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. Where other Banks have their Branches we have our Roots.



|                                                                                    |  |      
|----------------------------------------------------------------------------------- |  | -----
|Contents:                                                                           |  |      
|Shareholder Letter                                                                  |  | 2    
|Summary of Selected Financial Data                                                  |  | 3    
|Financial Charts                                                                    |  | 4-7  
|Managements Discussion and Analysis                                                |  | 8-25 
|Report of Independent Registered Public Accounting Firm                             |  | 26   
|Consolidated Balance Sheets                                                         |  | 27   
|Consolidated Statements of Income                                                   |  | 28   
|Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income |  | 29   
|Consolidated Statements of Cash Flows                                               |  | 30   
|Notes to Consolidated Financial Statements                                          |  | 31-48
|Directors, Officers and Staff                                                       |  | 49   
|Corporate Data                                                                      |  | 50   
|Services                                                                            |  | 51   



Member FDIC



---

COMMUNITYCORP



Dear Shareholder,



It is a pleasure to report the progress of Communitycorp and its subsidiary, Bank of Walterboro, during 2004. 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 1.29%, a sound capital to asset ratio of 9.13%, and reserve for loan losses of 1.75%.



Deposits at year-end were $124,911,327, an increase of $12,327,501, or 10.95%, over 2003
year-end. Net loans increased from $78,899,252 to $81,549,925, an increase of $2,650,673, or 3.36%. The reserve for loan losses increased from a December 31, 2003 balance of $1,270,062 to $1,456,326 or 1.75% of gross loans. Total assets increased
from $124,755,498 to a December 31, 2004 total of $138,407,723 an increase of $13,652,225, or 10.94%.



Earnings increased in 2004 for the Company with net income of $1,655,257, an increase of $230,216, or 16.16%, more than 2003 earnings of $1,425,041. Earnings of $6.69 per share increased over $5.46 per share in 2003.
Our net interest margin increased from 4.04% in 2003 to 4.32% in 2004.



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 Wednesday, April 27, 2005.



Very truly yours,



|                   |  |  |  |                      
|------------------ |  |  |  | ---------------------
|/s/ W. Roger Crook |  |  |  | /s/ Peden B. McLeod  
|W. Roger Crook     |  |  |  | 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) |  | 2004 |         |   | 2003 |   |         | 2002 |  |   | 2001    |   |  | 2000 |        
|Results of Operations:                                           |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Interest income                                                  |  | $    | 6,831   |   |      | $ | 6,537   |      |  | $ | 7,000   |   |  | $    | 7,897   |   |  | $ | 7,511   |  
|Interest expense                                                 |  |      | 1,607   |   |      |   | 1,906   |      |  |   | 2,640   |   |  |      | 4,030   |   |  |   | 3,579   |  
|                                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net interest income                                              |  |      | 5,224   |   |      |   | 4,631   |      |  |   | 4,360   |   |  |      | 3,867   |   |  |   | 3,932   |  
|Provision for loan losses                                        |  |      | 471     |   |      |   | 405     |      |  |   | 405     |   |  |      | 257     |   |  |   | 290     |  
|                                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net interest income after provision for loan losses              |  |      | 4,753   |   |      |   | 4,226   |      |  |   | 3,955   |   |  |      | 3,610   |   |  |   | 3,642   |  
|Other income                                                     |  |      | 579     |   |      |   | 558     |      |  |   | 492     |   |  |      | 493     |   |  |   | 480     |  
|Other expense                                                    |  |      | 2,875   |   |      |   | 2,706   |      |  |   | 2,224   |   |  |      | 2,183   |   |  |   | 1,974   |  
|                                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Income before income taxes                                       |  |      | 2,457   |   |      |   | 2,078   |      |  |   | 2,223   |   |  |      | 1,920   |   |  |   | 2,148   |  
|Income tax expense                                               |  |      | 802     |   |      |   | 653     |      |  |   | 715     |   |  |      | 617     |   |  |   | 692     |  
|                                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income                                                       |  | $    | 1,655   |   |      | $ | 1,425   |      |  | $ | 1,508   |   |  | $    | 1,303   |   |  | $ | 1,456   |  
|                                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Balance Sheet Data:                                              |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Securities available-for-sale                                    |  | $    | 25,310  |   |      | $ | 16,495  |      |  | $ | 12,661  |   |  | $    | 11,343  |   |  | $ | 18,867  |  
|Securities held-to-maturity                                      |  |      | 2,181   |   |      |   | 2,644   |      |  |   | 3,050   |   |  |      | 3,499   |   |  |   | 4,598   |  
|Allowance for loan losses                                        |  |      | 1,456   |   |      |   | 1,270   |      |  |   | 1,319   |   |  |      | 1,231   |   |  |   | 1,174   |  
|Net loans                                                        |  |      | 81,550  |   |      |   | 78,899  |      |  |   | 73,856  |   |  |      | 70,128  |   |  |   | 66,621  |  
|Premises and equipment, net                                      |  |      | 3,441   |   |      |   | 2,517   |      |  |   | 2,169   |   |  |      | 2,013   |   |  |   | 2,160   |  
|Total assets                                                     |  |      | 138,408 |   |      |   | 124,755 |      |  |   | 115,775 |   |  |      | 110,850 |   |  |   | 103,069 |  
|Noninterest-bearing deposits                                     |  |      | 16,532  |   |      |   | 13,952  |      |  |   | 9,304   |   |  |      | 9,230   |   |  |   | 9,800   |  
|Interest-bearing deposits                                        |  |      | 108,379 |   |      |   | 98,631  |      |  |   | 93,316  |   |  |      | 89,190  |   |  |   | 81,997  |  
|Total deposits                                                   |  |      | 124,911 |   |      |   | 112,584 |      |  |   | 102,620 |   |  |      | 98,420  |   |  |   | 91,797  |  
|Short-term borrowings                                            |  |      | 390     |   |      |   | 450     |      |  |   | 400     |   |  |      | 560     |   |  |   | 530     |  
|Total liabilities                                                |  |      | 125,772 |   |      |   | 113,515 |      |  |   | 103,526 |   |  |      | 99,848  |   |  |   | 93,189  |  
|Total shareholders equity                                       |  |      | 12,636  |   |      |   | 11,240  |      |  |   | 12,249  |   |  |      | 11,002  |   |  |   | 9,880   |  
|                                                                 |  |      |         |   |     
|Per Share Data:                                                  |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Weighted-average common shares outstanding                       |  |      | 247,446 |   |      |   | 261,221 |      |  |   | 276,473 |   |  |      | 280,330 |   |  |   | 283,194 |  
|Net income                                                       |  | $    | 6.69    |   |      | $ | 5.46    |      |  | $ | 5.46    |   |  | $    | 4.65    |   |  | $ | 5.14    |  
|Cash dividends paid                                              |  | $    | 0.72    |   |      | $ | 0.65    |      |  | $ | 0.59    |   |  | $    | 0.55    |   |  | $ | 0.50    |  
|Period end book value                                            |  | $    | 51.26   |   |      | $ | 45.45   |      |  | $ | 44.62   |   |  | $    | 39.52   |   |  | $ | 35.07   |  
|                                                                 |  |      |         |   |     
|Return on Equity and Assets:                                     |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Return on average assets                                         |  |      | 1.29    | % |      |   | 1.18    | %    |  |   | 1.31    | % |  |      | 1.18    | % |  |   | 1.30    | %
|Return on average equity                                         |  |      | 14.04   | % |      |   | 13.08   | %    |  |   | 13.04   | % |  |      | 12.45   | % |  |   | 16.17   | %
|Equity to assets ratio                                           |  |      | 9.16    | % |      |   | 9.02    | %    |  |   | 10.04   | % |  |      | 9.46    | % |  |   | 9.29    | %
|Dividend payout ratio                                            |  |      | 10.85   | % |      |   | 12.52   | %    |  |   | 10.86   | % |  |      | 11.89   | % |  |   | 9.72    | %



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 is primarily 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, 2004, the Company had forty 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 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, 2004 was $1,655,257 or $6.69 per share, compared to $1,425,041, or $5.46 per share, for the year
ended December 31, 2003. The increase in net income for 2004 resulted primarily from the increase in interest income of $294,374 over the 2003 amount of $6,536,838. Total interest expense decreased $298,962 over the 2003 amount of $1,905,706. Net
interest income increased $593,336 over the 2003 amount of $4,631,132, while noninterest income increased $20,411 over the 2003 amount of $558,145. For the year ended December 31, 2004 net interest margin increased from 4.04% in 2003 to 4.32% in
2004.



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 2004 was $5,224,468 compared to
$4,631,132 for 2003, an increase of 12.81%. The increase was mainly attributable to the increase in the average balances of our earning assets and the impact of lower interest rates paid on our interest-bearing liabilities.



For 2004 average-earning assets totaled approximately $120,949,000 with an annualized average
yield of 5.65% compared to $114,754,000 and 5.70%, respectively, for 2003. Average interest-bearing liabilities totaled approximately $101,590,000 with an annualized average cost of 1.58% for 2004 compared to $97,012,000 and 1.96%, respectively, for
2003.



Our net interest margin and net interest spread was 4.32% and 4.07% for
2004 compared to 4.04% and 3.74% respectively for 2003.



Our annualized yield
on average earning assets declined 5 basis points for 2004 compared to 2003, while our annualized average cost of our interest-bearing liabilities declined 38 basis points for 2004 compared to 2003. These reductions were reflective of the declining
interest rate environment during 2004.



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 66.03%
and 67.71% of average earning assets for December 31, 2004 and 2003, respectively. Loan interest income for December 31, 2004 and 2003 was $5,877,205 and 5,742,205 respectively. The annualized average yield on loans was 7.36% and 7.39% for 2004 and
2003, respectively. Average balances of loans increased to approximately $79,865,000 during 2004, an increase of approximately $2,168,000 over the average of approximately $77,697,000 during 2003.



Investment securities averaged approximately $23,151,000 or 19.14% of average earning assets,
for December 31, 2004 compared to approximately $17,029,000 or 14.83% of average earning assets, for the same period in 2003. Interest earned on investment securities amount to $717,620 for December 31, 2004, compared to $572,363 for the same period
last year. Investment securities yielded 3.10% and 3.36% for the period ended December 31, 2004 and 2003, respectively.



Total interest expense for the period December 31, 2004 and 2003 was $1,606,744 and $1,905,706 respectively. The largest component of interest expense is interest on
deposit accounts. Interest expense on deposit accounts was $1,605,442 and $1,904,900, for December 31, 2004 and 2003, respectively. The average balance of interest bearing deposits increased to approximately $101,268,000 during the period December
31, 2004 from approximately $96,642,000 during the same period last year. The annualized average cost of deposits was approximately 1.59% for the period December 31, 2004 compared to 1.97% for the same period in 2003.



For the year ended December 31, 2004 and 2003, the total annualized average cost of funds was
1.58% and 1.96%, respectively.



10



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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



|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|------------------------------------------ |  | -------------- | ------- | - | -------------- | - | ---------- |  | ---- | -------------- |  | - | -------------- | - | ---------- | - | ----- |  | ---- | -
|                                           |  | 2004           |         |   | 2003           |  
|(Dollars in thousands)                     |  | AverageBalance |         |   | Income/Expense |   | Yield/Rate |  |      | AverageBalance |  |   | Income/Expense |   | Yield/Rate |  
|Assets:                                    |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Earning Assets:                            |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Securities, taxable (1)                    |  | $              | 17,531  |   |                | $ | 499        |  | 2.85 | %              |  | $ | 11,414         |   |            | $ | 340   |  | 2.98 | %
|Securities, tax-exempt (1)                 |  |                | 5,420   |   |                |   | 213        |  | 3.93 |                |  |   | 5,353          |   |            |   | 221   |  | 4.13 |  
|Nonmarketable equity securities            |  |                | 200     |   |                |   | 5          |  | 2.50 |                |  |   | 262            |   |            |   | 11    |  | 4.20 |  
|Federal funds sold                         |  |                | 17,323  |   |                |   | 218        |  | 1.26 |                |  |   | 19,605         |   |            |   | 205   |  | 1.05 |  
|Time deposits with other banks             |  |                | 610     |   |                |   | 19         |  | 3.11 |                |  |   | 423            |   |            |   | 17    |  | 4.02 |  
|Loans (2)                                  |  |                | 79,865  |   |                |   | 5,877      |  | 7.36 |                |  |   | 77,697         |   |            |   | 5,742 |  | 7.39 |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Total earning assets                       |  |                | 120,949 |   |                |   | 6,831      |  | 5.65 |                |  |   | 114,754        |   |            |   | 6,536 |  | 5.70 |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Cash and due from banks                    |  |                | 4,261   |   |                |   |            |  |      |                |  |   | 3,469          |   |            |   |       |  |      |  
|Allowance for loan losses                  |  |                | (1,366  | ) |                |   |            |  |      |                |  |   | (1,298         | ) |            |   |       |  |      |  
|Premises and equipment                     |  |                | 2,778   |   |                |   |            |  |      |                |  |   | 2,262          |   |            |   |       |  |      |  
|Other assets                               |  |                | 2,141   |   |                |   |            |  |      |                |  |   | 1,688          |   |            |   |       |  |      |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Total assets                               |  | $              | 128,763 |   |                |   |            |  |      |                |  | $ | 120,875        |   |            |   |       |  |      |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Liabilities:                               |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Interest-bearing liabilities:              |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Interest-bearing deposits                  |  | $              | 101,268 |   |                |   | 1,606      |  | 1.59 | %              |  | $ | 96,642         |   |            |   | 1,904 |  | 1.97 | %
|Short-term borrowings                      |  |                | 322     |   |                |   | 1          |  | 0.31 |                |  |   | 370            |   |            |   | 1     |  | 0.27 |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Total interest-bearing liabilities         |  |                | 101,590 |   |                |   | 1,607      |  | 1.58 |                |  |   | 97,012         |   |            |   | 1,905 |  | 1.96 |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Noninterest-bearing deposits               |  |                | 14,918  |   |                |   |            |  |      |                |  |   | 11,680         |   |            |   |       |  |      |  
|Accrued interest and other liabilities     |  |                | 463     |   |                |   |            |  |      |                |  |   | 1,286          |   |            |   |       |  |      |  
|Shareholders equity                       |  |                | 11,792  |   |                |   |            |  |      |                |  |   | 10,897         |   |            |   |       |  |      |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Total liabilities and shareholders equity |  | $              | 128,763 |   |                |   |            |  |      |                |  | $ | 120,875        |   |            |   |       |  |      |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Net interest spread                        |  |                |         |   |                |   |            |  | 4.07 | %              |  |   |                |   |            |   |       |  | 3.74 | %
|Net interest income                        |  |                |         |   |                | $ | 5,224      |  |      |                |  |   |                |   |            | $ | 4,631 |  |      |  
|                                           |  |                |         |   |                |   |            |  |      |                |  |   |                |   |            |   |       |  |      |  
|Net interest margin                        |  |                |         |   |                |   |            |  | 4.32 | %              |  |   |                |   |            |   |       |  | 4.04 | %

---

|(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



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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



|                                |  |                         |     |   |                         |   |      |             |  |   |       |   |  |        |      |   |      |   |     |             |  |   |       |   |  |   |     |   |  |   |      |  
|------------------------------- |  | ----------------------- | --- | - | ----------------------- | - | ---- | ----------- |  | - | ----- | - |  | ------ | ---- | - | ---- | - | --- | ----------- |  | - | ----- | - |  | - | --- | - |  | - | ---- | -
|                                |  | 2004 Compared With 2003 |     |   | 2003 Compared With 2002 |  
|                                |  | Variance Due to         |     |   | Variance Due to         |  
|(Dollars in thousands)          |  | Volume                  |     |   | Rate                    |   |      | Volume/Rate |  |   | Total |   |  | Volume |      |   | Rate |   |     | Volume/Rate |  |   | Total |  
|Earning Assets                  |  |                         |     |   |                         |   |      |             |  |   |       |   |  |        |      |   |      |   |     |             |  |   |       |   |  |   |     |   |  |   |      |  
|Securities, taxable             |  | $                       | 182 |   |                         | $ | (15  | )           |  | $ | (8    | ) |  | $      | 159  |   |      | $ | 29  |             |  | $ | (127  | ) |  | $ | (8  | ) |  | $ | (106 | )
|Securities, tax-exempt          |  |                         | 3   |   |                         |   | (11  | )           |  |   |      |   |  |        | (8   | ) |      |   | (14 | )           |  |   | (1    | ) |  |   |    |   |  |   | (15  | )
|Nonmarketable equity securities |  |                         | (3  | ) |                         |   | (4   | )           |  |   | 1     |   |  |        | (6   | ) |      |   | (4  | )           |  |   | (3    | ) |  |   | 1   |   |  |   | (6   | )
|Federal funds sold              |  |                         | (24 | ) |                         |   | 42   |             |  |   | (5    | ) |  |        | 13   |   |      |   | 10  |             |  |   | (98   | ) |  |   | (3  | ) |  |   | (91  | )
|Time deposits with other banks  |  |                         | 8   |   |                         |   | (4   | )           |  |   | (2    | ) |  |        | 2    |   |      |   | 6   |             |  |   | (3    | ) |  |   | (1  | ) |  |   | 2    |  
|Loans                           |  |                         | 161 |   |                         |   | (25  | )           |  |   | (1    | ) |  |        | 135  |   |      |   | 338 |             |  |   | (553  | ) |  |   | (31 | ) |  |   | (246 | )
|                                |  |                         |     |   |                         |   |      |             |  |   |       |   |  |        |      |   |      |   |     |             |  |   |       |   |  |   |     |   |  |   |      |  
|Total interest income           |  |                         | 327 |   |                         |   | (17  | )           |  |   | (15   | ) |  |        | 295  |   |      |   | 365 |             |  |   | (785  | ) |  |   | (42 | ) |  |   | (462 | )
|                                |  |                         |     |   |                         |   |      |             |  |   |       |   |  |        |      |   |      |   |     |             |  |   |       |   |  |   |     |   |  |   |      |  
|Interest-Bearing Liabilities    |  |                         |     |   |                         |   |      |             |  |   |       |   |  |        |      |   |      |   |     |             |  |   |       |   |  |   |     |   |  |   |      |  
|Interest-bearing deposits       |  |                         | 89  |   |                         |   | (369 | )           |  |   | (18   | ) |  |        | (298 | ) |      |   | 49  |             |  |   | (765  | ) |  |   | (13 | ) |  |   | (729 | )
|Short-term borrowings           |  |                         |    |   |                         |   |     |             |  |   |      |   |  |        |     |   |      |   | (1  | )           |  |   | (3    | ) |  |   | 1   |   |  |   | (3   | )
|                                |  |                         |     |   |                         |   |      |             |  |   |       |   |  |        |      |   |      |   |     |             |  |   |       |   |  |   |     |   |  |   |      |  
|Total interest expense          |  |                         | 89  |   |                         |   | (369 | )           |  |   | (18   | ) |  |        | (298 | ) |      |   | 48  |             |  |   | (768  | ) |  |   | (12 | ) |  |   | (732 | )
|                                |  |                         |     |   |                         |   |      |             |  |   |       |   |  |        |      |   |      |   |     |             |  |   |       |   |  |   |     |   |  |   |      |  
|Net interest income             |  | $                       | 238 |   |                         | $ | 352  |             |  | $ | 3     |   |  | $      | 593  |   |      | $ | 317 |             |  | $ | (17   | ) |  | $ | (30 | ) |  | $ | 270  |  
|                                |  |                         |     |   |                         |   |      |             |  |   |       |   |  |        |      |   |      |   |     |             |  |   |       |   |  |   |     |   |  |   |      |  



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, 2004. The table may not be indicative of the Companys rate sensitivity position at other points in time.



Interest Sensitivity Analysis



|                                                                       |  |                   |         |    |                                |   |         |                           |  |   |                                        |   |  |       |        |   |  |   |        
|---------------------------------------------------------------------- |  | ----------------- | ------- | -- | ------------------------------ | - | ------- | ------------------------- |  | - | -------------------------------------- | - |  | ----- | ------ | - |  | - | -------
|(Dollars in thousands)                                                 |  | WithinThreeMonths |         |    | After ThreeThroughTwelveMonths |   |         | After OneThroughFiveyears |  |   | Greater ThanFive Years orNon-Sensitive |   |  | Total
|Assets                                                                 |  |                   |         |    |                                |   |         |                           |  |   |                                        |   |  |       |        |   |  |   |        
|Earning Assets:                                                        |  |                   |         |    |                                |   |         |                           |  |   |                                        |   |  |       |        |   |  |   |        
|Federal funds sold and securities purchased under agreements to resell |  | $                 | 19,046  |    |                                | $ |        |                           |  | $ |                                       |   |  | $     |       |   |  | $ | 19,046 
|Time deposits with other banks                                         |  |                   | 499     |    |                                |   |        |                           |  |   |                                       |   |  |       |       |   |  |   | 499    
|Investment securities                                                  |  |                   | 300     |    |                                |   | 606     |                           |  |   | 20,243                                 |   |  |       | 6,647  |   |  |   | 27,796 
|Loans (1)                                                              |  |                   | 16,726  |    |                                |   | 20,757  |                           |  |   | 44,341                                 |   |  |       | 418    |   |  |   | 82,242 
|                                                                       |  |                   |         |    |                                |   |         |                           |  |   |                                        |   |  |       |        |   |  |   |        
|Total earning assets                                                   |  |                   | 36,571  |    |                                |   | 21,363  |                           |  |   | 64,584                                 |   |  |       | 7,065  |   |  |   | 129,583
|                                                                       |  |                   |         |    |                                |   |         |                           |  |   |                                        |   |  |       |        |   |  |   |        
|Liabilities                                                            |  |                   |         |    |                                |   |         |                           |  |   |                                        |   |  |       |        |   |  |   |        
|Interest-bearing liabilities:                                          |  |                   |         |    |                                |   |         |                           |  |   |                                        |   |  |       |        |   |  |   |        
|Interest-bearing deposits:                                             |  |                   |         |    |                                |   |         |                           |  |   |                                        |   |  |       |        |   |  |   |        
|Demand deposits                                                        |  |                   | 27,152  |    |                                |   |        |                           |  |   |                                       |   |  |       |       |   |  |   | 27,152 
|Savings deposits                                                       |  |                   | 24,076  |    |                                |   |        |                           |  |   |                                       |   |  |       |       |   |  |   | 24,076 
|Time deposits                                                          |  |                   | 17,938  |    |                                |   | 34,897  |                           |  |   | 3,844                                  |   |  |       | 473    |   |  |   | 57,152 
|                                                                       |  |                   |         |    |                                |   |         |                           |  |   |                                        |   |  |       |        |   |  |   |        
|Total interest-bearing deposits                                        |  |                   | 69,166  |    |                                |   | 34,897  |                           |  |   | 3,844                                  |   |  |       | 473    |   |  |   | 108,380
|Short-term borrowings                                                  |  |                   | 390     |    |                                |   |        |                           |  |   |                                       |   |  |       |       |   |  |   | 390    
|                                                                       |  |                   |         |    |                                |   |         |                           |  |   |                                        |   |  |       |        |   |  |   |        
|Total interest-bearing deposits                                        |  |                   | 69,556  |    |                                |   | 34,897  |                           |  |   | 3,844                                  |   |  |       | 473    |   |  |   | 108,770
|                                                                       |  |                   |         |    |                                |   |         |                           |  |   |                                        |   |  |       |        |   |  |   |        
|Period gap                                                             |  | $                 | (32,985 | )  |                                | $ | (13,534 | )                         |  | $ | 60,740                                 |   |  | $     | 6,592  |   |  |   |        
|                                                                       |  |                   |         |    |                                |   |         |                           |  |   |                                        |   |  |       |        |   |  |   |        
|Cumulative gap                                                         |  | $                 | (32,985 | )  |                                | $ | (46,519 | )                         |  | $ | 14,221                                 |   |  | $     | 20,813 |   |  |   |        
|                                                                       |  |                   |         |    |                                |   |         |                           |  |   |                                        |   |  |       |        |   |  |   |        
|Ratio of cumulative gap to total earning assets                        |  |                   | (25.46  | )% |                                |   | (35.90  | )%                        |  |   | 10.97                                  | % |  |       | 16.06  | % |  |   |        

---

|(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 contra asset balance. 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 1.75% and 1.58% of total loans on December 31, 2004 and 2003, respectively. While we experienced a significant decline in net charge-offs, nonperforming loans and potential problem loans in 2004 compared to 2003, the allowance
for loan losses at December 31, 2004 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 model methodology. Accordingly, we believe the allowance as of December 31, 2004 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,                                                                                         |  | 2004         |            |   | 2003 |  
|Total loans outstanding at end of year                                                                          |  | $            | 83,006,251 |   |      | $ | 80,169,314 |  
|                                                                                                                |  |              |            |   |      |   |            |  
|Average loans outstanding                                                                                       |  | $            | 79,864,534 |   |      | $ | 77,697,588 |  
|                                                                                                                |  |              |            |   |      |   |            |  
|Balance of allowance for loan losses at beginning of period                                                     |  | $            | 1,270,062  |   |      | $ | 1,319,202  |  
|Loan losses:                                                                                                    |  |              |            |   |      |   |            |  
|Real estate - construction                                                                                      |  |              |           |   |      |   |           |  
|Real estate - mortgage                                                                                          |  |              |           |   |      |   |           |  
|Commercial and industrial                                                                                       |  |              | 215,635    |   |      |   | 243,893    |  
|Consumer                                                                                                        |  |              | 111,811    |   |      |   | 242,893    |  
|                                                                                                                |  |              |            |   |      |   |            |  
|Total loan losses                                                                                               |  |              | 327,446    |   |      |   | 486,786    |  
|                                                                                                                |  |              |            |   |      |   |            |  
|Recoveries of previous loan losses:                                                                             |  |              |            |   |      |   |            |  
|Real estate - construction                                                                                      |  |              |           |   |      |   |           |  
|Real estate - mortgage                                                                                          |  |              |           |   |      |   |           |  
|Commercial and industrial                                                                                       |  |              | 9,944      |   |      |   | 3,957      |  
|Consumer                                                                                                        |  |              | 32,815     |   |      |   | 28,689     |  
|                                                                                                                |  |              |            |   |      |   |            |  
|Total recoveries                                                                                                |  |              | 42,759     |   |      |   | 32,646     |  
|                                                                                                                |  |              |            |   |      |   |            |  
|Net charge-offs                                                                                                 |  |              | 284,687    |   |      |   | 454,140    |  
|Provision charged to operations                                                                                 |  |              | 470,951    |   |      |   | 405,000    |  
|                                                                                                                |  |              |            |   |      |   |            |  
|Balance of allowance for loan losses at end of year                                                             |  | $            | 1,456,326  |   |      | $ | 1,270,062  |  
|                                                                                                                |  |              |            |   |      |   |            |  
|Ratios:                                                                                                         |  |              |            |   |      |   |            |  
|Net charge-offs to average loans outstanding                                                                    |  |              | 0.36       | % |      |   | 0.58       | %
|Net charge-offs to loans at end of year                                                                         |  |              | 0.34       | % |      |   | 0.57       | %
|Allowance for loan losses to average loans                                                                      |  |              | 1.82       | % |      |   | 1.63       | %
|Allowance for loan losses to loans at end of year                                                               |  |              | 1.75       | % |      |   | 1.58       | %
|Net charge-offs to allowance for loan losses                                                                    |  |              | 19.55      | % |      |   | 35.76      | %
|Net charge-offs to provisions for loan losses                                                                   |  |              | 60.45      | % |      |   | 112.13     | %
|                                                                                                               
|Nonperforming Assets. The following table sets forth the Companys nonperforming assets at the dates
indicated: | 
|                                                                                                                | 
|                                                                                                                |  | December 31, |           
|                                                                                                                |  | 2004         |            |   | 2003 |  
|Nonaccrual loans (considered impaired)                                                                          |  | $            | 764,275    |   |      | $ | 2,352,253  |  
|Restructure or other impaired loans                                                                             |  |              |           |   |      |   |           |  
|Loans 90 days or more past due and still accruing interest                                                      |  |              | 5,479      |   |      |   |           |  
|                                                                                                                |  |              |            |   |      |   |            |  
|Total nonperforming loans                                                                                       |  |              | 769,754    |   |      |   | 2,352,253  |  
|Other real estate owned                                                                                         |  |              | 701,880    |   |      |   | 725,035    |  
|                                                                                                                |  |              |            |   |      |   |            |  
|Total nonperforming assets                                                                                      |  | $            | 1,471,634  |   |      | $ | 3,077,288  |  
|                                                                                                                |  |              |            |   |      |   |            |  
|Nonperforming assets to year end loans                                                                          |  |              | 1.77       | % |      |   | 3.84       | %



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, 2004 and 2003 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, 2004 and 2003.



15



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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, 2004 and 2003, which were identified through our internal review mechanisms.



|                 |  |              |           |      |   |          
|---------------- |  | ------------ | --------- | ---- | - | ---------
|                 |  | December 31,
|                 |  | 2004         |           | 2003
|Criticized loans |  | $            | 118,348   |      | $ | 654,624  
|Classified loans |  |              | 2,611,306 |      |   | 2,772,556



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, 2004 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, 2004 was $578,556, an increase of $20,411 or 3.66% from the comparable period in 2003. Service charges on deposit accounts increased
$16,177 or 3.86% from the year ended December 31, 2003 to $434,854 for the comparable period in 2004. The increase is mainly attributable to the increase in demand deposit accounts. All other categories of noninterest income increased 3.04% to
$143,702 for the year ended December 31, 2004 when compared to the year ended December 31, 2003.



Noninterest Expense.Total noninterest expenses for the year ended December 31, 2004 was $2,874,816, an increase of $168,505 or 6.23%, higher when compared to total noninterest expenses of $2,706,311 for
the year ended December 31, 2003. Salaries and employee benefits increased 10.78% from $1,413,196 for the year ended December 31, 2003 to $1,565,587 for the year ended December 31, 2004. This increase is primarily attributable to the addition of a
branch manager and a mortgage loan processor plus normal salary increases. The increase in salaries and employee benefits expense was reduced by the decrease in net occupancy and equipment expense of $18,594. Other operating expenses increased
$34,708 from the year ended December 31, 2003 to $841,827 for the year ended December 31, 2004.



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 2004 was
$802,000, an increase of $149,075 over the 2003 expense of $652,925. The increase in expense resulted primarily from the increase in the income before taxes. The Companys effective tax rates for the years ended December 31, 2004 and 2003 were
32.64% and 31.42%, respectively.



Net Income.The
combination of the above factors resulted in net income for the year ended December 31, 2004 of $1,655,257 as compared to $1,425,041 for the same period in 2003. This represents an increase of $230,216 or 16.16% over the same period in 2003.



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 $79,864,534 in 2004 compared to $77,697,588
in 2003, an increase of $2,166,946, or 2.79%. At December 31, 2004, total loans were $83,006,251 compared to $80,169,314 at December 31, 2003.



The Companys ratio of loans to deposits was 66.45% at December 31, 2004 as compared to 71.21% at December 31, 2003. 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



---

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, 2004 and 2003 and highlights our general emphasis on commercial and mortgage lending.



Loan Portfolio Composition



|                          |  |        |            |   |                 |        |   |        |   |            |                 |  |        |  
|------------------------- |  | ------ | ---------- | - | --------------- | ------ | - | ------ | - | ---------- | --------------- |  | ------ | -
|                          |  | 2004   |            |   | 2003            |       
|                          |  | Amount |            |   | Percentof Total |        |   | Amount |   |            | Percentof Total | 
|Commercial and industrial |  | $      | 27,991,611 |   |                 | 33.72  | % |        | $ | 30,668,580 |                 |  | 38.25  | %
|Real estate               |  |        |            |   |                 |        |   |        |   |            |                 |  |        |  
|Construction              |  |        | 4,695,143  |   |                 | 5.66   |   |        |   | 2,011,177  |                 |  | 2.51   |  
|Mortgage                  |  |        | 39,203,590 |   |                 | 47.23  |   |        |   | 36,813,674 |                 |  | 45.92  |  
|Consumer and other loans  |  |        | 11,115,907 |   |                 | 13.39  |   |        |   | 10,675,883 |                 |  | 13.32  |  
|                          |  |        |            |   |                 |        |   |        |   |            |                 |  |        |  
|Total loans               |  |        | 83,006,251 |   |                 | 100.00 | % |        |   | 80,169,314 |                 |  | 100.00 | %
|                          |  |        |            |   |                 |        |   |        |   |            |                 |  |        |  
|Allowance for loan losses |  |        | (1,456,326 | ) |                 |        |   |        |   | (1,270,062 | )               |  |        |  
|                          |  |        |            |   |                 |        |   |        |   |            |                 |  |        |  
|Net loans                 |  | $      | 81,549,925 |   |                 |        |   |        | $ | 78,899,252 |                 |  |        |  
|                          |  |        |            |   |                 |        |   |        |   |            |                 |  |        |  



Real estate loans, including
construction and mortgage loans, increased $5,073,882 or 13.07% to $43,898,733 at December 31, 2004. Consumer and all other loans increased $440,024 or 4.12% to $11,115,907 at December 31, 2004. Commercial and industrial loans decreased $2,676,969
or 8.73% from $30,668,580 at December 31, 2003.



Maturities and Sensitivity
of Loans to Changes in Interest Rates



The following table summarizes the
loan maturity distribution, by type, at December 31, 2004 and related interest rate characteristics:



|                                    |  |                 |            |                                |   |                |  |       |           |  |   |           
|----------------------------------- |  | --------------- | ---------- | ------------------------------ | - | -------------- |  | ----- | --------- |  | - | ----------
|                                    |  | One Year orLess |            | Over One YearThrough FiveYears |   | Over FiveYears |  | Total
|Real estate - construction          |  | $               | 3,401,167  |                                | $ | 1,293,976      |  | $     |          |  | $ | 4,695,143 
|Real estate  mortgage              |  |                 | 10,237,945 |                                |   | 26,636,749     |  |       | 2,328,896 |  |   | 39,203,590
|Commercial and industrial           |  |                 | 11,466,385 |                                |   | 15,509,922     |  |       | 1,015,304 |  |   | 27,991,611
|Consumer and other                  |  |                 | 2,970,609  |                                |   | 7,927,280      |  |       | 218,018   |  |   | 11,115,907
|                                    |  |                 |            |                                |   |                |  |       |           |  |   |           
|                                    |  | $               | 28,076,106 |                                | $ | 51,367,927     |  | $     | 3,562,218 |  | $ | 83,006,251
|                                    |  |                 |            |                                |   |                |  |       |           |  |   |           
|Loans maturing after one year with: |  |                 |            |                                |   |                |  |       |           |  |   |           
|Fixed interest rates                |  |                 |            |                                |   |                |  |       |           |  | $ | 51,571,217
|Floating interest rates             |  |                 |            |                                |   |                |  |       |           |  |   | 3,358,928 
|                                    |  |                 |            |                                |   |                |  |       |           |  |   |           
|                                    |  |                 |            |                                |   |                |  |       |           |  | $ | 54,930,145
|                                    |  |                 |            |                                |   |                |  |       |           |  |   |           



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 $17,323,163 in 2004, compared to $19,604,570 in 2003. At
December 31, 2004, short-term investments totaled $19,046,000. 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 $609,929 in 2004. The total of these time deposits was $499,000 at December 31, 2004.



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
$23,151,357 in 2004, compared to $17,029,835 in 2003. At December 31, 2004, the total securities portfolio was $27,795,633. Securities designated as available for sale totaled $25,309,730 and were recorded at estimated fair value. Securities
designated as held to maturity totaled $2,180,728 and were recorded at amortized cost. Securities designated as nonmarketable equity securities totaled $305,175 at December 31, 2004. 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 are primarily in obligations of U.S. government agencies and corporations.



Investment Portfolio. The following tables summarize the carrying value
of investment securities at December 31, 2004 and 2003 and the weighted average yields of those securities at December 31, 2004.



Investment Securities Portfolio Composition



|                                            |  |      |            |      |   |           
|------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                            |  | 2004 |            | 2003
|Available-for-Sale (1)                      |  |      |            |      |   |           
|U.S. government agencies and corporations   |  | $    | 18,442,019 |      | $ | 10,950,450
|Obligations of states and local governments |  |      | 3,475,297  |      |   | 3,071,635 
|Other                                       |  |      | 200,000    |      |   | 200,000   
|                                            |  |      |            |      |   |           
|                                            |  |      | 22,117,316 |      |   | 14,222,085
|Mortgage-backed securities                  |  |      | 3,192,414  |      |   | 2,272,553 
|                                            |  |      |            |      |   |           
|Total available-for-sale securities         |  | $    | 25,309,730 |      | $ | 16,494,638
|                                            |  |      |            |      |   |           
|                                            |  |     
|                                            |  | 2004 |            | 2003
|Held-to-Maturity (1)                        |  |      |            |      |   |           
|Obligations of states and local governments |  | $    | 2,173,836  |      | $ | 2,624,204 
|Mortgage-backed securities                  |  |      | 6,892      |      |   | 20,294    
|                                            |  |      |            |      |   |           
|Total held-to-maturity securities           |  | $    | 2,180,728  |      | $ | 2,644,498 
|                                            |  |      |            |      |   |           

---

|(1) | Held-to-maturity securities are stated at amortized cost and available-for-sale securities are stated at 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, 2004 (Dollars in thousands)    |        | Within One Year |           |  | After One ButWithin Five Years |        |  | After Five ButWithin Ten Years |        |  | Over Ten Years |  
|                                            | Amount |                 | Yield (1) |  |                                | Amount |  | Yield (1)                      |        |  | Amount         |   | Yield (1) |   |       | Amount |      | Yield (1) | 
|U.S. government agencies (3)                |        | $               |          |  |                               |        |  | $                              | 17,544 |  | 2.72           | % |           | $ | 898   |        | 3.11 | %         |  | $ |      |  |     | %
|Obligations of states and local governments |        |                 | 100       |  | 4.37                           | %      |  |                                | 1,890  |  | 5.16           | % |           |   | 682   |        | 5.63 | %         |  |   | 803   |  | 5.69 | %
|Other                                       |        |                 |          |  |                               |        |  |                                |       |  |               |   |           |   |      |        |     |           |  |   | 200   |  | 6.25 | %
|                                            |        |                 |           |  |                                |        |  |                                |        |  |                |   |           |   |       |        |      |           |  |   |       |  |      |  
|Total available-for-sale securities         |        | $               | 100       |  | 4.37                           | %      |  | $                              | 19,434 |  | 2.95           | % |           | $ | 1,580 |        | 4.20 | %         |  | $ | 1,003 |  | 5.80 | %
|                                            |        |                 |           |  |                                |        |  |                                |        |  |                |   |           |   |       |        |      |           |  |   |       |  |      |  
|                                            |        |                 |           |  |                                |        |  |                               
|Held-to-Maturity                            |        |                 |           |  |                                |        |  |                                |        |  |                |   |           |   |       |        |      |           |  |   |       |  |      |  
|December 31, 2004 (Dollars in thousands)    |        | Within One Year |           |  | After One ButWithin Five Years |        |  | After Five ButWithin 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 |        |                 | 500       |  | 5.68                           | %      |  |                                | 809    |  | 5.83           | % |           |   | 865   |        | 6.05 | %         |  |   |      |  |      | %
|                                            |        |                 |           |  |                                |        |  |                                |        |  |                |   |           |   |       |        |      |           |  |   |       |  |      |  
|Total available-for-sale securities         |        | $               | 500       |  | 5.68                           | %      |  | $                              | 809    |  | 5.83           | % |           | $ | 865   |        | 6.05 | %         |  | $ |      |  |      | %
|                                            |        |                 |           |  |                                |        |  |                                |        |  |                |   |           |   |       |        |      |           |  |   |       |  |      |  

---

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

|(2) | Excludes mortgage-backed securities totaling $6,892 with a yield of 7.31%.
|--- | --------------------------------------------------------------------------

|(3) | Excludes mortgage-backed securities totaling $3,192,414 with a yield of 3.62%.
|--- | ------------------------------------------------------------------------------



DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES



Deposits. During 2004, the Company experienced significant growth in overall deposits. Total average deposits increased from $108,321,637 in 2003 to
$116,186,380 in 2004. This represents an increase of $7,864,743 or 7.26% over the 2003 amount. The following table summarizes the Companys deposits for the years ended December 31, 2004 and 2003.



|                                  |  |        |             |                    |        |   |        |   |                    |  |        |  
|--------------------------------- |  | ------ | ----------- | ------------------ | ------ | - | ------ | - | ------------------ |  | ------ | -
|                                  |  | 2004   |             |                    | 2003   |  
|                                  |  | Amount |             | Percent ofDeposits |        |   | Amount |   | Percent ofDeposits | 
|Noninterest bearing demand        |  | $      | 16,531,784  |                    | 13.23  | % |        | $ | 13,952,334         |  | 12.39  | %
|Interest-bearing demand           |  |        | 27,151,995  |                    | 21.74  |   |        |   | 22,836,817         |  | 20.28  |  
|Savings accounts                  |  |        | 24,075,836  |                    | 19.27  |   |        |   | 21,945,671         |  | 19.49  |  
|Time deposits of $100,000 or over |  |        | 28,598,107  |                    | 22.89  |   |        |   | 25,434,140         |  | 22.59  |  
|Other time deposits               |  |        | 28,553,605  |                    | 22.87  |   |        |   | 28,414,864         |  | 25.25  |  
|                                  |  |        |             |                    |        |   |        |   |                    |  |        |  
|Total deposits                    |  | $      | 124,911,327 |                    | 100.00 | % |        | $ | 112,583,826        |  | 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 $96,313,220 and $87,149,686 at December 31, 2004 and 2003, 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, 2004, is shown in the following table.



|                                            |  |                    |           |                              |   |                              |  |                    |           |       |   |           |  |   |           
|------------------------------------------- |  | ------------------ | --------- | ---------------------------- | - | ---------------------------- |  | ------------------ | --------- | ----- | - | --------- |  | - | ----------
|                                            |  | Within ThreeMonths |           | After ThreeThrough SixMonths |   | After SixThroughTwelveMonths |  | After TwelveMonths |           | Total
|Certificates of deposit of $100,000 or more |  | $                  | 9,727,639 |                              | $ | 7,089,385                    |  | $                  | 9,816,525 |       | $ | 1,964,558 |  | $ | 28,598,107



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. Some financial institutions partially fund their balance sheet using large
certificates of deposit obtained through brokers. These brokered deposits are generally expensive and are unreliable as long-term funding sources. Accordingly, the Company does not accept brokered deposits.



Short-term Borrowings. At December 31, 2004 and 2003, 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, |        
|                                          |  | 2004                     |         |   | 2003 |  
|Average balance during the year           |  | $                        | 322,227 |   |      | $ | 369,671 |  
|Average interest rate during the year     |  |                          | 0.43    | % |      |   | 0.22    | %
|Maximum month-end balance during the year |  | $                        | 390,000 |   |      | $ | 510,000 |  



CAPITAL



Total shareholders equity increased by $1,395,905 from $11,240,223
at December 31, 2003 to $12,636,128 at December 31, 2004. The increase is attributable to the sale of treasury stock of $42,600 and net income of $1,655,257. The increase was offset by the purchase of treasury stock during the period of $91,115, the
payment of dividends of $178,421, and the decline in other comprehensive income of $32,416.



On June 30, 2003, the Company purchased and redeemed 27,454 shares of its common stock, $5.00 par value from a former director, a corporation controlled by this individual and members of this individuals family,
for $80.00 per share or $2,196,320 in the aggregate. The 27,454 shares repurchased by the Company represented 9.92% of the 276,734 shares of common stock outstanding immediately prior to the purchase. An outside consultant reported to the Board that
the repurchase of these shares would be accretive as to all other Company shareholders in terms of earning per share.



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, 2004, 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 CapitalAdequacy Purposes |   |        | To Be Well-Capitalized UnderPrompt CorrectiveAction Provisions |          
|                                         |  |        |            |       | Minimum                      |   |        | Minimum                                                        |          
|                                         |  | Amount |            | Ratio |                              |   | Amount |                                                                | Ratio     |  |      | Amount |  | Ratio |          
|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  |  
|                                         |  |        |            |       |                              |  
|December 31, 2003                        |  |        |            |       |                              |   |        |                                                                |           |  |      |        |  |       |           |  |       |  
|Total capital (to risk-weighted assets)  |  | $      | 12,191,536 |       | 13.83                        | % |        | $                                                              | 7,050,500 |  | 8.00 | %      |  | $     | 8,813,125 |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |        | 11,089,896 |       | 12.58                        |   |        |                                                                | 3,525,250 |  | 4.00 |        |  |       | 5,287,875 |  | 6.00  |  
|Tier 1 capital (to average assets)       |  |        | 11,089,896 |       | 9.05                         |   |        |                                                                | 4,901,080 |  | 4.00 |        |  |       | 6,126,350 |  | 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, 2004 and 2003 core deposits represented 77.11% and 77.41%, respectively of total deposits.



The Bank had available at the end of 2004 unused short-term lines 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, 2004,
the available credit totaled approximately $20,800,000 and there were no borrowings outstanding. Any borrowings from the FHLB will be secured by liens on all of the Banks 1-4 family residential first lien mortgage loans.



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, 2004, the Banks available undivided profits totaled $9,297,422. 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.



The Company uses 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.



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 that could significantly impact earnings.



23



---

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 was 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, 2004, the Bank had issued
commitments to extend credit of $8,554,442 and standby letters of credit of $1,095,000 through various types of commercial lending arrangements. Approximately $576,809 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, 2004.



|                                    |  |                 |           |                             |   |                                |  |                |           |                      |   |           |  |   |           |  |   |          
|----------------------------------- |  | --------------- | --------- | --------------------------- | - | ------------------------------ |  | -------------- | --------- | -------------------- | - | --------- |  | - | --------- |  | - | ---------
|                                    |  | Within OneMonth |           | After OneThroughThreeMonths |   | After ThreeThroughTwelveMonths |  | Within OneYear |           | GreaterThan One Year |   | Total    
|Unused commitments to extend credit |  | $               | 1,017,802 |                             | $ | 488,569                        |  | $              | 5,612,356 |                      | $ | 7,118,727 |  | $ | 1,435,715 |  | $ | 8,554,442
|Standby letters of credit           |  |                 | 20,000    |                             |   | 600,000                        |  |                | 475,000   |                      |   | 1,095,000 |  |   |          |  |   | 1,095,000
|                                    |  |                 |           |                             |   |                                |  |                |           |                      |   |           |  |   |           |  |   |          
|Totals                              |  | $               | 1,037,802 |                             | $ | 1,088,569                      |  | $              | 6,087,356 |                      | $ | 8,213,727 |  | $ | 1,435,715 |  | $ | 9,649,442
|                                    |  |                 |           |                             |   |                                |  |                |           |                      |   |           |  |   |           |  |   |          



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



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 Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards 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.



24



---

COMMUNITYCORP

Managements Discussion and Analysis of

Financial Condition and Results of Operations



IMPACT OF RECENT ACCOUNTING CHANGES  (continued)



SFAS No. 123(R) is effective beginning as of the first interim or annual reporting period
beginning after December 15, 2005.The Company currently does not have any stock-based compensation. The adoption of SFAS No.123 (R) is not expected to have any impact on the Companys financial position or results of operations.



In December 2003, the FASB issued FASB Interpretation (FIN) No. 46
(revised), Consolidation of Variable Interest Entities (FIN No. 46(R)), which addresses consolidation by business enterprises of variable interest entities. FIN No. 46(R) requires a variable interest entity to be consolidated
by a company if that company is subject to a majority of the risk of loss from the variable interest entitys activities or entitled to receive a majority of the entitys residual returns, or both. FIN No. 46(R) also requires disclosures
about variable interest entities that a company is not required to consolidate, but in which it has a significant variable interest. FIN No. 46(R) provides guidance for determining whether an entity qualifies as a variable interest entity by
considering, among other considerations, whether the entity lacks sufficient equity or its equity holders lack adequate decision-making ability. The consolidation requirements of FIN No. 46(R) applied immediately to variable interest entities
created after January 31, 2003. The consolidation requirements applied to the Companys existing variable interest entities in the first reporting period ending after December 15, 2004. Certain of the disclosure requirements applied to all
financial statements issued after December 31, 2003, regardless of when the variable interest entity was established. The adoption of FIN No. 46(R) did not have any impact on the Companys financial position or results of operations.



In November 2003, the Emerging Issues Task Force (EITF) reached a
consensus that certain quantitative and qualitative disclosures should be required for debt and marketable equity securities classified as available for sale or held to maturity under SFAS No. 115 and SFAS No. 124 that are impaired at the balance
sheet date but for which other-than-temporary impairment has not been recognized. Accordingly the EITF issued EITF No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. This issue addresses
the meaning of other-than-temporary impairment and its application to investments classified as either available for sale or held to maturity under SFAS No. 115 and provides guidance on quantitative and qualitative disclosures. The disclosure
requirements of EITF No. 03-1 are effective for annual financial statements for fiscal years ending after June 15, 2004. The effective date for the measurement and recognition guidance of EITF No. 03-1 has been delayed. The FASB staff has issued a
proposed Board-directed FASB Staff Position (FSP), FSP EITF 03-1-a, Implementation Guidance for the Application of Paragraph 16 of Issue No. 03-1. The proposed FSP would provide implementation guidance with respect to debt
securities that are impaired solely due to interest rates and/or sector spreads and analyzed for other-than-temporary impairment under the measurement and recognition requirements of EITF No. 03-1. The delay of the effective date for the measurement
and recognition requirements of EITF No. 03-1 will be superseded concurrent with the final issuance of FSP EITF 03-1-a. Adopting the disclosure provisions of EITF No. 03-1 did not have any impact on the Companys financial position or results
of operations.



In March 2004, the Securities and Exchange Commission
(SEC) issued Staff Accounting Bulletin (SAB) No. 105, Application of Accounting Principles to Loan Commitments, to inform registrants of the Staffs view that the fair value of the recorded loan commitments
should not consider the expected future cash flows related to the associated servicing of the future loan. The provisions of SAB No. 105 must be applied to loan commitments accounted for as derivatives that are entered into after March 31, 2004. The
Staff will not object to the application of existing accounting practices to loan commitments accounted for as derivatives that are entered into on or before March 31, 2004, with appropriate disclosures. The Company adopted the provisions of SAB No.
105 on April 1, 2004. The adoption of SAB No. 105 did not have any impact on the Companys financial condition or results of operations.



Other accounting standards that have been issued or proposed by the Public Company Accounting Oversight Board (PCAOB) or other standards-setting bodies that
do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.



25



---

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 Communitycorpand Subsidiary, (the Company) as of December 31, 2004 and 2003, 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, 2004 and 2003 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.



|                          
|--------------------------
|/s/ Elliot Davis, LLC     
|Greenville, South Carolina
|February 18, 2005         





26



---

COMMUNITYCORP



Consolidated Balance Sheets



|                                                                                                |  |              |             |   |      |   |             |  
|----------------------------------------------------------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                                |  | December 31, |            
|                                                                                                |  | 2004         |             |   | 2003 |  
|Assets:                                                                                         |  |              |             |   |      |   |             |  
|Cash and cash equivalents:                                                                      |  |              |             |   |      |   |             |  
|Cash and due from banks                                                                         |  | $            | 3,705,335   |   |      | $ | 4,862,983   |  
|Federal funds sold                                                                              |  |              | 19,046,000  |   |      |   | 16,367,000  |  
|                                                                                                |  |              |             |   |      |   |             |  
|Total cash and cash equivalents                                                                 |  |              | 22,751,335  |   |      |   | 21,229,983  |  
|                                                                                                |  |              |             |   |      |   |             |  
|Time deposits with other banks                                                                  |  |              | 499,000     |   |      |   | 499,000     |  
|Investment securities:                                                                          |  |              |             |   |      |   |             |  
|Securities available-for-sale                                                                   |  |              | 25,309,730  |   |      |   | 16,494,638  |  
|Securities held-to-maturity (estimated fair value of $2,269,336 in 2004 and $2,764,762 in 2003) |  |              | 2,180,728   |   |      |   | 2,644,498   |  
|Nonmarketable equity securities                                                                 |  |              | 305,175     |   |      |   | 214,375     |  
|                                                                                                |  |              |             |   |      |   |             |  
|Total investment securities                                                                     |  |              | 27,795,633  |   |      |   | 19,353,511  |  
|                                                                                                |  |              |             |   |      |   |             |  
|Loans receivable                                                                                |  |              | 83,006,251  |   |      |   | 80,169,314  |  
|Less allowance for loan losses                                                                  |  |              | (1,456,326  | ) |      |   | (1,270,062  | )
|                                                                                                |  |              |             |   |      |   |             |  
|Loans, net                                                                                      |  |              | 81,549,925  |   |      |   | 78,899,252  |  
|Premises and equipment, net                                                                     |  |              | 3,441,334   |   |      |   | 2,517,479   |  
|Accrued interest receivable                                                                     |  |              | 822,240     |   |      |   | 817,309     |  
|Other real estate owned                                                                         |  |              | 701,880     |   |      |   | 725,035     |  
|Other assets                                                                                    |  |              | 846,376     |   |      |   | 713,929     |  
|                                                                                                |  |              |             |   |      |   |             |  
|Total assets                                                                                    |  | $            | 138,407,723 |   |      | $ | 124,755,498 |  
|                                                                                                |  |              |             |   |      |   |             |  
|Liabilities:                                                                                    |  |              |             |   |      |   |             |  
|Deposits:                                                                                       |  |              |             |   |      |   |             |  
|Noninterest-bearing transaction accounts                                                        |  | $            | 16,531,784  |   |      | $ | 13,952,334  |  
|Interest-bearing transaction accounts                                                           |  |              | 27,151,995  |   |      |   | 22,836,817  |  
|Money market savings accounts                                                                   |  |              | 3,070,070   |   |      |   | 3,483,021   |  
|Savings                                                                                         |  |              | 21,005,766  |   |      |   | 18,462,650  |  
|Time deposits $100,000 and over                                                                 |  |              | 28,598,107  |   |      |   | 25,434,140  |  
|Other time deposits                                                                             |  |              | 28,553,605  |   |      |   | 28,414,864  |  
|                                                                                                |  |              |             |   |      |   |             |  
|Total deposits                                                                                  |  |              | 124,911,327 |   |      |   | 112,583,826 |  
|                                                                                                |  |             
|Short-term borrowings                                                                           |  |              | 390,000     |   |      |   | 450,000     |  
|Accrued interest payable                                                                        |  |              | 295,430     |   |      |   | 295,934     |  
|Other liabilities                                                                               |  |              | 174,838     |   |      |   | 185,515     |  
|                                                                                                |  |              |             |   |      |   |             |  
|Total liabilities                                                                               |  |              | 125,771,595 |   |      |   | 113,515,275 |  
|                                                                                                |  |              |             |   |      |   |             |  
|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                                                                                 |  |              | 1,721,023   |   |      |   | 1,731,708   |  
|Retained earnings                                                                               |  |              | 12,715,882  |   |      |   | 11,239,046  |  
|Accumulated other comprehensive income                                                          |  |              | 32,129      |   |      |   | 64,545      |  
|Treasury stock (53,505 shares in 2004 and 52,664 shares in 2003)                                |  |              | (3,332,906  | ) |      |   | (3,295,076  | )
|                                                                                                |  |              |             |   |      |   |             |  
|Total shareholders equity                                                                      |  |              | 12,636,128  |   |      |   | 11,240,223  |  
|                                                                                                |  |              |             |   |      |   |             |  
|Total liabilities and shareholders equity                                                      |  | $            | 138,407,723 |   |      | $ | 124,755,498 |  
|                                                                                                |  |              |             |   |      |   |             |  



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



27



---

COMMUNITYCORP



Consolidated Statements of Income



|                                                                       |  |                          |           |      |   |          
|---------------------------------------------------------------------- |  | ------------------------ | --------- | ---- | - | ---------
|                                                                       |  | Years Ended December 31,
|                                                                       |  | 2004                     |           | 2003
|Interest income:                                                       |  |                          |           |      |   |          
|Loans, including fees                                                  |  | $                        | 5,877,205 |      | $ | 5,742,205
|Investment securities:                                                 |  |                          |           |      |   |          
|Taxable                                                                |  |                          | 499,150   |      |   | 339,589  
|Tax-exempt                                                             |  |                          | 213,258   |      |   | 221,384  
|Nonmarketable equity securities                                        |  |                          | 5,212     |      |   | 11,390   
|Federal funds sold and securities purchased under agreements to resell |  |                          | 217,629   |      |   | 204,962  
|Time deposits with other banks                                         |  |                          | 18,758    |      |   | 17,308   
|                                                                       |  |                          |           |      |   |          
|Total interest income                                                  |  |                          | 6,831,212 |      |   | 6,536,838
|                                                                       |  |                          |           |      |   |          
|Interest expense:                                                      |  |                          |           |      |   |          
|Deposits                                                               |  |                          | 1,605,442 |      |   | 1,904,900
|Short-term borrowings                                                  |  |                          | 1,302     |      |   | 806      
|                                                                       |  |                          |           |      |   |          
|Total interest expense                                                 |  |                          | 1,606,744 |      |   | 1,905,706
|                                                                       |  |                          |           |      |   |          
|Net interest income                                                    |  |                          | 5,224,468 |      |   | 4,631,132
|                                                                       |  |                         
|Provision for loan losses                                              |  |                          | 470,951   |      |   | 405,000  
|                                                                       |  |                          |           |      |   |          
|Net interest income after provision for loan losses                    |  |                          | 4,753,517 |      |   | 4,226,132
|                                                                       |  |                          |           |      |   |          
|Noninterest income:                                                    |  |                          |           |      |   |          
|Service charges on deposit accounts                                    |  |                          | 434,854   |      |   | 418,677  
|Commissions on credit life insurance                                   |  |                          | 12,130    |      |   | 14,414   
|Other charges, fees, and commissions                                   |  |                          | 88,233    |      |   | 87,541   
|Other                                                                  |  |                          | 43,339    |      |   | 37,513   
|                                                                       |  |                          |           |      |   |          
|Total noninterest income                                               |  |                          | 578,556   |      |   | 558,145  
|                                                                       |  |                          |           |      |   |          
|Noninterest expenses:                                                  |  |                          |           |      |   |          
|Salaries and employee benefits                                         |  |                          | 1,565,587 |      |   | 1,413,196
|Net occupancy                                                          |  |                          | 185,584   |      |   | 172,857  
|Equipment                                                              |  |                          | 281,818   |      |   | 313,139  
|Other operating                                                        |  |                          | 841,827   |      |   | 807,119  
|                                                                       |  |                          |           |      |   |          
|Total noninterest expenses                                             |  |                          | 2,874,816 |      |   | 2,706,311
|                                                                       |  |                          |           |      |   |          
|Income before income taxes                                             |  |                          | 2,457,257 |      |   | 2,077,966
|                                                                       |  |                         
|Income tax expense                                                     |  |                          | 802,000   |      |   | 652,925  
|                                                                       |  |                          |           |      |   |          
|Net income                                                             |  | $                        | 1,655,257 |      | $ | 1,425,041
|                                                                       |  |                          |           |      |   |          
|Earnings per share:                                                    |  |                          |           |      |   |          
|Weighted-average common shares outstanding                             |  |                          | 247,446   |      |   | 261,221  
|Basic                                                                  |  | $                        | 6.69      |      | $ | 5.46     



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



28



---

COMMUNITYCORP



Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income

For the years ended December 31, 2004 and 2003



|                                                        |  |              |  |                |           |  |                  |           |   |                                      |   |            |                        |  |   |                          |   |  |   |            |   |  |   |            |  
|------------------------------------------------------- |  | ------------ |  | -------------- | --------- |  | ---------------- | --------- | - | ------------------------------------ | - | ---------- | ---------------------- |  | - | ------------------------ | - |  | - | ---------- | - |  | - | ---------- | -
|                                                        |  | Common stock |  | Capitalsurplus |           |  | Retainedearnings |           |   | Accumulatedother comprehensiveincome |   |            | Treasurystock, at cost |  |   | Totalshareholdersequity |  
|                                                        |  | Shares       |  | Amount         |           |  |                  |           |  
|Balance, December 31, 2002                              |  | 300,000      |  | $              | 1,500,000 |  | $                | 1,731,708 |   |                                      | $ | 9,993,521  |                        |  | $ | 128,119                  |   |  | $ | (1,104,171 | ) |  | $ | 12,249,177 |  
|                                                        |  |              |  |                |           |  |                  |           |   |                                      |   |            |                        |  |   |                          |   |  |   |            |   |  |   |            |  
|Net income                                              |  |              |  |                |           |  |                  |           |   |                                      |   | 1,425,041  |                        |  |   |                          |   |  |   |            |   |  |   | 1,425,041  |  
|Other comprehensive loss, net of tax benefit of $33,454 |  |              |  |                |           |  |                  |           |   |                                      |   |            |                        |  |   | (63,574                  | ) |  |   |            |   |  |   | (63,574    | )
|                                                        |  |              |  |                |           |  |                  |           |   |                                      |   |            |                        |  |   |                          |   |  |   |            |   |  |   |            |  
|Comprehensive income                                    |  |              |  |                |           |  |                  |           |   |                                      |   |            |                        |  |   |                          |   |  |   |            |   |  |   | 1,361,467  |  
|Cash dividends paid($.65 per share)                     |  |              |  |                |           |  |                  |           |   |                                      |   | (179,516   | )                      |  |   |                          |   |  |   |            |   |  |   | (179,516   | )
|Purchase of treasury stock                              |  |              |  |                |           |  |                  |           |   |                                      |   |            |                        |  |   |                          |   |  |   | (2,358,620 | ) |  |   | (2,358,620 | )
|Sale of treasury stock                                  |  |              |  |                |           |  |                  |           |   |                                      |   |            |                        |  |   |                          |   |  |   | 167,715    |   |  |   | 167,715    |  
|                                                        |  |              |  |                |           |  |                  |           |   |                                      |   |            |                        |  |   |                          |   |  |   |            |   |  |   |            |  
|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 |  
|                                                        |  |              |  |                |           |  |                  |           |   |                                      |   |            |                        |  |   |                          |   |  |   |            |   |  |   |            |  



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



29



---

COMMUNITYCORP



Consolidated Statements of Cash Flows



|                                                                                            |  |                          |             |   |      |   |             |  
|------------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                            |  | Years Ended December 31, |            
|                                                                                            |  | 2004                     |             |   | 2003 |  
|Cash flows from operating activities:                                                       |  |                          |             |   |      |   |             |  
|Net income                                                                                  |  | $                        | 1,655,257   |   |      | $ | 1,425,041   |  
|Adjustments to reconcile net income to net cash provided by operating activities:           |  |                          |             |   |      |   |             |  
|Provision for loan losses                                                                   |  |                          | 470,951     |   |      |   | 405,000     |  
|Depreciation expense                                                                        |  |                          | 191,560     |   |      |   | 243,996     |  
|Premium amortization less discount accretion on investment securities                       |  |                          | 142,148     |   |      |   | 59,473      |  
|Deferred income tax expense (benefit)                                                       |  |                          | 12,056      |   |      |   | (17,233     | )
|Amortization of loan fees and costs                                                         |  |                          | 1,629       |   |      |   | 107         |  
|Loss on sale of other real estate owned                                                     |  |                          |            |   |      |   | 23,888      |  
|Increase in accrued interest receivable                                                     |  |                          | (4,931      | ) |      |   | (28,643     | )
|Decrease in accrued interest payable                                                        |  |                          | (504        | ) |      |   | (126,568    | )
|Increase in other assets                                                                    |  |                          | (127,429    | ) |      |   | (218,653    | )
|Increase (decrease) in other liabilities                                                    |  |                          | (10,677     | ) |      |   | 135,174     |  
|                                                                                            |  |                          |             |   |      |   |             |  
|Net cash provided by operating activities                                                   |  |                          | 2,330,060   |   |      |   | 1,901,582   |  
|                                                                                            |  |                          |             |   |      |   |             |  
|Cash flows from investing activities:                                                       |  |                          |             |   |      |   |             |  
|Proceeds from maturities of securities available-for-sale                                   |  |                          | 11,902,730  |   |      |   | 15,160,229  |  
|Purchases of securities available-for-sale                                                  |  |                          | (20,909,177 | ) |      |   | (19,150,714 | )
|Proceeds from maturities of securities held-to-maturity                                     |  |                          | 463,487     |   |      |   | 405,781     |  
|(Purchases) sales of nonmarketable equity securities                                        |  |                          | (90,800     | ) |      |   | 120,500     |  
|Proceeds from the sale of other real estate owned                                           |  |                          | 31,655      |   |      |   | 58,380      |  
|Increase in time deposits with other banks                                                  |  |                          |            |   |      |   | (200,000    | )
|Net increase in loans to customers                                                          |  |                          | (3,131,753  | ) |      |   | (5,942,095  | )
|Purchases of premises and equipment                                                         |  |                          | (1,115,415  | ) |      |   | (592,324    | )
|                                                                                            |  |                          |             |   |      |   |             |  
|Net cash used for investing activities                                                      |  |                          | (12,849,273 | ) |      |   | (10,140,243 | )
|                                                                                            |  |                          |             |   |      |   |             |  
|Cash flows from financing activities:                                                       |  |                          |             |   |      |   |             |  
|Net increase in demand deposits, interest-bearing transaction accounts and savings accounts |  |                          | 9,024,793   |   |      |   | 12,439,932  |  
|Net increase (decrease) in time deposits                                                    |  |                          | 3,302,708   |   |      |   | (2,475,865  | )
|Net increase (decrease) in short-term borrowings                                            |  |                          | (60,000     | ) |      |   | 50,000      |  
|Cash dividends paid                                                                         |  |                          | (178,421    | ) |      |   | (179,516    | )
|Purchase of treasury stock                                                                  |  |                          | (91,115     | ) |      |   | (2,358,620  | )
|Sale of treasury stock                                                                      |  |                          | 42,600      |   |      |   | 167,715     |  
|                                                                                            |  |                          |             |   |      |   |             |  
|Net cash provided by financing activities                                                   |  |                          | 12,040,565  |   |      |   | 7,643,646   |  
|                                                                                            |  |                          |             |   |      |   |             |  
|Net increase (decrease) in cash and cash equivalents                                        |  |                          | 1,521,352   |   |      |   | (595,015    | )
|Cash and cash equivalents, beginning of year                                                |  |                          | 21,229,983  |   |      |   | 21,824,998  |  
|                                                                                            |  |                          |             |   |      |   |             |  
|Cash and cash equivalents, end of year                                                      |  | $                        | 22,751,335  |   |      | $ | 21,229,983  |  
|                                                                                            |  |                          |             |   |      |   |             |  



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



30



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COMMUNITYCORP



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 and Charleston 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.



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.



Concentrations of Credit Risk - Financial instruments, which potentially
subject the Company to concentrations of credit risk, consist principally of loans receivable, investment securities, federal funds sold and amounts due from banks. Management is not aware of any concentrations of loans to classes of borrowers or
industries that would be similarly affected by economic conditions. 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 and Charleston Counties and surrounding areas. 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.



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.



31



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COMMUNITYCORP



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



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 the Enterprise Bank. 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, 2004 and 2003, the investment in Federal Home Loan Bank stock
was $250,100 and $159,300 respectively. At December 31, 2004 and 2003, the investment in Community Financial Services, Inc. stock was $50,575 and the investment in the Enterprise Bank was $4,500.



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.



32



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COMMUNITYCORP



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Allowance for Loan Losses (the Allowance) (continued)



The methodology for assessing the adequacy of the Allowance establishes both
an allocated and unallocated component of the contra asset balance. 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.



Impaired Loans - The Bank accounts for its impaired loans in accordance with 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.



33



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COMMUNITYCORP



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)



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.



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 a 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 $51,265 and $48,765 in 2004 and 2003, 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 $26,500 and $34,280 in 2004 and 2003, 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 2004 and 2003, the Company paid $1,607,248 and $2,032,274, respectively, for interest.
Cash paid for income taxes was $947,500 and $697,489 in 2004 and 2003, respectively.



Supplemental noncash investing activities are as follows: The Bank reclassified loans totaling $8,500 and $494,155 as foreclosures of real estate and repossessed assets in 2004 and 2003, respectively.



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.



34



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COMMUNITYCORP



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, |        
|                                                                      |  | 2004                    |         |   | 2003 |  
|Unrealized losses on available-for-sale securities                    |  | $                       | (49,490 | ) |      | $ | (97,028 | )
|Reclassification adjustment for gains (losses) realized in net income |  |                         |        |   |      |   |        |  
|                                                                      |  |                         |         |   |      |   |         |  
|Net unrealized losses on securities                                   |  |                         | (49,490 | ) |      |   | (97,028 | )
|Tax effect                                                            |  |                         | 17,074  |   |      |   | 33,454  |  
|                                                                      |  |                         |         |   |      |   |         |  
|Net-of-tax amount                                                     |  | $                       | (32,416 | ) |      | $ | (63,574 | )
|                                                                      |  |                         |         |   |      |   |         |  



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 Financial Accounting Standards Board (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 interim or annual reporting period beginning after December 15, 2005. The Company currently does not have any stock-based compensation. The adoption of SFAS No.123 (R) is not expected to have any impact on the Companys financial position
or results of operations.



In December 2003, the FASB issued FASB
Interpretation (FIN) No. 46 (revised), Consolidation of Variable Interest Entities (FIN No. 46(R)), which addresses consolidation by business enterprises of variable interest entities. FIN No. 46(R) requires a
variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entitys activities or entitled to receive a majority of the entitys residual returns, or
both. FIN No. 46(R) also requires disclosures about variable interest entities that a company is not required to consolidate, but in which it has a significant variable interest. FIN No. 46(R) provides guidance for determining whether an entity
qualifies as a variable interest entity by considering, among other considerations, whether the entity lacks sufficient equity or its equity holders lack adequate decision-making ability. The consolidation requirements of FIN No. 46(R) applied
immediately to variable interest entities created after January 31, 2003. The consolidation requirements applied to the Companys existing variable interest entities in the first reporting period ending after December 15, 2004. Certain of the
disclosure requirements applied to all financial statements issued after December 31, 2003, regardless of when the variable interest entity was established. The adoption of FIN No. 46(R) did not have any impact on the Companys financial
position or results of operations.



35



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COMMUNITYCORP



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)



Recent Accounting Pronouncements(continued)



In November 2003, the Emerging Issues Task Force (EITF) reached a consensus that
certain quantitative and qualitative disclosures should be required for debt and marketable equity securities classified as available for sale or held to maturity under SFAS No. 115 and SFAS No. 124 that are impaired at the balance sheet date but
for which other-than-temporary impairment has not been recognized. Accordingly the EITF issued EITF No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. This issue addresses the meaning of
other-than-temporary impairment and its application to investments classified as either available for sale or held to maturity under SFAS No. 115 and provides guidance on quantitative and qualitative disclosures. The disclosure requirements of EITF
No. 03-1 are effective for annual financial statements for fiscal years ending after June 15, 2004. The effective date for the measurement and recognition guidance of EITF No. 03-1 has been delayed. The FASB staff has issued a proposed
Board-directed FASB Staff Position (FSP), FSP EITF 03-1-a, Implementation Guidance for the Application of Paragraph 16 of Issue No. 03-1. The proposed FSP would provide implementation guidance with respect to debt securities
that are impaired solely due to interest rates and/or sector spreads and analyzed for other-than-temporary impairment under the measurement and recognition requirements of EITF No. 03-1. The delay of the effective date for the measurement and
recognition requirements of EITF No. 03-1 will be superseded concurrent with the final issuance of FSP EITF 03-1-a. Adopting the disclosure provisions of EITF No. 03-1 did not have any impact on the Companys financial position or results of
operations.



In March 2004, the Securities and Exchange Commission
(SEC) issued Staff Accounting Bulletin (SAB) No. 105, Application of Accounting Principles to Loan Commitments, to inform registrants of the Staffs view that the fair value of the recorded loan commitments
should not consider the expected future cash flows related to the associated servicing of the future loan. The provisions of SAB No. 105 must be applied to loan commitments accounted for as derivatives that are entered into after March 31, 2004. The
Staff will not object to the application of existing accounting practices to loan commitments accounted for as derivatives that are entered into on or before March 31, 2004, with appropriate disclosures. The Company adopted the provisions of SAB No.
105 on April 1, 2004. The adoption of SAB No. 105 did not have any impact on the Companys financial condition or results of operations.



Other accounting standards that have been issued or proposed by the PCAOB or other standards-setting bodies that do not require adoption until a future date are not
expected to have a material impact on the consolidated financial statements upon adoption.



Reclassifications - Certain captions and amounts in the consolidated financial statements of 2003 were reclassified to conform with the 2004 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, 2004 and 2003 were approximately $873,000 and $697,000 respectively. These requirements were satisfied by vault cash.



36



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COMMUNITYCORP



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, 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
|                                           |  |                |            |                  |   |                      |  |   |        |  |   |           
|December 31, 2003                          |  |                |            |                  |   |                      |  |   |        |  |   |           
|U.S. government agencies and corporations  |  | $              | 13,242,492 |                  | $ | 39,916               |  | $ | 59,406 |  | $ | 13,223,002
|Obligations of state and local governments |  |                | 2,953,604  |                  |   | 119,775              |  |   | 1,743  |  |   | 3,071,636 
|Other                                      |  |                | 200,000    |                  |   |                     |  |   |       |  |   | 200,000   
|                                           |  |                |            |                  |   |                      |  |   |        |  |   |           
|Total                                      |  | $              | 16,396,096 |                  | $ | 159,691              |  | $ | 61,149 |  | $ | 16,494,638
|                                           |  |                |            |                  |   |                      |  |   |        |  |   |           



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, 2004.



|                                           |  |                     |            |                   |   |            |  |                  |         |            |   |                  |  |   |            |  |   |       
|------------------------------------------ |  | ------------------- | ---------- | ----------------- | - | ---------- |  | ---------------- | ------- | ---------- | - | ---------------- |  | - | ---------- |  | - | ------
|                                           |  | Less Than 12 Months |            | 12 Months Or More |   | Total     
|                                           |  | Fair Value          |            | UnrealizedLosses  |   | Fair Value |  | UnrealizedLosses |         | Fair Value |   | UnrealizedLosses
|U. S. Government agencies and corporations |  | $                   | 16,105,989 |                   | $ | 78,153     |  | $                | 569,490 |            | $ | 7,122            |  | $ | 16,675,479 |  | $ | 85,275
|Obligations of state and Local governments |  |                     | 385,580    |                   |   | 1,000      |  |                  |        |            |   |                 |  |   | 385,580    |  |   | 1,000 
|                                           |  |                     |            |                   |   |            |  |                  |         |            |   |                  |  |   |            |  |   |       
|Total                                      |  | $                   | 16,491,569 |                   | $ | 79,153     |  | $                | 569,490 |            | $ | 7,122            |  | $ | 17,061,059 |  | $ | 86,275
|                                           |  |                     |            |                   |   |            |  |                  |         |            |   |                  |  |   |            |  |   |       



Securities classified as available for
sale are recorded at fair market value. At December 31, 2004, the amounts included in the category twelve months or more in the above table consisted of three mortgage-backed securities issued by the Federal Home Loan Mortgage
Corporation (FHLMC) which were in a continuous loss position for twelve months. These mortgage-backed securities are protected by mortgage insurance as well as the direct credit to the FHLMC. 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.



37



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COMMUNITYCORP



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, 2004
|                                          |  | AmortizedCost     |            | EstimatedFair Value
|Due in one year or less                   |  | $                 | 100,051    |                     | $ | 100,244   
|Due after one year but within five years  |  |                   | 19,425,476 |                     |   | 19,433,977
|Due after five years but within ten years |  |                   | 1,552,090  |                     |   | 1,580,457 
|Due after ten years                       |  |                   | 989,560    |                     |   | 1,002,638 
|                                          |  |                   |            |                     |   |           
|                                          |  |                   | 22,067,177 |                     |   | 22,117,316
|Mortgage-backed securities                |  |                   | 3,193,500  |                     |   | 3,192,414 
|                                          |  |                   |            |                     |   |           
|Total                                     |  | $                 | 25,260,677 |                     | $ | 25,309,730
|                                          |  |                   |            |                     |   |           



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, 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
|                                           |  |                |           |                  |   |                      |  |   |   |  |   |          
|December 31, 2003                          |  |                |           |                  |   |                      |  |   |   |  |   |          
|U.S. government agencies and corporations  |  | $              | 20,294    |                  | $ | 1,046                |  | $ |  |  | $ | 21,340   
|Obligations of state and local governments |  |                | 2,624,204 |                  |   | 119,218              |  |   |  |  |   | 2,743,422
|                                           |  |                |           |                  |   |                      |  |   |   |  |   |          
|Total                                      |  | $              | 2,644,498 |                  | $ | 120,264              |  | $ |  |  | $ | 2,764,762
|                                           |  |                |           |                  |   |                      |  |   |   |  |   |          



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, 2004
|                                          |  | AmortizedCost     |           | EstimatedFair Value
|Due in one year or less                   |  | $                 | 500,132   |                     | $ | 505,343  
|Due after one year but within five years  |  |                   | 809,468   |                     |   | 843,434  
|Due after five years but within ten years |  |                   | 864,225   |                     |   | 913,474  
|                                          |  |                   |           |                     |   |          
|                                          |  |                   | 2,173,825 |                     |   | 2,262,251
|Mortgage-backed securities                |  |                   | 6,903     |                     |   | 7,085    
|                                          |  |                   |           |                     |   |          
|Total                                     |  | $                 | 2,180,728 |                     | $ | 2,269,336
|                                          |  |                   |           |                     |   |          



At December 31, 2004 and 2003,
investment securities with an amortized cost of $17,167,850 and $13,705,677 and a fair value of $17,275,203 and $13,913,099, 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, 2004 and 2003.



38



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COMMUNITYCORP



NOTE 4 - LOANS RECEIVABLE



Loans consisted of the following:



|                           |  |              |            |      |   |           
|-------------------------- |  | ------------ | ---------- | ---- | - | ----------
|                           |  | December 31,
|                           |  | 2004         |            | 2003
|Real estate - construction |  | $            | 4,695,143  |      | $ | 2,011,177 
|Real estate - mortgage     |  |              | 39,203,590 |      |   | 36,813,674
|Commercial and industrial  |  |              | 27,991,611 |      |   | 30,668,580
|Consumer and other         |  |              | 11,115,907 |      |   | 10,675,883
|                           |  |              |            |      |   |           
|Total gross loans          |  | $            | 83,006,251 |      | $ | 80,169,314
|                           |  |              |            |      |   |           



As of December 31, 2004 and 2003,
management had placed loans totaling $764,375 and $2,352,253, respectively, in nonaccrual status because the loans were not performing as originally contracted. For 2004 and 2003 the total amount of interest earned on nonaccrual loans was
approximately $95,000 and $55,000, respectively. The gross interest income which would have been recorded under the original terms of the nonaccrual loans amounted to approximately $115,000 and $189,000 for 2004 and 2003, respectively.



Loans ninety days or more past due and still accruing interest were $5,479 at December 31,
2004. There were no loans ninety days or more past due and still accruing interest at December 31, 2003.



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, 2004 and 2003 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, 2004 and 2003.



Transactions in the allowance for loan losses are summarized below:



|                                           |  |                          |           |   |      |   |           |  
|------------------------------------------ |  | ------------------------ | --------- | - | ---- | - | --------- | -
|                                           |  | Years ended December 31, |          
|                                           |  | 2004                     |           |   | 2003 |  
|Balance, beginning of year                 |  | $                        | 1,270,062 |   |      | $ | 1,319,202 |  
|Provision charged to operations            |  |                          | 470,951   |   |      |   | 405,000   |  
|Recoveries on loans previously charged-off |  |                          | 42,759    |   |      |   | 32,646    |  
|Loans charged-off                          |  |                          | (327,446  | ) |      |   | (486,786  | )
|                                           |  |                          |           |   |      |   |           |  
|Balance, end of year                       |  | $                        | 1,456,326 |   |      | $ | 1,270,062 |  
|                                           |  |                          |           |   |      |   |           |  



39



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COMMUNITYCORP



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,
|                             |  | 2004         |           | 2003
|Commitments to extend credit |  | $            | 8,554,442 |      | $ | 7,158,562
|Standby letters of credit    |  |              | 1,095,000 |      |   | 1,142,411



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, 2004, the Company was not committed to lend additional funds to borrowers having loans in nonaccrual
status.



40



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COMMUNITYCORP



NOTE 5 - PREMISES AND EQUIPMENT



Premises and equipment consisted of the following:



|                               |  |              |            |   |      |   |            |  
|------------------------------ |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                               |  | December 31, |           
|                               |  | 2004         |            |   | 2003 |  
|Land                           |  | $            | 710,605    |   |      | $ | 710,605    |  
|Building and land improvements |  |              | 2,594,297  |   |      |   | 1,708,464  |  
|Furniture and equipment        |  |              | 1,899,391  |   |      |   | 1,669,809  |  
|                               |  |              |            |   |      |   |            |  
|Total                          |  |              | 5,204,293  |   |      |   | 4,088,878  |  
|Less, accumulated depreciation |  |              | (1,762,959 | ) |      |   | (1,571,399 | )
|                               |  |              |            |   |      |   |            |  
|Premises and equipment, net    |  | $            | 3,441,334  |   |      | $ | 2,517,479  |  
|                               |  |              |            |   |      |   |            |  



Depreciation expense totaled $191,560
and $243,996 in 2004 and 2003, respectively.



NOTE 6 - DEPOSITS



At December 31, 2004, the scheduled maturities of time deposits were as
follows:



|            |  |        |           
|----------- |  | ------ | ----------
|            |  | Amount
|Maturing in |  |        |           
|2005        |  | $      | 52,835,421
|2006        |  |        | 1,950,052 
|2007        |  |        | 1,893,484 
|2009        |  |        | 122,660   
|2010        |  |        | 350,095   
|            |  |        |           
|Total       |  | $      | 57,151,712
|            |  |        |           



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 $3,133,790 and $2,990,249 at
December 31, 2004 and 2003, respectively. During 2004, $2,028,312 of new loans were made to related parties, and repayments totaled $1,884,771.



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 $1,362, and $2,276 for the years ended December 31, 2004 and 2003, respectively.





41



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COMMUNITYCORP



NOTE 8 - SHORT-TERM BORROWINGS



At December 31, 2004 and 2003, 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, |        
|                                          |  | 2004                     |         |   | 2003 |  
|Average balance during the year           |  | $                        | 322,227 |   |      | $ | 369,671 |  
|Average interest rate during the year     |  |                          | 0.43    | % |      |   | 0.22    | %
|Maximum month-end balance during the year |  | $                        | 390,000 |   |      | $ | 510,000 |  



The Company has an agreement with its
safekeeping agent (an independent third party) to pledge certain of their U.S. Government obligation securities as collateral for the agreements. As of December 31, 2004, the par value and fair value of the securities underlying the agreements were
$525,000 and $524,642, respectively.



NOTE 9 - UNUSED LINES OF CREDIT



As of December 31, 2004, the Company had unused lines of credit to
purchase federal funds from other financial institutions totaling $3,800,000. These lines of credit are available on a one to seven day basis for general corporate purposes. The lenders have reserved the right to withdraw these lines 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, 2004, the available credit totaled approximately $20,800,000 and
there were no borrowings outstanding on this line.



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, 2004, 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.



NOTE 11 - SHAREHOLDERS EQUITY



In 2000, the Board of Directors approved the repurchase of shares of the Companys
outstanding stock. At December 31, 2004 and 2003, the Company had 53,505 and 52,664 shares, respectively held in treasury stock. During 2004 and 2003, the Company purchased 1,693 and 30,920 shares respectively, and sold 852 and 3,727 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. All of the Banks dividends to the Company are
payable only from the undivided profits of the Bank. At December 31, 2004, the Banks undivided profits were $9,297,422. 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 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.



42



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COMMUNITYCORP



NOTE 12 - OTHER OPERATING EXPENSES



Other operating expenses are summarized as follows:



|                                  |  |                          |         |      |   |        
|--------------------------------- |  | ------------------------ | ------- | ---- | - | -------
|                                  |  | Years ended December 31,
|                                  |  | 2004                     |         | 2003
|Stationary, printing, and postage |  | $                        | 198,557 |      | $ | 178,087
|Advertising and promotion         |  |                          | 33,662  |      |   | 26,561 
|Professional fees                 |  |                          | 166,316 |      |   | 154,851
|Directors fees                   |  |                          | 50,100  |      |   | 46,500 
|Telephone expenses                |  |                          | 54,509  |      |   | 53,970 
|ATM surcharges                    |  |                          | 52,323  |      |   | 60,018 
|ACH charges                       |  |                          | 33,245  |      |   | 40,704 
|Armored Car/Courier Services      |  |                          | 30,220  |      |   | 24,675 
|Membership Dues/Subscriptions     |  |                          | 32,422  |      |   | 22,397 
|Other                             |  |                          | 190,473 |      |   | 199,356
|                                  |  |                          |         |      |   |        
|Total                             |  | $                        | 841,827 |      | $ | 807,119
|                                  |  |                          |         |      |   |        



NOTE 13 - INCOME TAXES



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



|                                      |  |                          |         |      |   |         |  
|------------------------------------- |  | ------------------------ | ------- | ---- | - | ------- | -
|                                      |  | Years ended December 31, |        
|                                      |  | 2004                     |         | 2003 |  
|Currently payable:                    |  |                          |         |      |   |         |  
|Federal                               |  | $                        | 715,457 |      | $ | 606,024 |  
|State                                 |  |                          | 74,487  |      |   | 64,134  |  
|                                      |  |                          |         |      |   |         |  
|Total current                         |  |                          | 789,944 |      |   | 670,158 |  
|                                      |  |                         
|Deferred income tax expense (benefit) |  |                          | 12,056  |      |   | (17,233 | )
|                                      |  |                          |         |      |   |         |  
|Income tax expense                    |  | $                        | 802,000 |      | $ | 652,925 |  
|                                      |  |                          |         |      |   |         |  



Deferred income taxes are included in
other assets at December 31, 2004 and 2003.





43



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COMMUNITYCORP



NOTE 13 - INCOME TAXES(continued)



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



|                                |  |              |         |   |      |   |         |  
|------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                |  | December 31, |        
|                                |  | 2004         |         |   | 2003 |  
|Deferred tax assets:            |  |              |         |   |      |   |         |  
|Allowance for loan losses       |  | $            | 394,875 |   |      | $ | 342,077 |  
|Deferred compensation           |  |              | 82,100  |   |      |   | 84,265  |  
|Nonaccrual loan interest income |  |              | 81,795  |   |      |   | 124,065 |  
|Other                           |  |              | 13,370  |   |      |   | 11,467  |  
|                                |  |              |         |   |      |   |         |  
|Total deferred tax assets       |  |              | 572,140 |   |      |   | 561,874 |  
|                                |  |              |         |   |      |   |         |  
|Deferred tax liabilities:       |  |              |         |   |      |   |         |  
|Accumulated depreciation        |  |              | (81,719 | ) |      |   | (59,397 | )
|Securities available-for-sale   |  |              | (16,923 | ) |      |   | (33,997 | )
|                                |  |              |         |   |      |   |         |  
|Total deferred tax liabilities  |  |              | (98,642 | ) |      |   | (93,394 | )
|                                |  |              |         |   |      |   |         |  
|Net deferred tax asset          |  | $            | 473,498 |   |      | $ | 468,480 |  
|                                |  |              |         |   |      |   |         |  



The net deferred tax assets are
included in other assets in the consolidated balance sheets. 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, 2004 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 |        
|                                                    |  | 2004                    |         |   | 2003 |  
|Tax expense at statutory rate                       |  | $                       | 835,467 |   |      | $ | 706,508 |  
|State income tax, net of federal income tax benefit |  |                         | 49,161  |   |      |   | 37,307  |  
|Tax-exempt interest income                          |  |                         | (72,508 | ) |      |   | (79,111 | )
|Disallowed interest expense                         |  |                         | 7,880   |   |      |   | 10,110  |  
|Other, net                                          |  |                         | (18,000 | ) |      |   | (21,889 | )
|                                                    |  |                         |         |   |      |   |         |  
|Total                                               |  | $                       | 802,000 |   |      | $ | 652,925 |  
|                                                    |  |                         |         |   |      |   |         |  



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.



44



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COMMUNITYCORP



NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS(continued)



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.



45



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COMMUNITYCORP



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,  
|                                                                   |  | 2004           |            | 2003               
|                                                                   |  | CarryingAmount |            | EstimatedFair Value |   | CarryingAmount |  | EstimatedFair Value
|Financial Assets:                                                  |  |                |            |                     |   |                |  |                     |            |  |   |           
|Cash and due from banks                                            |  | $              | 3,705,335  |                     | $ | 3,705,335      |  | $                   | 4,862,983  |  | $ | 4,862,983 
|Federal funds sold                                                 |  |                | 19,046,000 |                     |   | 19,046,000     |  |                     | 16,367,000 |  |   | 16,367,000
|Time deposits with other banks                                     |  |                | 499,000    |                     |   | 499,000        |  |                     | 499,000    |  |   | 499,000   
|Securities available-for-sale                                      |  |                | 25,309,730 |                     |   | 25,309,730     |  |                     | 16,494,638 |  |   | 16,494,638
|Securities held-to-maturity                                        |  |                | 2,180,728  |                     |   | 2,269,336      |  |                     | 2,644,498  |  |   | 2,764,762 
|Nonmarketable equity securities                                    |  |                | 305,175    |                     |   | 305,175        |  |                     | 214,375    |  |   | 214,375   
|Loans receivable, gross                                            |  |                | 83,006,251 |                     |   | 82,635,590     |  |                     | 80,169,314 |  |   | 80,001,777
|Accrued interest receivable                                        |  |                | 822,240    |                     |   | 822,240        |  |                     | 817,309    |  |   | 817,309   
|                                                                   |  |                |            |                    
|Financial Liabilities:                                             |  |                |            |                     |   |                |  |                     |            |  |   |           
|Demand deposit, interest-bearing transaction, and savings accounts |  | $              | 67,759,615 |                     | $ | 67,759,615     |  | $                   | 58,734,822 |  | $ | 58,734,822
|Time deposits                                                      |  |                | 57,151,712 |                     |   | 57,341,084     |  |                     | 53,849,004 |  |   | 53,980,229
|Short-term borrowings                                              |  |                | 390,000    |                     |   | 390,000        |  |                     | 450,000    |  |   | 450,000   
|Accrued interest payable                                           |  |                | 295,430    |                     |   | 295,430        |  |                     | 295,934    |  |   | 295,934   



|                                         |  |                |           |                |   |          
|---------------------------------------- |  | -------------- | --------- | -------------- | - | ---------
|                                         |  |               
|                                         |  | NotionalAmount |           | NotionalAmount
|Off-Balance Sheet Financial Instruments: |  |                |           |                |   |          
|Commitments to extend credit             |  | $              | 8,554,442 |                | $ | 7,158,562
|Standby letters of credit                |  |                | 1,095,000 |                |   | 1,142,411



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.



46



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COMMUNITYCORP



NOTE 15 - REGULATORY MATTERS(continued)



As of December 31, 2004, 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 CapitalAdequacy Purposes |   |         | To Be Well- Capitalized UnderPrompt CorrectiveAction Provisions |          
|                                         |  |        |            |       |                              |   | Minimum |                                                                 |           | Minimum |     
|                                         |  | Amount |            | Ratio |                              |   | Amount  |                                                                 | Ratio     |         |      | Amount |  | Ratio |          
|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  |  
|                                         |  |        |            |       |                              |  
|December 31, 2003                        |  |        |            |       |                              |   |         |                                                                 |           |         |      |        |  |       |           |  |       |  
|Total capital (to risk-weighted assets)  |  | $      | 12,191,536 |       | 13.83                        | % |         | $                                                               | 7,050,500 |         | 8.00 | %      |  | $     | 8,813,125 |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |        | 11,089,896 |       | 12.58                        |   |         |                                                                 | 3,525,250 |         | 4.00 |        |  |       | 5,287,875 |  | 6.00  |  
|Tier 1 capital (to average assets)       |  |        | 11,089,896 |       | 9.05                         |   |         |                                                                 | 4,901,080 |         | 4.00 |        |  |       | 6,126,350 |  | 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,
|                                 |  | 2004         |            | 2003
|Assets                           |  |              |            |      |   |           
|Cash                             |  | $            | 66,797     |      | $ | 77,732    
|Investment in banking subsidiary |  |              | 12,561,281 |      |   | 11,154,441
|Nonmarketable equity securities  |  |              | 4,500      |      |   | 4,500     
|Other assets                     |  |              | 3,550      |      |   | 3,550     
|                                 |  |              |            |      |   |           
|Total assets                     |  | $            | 12,636,128 |      | $ | 11,240,223
|                                 |  |              |            |      |   |           
|Shareholders equity             |  | $            | 12,636,128 |      | $ | 11,240,223
|                                 |  |              |            |      |   |           



47



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COMMUNITYCORP



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



Condensed Statements of Income



|                                                                                      |  |                          |           |      |   |           |  
|------------------------------------------------------------------------------------- |  | ------------------------ | --------- | ---- | - | --------- | -
|                                                                                      |  | Years ended December 31, |          
|                                                                                      |  | 2004                     |           | 2003 |  
|Income                                                                                |  |                          |           |      |   |           |  
|Dividends from banking subsidiary                                                     |  | $                        | 216,000   |      | $ | 2,391,321 |  
|Other income                                                                          |  |                          | 1         |      |   | 1         |  
|                                                                                      |  |                          |           |      |   |           |  
|Total income                                                                          |  |                          | 216,001   |      |   | 2,391,322 |  
|                                                                                      |  |                         
|Expenses                                                                              |  |                          |          |      |   | 225       |  
|                                                                                      |  |                          |           |      |   |           |  
|Income before income taxes and equity in undistributed earnings of banking subsidiary |  |                          | 216,001   |      |   | 2,391,097 |  
|                                                                                      |  |                         
|Income tax benefit                                                                    |  |                          |          |      |   | 75        |  
|Equity in undistributed earnings of banking subsidiary                                |  |                          | 1,439,256 |      |   | (966,131  | )
|                                                                                      |  |                          |           |      |   |           |  
|Net income                                                                            |  | $                        | 1,655,257 |      | $ | 1,425,041 |  
|                                                                                      |  |                          |           |      |   |           |  



Condensed Statements
of Cash Flows



|                                                                                  |  |                          |            |   |      |   |            |  
|--------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                                  |  | Years ended December 31, |           
|                                                                                  |  | 2004                     |            |   | 2003 |  
|Cash flows from operating activities                                              |  |                          |            |   |      |   |            |  
|Net income                                                                        |  | $                        | 1,655,257  |   |      | $ | 1,425,041  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                          |            |   |      |   |            |  
|Equity in undistributed earnings of banking subsidiary                            |  |                          | (1,439,256 | ) |      |   | 966,131    |  
|Increase in other assets                                                          |  |                          |           |   |      |   | (117       | )
|                                                                                  |  |                          |            |   |      |   |            |  
|Net cash provided by operating activities                                         |  |                          | 216,001    |   |      |   | 2,391,055  |  
|                                                                                  |  |                          |            |   |      |   |            |  
|Cash flows from financing activities                                              |  |                          |            |   |      |   |            |  
|Cash dividends paid                                                               |  |                          | (178,421   | ) |      |   | (179,516   | )
|Purchases of treasury stock                                                       |  |                          | (91,115    | ) |      |   | (2,358,620 | )
|Sale of treasury stock                                                            |  |                          | 42,600     |   |      |   | 167,715    |  
|                                                                                  |  |                          |            |   |      |   |            |  
|Net cash used by financing activities                                             |  |                          | (226,936   | ) |      |   | (2,370,421 | )
|                                                                                  |  |                          |            |   |      |   |            |  
|Increase (decrease) in cash                                                       |  |                          | (10,935    | ) |      |   | 20,634     |  
|Cash, beginning of year                                                           |  |                          | 77,732     |   |      |   | 57,098     |  
|                                                                                  |  |                          |            |   |      |   |            |  
|Cash, ending of year                                                              |  | $                        | 66,797     |   |      | $ | 77,732     |  
|                                                                                  |  |                          |            |   |      |   |            |  





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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                   |  |  |  |                               
|Retired                               |  |  |  |                               



OFFICERS



|                                                      |  |                                      |  |                         
|----------------------------------------------------- |  | ------------------------------------ |  | ------------------------
|W. Roger Crook                                        |  | Mildred N. Whidden                   |  | William Steadman        
|Chief Executive Officer and President                 |  | Assistant Cashier    and Head Teller |  | Executive Vice President
|                                                      |  |                                     
|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 and
Administrative Assistant |  | Vice President                       |  | Mortgage Loan Originator
|                                                      |  |                                     
|Bruce Tate                                            |  |                                      |  | Paulette M. Masters     
|Loan Officer                                          |  |                                      |  | Branch Manager          



STAFF MEMBERS



|                  |  |  |  |                 
|----------------- |  |  |  | ----------------
|Annette Lyons     |  |  |  |                 
|Cindy Ackerman    |  |  |  | Sharon Milligan 
|Angela Adams      |  |  |  | Amy Avant       
|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 Smith     
|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        |  |  |  |                 





49



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COMMUNITYCORP



CORPORATE DATA



ANNUAL MEETING:



The Annual Meeting of Shareholders of Communitycorp will be held at 6 p.m. on Wednesday, April 27, 2005 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                        
|                           |  | 
|STOCK TRANSFER DEPARTMENT: |  |  |  | INDEPENDENT REGISTERED 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 $55.00 during the past two years. There were
approximately 569 shareholders of record as of December 31, 2004.



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.



50



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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

398
East Main Street, Ridgeland, SC 29936

Member FDIC



51