | 844,803   
|                                    |  |                  |           |                                |   |                                   |  |                 |           |                       |   |           |  |   |           |  |   |           
|Totals                              |  | $                | 1,108,657 |                                | $ | 1,528,390                         |  | $               | 6,891,489 |                       | $ | 9,528,536 |  | $ | 2,277,037 |  | $ | 11,805,573
|                                    |  |                  |           |                                |   |                                   |  |                 |           |                       |   |           |  |   |           |  |   |           

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

IMPACT OF INFLATION

The
consolidated financial statements and related financial data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America which require the measurement of financial position and
operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are
monetary in nature. As a result, interest rates generally have a more significant impact on a financial institutions performance than does the effect of inflation.

While the effect of inflation on a bank is normally not as significant as its influence on those businesses that have large investments in plant and inventories, it does have an effect. Interest rates generally
increase as the rate of inflation increases, but the magnitude of the change in rates may not be the same. While interest rates have traditionally moved with inflation, the effect on income is diminished because both interest earned on assets and
interest paid on liabilities vary directly with each other. Also, increases in the price of goods and services will generally result in increased operating expenses.

IMPACT OF RECENT ACCOUNTING CHANGES

For a summary of recent authoritative pronouncements that affect accounting,
reporting, and disclosure of financial information by the Company see Note 1 of the consolidated financial statements.



24



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

Communitycorp and
Subsidiary

Walterboro, South Carolina

We have audited the accompanying consolidated balance sheets of Communitycorp and Subsidiary, (the Company) as of
December 31, 2005 and 2004, and the related consolidated statements of income, changes in shareholders equity and comprehensive income, and cash flows for the years then ended. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Communitycorp and Subsidiary as of December 31, 2005 and 2004 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of
America.

Greenville, South Carolina

February 17, 2006



25



---

COMMUNITYCORP

Consolidated Balance Sheets



|                                                                                                |  |              |             |   |      |   |             |  
|----------------------------------------------------------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                                |  | December 31, |            
|                                                                                                |  | 2005         |             |   | 2004 |  
|Assets:                                                                                         |  |              |             |   |      |   |             |  
|Cash and cash equivalents:                                                                      |  |              |             |   |      |   |             |  
|Cash and due from banks                                                                         |  | $            | 5,089,462   |   |      | $ | 3,705,335   |  
|Federal funds sold                                                                              |  |              | 2,773,000   |   |      |   | 19,046,000  |  
|                                                                                                |  |              |             |   |      |   |             |  
|Total cash and cash equivalents                                                                 |  |              | 7,862,462   |   |      |   | 22,751,335  |  
|                                                                                                |  |              |             |   |      |   |             |  
|Time deposits with other banks                                                                  |  |              | 300,000     |   |      |   | 499,000     |  
|                                                                                                |  |             
|Investment securities:                                                                          |  |              |             |   |      |   |             |  
|Securities available-for-sale                                                                   |  |              | 30,855,760  |   |      |   | 25,309,730  |  
|Securities held-to-maturity (estimated fair value of $1,908,781 in 2005 and $2,269,336 in 2004) |  |              | 1,875,133   |   |      |   | 2,180,728   |  
|Nonmarketable equity securities                                                                 |  |              | 339,657     |   |      |   | 305,175     |  
|                                                                                                |  |              |             |   |      |   |             |  
|Total investment securities                                                                     |  |              | 33,070,550  |   |      |   | 27,795,633  |  
|                                                                                                |  |              |             |   |      |   |             |  
|Loans receivable                                                                                |  |              | 97,595,299  |   |      |   | 83,006,251  |  
|Less allowance for loan losses                                                                  |  |              | (1,664,948  | ) |      |   | (1,456,326  | )
|                                                                                                |  |              |             |   |      |   |             |  
|Loans, net                                                                                      |  |              | 95,930,351  |   |      |   | 81,549,925  |  
|Premises and equipment, net                                                                     |  |              | 3,265,920   |   |      |   | 3,441,334   |  
|Accrued interest receivable                                                                     |  |              | 989,582     |   |      |   | 822,240     |  
|Other real estate owned                                                                         |  |              |            |   |      |   | 701,880     |  
|Other assets                                                                                    |  |              | 800,871     |   |      |   | 846,376     |  
|                                                                                                |  |              |             |   |      |   |             |  
|Total assets                                                                                    |  | $            | 142,219,736 |   |      | $ | 138,407,723 |  
|                                                                                                |  |              |             |   |      |   |             |  
|Liabilities:                                                                                    |  |              |             |   |      |   |             |  
|Deposits:                                                                                       |  |              |             |   |      |   |             |  
|Noninterest-bearing transaction accounts                                                        |  | $            | 18,020,633  |   |      | $ | 16,531,784  |  
|Interest-bearing transaction accounts                                                           |  |              | 28,958,482  |   |      |   | 27,151,995  |  
|Money market savings accounts                                                                   |  |              | 3,417,278   |   |      |   | 3,070,070   |  
|Savings                                                                                         |  |              | 14,706,147  |   |      |   | 21,005,766  |  
|Time deposits $100,000 and over                                                                 |  |              | 34,253,375  |   |      |   | 28,598,107  |  
|Other time deposits                                                                             |  |              | 28,102,391  |   |      |   | 28,553,605  |  
|                                                                                                |  |              |             |   |      |   |             |  
|Total deposits                                                                                  |  |              | 127,458,306 |   |      |   | 124,911,327 |  
|                                                                                                |  |             
|Short-term borrowings                                                                           |  |              | 370,000     |   |      |   | 390,000     |  
|Accrued interest payable                                                                        |  |              | 584,352     |   |      |   | 295,430     |  
|Other liabilities                                                                               |  |              | 163,705     |   |      |   | 174,838     |  
|                                                                                                |  |              |             |   |      |   |             |  
|Total liabilities                                                                               |  |              | 128,576,363 |   |      |   | 125,771,595 |  
|                                                                                                |  |              |             |   |      |   |             |  
|Commitments and contingencies - Notes 4 and 10                                                  |  |              |             |   |      |   |             |  
|                                                                                                |  |             
|Shareholders Equity:                                                                           |  |              |             |   |      |   |             |  
|Preferred stock, $5 par value, 3,000,000 shares authorized and unissued                         |  |              |            |   |      |   |            |  
|Common stock, $5 par value, 3,000,000 shares authorized; 300,000 shares issued and outstanding  |  |              | 1,500,000   |   |      |   | 1,500,000   |  
|Capital surplus                                                                                 |  |              | 1,716,455   |   |      |   | 1,721,023   |  
|Retained earnings                                                                               |  |              | 14,224,597  |   |      |   | 12,715,882  |  
|Accumulated other comprehensive income (loss)                                                   |  |              | (265,071    | ) |      |   | 32,129      |  
|Treasury stock (56,952 shares in 2005 and 53,505 shares in 2004)                                |  |              | (3,532,608  | ) |      |   | (3,332,906  | )
|                                                                                                |  |              |             |   |      |   |             |  
|Total shareholders equity                                                                      |  |              | 13,643,373  |   |      |   | 12,636,128  |  
|                                                                                                |  |              |             |   |      |   |             |  
|Total liabilities and shareholders equity                                                      |  | $            | 142,219,736 |   |      | $ | 138,407,723 |  
|                                                                                                |  |              |             |   |      |   |             |  

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



26



---

COMMUNITYCORP

Consolidated Statements of Income



|                                                                       |  |                          |           |      |   |          
|---------------------------------------------------------------------- |  | ------------------------ | --------- | ---- | - | ---------
|                                                                       |  | Years Ended December 31,
|                                                                       |  | 2005                     |           | 2004
|Interest income:                                                       |  |                          |           |      |   |          
|Loans, including fees                                                  |  | $                        | 6,313,934 |      | $ | 5,877,205
|Investment securities:                                                 |  |                          |           |      |   |          
|Taxable                                                                |  |                          | 835,296   |      |   | 499,150  
|Tax-exempt                                                             |  |                          | 249,117   |      |   | 213,258  
|Nonmarketable equity securities                                        |  |                          | 5,652     |      |   | 5,212    
|Federal funds sold and securities purchased under agreements to resell |  |                          | 315,865   |      |   | 217,629  
|Time deposits with other banks                                         |  |                          | 16,775    |      |   | 18,758   
|                                                                       |  |                          |           |      |   |          
|Total interest income                                                  |  |                          | 7,736,639 |      |   | 6,831,212
|                                                                       |  |                          |           |      |   |          
|Interest expense:                                                      |  |                          |           |      |   |          
|Deposits                                                               |  |                          | 2,216,939 |      |   | 1,605,442
|Short-term borrowings                                                  |  |                          | 7,594     |      |   | 1,302    
|                                                                       |  |                          |           |      |   |          
|Total interest expense                                                 |  |                          | 2,224,533 |      |   | 1,606,744
|                                                                       |  |                          |           |      |   |          
|Net interest income                                                    |  |                          | 5,512,106 |      |   | 5,224,468
|                                                                       |  |                         
|Provision for loan losses                                              |  |                          | 381,017   |      |   | 470,951  
|                                                                       |  |                          |           |      |   |          
|Net interest income after provision for loan losses                    |  |                          | 5,131,089 |      |   | 4,753,517
|                                                                       |  |                          |           |      |   |          
|Noninterest income:                                                    |  |                          |           |      |   |          
|Service charges on deposit accounts                                    |  |                          | 427,534   |      |   | 434,854  
|Commissions on credit life insurance                                   |  |                          | 13,760    |      |   | 12,130   
|Other charges, fees, and commissions                                   |  |                          | 107,361   |      |   | 88,233   
|Other                                                                  |  |                          | 50,311    |      |   | 43,339   
|                                                                       |  |                          |           |      |   |          
|Total noninterest income                                               |  |                          | 598,966   |      |   | 578,556  
|                                                                       |  |                          |           |      |   |          
|Noninterest expenses:                                                  |  |                          |           |      |   |          
|Salaries and employee benefits                                         |  |                          | 1,795,361 |      |   | 1,565,587
|Net occupancy                                                          |  |                          | 221,479   |      |   | 185,584  
|Equipment                                                              |  |                          | 317,097   |      |   | 281,818  
|Other operating                                                        |  |                          | 898,194   |      |   | 841,827  
|                                                                       |  |                          |           |      |   |          
|Total noninterest expenses                                             |  |                          | 3,232,131 |      |   | 2,874,816
|                                                                       |  |                          |           |      |   |          
|Income before income taxes                                             |  |                          | 2,497,924 |      |   | 2,457,257
|                                                                       |  |                         
|Income tax expense                                                     |  |                          | 787,500   |      |   | 802,000  
|                                                                       |  |                          |           |      |   |          
|Net income                                                             |  | $                        | 1,710,424 |      | $ | 1,655,257
|                                                                       |  |                          |           |      |   |          
|Earnings per share:                                                    |  |                          |           |      |   |          
|Weighted-average common shares outstanding                             |  |                          | 244,788   |      |   | 247,446  
|Basic                                                                  |  | $                        | 6.99      |      | $ | 6.69     

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



27



---

COMMUNITYCORP

Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income

For the
years ended December 31, 2005 and 2004



|                                                         |  |              |  |                 |           |  |                   |           |   |                                               |   |            |                         |  |   |                            |   |  |   |            |   |  |   |            |  
|-------------------------------------------------------- |  | ------------ |  | --------------- | --------- |  | ----------------- | --------- | - | --------------------------------------------- | - | ---------- | ----------------------- |  | - | -------------------------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                         |  | Common stock |  | Capital surplus |           |  | Retained earnings |           |   | Accumulated other comprehensive income (loss) |   |            | Treasury stock, at cost |  |   | Total shareholders equity |  
|                                                         |  | Shares       |  | Amount          |           |  |                   |           |  
|Balance, December 31, 2003                               |  | 300,000      |  | $               | 1,500,000 |  | $                 | 1,731,708 |   |                                               | $ | 11,239,046 |                         |  | $ | 64,545                     |   |  | $ | (3,295,076 | ) |  | $ | 11,240,223 |  
|                                                         |  |              |  |                 |           |  |                   |           |   |                                               |   |            |                         |  |   |                            |   |  |   |            |   |  |   |            |  
|Net income                                               |  |              |  |                 |           |  |                   |           |   |                                               |   | 1,655,257  |                         |  |   |                            |   |  |   |            |   |  |   | 1,655,257  |  
|Other comprehensive loss, net of tax benefit of $17,074  |  |              |  |                 |           |  |                   |           |   |                                               |   |            |                         |  |   | (32,416                    | ) |  |   |            |   |  |   | (32,416    | )
|                                                         |  |              |  |                 |           |  |                   |           |   |                                               |   |            |                         |  |   |                            |   |  |   |            |   |  |   |            |  
|Comprehensive income                                     |  |              |  |                 |           |  |                   |           |   |                                               |   |            |                         |  |   |                            |   |  |   |            |   |  |   | 1,622,841  |  
|                                                         |  |              |  |                 |           |  |                  
|Cash dividends paid ($.72 per share)                     |  |              |  |                 |           |  |                   |           |   |                                               |   | (178,421   | )                       |  |   |                            |   |  |   |            |   |  |   | (178,421   | )
|Purchase of treasury stock                               |  |              |  |                 |           |  |                   |           |   |                                               |   |            |                         |  |   |                            |   |  |   | (91,115    | ) |  |   | (91,115    | )
|Sale of treasury stock                                   |  |              |  |                 |           |  |                   | (10,685   | ) |                                               |   |            |                         |  |   |                            |   |  |   | 53,285     |   |  |   | 42,600     |  
|                                                         |  |              |  |                 |           |  |                   |           |   |                                               |   |            |                         |  |   |                            |   |  |   |            |   |  |   |            |  
|Balance, December 31, 2004                               |  | 300,000      |  |                 | 1,500,000 |  |                   | 1,721,023 |   |                                               |   | 12,715,882 |                         |  |   | 32,129                     |   |  |   | (3,332,906 | ) |  | $ | 12,636,128 |  
|                                                         |  |              |  |                 |           |  |                  
|Net income                                               |  |              |  |                 |           |  |                   |           |   |                                               |   | 1,710,424  |                         |  |   |                            |   |  |   |            |   |  |   | 1,710,424  |  
|                                                         |  |              |  |                 |           |  |                  
|Other comprehensive loss, net of tax benefit of $156,541 |  |              |  |                 |           |  |                   |           |   |                                               |   |            |                         |  |   | (297,200                   | ) |  |   |            |   |  |   | (297,200   | )
|                                                         |  |              |  |                 |           |  |                   |           |   |                                               |   |            |                         |  |   |                            |   |  |   |            |   |  |   |            |  
|Comprehensive income                                     |  |              |  |                 |           |  |                   |           |   |                                               |   |            |                         |  |   |                            |   |  |   |            |   |  |   | 1,413,224  |  
|                                                         |  |              |  |                 |           |  |                  
|Cash dividends paid ($.82 per share)                     |  |              |  |                 |           |  |                   |           |   |                                               |   | (201,709   | )                       |  |   |                            |   |  |   |            |   |  |   | (201,709   | )
|Purchase of treasury stock                               |  |              |  |                 |           |  |                   |           |   |                                               |   |            |                         |  |   |                            |   |  |   | (246,920   | ) |  |   | (246,920   | )
|                                                         |  |              |  |                 |           |  |                  
|Sale of treasury stock                                   |  |              |  |                 |           |  |                   | (4,568    | ) |                                               |   |            |                         |  |   |                            |   |  |   | 47,218     |   |  |   | 42,650     |  
|                                                         |  |              |  |                 |           |  |                   |           |   |                                               |   |            |                         |  |   |                            |   |  |   |            |   |  |   |            |  
|Balance, December 31, 2005                               |  | 300,000      |  | $               | 1,500,000 |  | $                 | 1,716,455 |   |                                               | $ | 14,224,597 |                         |  | $ | (265,071                   | ) |  | $ | (3,532,608 | ) |  | $ | 13,643,373 |  
|                                                         |  |              |  |                 |           |  |                   |           |   |                                               |   |            |                         |  |   |                            |   |  |   |            |   |  |   |            |  

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



28



---

COMMUNITYCORP

Consolidated Statements of Cash Flows



|                                                                                                       |  |                          |             |   |      |   |             |  
|------------------------------------------------------------------------------------------------------ |  | ------------------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                                       |  | Years Ended December 31, |            
|                                                                                                       |  | 2005                     |             |   | 2004 |  
|Cash flows from operating activities:                                                                  |  |                          |             |   |      |   |             |  
|Net income                                                                                             |  | $                        | 1,710,424   |   |      | $ | 1,655,257   |  
|Adjustments to reconcile net income to net cash provided by operating activities:                      |  |                          |             |   |      |   |             |  
|Provision for loan losses                                                                              |  |                          | 381,017     |   |      |   | 470,951     |  
|Depreciation expense                                                                                   |  |                          | 210,242     |   |      |   | 191,560     |  
|Premium amortization less discount accretion on investment securities                                  |  |                          | 32,545      |   |      |   | 142,148     |  
|Deferred income tax expense                                                                            |  |                          | 8,970       |   |      |   | 12,056      |  
|Amortization of loan fees and costs                                                                    |  |                          | (2,992      | ) |      |   | 1,629       |  
|Gain on sale of other real estate owned                                                                |  |                          | (27,270     | ) |      |   |            |  
|Increase in accrued interest receivable                                                                |  |                          | (167,342    | ) |      |   | (4,931      | )
|Increase (Decrease) in accrued interest payable                                                        |  |                          | 288,922     |   |      |   | (504        | )
|(Increase) Decrease in other assets                                                                    |  |                          | 193,076     |   |      |   | (127,429    | )
|Decrease in other liabilities                                                                          |  |                          | (11,133     | ) |      |   | (10,677     | )
|                                                                                                       |  |                          |             |   |      |   |             |  
|Net cash provided by operating activities                                                              |  |                          | 2,616,459   |   |      |   | 2,330,060   |  
|                                                                                                       |  |                          |             |   |      |   |             |  
|Cash flows from investing activities:                                                                  |  |                          |             |   |      |   |             |  
|Proceeds from maturities of securities available-for-sale                                              |  |                          | 2,530,455   |   |      |   | 11,902,730  |  
|Purchases of securities available-for-sale                                                             |  |                          | (8,562,922  | ) |      |   | (20,909,177 | )
|Proceeds from maturities of securities held-to-maturity                                                |  |                          | 505,745     |   |      |   | 463,487     |  
|Purchases of securities held-to-maturity                                                               |  |                          | (200,000    | ) |      |   |            |  
|Purchases of nonmarketable equity securities                                                           |  |                          | (34,481     | ) |      |   | (90,800     | )
|Proceeds from the sale of other real estate owned                                                      |  |                          | 736,650     |   |      |   | 31,655      |  
|Decrease in time deposits with other banks                                                             |  |                          | 199,000     |   |      |   |            |  
|Net increase in loans to customers                                                                     |  |                          | (14,765,951 | ) |      |   | (3,131,753  | )
|Purchases of premises and equipment                                                                    |  |                          | (34,828     | ) |      |   | (1,115,415  | )
|                                                                                                       |  |                          |             |   |      |   |             |  
|Net cash used for investing activities                                                                 |  |                          | (19,626,332 | ) |      |   | (12,849,273 | )
|                                                                                                       |  |                          |             |   |      |   |             |  
|Cash flows from financing activities:                                                                  |  |                          |             |   |      |   |             |  
|Net increase (decrease) in demand deposits, interest-bearing transaction accounts and savings accounts |  |                          | (2,657,075  | ) |      |   | 9,024,793   |  
|Net increase in time deposits                                                                          |  |                          | 5,204,054   |   |      |   | 3,302,708   |  
|Net decrease in short-term borrowings                                                                  |  |                          | (20,000     | ) |      |   | (60,000     | )
|Cash dividends paid                                                                                    |  |                          | (201,709    | ) |      |   | (178,421    | )
|Purchase of treasury stock                                                                             |  |                          | (246,920    | ) |      |   | (91,115     | )
|Sale of treasury stock                                                                                 |  |                          | 42,650      |   |      |   | 42,600      |  
|                                                                                                       |  |                          |             |   |      |   |             |  
|Net cash provided by financing activities                                                              |  |                          | 2,121,000   |   |      |   | 12,040,565  |  
|                                                                                                       |  |                          |             |   |      |   |             |  
|Net increase (decrease) in cash and cash equivalents                                                   |  |                          | (14,888,873 | ) |      |   | 1,521,352   |  
|                                                                                                       |  |                         
|Cash and cash equivalents, beginning of year                                                           |  |                          | 22,751,335  |   |      |   | 21,229,983  |  
|                                                                                                       |  |                          |             |   |      |   |             |  
|Cash and cash equivalents, end of year                                                                 |  | $                        | 7,862,462   |   |      | $ | 22,751,335  |  
|                                                                                                       |  |                          |             |   |      |   |             |  

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



29



---

COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation - Communitycorp, a bank holding company, (the Company), and its subsidiary, Bank of Walterboro (the Bank), provide commercial banking
services to domestic markets principally in Colleton, Charleston, and Jasper counties South Carolina. The consolidated financial statements include the accounts of the parent company and its wholly-owned subsidiary after elimination of all
significant intercompany balances and transactions.

Disclosure Regarding Segments - The Company reports as one operating segment, as the
chief operating decision-maker reviews the results of operations of the Company as a single enterprise.

Managements Estimates - The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for losses on loans, including valuation
allowances for impaired loans, and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowance for losses on loans and foreclosed real estate, management
obtains independent appraisals for significant properties. Management must also make estimates in determining the estimated useful lives and methods for depreciating premises and equipment.

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

Securities Available-for-Sale - Investment securities available-for-sale are carried at amortized cost and adjusted
to estimated fair value by recognizing the aggregate unrealized gains or losses in a valuation account. Aggregate market valuation adjustments are recorded in shareholders equity net of deferred income taxes. Reductions in fair value
considered by management to be other than temporary are reported as a realized loss and a reduction in the cost basis of the security. The adjusted cost basis of securities available-for-sale is determined by specific identification and is used in
computing the gain or loss upon sale.

Securities Held-to-Maturity - Investment securities held-to-maturity are stated at cost, adjusted for
amortization of premium and accretion of discount computed by the straight-line method. The Company has the ability and management has the intent to hold designated investment securities to maturity. Reductions in market value considered by
management to be other than temporary are reported as a realized loss and a reduction in the cost basis of the security.

Nonmarketable Equity
Securities - Nonmarketable equity securities include the Companys investments in the stock of the Federal Home Loan Bank, Community Financial Services, Inc., and other community banks. The stocks are carried at cost because they have
no quoted market value and no ready market exists. Investment in Federal Home Loan Bank stock is a condition of borrowing from the Federal Home Loan Bank, and the stock is pledged to collateralize the borrowings. Dividends received on these stocks
are included as a separate component of interest income.

At December 31, 2005 and 2004, the investment in Federal Home Loan Bank stock was $276,800
and $250,100, respectively. At December 31, 2005 and 2004, the investment in Community Financial Services, Inc. stock was $56,857 and $50,575 and the investment in the other community banks was $6,000 and $4,500, respectively.



30



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COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)

Loans Receivable and Interest Income  Loans are stated at the amount of unpaid principal reduced by an
allowance for loan losses. Interest income on all loans is computed based upon the unpaid principal balance. Interest income is computed using the simple interest method and is recorded in the period earned.

The Company determines a loan to be delinquent when payments have not been made according to contractual terms, typically evidenced by nonpayment of a monthly
installment by the due date. The accrual of interest income is discontinued when a loan becomes 90 days past due as to principal or interest. Management may elect to continue the accrual of interest when the estimated net realizable value of
collateral exceeds the principal balance and accrued interest.

Loan origination and commitment fees and certain direct loan origination costs (principally
salaries and employee benefits) are being deferred and amortized to income over the contractual life of the related loans or commitments, adjusted for prepayments, using the level yield method.

Allowance for Loan Losses (the Allowance) - The Company provides for loan losses using the allowance method. Increases to the Allowance are
charged by recording a provision for loan losses. Loan losses and recoveries are charged to the Allowance. Charge-offs to the Allowance are made when all or a portion of the loan is confirmed as a loss based on Managements review of the loan,
through possession of the underlying security, or through a troubled debt restructuring transaction. Likewise, recoveries offset these increases through credits to the Allowance.

The Allowance is maintained at a level that Management believes is sufficient to cover losses in the loan portfolio at a specific point in time. Assessing the adequacy of the Allowance requires considerable judgment.
The adequacy of the Allowance is analyzed on a monthly basis using an internal analysis model. For purposes of this analysis, adequacy is defined as a level sufficient to absorb probable losses in the portfolio. This methodology relies upon
Managements judgment. Managements judgments are based on its assessment of various issues, including, but not limited to, the pace of loan growth, emerging portfolio concentrations, the risk management system relating to lending
activities, entry into new markets, new product offerings, loan portfolio quality trends, and uncertainty in current economic and business conditions. An Allowance model is used that takes into account factors including the composition of the loan
portfolio such as risk grade classifications, historical asset quality trends including, but not limited to, previous loss experience ratios, Managements assessment of current economic conditions, and reviews of specific high risk sectors of
the portfolio. Loans are graded at inception and are reviewed on a periodic basis to ensure that assigned risk grades are proper based on the definition of such classification. The value of underlying collateral is also considered during such
analysis. The resulting monthly model and the related conclusions are reviewed and approved by Senior Management. The Companys analysis of Allowance adequacy includes consideration for loan impairment. While Management uses the best
information available to make evaluations, future adjustments to the Allowance may be necessary if results differ substantially from the assumptions used in making the evaluations.

The methodology for assessing the adequacy of the Allowance establishes both an allocated and unallocated component of the Allowance. The allocated component is based principally on current loan grades and historical
loss rates. The unallocated component is the result of the portion of the assessment that estimates probable losses in the portfolio that are not fully captured in the allocated Allowance. This analysis includes, but is not necessarily limited to,
industry concentrations, future market expansions, model imprecision, and the estimated impact of current economic conditions on historical loss rates. On a continual basis, Management monitors trends within the portfolio, both quantitative and
qualitative, and assesses the reasonableness of the unallocated component.

The Allowance is subject to examination and adequacy testing by regulatory
agencies. In addition, such regulatory agencies could require Allowance adjustments based on information available to them at the time of their examination.



31



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COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)

Impaired Loans - The Bank accounts for its impaired loans in accordance with Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS No. 118, Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosuresan amendment of FASB Statement No. 114, which requires that creditors value all specifically reviewed nonhomogeneous loans for which it is probable that the creditors will be unable to collect
all amounts due according to the terms of the loan agreements, at their respective fair market values. Fair market value may be determined based upon the present value of expected cash flows, market price of the loan, if available, or value of the
underlying collateral. Expected cash flows are required to be discounted at the loans effective interest rate. SFAS No. 114 was amended by SFAS No. 118 to allow a creditor to use existing methods for recognizing interest income on
impaired loans and by requiring additional disclosures about the manner in which a creditor recognizes interest income related to impaired loans.

The
Company considers a loan to be impaired when, based upon current information and events, Management believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The
Companys impaired loans include loans identified as impaired through review of the nonhomogeneous portfolio and troubled debt restructurings. Specific allowances are established on impaired loans, if deemed necessary, for the difference
between the loan amount and the fair market value less estimated selling costs. Impaired loans may be left on accrual status during the period the Company is pursuing repayment of the loan. Impairment losses are recognized through an increase in the
Allowance and a corresponding charge to the provision for loan losses. Adjustments to impairment losses due to changes in the fair market value of the collateral properties for impaired loans are also recognized through an increase in the Allowance
and a corresponding charge to the provision for loan losses. When an impaired loan is sold, transferred to other real estate owned, or written-down, any specific allowance is charged-off.

Loan Fees and Costs - Nonrefundable fees and certain direct costs associated with the origination of loans are deferred and recognized as a yield
adjustment over the contractual life of the related loans, or if the related loan is held for resale, until such time that the loan is sold. Recognition of deferred fees and costs is discontinued on nonaccrual loans until they return to accrual
status or are charged-off.

Premises and Equipment - Premises and equipment are stated at cost, less accumulated depreciation. The provision
for depreciation is computed by the straight-line method. Rates of depreciation are generally based on the following estimated useful lives: buildings - 40 years; furniture and equipment - 5 to 10 years. The cost of assets sold or otherwise disposed
of, and the related accumulated depreciation are eliminated from the accounts and the resulting gains or losses are reflected in the income statement. Maintenance and repairs are charged to current expense as incurred, and the costs of major
renewals and improvements are capitalized.

Other Real Estate Owned - Other real estate owned includes real estate acquired through
foreclosure. Other real estate owned is initially recorded at the lower of cost (principal balance of the former loan plus costs of improvements) or estimated fair value. Any write-downs at the dates of acquisition are charged to the allowance for
possible loan losses. Expenses to maintain such assets, subsequent write-downs and gains and losses on disposal are included in other expenses.

Income and Expense Recognition - The accrual method of accounting is used for all significant categories of income and expense. Immaterial amounts of insurance commissions and other miscellaneous fees are reported when
received.

Advertising - Advertising, promotional, and other business development costs generally are expensed as incurred. External costs
incurred in producing media advertising are expensed the first time the advertising takes place. External costs relating to direct mailing costs are expensed in the period in which the direct mailings are sent.



32



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COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)

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

Retirement and Deferred Compensation Plans - The Company has a trusteed noncontributory profit-sharing plan which provides retirement and other benefits to all full-time employees who have worked 1,000 or more hours during the
calendar year and have put in one year of service. All eligible employees must be at least age 21. Contributions are determined annually by the Board of Directors. Expenses charged to earnings for the profit-sharing plan were $65,139 and $51,265 in
2005 and 2004, respectively. The Companys policy is to fund contributions to the profit-sharing plan in the amount approved by the Board of Directors. In addition, the plan includes a salary reduction feature pursuant to
Section 401(k) of the Internal Revenue Code. Under the plan and present policies, participants are permitted to make discretionary contributions up to 10% of annual compensation. The Company makes no matching contributions to this plan.

In addition, the Company has a nonqualified voluntary salary deferral plan for certain officers of the Company. Under the plan, these officers may defer
up to 25% of their compensation and earn interest on the deferred amount. Upon retirement, the total amount deferred and interest earned is to be paid to each participant over a period not to exceed fifteen years. Expenses charged to earnings for
the salary deferral plan were $22,500 and $26,500 in 2005 and 2004, respectively. The Company does not provide post employment benefits to employees beyond the plans described above.

Earnings Per Share - Earnings per share is calculated by dividing earnings by the weighted-average number of common shares outstanding during the year. The Company has no instruments which are considered
common stock equivalents and therefore, dilutive earnings per share is not presented.

Statement of Cash Flows - For purposes of reporting
cash flows, the Company considers certain highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents include amounts due from banks, federal funds sold, and securities purchased under
agreements to resell.

During 2005 and 2004, the Company paid $1,935,611 and $1,607,248, respectively, for interest. Cash paid for income taxes was
$605,120 and $947,500 in 2005 and 2004, respectively.

Supplemental noncash investing activities are as follows: Loans totaling $8,500 were reclassified as
foreclosures of real estate in 2004. No loans were reclassified in 2005.

Changes in the valuation account of securities available for sale, including the
deferred tax effects, are considered noncash transactions for purposes of the statement of cash flows and are presented in detail in the notes to the financial statements.



33



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COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)

Comprehensive Income - Accounting principles generally accepted in the United States of America require that
recognized revenue, expenses, gains, and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity
section of the balance sheet, such items, along with net income, are components of comprehensive income.

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



|                                                                      |  |                         |          |   |      |   |         |  
|--------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | ------- | -
|                                                                      |  | Year Ended December 31, |         
|                                                                      |  | 2005                    |          |   | 2004 |  
|Unrealized losses on available-for-sale securities                    |  | $                       | (453,741 | ) |      | $ | (49,490 | )
|Reclassification adjustment for gains (losses) realized in net income |  |                         |         |   |      |   |        |  
|                                                                      |  |                         |          |   |      |   |         |  
|Net unrealized losses on securities                                   |  |                         | (453,741 | ) |      |   | (49,490 | )
|Tax effect                                                            |  |                         | 156,541  |   |      |   | 17,074  |  
|                                                                      |  |                         |          |   |      |   |         |  
|Net-of-tax amount                                                     |  | $                       | (297,200 | ) |      | $ | (32,416 | )
|                                                                      |  |                         |          |   |      |   |         |  

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

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

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS
No. 123(R)). SFAS No. 123(R) will require companies to measure all employee stock-based compensation awards using a fair value method and record such expense in its financial statements. In addition, the adoption of SFAS
No. 123(R) requires additional accounting and disclosure related to the income tax and cash flow effects resulting from share-based payment arrangements. SFAS No. 123(R) is effective beginning as of the first annual reporting period
beginning after December 15, 2005. SFAS No. 123(R) allows for adoption using either the modified prospective or modified retrospective methods. The Company anticipates using the modified prospective method when this statement is adopted in
the first quarter of 2006. The Company has evaluated the impact upon adoption of SFAS No. 123(R) and related guidance and has concluded that the adoption will not have a material impact on financial position or results of operations upon
adoption.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets  an amendment of APB Opinion No. 29.
The standard is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged and eliminates the exception under APB Opinion No. 29 for an exchange of similar productive assets
and replaces it with an exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of
the exchange. The standard is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of SFAS No. 153 is not expected to have any impact on the Companys financial position or
results of operations.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections  a replacement of APB Opinion
No. 20 and FASB Statement No. 3. SFAS No. 154 establishes retrospective application as the required method for reporting a change in accounting principle, unless it is impracticable, in which case the changes should be applied
to the latest practicable date presented. SFAS No. 154 also requires that a correction of an error be reported as a prior period adjustment by restating prior period financial statements. SFAS No. 154 is effective for accounting changes
and corrections of errors made in fiscal years beginning after December 15, 2005.



34



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COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)

Recent Accounting Pronouncements(continued)

In March 2005, the FASB issued FASB Interpretation (FIN) No. 47, Accounting for Conditional Asset Retirement Obligationsan interpretation of
FASB Statement No. 143. This Interpretation clarifies that the term conditional asset retirement obligation as used in SFAS No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an
asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even
though uncertainty exists about the timing and (or) method of settlement. Thus, the timing and (or) method of settlement may be conditional on a future event. Accordingly, an entity is required to recognize a liability for the fair value of a
conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. The fair value of a liability for the conditional asset retirement obligation should be recognized when incurredgenerally upon acquisition,
construction, or development and (or) through the normal operation of the asset. Uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when
sufficient information exists. FIN No. 47 is effective no later than the end of fiscal years ending after December 15, 2005. The Company adopted FIN No. 47 in 2005 and its adoption had no effect on the Companys financial
position or results of operations.

In March 2004, the FASB issued Emerging Issues Task Force (EITF) Issue 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 it also provides guidance on quantitative and qualitative disclosures. The disclosure requirements in paragraph 21 of this Issue were adopted by the Company effective December 31, 2003. The recognition and
measurement guidance in paragraphs 6-20 of this Issue was to be applied to other-than-temporary impairment evaluations in reporting periods beginning after June 15, 2004, but was delayed by FASB action in October 2004 through the issuance of a
proposed FASB Staff Position (FSP) on the issue. In July 2005, the FASB issued FSP FAS 115-1 and FSP FAS 124-1  The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. This FSP
addresses the determination as to when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. This FSP also includes accounting considerations subsequent to the recognition
of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. This FSP will be effective for other-than-temporary impairment analysis conducted in
periods beginning after December 15, 2005. The Company has evaluated the impact of adopting of FSP FAS 115-1 and FSP FAS 124-1 and has concluded that the adoption will not have a material impact on financial position and results of operations.

In December 2005, the FASB issued FSP SOP 94-6-1, Terms of Loan Products that May Give Rise to a Concentration of Credit Risk. The disclosure
guidance in this FSP is effective for interim and annual periods ending after December 19, 2005. The FSP states that the terms of certain loan products may increase a reporting entitys exposure to credit risk and thereby may result in a
concentration of credit risk as that term is used in SFAS No. 107, either as an individual product type or as a group of products with similar features. SFAS No. 107 requires disclosures about each significant concentration, including
information about the (shared) activity, region, or economic characteristic that identifies the concentration. The FSP suggests possible shared characteristics on which significant concentrations may be determined which include, but are
not limited to (1) loans that subject borrowers to significant payment increases, (2) loans with terms that permit negative amortization, and (3) loans with high loan-to-value ratios. This FSP requires entities to provide the
disclosures required by SFAS No. 107 for loan products that are determined to represent a concentration of credit risk in accordance with the guidance of this FSP for all periods presented. The Company adopted this disclosure standard effective
December 31, 2005.

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 Companys consolidated financial statements upon adoption.



35



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COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)

Reclassifications - Certain captions and amounts in the consolidated financial statements of 2004
were reclassified to conform with the 2005 presentation. These reclassifications had no effect on previously reported net income or shareholders equity.

NOTE 2 - CASH AND DUE FROM BANKS

The Company is required by regulation to maintain an average cash reserve balance based on a percentage of
deposits. The average amounts of the cash reserve balances at December 31, 2005 and 2004 were approximately $1,109,000 and $873,000 respectively. These requirements were satisfied by vault cash.

NOTE 3 - INVESTMENT SECURITIES

Securities Available-for-Sale

The amortized cost and estimated fair values of securities available-for-sale were:



|                                           |  |                |            |                  |        |                      |  |   |         |  |   |           
|------------------------------------------ |  | -------------- | ---------- | ---------------- | ------ | -------------------- |  | - | ------- |  | - | ----------
|                                           |  | Amortized Cost |            | Gross Unrealized |        | Estimated Fair Value
|                                           |  |                | Gains      |                  | Losses |                     
|December 31, 2005                          |  |                |            |                  |        |                      |  |   |         |  |   |           
|U.S. government agencies and corporations  |  | $              | 26,220,690 |                  | $      | 4,050                |  | $ | 405,231 |  | $ | 25,819,509
|Obligations of state and local governments |  |                | 4,839,759  |                  |        | 35,989               |  |   | 39,497  |  |   | 4,836,251 
|Other                                      |  |                | 200,000    |                  |        |                     |  |   |        |  |   | 200,000   
|                                           |  |                |            |                  |        |                      |  |   |         |  |   |           
|Total                                      |  | $              | 31,260,449 |                  | $      | 40,039               |  | $ | 444,728 |  | $ | 30,855,760
|                                           |  |                |            |                  |        |                      |  |   |         |  |   |           
|December 31, 2004                          |  |                |            |                  |        |                      |  |   |         |  |   |           
|U.S. government agencies and corporations  |  | $              | 21,700,085 |                  | $      | 19,624               |  | $ | 85,275  |  | $ | 21,634,434
|Obligations of state and local governments |  |                | 3,360,592  |                  |        | 115,704              |  |   | 1,000   |  |   | 3,475,296 
|Other                                      |  |                | 200,000    |                  |        |                     |  |   |        |  |   | 200,000   
|                                           |  |                |            |                  |        |                      |  |   |         |  |   |           
|Total                                      |  | $              | 25,260,677 |                  | $      | 135,328              |  | $ | 86,275  |  | $ | 25,309,730
|                                           |  |                |            |                  |        |                      |  |   |         |  |   |           

The following table shows gross unrealized losses and fair value, aggregated by investment category, and length of
time that individual securities have been in a continuous unrealized loss position, at December 31, 2005.



|                                           |  |                     |            |                   |   |            |  |                  |            |            |   |                  |  |   |            |  |   |        
|------------------------------------------ |  | ------------------- | ---------- | ----------------- | - | ---------- |  | ---------------- | ---------- | ---------- | - | ---------------- |  | - | ---------- |  | - | -------
|                                           |  | Less Than 12 Months |            | 12 Months Or More |   | Total     
|                                           |  | Fair Value          |            | UnrealizedLosses  |   | Fair Value |  | UnrealizedLosses |            | Fair Value |   | UnrealizedLosses
|U. S. Government agencies and corporations |  | $                   | 7,631,515  |                   | $ | 99,336     |  | $                | 17,653,331 |            | $ | 305,895          |  | $ | 25,284,846 |  | $ | 405,231
|Obligations of state and local governments |  |                     | 2,596,130  |                   |   | 29,041     |  |                  | 468,021    |            |   | 10,456           |  |   | 3,064,151  |  |   | 39,497 
|                                           |  |                     |            |                   |   |            |  |                  |            |            |   |                  |  |   |            |  |   |        
|Total                                      |  | $                   | 10,227,645 |                   | $ | 128,377    |  | $                | 18,121,352 |            | $ | 316,351          |  | $ | 28,348,997 |  | $ | 444,728
|                                           |  |                     |            |                   |   |            |  |                  |            |            |   |                  |  |   |            |  |   |        

There were a total of ninety-seven available-for-sale securities that were in a loss position at December 31,
2005. Of these securities, fifty-seven were in a loss position of twelve months or more, which consisted of forty-six U.S. Government agencies, three obligations of state and local governments, and eight mortgage-backed securities. The
mortgage-backed securities are protected by mortgage insurance as well as the direct credit to the related agencies. The Company believes that the deterioration in value is attributable to changes in market interest rates and not in credit quality
and considers these losses to be temporary. The Company has the ability and intent to hold these securities until such time as the value recovers. At December 31, 2005 there were no held-to-maturity securities that were in a continuous loss
position for twelve or more months.



36



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COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 3 - INVESTMENT SECURITIES(continued)

The amortized cost and estimated fair values of securities available-for-sale based on their contractual maturities are summarized below. Actual maturities may differ
from contractual maturities because borrowers may have the right to call or prepay obligations without penalty.



|                                          |  |                   |            |                      |   |           
|----------------------------------------- |  | ----------------- | ---------- | -------------------- | - | ----------
|                                          |  | December 31, 2005
|                                          |  | Amortized Cost    |            | Estimated Fair Value
|Due in one year or less                   |  | $                 | 3,100,000  |                      | $ | 3,075,688 
|Due after one year but within five years  |  |                   | 22,378,003 |                      |   | 22,099,953
|Due after five years but within ten years |  |                   | 1,429,738  |                      |   | 1,409,724 
|Due after ten years                       |  |                   | 1,397,990  |                      |   | 1,383,217 
|                                          |  |                   |            |                      |   |           
|                                          |  |                   | 28,305,731 |                      |   | 27,968,582
|Mortgage-backed securities                |  |                   | 2,954,718  |                      |   | 2,887,178 
|                                          |  |                   |            |                      |   |           
|Total                                     |  | $                 | 31,260,449 |                      | $ | 30,855,760
|                                          |  |                   |            |                      |   |           

Securities Held-To-Maturity

The amortized cost and estimated fair values of securities held-to-maturity were:



|                                           |  |                |           |                  |        |                      |  |   |     |  |   |          
|------------------------------------------ |  | -------------- | --------- | ---------------- | ------ | -------------------- |  | - | --- |  | - | ---------
|                                           |  | Amortized Cost |           | Gross Unrealized |        | Estimated Fair Value
|                                           |  |                | Gains     |                  | Losses |                     
|December 31, 2005                          |  |                |           |                  |        |                      |  |   |     |  |   |          
|U.S. government agencies and corporations  |  | $              | 1,167     |                  | $      | 9                    |  | $ |    |  | $ | 1,176    
|Obligations of state and local governments |  |                | 1,873,966 |                  |        | 34,245               |  |   | 606 |  |   | 1,907,605
|                                           |  |                |           |                  |        |                      |  |   |     |  |   |          
|Total                                      |  | $              | 1,875,133 |                  | $      | 34,254               |  | $ | 606 |  | $ | 1,908,781
|                                           |  |                |           |                  |        |                      |  |   |     |  |   |          
|December 31, 2004                          |  |                |           |                  |        |                      |  |   |     |  |   |          
|U.S. government agencies and corporations  |  | $              | 6,892     |                  | $      | 182                  |  | $ |    |  | $ | 7,074    
|Obligations of state and local governments |  |                | 2,173,836 |                  |        | 88,426               |  |   |    |  |   | 2,262,262
|                                           |  |                |           |                  |        |                      |  |   |     |  |   |          
|Total                                      |  | $              | 2,180,728 |                  | $      | 88,608               |  | $ |    |  | $ | 2,269,336
|                                           |  |                |           |                  |        |                      |  |   |     |  |   |          

The amortized cost and estimated fair values of securities held-to-maturity based on their contractual maturities
are summarized below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations without penalty.



|                                          |  |                   |           |                      |   |          
|----------------------------------------- |  | ----------------- | --------- | -------------------- | - | ---------
|                                          |  | December 31, 2005
|                                          |  | Amortized Cost    |           | Estimated Fair Value
|Due in one year or less                   |  | $                 | 200,000   |                      | $ | 200,238  
|Due after one year but within five years  |  |                   | 1,274,264 |                      |   | 1,302,296
|Due after five years but within ten years |  |                   | 199,702   |                      |   | 205,677  
|Due after ten years                       |  |                   | 200,000   |                      |   | 199,394  
|                                          |  |                   |           |                      |   |          
|                                          |  |                   | 1,873,966 |                      |   | 1,907,605
|Mortgage-backed securities                |  |                   | 1,167     |                      |   | 1,176    
|                                          |  |                   |           |                      |   |          
|Total                                     |  | $                 | 1,875,133 |                      | $ | 1,908,781
|                                          |  |                   |           |                      |   |          

At December 31, 2005 and 2004, investment securities with an amortized cost of $16,272,368 and $17,167,850
and a fair value of $16,102,415 and $17,275,203, respectively, were pledged as collateral to secure public deposits and short-term borrowings. There were no sales of investment securities for the years ended December 31, 2005 and 2004.



37



---

COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 4 - LOANS RECEIVABLE

Loans consisted of the following:



|                           |  |              |            |      |   |           
|-------------------------- |  | ------------ | ---------- | ---- | - | ----------
|                           |  | December 31,
|                           |  | 2005         |            | 2004
|Real estate - construction |  | $            | 4,453,312  |      | $ | 4,695,143 
|Real estate - mortgage     |  |              | 37,478,906 |      |   | 39,203,590
|Commercial and industrial  |  |              | 42,727,235 |      |   | 27,991,611
|Consumer and other         |  |              | 12,935,846 |      |   | 11,115,907
|                           |  |              |            |      |   |           
|Total gross loans          |  | $            | 97,595,299 |      | $ | 83,006,251
|                           |  |              |            |      |   |           

As of December 31, 2005 and 2004, management had placed loans totaling $279,969 and $764,375, respectively,
in nonaccrual status because the loans were not performing as originally contracted. For 2005 and 2004 the total amount of interest earned on nonaccrual loans was approximately $31,000 and $95,000, respectively. The gross interest income which would
have been recorded under the original terms of the nonaccrual loans amounted to approximately $38,000 and $115,000 for 2005 and 2004, respectively.

Loans
ninety days or more past due and still accruing interest were $4,433 and $5,479 at December 31, 2005 and 2004, respectively.

The Company identifies
impaired loans through its normal internal loan review process. Loans on the Companys problem loan watch list are considered potentially impaired loans. These loans are evaluated in determining whether all outstanding principal and interest
are expected to be collected. All of the nonaccrual loans at December 31, 2005 and 2004 were considered to be impaired and were appropriately provided for in the related computation of the allowance of loan losses as of those dates. No other
loans were identified as being impaired at December 31, 2005 and 2004.

Transactions in the allowance for loan losses
are summarized below:



|                                           |  |                          |           |   |      |   |           |  
|------------------------------------------ |  | ------------------------ | --------- | - | ---- | - | --------- | -
|                                           |  | Years ended December 31, |          
|                                           |  | 2005                     |           |   | 2004 |  
|Balance, beginning of year                 |  | $                        | 1,456,326 |   |      | $ | 1,270,062 |  
|Provision charged to operations            |  |                          | 381,017   |   |      |   | 470,951   |  
|Recoveries on loans previously charged-off |  |                          | 42,997    |   |      |   | 42,759    |  
|Loans charged-off                          |  |                          | (215,392  | ) |      |   | (327,446  | )
|                                           |  |                          |           |   |      |   |           |  
|Balance, end of year                       |  | $                        | 1,664,948 |   |      | $ | 1,456,326 |  
|                                           |  |                          |           |   |      |   |           |  



38



---

COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 4  LOANS RECEIVABLE(continued)

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its
customers. These financial instruments consist of commitments to extend credit and standby letters of credit. Commitments to extend credit are legally binding agreements to lend to a customer at predetermined interest rates as long as there is no
violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. A commitment involves, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the balance sheets. The Companys exposure to credit loss in the event of nonperformance by the other party to the instrument is represented by the contractual notional amount of the instrument. Since
certain commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Standby letters of credit are conditional commitments issued to guarantee a customers
performance to a third party and have essentially the same credit risk as other lending facilities. Standby letters of credit often expire without being used. The Company believes that through various sources of liquidity, it has the necessary
resources to meet obligations arising from these financial instruments.

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

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

The following table summarizes the Companys off-balance-sheet financial instruments whose contractual amounts represent credit risk:



|                             |  |              |            |      |   |          
|---------------------------- |  | ------------ | ---------- | ---- | - | ---------
|                             |  | December 31,
|                             |  | 2005         |            | 2004
|Commitments to extend credit |  | $            | 10,960,770 |      | $ | 8,554,442
|Standby letters of credit    |  |              | 844,803    |      |   | 1,095,000

Management is not aware of any significant concentrations of loans to classes of borrowers or industries that
would be affected similarly by economic conditions. At December 31, 2005, the Company was not committed to lend additional funds to borrowers having loans in nonaccrual status.



39



---

COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 5 - PREMISES AND EQUIPMENT

Premises and equipment consisted of the following:



|                               |  |              |            |   |      |   |            |  
|------------------------------ |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                               |  | December 31, |           
|                               |  | 2005         |            |   | 2004 |  
|Land                           |  | $            | 710,605    |   |      | $ | 710,605    |  
|Building and land improvements |  |              | 2,611,083  |   |      |   | 2,594,297  |  
|Furniture and equipment        |  |              | 1,935,223  |   |      |   | 1,899,391  |  
|                               |  |              |            |   |      |   |            |  
|Total                          |  |              | 5,256,911  |   |      |   | 5,204,293  |  
|Less, accumulated depreciation |  |              | (1,990,991 | ) |      |   | (1,762,959 | )
|                               |  |              |            |   |      |   |            |  
|Premises and equipment, net    |  | $            | 3,265,920  |   |      | $ | 3,441,334  |  
|                               |  |              |            |   |      |   |            |  

Depreciation expense totaled $210,242 and $191,560 in 2005 and 2004,
respectively.

NOTE 6 - DEPOSITS

At December 31, 2005, the scheduled maturities of time deposits were as follows:



|            |  |        |           
|----------- |  | ------ | ----------
|            |  | Amount
|Maturing in |  |        |           
|2006        |  | $      | 57,410,757
|2007        |  |        | 2,620,295 
|2008        |  |        | 2,265,285 
|2011        |  |        | 59,429    
|            |  |        |           
|Total       |  | $      | 62,355,766
|            |  |        |           

NOTE 7 - RELATED PARTY TRANSACTIONS

Certain parties (principally certain directors and officers of the Company, their immediate families and business interests) were loan customers of, and had other transactions in the normal course of business with the
Company. Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than normal risk of
collectibility. The aggregate dollar amount of loans to related parties was $4,619,909 and $3,133,790 at December 31, 2005 and 2004, respectively. During 2005, $3,350,846 of new loans were made to related parties, and repayments totaled
$1,864,728.

Legal services were provided to the Company in the ordinary course of business by a law firm in which two of the partners are directors of the
Company. The amount paid to this law firm for services rendered was $2,593, and $1,362 for the years ended December 31, 2005 and 2004, respectively.



40



---

COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 8 - SHORT-TERM BORROWINGS

At December 31, 2005 and 2004, the Company had securities sold under agreements to repurchase, which are classified as secured borrowings and generally mature within
one to seven day periods. Either party may cancel the arrangement without penalty. Information concerning securities sold under agreements to repurchase is summarized as follows:



|                                          |  |                          |         |   |      |   |         |  
|----------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                          |  | Years ended December 31, |        
|                                          |  | 2005                     |         |   | 2004 |  
|Average balance during the year           |  | $                        | 324,917 |   |      | $ | 322,227 |  
|Average interest rate during the year     |  |                          | 2.33    | % |      |   | 0.43    | %
|Maximum month-end balance during the year |  | $                        | 620,000 |   |      | $ | 390,000 |  

The Company has an agreement with its safekeeping agent (an independent third party) to pledge certain of the
Companys U.S. Government obligation securities as collateral for the agreements. As of December 31, 2005, the par value and fair value of the securities underlying the agreements were $525,000 and $515,675, respectively.

NOTE 9 - UNUSED LINES OF CREDIT

As of December 31, 2005, the
Company had an unused line of credit to purchase federal funds from an unrelated financial institution totaling $3,800,000. This line of credit is unsecured and is available on a one to seven day basis for general corporate purposes. The lender has
reserved the right to withdraw this line at their option. The Company also has a credit availability agreement with the Federal Home Loan Bank totaling 15 percent of the Banks assets as of any quarter end. As of December 31, 2005, the
available credit totaled approximately $20,999,000 and there were no borrowings outstanding on this line. Any borrowings under the FHLB credit agreement will be secured by a blanket lien on all of the Banks 1-4 family residential first lien mortgage
loans and or investment securities.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

The Company is subject to claims and lawsuits which arise primarily in the ordinary course of business. At December 31, 2005, management is not aware of any pending or threatened litigation or unasserted claims
that could result in losses, if any that would be material to the financial statements.

The Company makes loans to individuals and small businesses for
various personal and commercial purposes. Although the Companys loan portfolio is diversified, a substantial portion of its borrowers ability to honor the terms of their loans is dependent on business and economic conditions in Colleton,
Charleston, and Jasper counties and surrounding areas. The Companys loan portfolio is not concentrated in loans to any single borrower or in a relatively small number of borrowers. Additionally, management is not aware of any concentrations of
loans to classes of borrowers or industries that would be similarly affected by economic conditions.

In addition to monitoring potential concentrations of
loans to particular borrowers or groups of borrowers, industries and geographic regions, management monitors exposure to credit risk that could arise from potential concentrations of lending products and practices such as loans that subject
borrowers to substantial payment increases (e.g. principal deferral periods, loans with initial interest-only periods, etc), and loans with high loan-to-value ratios. Additionally, there are industry practices that could subject the Company to
increased credit risk should economic conditions change over the course of a loans life. For example, the Company makes variable rate loans and fixed rate principal-amortizing loans with maturities prior to the loan being fully paid (i.e.
balloon payment loans). These loans are underwritten and monitored to manage the associated risks. Management has determined that there is no concentration of credit risk associated with its lending policies or practices.



41



---

COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 10 - COMMITMENTS AND CONTINGENCIES(continued)

The Companys investment portfolio consists principally of obligations of the United States, its agencies or its corporations and general
obligation municipal securities. In the opinion of management, there is no concentration of credit risk in its investment portfolio.

The Company places
its deposits and correspondent accounts with and sells its federal funds to high quality institutions. By policy, time deposits are limited to amounts insured by the Federal Deposit Insurance Corporation. Management believes credit risk associated
with correspondent accounts is not significant.

NOTE 11 - SHAREHOLDERS EQUITY

At December 31, 2005 and 2004, the Company had 56,952 and 53,505 shares, respectively held in treasury stock. During 2005 and 2004, the Company purchased 4,207 and 1,693 shares respectively, and sold 760 and 852
shares respectively.

The ability of the Company to pay cash dividends is dependent upon receiving cash in the form of dividends from the Bank. However,
certain restrictions exist regarding the ability of the Bank to transfer funds to Communitycorp in the form of cash dividends. Dividends to the Company are payable only from the undivided profits of the Bank. At December 31, 2005, the
Banks undivided profits were $8,901,422. The Bank is authorized to pay cash dividends up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Commissioner of Banking provided that the Bank received a
composite rating of one or two at the last Federal or State regulatory examination. Under Federal Reserve Board regulations, the amounts of loans or advances from the Bank to the parent company are also restricted.

NOTE 12 - OTHER OPERATING EXPENSES

Other operating expenses are summarized as follows:



|                                  |  |                          |         |      |   |        
|--------------------------------- |  | ------------------------ | ------- | ---- | - | -------
|                                  |  | Years ended December 31,
|                                  |  | 2005                     |         | 2004
|Stationary, printing, and postage |  | $                        | 186,248 |      | $ | 198,557
|Advertising and promotion         |  |                          | 49,591  |      |   | 33,662 
|Professional fees                 |  |                          | 150,044 |      |   | 166,316
|Directors fees                   |  |                          | 60,200  |      |   | 50,100 
|Telephone expenses                |  |                          | 67,432  |      |   | 54,509 
|ATM surcharges                    |  |                          | 52,869  |      |   | 52,323 
|ACH charges                       |  |                          | 41,417  |      |   | 33,245 
|Armored Car/Courier Services      |  |                          | 44,295  |      |   | 30,220 
|Membership Dues/Subscriptions     |  |                          | 26,345  |      |   | 32,422 
|Other                             |  |                          | 219,753 |      |   | 190,473
|                                  |  |                          |         |      |   |        
|Total                             |  | $                        | 898,194 |      | $ | 841,827
|                                  |  |                          |         |      |   |        



42



---

COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 13 - INCOME TAXES

Income tax expense included in the consolidated statements of operations is summarized as follows:



|                            |  |                          |         |      |   |        
|--------------------------- |  | ------------------------ | ------- | ---- | - | -------
|                            |  | Years ended December 31,
|                            |  | 2005                     |         | 2004
|Currently payable:          |  |                          |         |      |   |        
|Federal                     |  | $                        | 701,561 |      | $ | 715,457
|State                       |  |                          | 76,969  |      |   | 74,487 
|                            |  |                          |         |      |   |        
|Total current               |  |                          | 778,530 |      |   | 789,944
|                            |  |                         
|Deferred income tax expense |  |                          | 8,970   |      |   | 12,056 
|                            |  |                          |         |      |   |        
|Income tax expense          |  | $                        | 787,500 |      | $ | 802,000
|                            |  |                          |         |      |   |        

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



|                                |  |              |          |   |      |   |         |  
|------------------------------- |  | ------------ | -------- | - | ---- | - | ------- | -
|                                |  | December 31, |         
|                                |  | 2005         |          |   | 2004 |  
|Deferred tax assets:            |  |              |          |   |      |   |         |  
|Allowance for loan losses       |  | $            | 454,079  |   |      | $ | 394,875 |  
|Deferred compensation           |  |              | 90,931   |   |      |   | 82,100  |  
|Nonaccrual loan interest income |  |              | 35,151   |   |      |   | 81,795  |  
|Securities available-for-sale   |  |              | 149,735  |   |      |   |        |  
|Other                           |  |              | 26,589   |   |      |   | 13,370  |  
|                                |  |              |          |   |      |   |         |  
|Total deferred tax assets       |  |              | 756,485  |   |      |   | 572,140 |  
|                                |  |              |          |   |      |   |         |  
|Deferred tax liabilities:       |  |              |          |   |      |   |         |  
|Accumulated depreciation        |  |              | (125,299 | ) |      |   | (81,719 | )
|Securities available-for-sale   |  |              |         |   |      |   | (16,923 | )
|                                |  |              |          |   |      |   |         |  
|Total deferred tax liabilities  |  |              | (125,299 | ) |      |   | (16,923 | )
|                                |  |              |          |   |      |   |         |  
|Net deferred tax asset          |  | $            | 631,186  |   |      | $ | 473,498 |  
|                                |  |              |          |   |      |   |         |  

The net deferred tax assets are included in other assets in the consolidated balance sheets at December 31,
2005 and 2004. Deferred tax assets represent the future tax benefit of deductible differences and, if it is more likely than not that a tax asset will not be realized, a valuation allowance is required to reduce the recorded deferred tax assets to
net realizable value. Management has determined that it is more likely than not that the entire deferred tax asset at December 31, 2005 will be realized, and accordingly, has not established a valuation allowance.

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



|                                                    |  |                         |         |   |      |   |         |  
|--------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | -
|                                                    |  | Years ended December 31 |        
|                                                    |  | 2005                    |         |   | 2004 |  
|Tax expense at statutory rate                       |  | $                       | 849,294 |   |      | $ | 835,467 |  
|State income tax, net of federal income tax benefit |  |                         | 50,800  |   |      |   | 49,161  |  
|Tax-exempt interest income                          |  |                         | (80,450 | ) |      |   | (72,508 | )
|Disallowed interest expense                         |  |                         | 7,425   |   |      |   | 7,880   |  
|Other, net                                          |  |                         | (39,569 | ) |      |   | (18,000 | )
|                                                    |  |                         |         |   |      |   |         |  
|Total                                               |  | $                       | 787,500 |   |      | $ | 802,000 |  
|                                                    |  |                         |         |   |      |   |         |  



43



---

COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

Federal Funds Sold - Federal funds sold are typically for a term of one day, and the carrying
amount approximates the fair value.

Time Deposits with Other Banks The carrying value of these
instruments is a reasonable estimate of fair value.

Investment Securities - The fair values of marketable securities held-to-maturity are
based on quoted market prices or dealer quotes. For securities available-for-sale, fair value equals the carrying amount, which is the quoted market price. If quoted market prices are not available, fair values are based on quoted market prices of
comparable securities. The carrying amount of nonmarketable securities is a reasonable estimate of fair value since no ready market exists for these securities.

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

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

Short-term Borrowings - The carrying value of securities sold under agreements to repurchase is a reasonable estimate of fair value because these
instruments typically have terms of one day.

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

Off-Balance-Sheet Financial Instruments - The notional amount represents the amounts of loan commitments
and letters of credit, which are off-balance-sheet financial instruments. The fair value of these instruments is not material.



44



---

COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS(continued)

The carrying values and estimated fair values of the Companys financial instruments were as follows:



|                                                                   |  |                 |            |                      |   |                 |  |                      |            |  |   |           
|------------------------------------------------------------------ |  | --------------- | ---------- | -------------------- | - | --------------- |  | -------------------- | ---------- |  | - | ----------
|                                                                   |  | December 31,   
|                                                                   |  | 2005            |            | 2004                
|                                                                   |  | Carrying Amount |            | Estimated Fair Value |   | Carrying Amount |  | Estimated Fair Value
|Financial Assets:                                                  |  |                 |            |                      |   |                 |  |                      |            |  |   |           
|Cash and due from banks                                            |  | $               | 5,089,462  |                      | $ | 5,089,462       |  | $                    | 3,705,335  |  | $ | 3,705,335 
|Federal funds sold                                                 |  |                 | 2,773,000  |                      |   | 2,773,000       |  |                      | 19,046,000 |  |   | 19,046,000
|Time deposits with other banks                                     |  |                 | 300,000    |                      |   | 300,000         |  |                      | 499,000    |  |   | 499,000   
|Securities available-for-sale                                      |  |                 | 30,855,760 |                      |   | 30,855,760      |  |                      | 25,309,730 |  |   | 25,309,730
|Securities held-to-maturity                                        |  |                 | 1,875,133  |                      |   | 1,908,781       |  |                      | 2,180,728  |  |   | 2,269,336 
|Nonmarketable equity securities                                    |  |                 | 339,657    |                      |   | 339,657         |  |                      | 305,175    |  |   | 305,175   
|Loans receivable, gross                                            |  |                 | 97,595,299 |                      |   | 97,055,135      |  |                      | 83,006,251 |  |   | 82,635,590
|Accrued interest receivable                                        |  |                 | 989,582    |                      |   | 989,582         |  |                      | 822,240    |  |   | 822,240   
|                                                                   |  |                 |            |                     
|Financial Liabilities:                                             |  |                 |            |                      |   |                 |  |                      |            |  |   |           
|Demand deposit, interest-bearing transaction, and savings accounts |  | $               | 65,102,540 |                      | $ | 65,102,540      |  | $                    | 67,759,615 |  | $ | 67,759,615
|Time deposits                                                      |  |                 | 62,355,766 |                      |   | 62,550,049      |  |                      | 57,151,712 |  |   | 57,341,084
|Short-term borrowings                                              |  |                 | 370,000    |                      |   | 370,000         |  |                      | 390,000    |  |   | 390,000   
|Accrued interest payable                                           |  |                 | 584,352    |                      |   | 584,352         |  |                      | 295,430    |  |   | 295,430   



|                                         |  |                 |            |                 |   |          
|---------------------------------------- |  | --------------- | ---------- | --------------- | - | ---------
|                                         |  | Notional Amount |            | Notional Amount
|Off-Balance Sheet Financial Instruments: |  |                 |            |                 |   |          
|Commitments to extend credit             |  | $               | 10,960,770 |                 | $ | 8,554,442
|Standby letters of credit                |  |                 | 844,803    |                 |   | 1,095,000

NOTE 15 - REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct material effect on the Banks financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the Banks assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Banks capital amounts and classification are
also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by
regulation to ensure capital adequacy require the Bank to maintain minimum ratios of Tier 1 and total capital as a percentage of assets and off-balance-sheet exposures, adjusted for risk weights ranging from 0% to 100%. Tier 1 capital consists of
common shareholders equity, excluding the unrealized gain or loss on securities available for sale, minus certain intangible assets. Tier 2 capital consists of the allowance for loan losses subject to certain limitations. Total capital for
purposes of computing the capital ratios consists of the sum of Tier 1 and Tier 2 capital. Total regulatory minimum requirements are 4% for Tier 1 and 8% for total risk-based capital.



45



---

COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 15 - REGULATORY MATTERS(continued)

As of December 31, 2005, the most recent notification from the Banks primary regulator categorized the Bank as well-capitalized under the regulatory framework
for prompt-corrective action. There are no conditions or events that management believes have changed the Banks category.

The following table summarizes the capital amounts and ratios of the Bank and the regulatory minimum requirements.



|                                         |  |        |            |       |                   |   |             |                   |           |                   |      |                   |  |       |            |  |       |  
|---------------------------------------- |  | ------ | ---------- | ----- | ----------------- | - | ----------- | ----------------- | --------- | ----------------- | ---- | ----------------- |  | ----- | ---------- |  | ----- | -
|                                         |  |        |            |       |                   |   |             |                   |           |                   |      | To Be Well-       | 
|                                         |  |        |            |       |                   |   |             |                   |           |                   |      | Capitalized Under | 
|                                         |  |        |            |       |                   |   | For Capital |                   |           | Prompt Corrective |     
|                                         |  |        |            |       | Adequacy Purposes |   |             | Action Provisions |          
|                                         |  | Actual |            |       | Minimum           |   |             | Minimum           |          
|                                         |  | Amount |            | Ratio |                   |   | Amount      |                   | Ratio     |                   |      | Amount            |  | Ratio |           
|December 31, 2005                        |  |        |            |       |                   |   |             |                   |           |                   |      |                   |  |       |            |  |       |  
|Total capital (to risk-weighted assets)  |  | $      | 15,138,528 |       | 14.61             | % |             | $                 | 8,287,840 |                   | 8.00 | %                 |  | $     | 10,359,800 |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |        | 13,843,553 |       | 13.36             |   |             |                   | 4,143,920 |                   | 4.00 |                   |  |       | 6,215,880  |  | 6.00  |  
|Tier 1 capital (to average assets)       |  |        | 13,843,553 |       | 9.80              |   |             |                   | 5,647,960 |                   | 4.00 |                   |  |       | 7,059,950  |  | 5.00  |  
|                                         |  |        |            |       |                   |  
|December 31, 2004                        |  |        |            |       |                   |   |             |                   |           |                   |      |                   |  |       |            |  |       |  
|Total capital (to risk-weighted assets)  |  | $      | 13,710,543 |       | 14.51             | % |             | $                 | 7,561,040 |                   | 8.00 | %                 |  | $     | 9,451,300  |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |        | 12,529,130 |       | 13.26             |   |             |                   | 3,780,520 |                   | 4.00 |                   |  |       | 5,670,780  |  | 6.00  |  
|Tier 1 capital (to average assets)       |  |        | 12,529,130 |       | 9.38              |   |             |                   | 5,344,800 |                   | 4.00 |                   |  |       | 6,681,000  |  | 5.00  |  

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

NOTE 16 - COMMUNITYCORP (PARENT COMPANY ONLY)

Presented below are the condensed
financial statements for Communitycorp (Parent Company Only).

Condensed Balance Sheets



|                                 |  |              |            |      |   |           
|-------------------------------- |  | ------------ | ---------- | ---- | - | ----------
|                                 |  | December 31,
|                                 |  | 2005         |            | 2004
|Assets                           |  |              |            |      |   |           
|Cash                             |  | $            | 55,319     |      | $ | 66,797    
|Investment in banking subsidiary |  |              | 13,578,504 |      |   | 12,561,281
|Nonmarketable equity securities  |  |              | 6,000      |      |   | 4,500     
|Other assets                     |  |              | 3,550      |      |   | 3,550     
|                                 |  |              |            |      |   |           
|Total assets                     |  | $            | 13,643,373 |      | $ | 12,636,128
|                                 |  |              |            |      |   |           
|Shareholders equity             |  | $            | 13,643,373 |      | $ | 12,636,128
|                                 |  |              |            |      |   |           



46



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COMMUNITYCORP

Notes to Consolidated Financial Statements

NOTE 16 - COMMUNITYCORP (PARENT COMPANY ONLY)(continued)

Condensed Statements of Income



|                                                                                      |  |                          |           |      |   |          
|------------------------------------------------------------------------------------- |  | ------------------------ | --------- | ---- | - | ---------
|                                                                                      |  | Years ended December 31,
|                                                                                      |  | 2005                     |           | 2004
|Income                                                                                |  |                          |           |      |   |          
|Dividends from banking subsidiary                                                     |  | $                        | 396,000   |      | $ | 216,000  
|Other income                                                                          |  |                          | 1         |      |   | 1        
|                                                                                      |  |                          |           |      |   |          
|Total income                                                                          |  |                          | 396,001   |      |   | 216,001  
|Expenses                                                                              |  |                          |          |      |   |         
|                                                                                      |  |                          |           |      |   |          
|Income before income taxes and equity in undistributed earnings of banking subsidiary |  |                          | 396,001   |      |   | 216,001  
|                                                                                      |  |                         
|Income tax benefit                                                                    |  |                          |          |      |   |         
|Equity in undistributed earnings of banking subsidiary                                |  |                          | 1,314,423 |      |   | 1,439,256
|                                                                                      |  |                          |           |      |   |          
|Net income                                                                            |  | $                        | 1,710,424 |      | $ | 1,655,257
|                                                                                      |  |                          |           |      |   |          

Condensed Statements of Cash Flows



|                                                                                  |  |                          |            |   |      |   |            |  
|--------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                                  |  | Years ended December 31, |           
|                                                                                  |  | 2005                     |            |   | 2004 |  
|Cash flows from operating activities                                              |  |                          |            |   |      |   |            |  
|Net income                                                                        |  | $                        | 1,710,424  |   |      | $ | 1,655,257  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                          |            |   |      |   |            |  
|Equity in undistributed earnings of banking subsidiary                            |  |                          | (1,314,423 | ) |      |   | (1,439,256 | )
|                                                                                  |  |                          |            |   |      |   |            |  
|Net cash provided by operating activities                                         |  |                          | 396,001    |   |      |   | 216,001    |  
|                                                                                  |  |                          |            |   |      |   |            |  
|Cash flows from investing activities                                              |  |                          |            |   |      |   |            |  
|Purchase of nonmaketable equity securities                                        |  |                          | (1,500     | ) |      |   |           |  
|                                                                                  |  |                          |            |   |      |   |            |  
|Net cash provided by investing activities                                         |  |                          | (1,500     | ) |      |   |           |  
|                                                                                  |  |                          |            |   |      |   |            |  
|Cash flows from financing activities                                              |  |                          |            |   |      |   |            |  
|Cash dividends paid                                                               |  |                          | (201,709   | ) |      |   | (178,421   | )
|Purchases of treasury stock                                                       |  |                          | (246,920   | ) |      |   | (91,115    | )
|Sale of treasury stock                                                            |  |                          | 42,650     |   |      |   | 42,600     |  
|                                                                                  |  |                          |            |   |      |   |            |  
|Net cash used by financing activities                                             |  |                          | (405,979   | ) |      |   | (226,936   | )
|                                                                                  |  |                          |            |   |      |   |            |  
|Decrease in cash                                                                  |  |                          | (11,478    | ) |      |   | (10,935    | )
|                                                                                  |  |                         
|Cash, beginning of year                                                           |  |                          | 66,797     |   |      |   | 77,732     |  
|                                                                                  |  |                          |            |   |      |   |            |  
|Cash, ending of year                                                              |  | $                        | 55,319     |   |      | $ | 66,797     |  
|                                                                                  |  |                          |            |   |      |   |            |  



47



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COMMUNITYCORP

BOARD OF DIRECTORS



|                                      |  |                    |  |                               
|------------------------------------- |  | ------------------ |  | ------------------------------
|George W. Cone                        |  |                    |  | J. Barnwell Fishburne         
|Attorney                              |  |                    |  | Owner, Fishburne & Co.        
|McLeod, Fraser & Cone                 |  |                    |  | Real Estate                   
|                                      |  |                   
|W. Roger Crook                        |  |                    |  | Peden B. McLeod               
|Chief Executive Officer and President |  |                    |  | Chairman of the Board Attorney
|Bank of Walterboro                    |  |                    |  | McLeod, Fraser & Cone         
|                                      |  |                   
|Steven Murdaugh                       |  |                    |  | Harry L. Hill                 
|Certified Public Accountant           |  |                    |  | Retired                       
|                                      |  |                   
|Harold M. Robertson                   |  |                    |  | Calvert Huffines              
|Retired                               |  |                    |  | President, Huffines Co        
|                                      |  |                    |  | Real Estate Broker            
|                                     
|OFFICERS                             
|                                      |  |                   
|W. Roger Crook                        |  | Mildred N. Whidden |  | William Steadman              
|Chief Executive Officer               |  | Assistant Cashier  |  | Executive Vice President      
|and President                         |  | and Head Teller    |  |                               
|                                      |  |                   
|Gwendolyn P. Bunton                   |  | Andrea M. Davis    |  | D.A. Strickland               
|Vice President and Cashier            |  | Branch Manager     |  | Branch Manager                
|                                      |  |                   
|Lynn H. Murdaugh                      |  | M. Ellison Young   |  | Joanne Copeland               
|Assistant Vice President              |  | Vice President     |  | Mortgage Loan Originator      
|and Administrative Assistant          |  |                    |  |                               
|                                      |  |                   
|Bruce Tate                            |  |                    |  | Paulette M. Masters           
|Loan Officer                          |  |                    |  | Branch Manager                
|                                     
|STAFF MEMBERS                        
|                                      |  |                   
|Annette Lyons                         |  |                    |  |                               
|Cindy Ackerman                        |  |                    |  | Sharon Milligan               
|                                      |  |                    |  | Brandy Ackerman               
|Kimber Alderman                       |  |                    |  | Aubrey Davis                  
|Kristen Barrineau                     |  |                    |  | Telie Etheridge               
|Casey Beach                           |  |                    |  | Tanya Hickman                 
|Carolyn Brant                         |  |                    |  | Lynn Hiott                    
|Dorothy Brunson                       |  |                    |  | Angela Keen                   
|William S. Crook                      |  |                    |  | Natalie Powers                
|Jennifer Crosby                       |  |                    |  | Pam OQuinn                   
|Melissa Dandridge                     |  |                    |  | Amy Bunton                    
|Betty Ford                            |  |                    |  | Kelly Strickland              
|Elizabeth Gray                        |  |                    |  | Melissa T. Smyly              
|Krystal Thomas                        |  |                    |  | Cynthia Mills                 
|Sharon Hillier                        |  |                    |  | Candice Kubik                 
|Carolyn Rahn                          |  |                    |  | Rose Walker                   
|Stephanie Kelly                       |  |                    |  | Nichole Espisito              
|Joy Koth                              |  |                    |  | Louie Whidden                 
|Pam Nelson                            |  |                    |  | Mallory Bunton                
|Tracy Wilson                          |  |                    |  |                               



48



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COMMUNITYCORP

CORPORATE DATA

ANNUAL MEETING:

The Annual Meeting of Shareholders of Communitycorp will be held at 6 p.m. on Monday, April 24, 2006 at Bank of Walterboro, 1100 North Jefferies Boulevard, Walterboro, South Carolina.



|                           |  |                        
|-------------------------- |  | -----------------------
|CORPORATE OFFICE:          |  | GENERAL COUNSEL:       
|                           | 
|P.O. Box 1707              |  | McLeod, Fraser & Cone  
|1100 North Jefferies Blvd. |  | P.O. Box 230           
|Walterboro, S.C. 29488     |  | Washington Street      
|(843) 549-2265             |  | Walterboro, S.C. 29488 
|                           | 
|                           |  | INDEPENDENT REGISTERED 
|STOCK TRANSFER DEPARTMENT: |  | PUBLIC ACCOUNTING FIRM:
|                           | 
|Bank of Walterboro         |  | Elliott Davis, LLC     
|P.O. Box 1707              |  | 200 East Broad Street  
|Walterboro, S.C. 29488     |  | Greenville, SC 29601   

STOCK INFORMATION:

The Common Stock of Communitycorp is not listed on any exchange, nor is there a recognized or established market. There is limited trading in the Companys shares of Common Stock. Management believes that the Common Stock has traded
for a price per share of $50.00 to $60.00 during the past two years. There were approximately 566 shareholders of record as of December 31, 2005.

The
ability of Communitycorp to pay cash dividends is dependent upon receiving cash in the form of dividends from Bank of Walterboro. However, certain restrictions exist regarding the ability of the Bank to transfer funds to Communitycorp in the form of
cash dividends. All of the Banks dividends to the Company are payable only from the undivided profits of the Bank.

FORM 10-KSB

The Company will furnish upon request, free of charge, copies of the Annual Report and the Companys Report to the Securities and Exchange Commission (Form 10-KSB)
by contacting Gwen P. Bunton, Vice President, Communitycorp, P.O. Box 1707, Walterboro, South Carolina 29488.

This Annual Report serves as the ANNUAL
FINANCIAL DISCLOSURE STATEMENT furnished pursuant to Part 350 of the Federal Deposit Insurance Corporations Rules and Regulations. THIS STATEMENT HAS NOT BEEN REVIEWED, OR CONFIRMED FOR ACCURACY OR RELEVANCE BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION.



49



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COMMUNITYCORP

SERVICES

All Day Banking

American Express Travelers Checks

ATM Service

Bank By Mail

Bond Coupon Redemption

Business Checking

Canceled
Checks Returned with Statement

Cashiers Checks

Certificates of Deposit

Christmas Clubs

Collection Items

Commercial Loans

Direct Deposits

Discount Brokerage Service

Drive-In Service

Individual
Retirement Accounts

Interest Checking

Internet Banking

Letters of Credit

Money Market Accounts

Money Orders

Mortgage Loans

Night Depository

Overdraft Protection

Personal Checking

Personal Lines of Credit

Personal Loans

Regular Savings

Safe Deposit
Boxes

Senior Checking

Treasury,
Tax & Loan Deposits

U.S. Savings Bonds

Visa and Master Card

Wire Transfers

§

110 Forest Hills Road, Walterboro, S.C. 29488

1100 North Jefferies Boulevard, Walterboro, S.C. 29488

6225 Savannah Highway, Ravenel, S.C. 29470

8058 East Main Street, Ridgeland, SC 29936

Member FDIC



50