Exhibit 13

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

Contents:
Shareholder Letter	2
Summary of Selected Financial Data	3
Financial Charts	4-7
Management’s Discussion and Analysis	8-24
Management’s Annual Report on Internal Control Over Financial Reporting	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 AND SUBSIDIARY

Dear Shareholder,

It is a pleasure to report the progress of Communitycorp and its subsidiary, Bank of Walterboro, during 2009. As you are aware, our local and national economy has been very depressed over the past several years and it has been a challenging time for the banking industry. For 2009 and 2008, many South Carolina banks reported operating losses for the first time. In spite of the difficult challenges we faced during 2009, we were able to generate a net income of $300,474, or $1.28 per share. Also, we were able to increase our net loans, assets, and deposits; and a sound capital to asset ratio of 10.73%

Our total assets increased from $164,585,287 to a December 31, 2009 total of $165,393,055, an increase of $807,768, or 0.49%.

Net loans increased from $111,722,883 to $114,405,140, an increase of $2,682,257, or 2.40%. The allowance for loan losses increased from a December 31, 2008 balance of $1,981,637 to $2,053,340, 1.76% of gross loans.

Deposits at year-end 2009 were $146,687,996 compared to $145,713,985, for year-end 2008, representing an increase of $974,011, or 0.67%, from 2008 year-end.

Earnings decreased in 2009 with net income of $300,474 a decrease of $1,191,187, or 79.86%, less than 2008 earnings of $1,491,661. For 2009 we earned $1.28 per share compared to $6.22 for 2008.

Our net interest margin decreased slightly from 3.69% in 2008 to 3.67% in 2009.

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 28, 2010.

Very truly yours,

W. Roger Crook	Peden B. McLeod
President and CEO	Chairman of the Board

2

COMMUNITYCORP AND SUBSIDIARY

SELECTED FINANCIAL DATA

The following selected consolidated financial data for the five years ended December 31, 2009 are derived from our consolidated financial statements and other data. The selected consolidated financial data should be read in conjunction with our consolidated financial statements, including the accompanying notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included elsewhere herein.

Year Ended December 31,	2009		2008		2007		2006		2005
(Dollars in thousands, except per share)
Results of Operations:
Interest income	$	8,753	$	9,958	$	10,392	$	9,358	$	7,737
Interest expense		3,290		4,213		4,767		3,871		2,225
Net interest income		5,463		5,745		5,625		5,487		5,512
Provision for loan losses		1,083		400		202		225		381
Net interest income after provision for loan losses		4,380		5,345		5,423		5,262		5,131
Noninterest income		117		691		666		713		599
Noninterest expense		4,028		3,845		3,533		3,411		3,232
Income before income taxes		469		2,191		2,556		2,565		2,498
Income tax expense		169		699		794		823		788
Net income	$	300	$	1,492	$	1,762	$	1,742	$	1,710
Balance Sheet Data:
Securities available-for-sale	$	24,620	$	27,815	$	34,585	$	32,468	$	30,856
Securities held-to-maturity		565		1,320		1,819		1,574		1,875
Allowance for loan losses		2,053		1,982		1,929		1,857		1,665
Net loans		114,405		111,723		112,668		103,983		95,930
Premises and equipment, net		3,090		3,029		2,989		3,131		3,266
Total assets		165,393		164,585		161,320		158,092		142,220
Noninterest-bearing deposits		14,163		15,652		16,461		19,765		18,021
Interest-bearing deposits		132,525		130,062		123,133		121,021		109,437
Total deposits		146,688		145,714		139,594		140,786		127,458
Short-term borrowings		-		-		3,068		250		370
Total liabilities		147,647		146,892		144,583		142,955		128,576
Total shareholders’ equity		17,746		17,693		16,736		15,137		13,643
Per Share Data:
Weighted-average common shares outstanding		234,849		239,634		240,708		242,636		244,788
Net income	$	1.28	$	6.22	$	7.32	$	7.18	$	6.99
Cash dividends paid	$	1.07	$	1.05	$	1.00	$	0.90	$	0.82
Period end book value	$	75.74	$	74.69	$	69.60	$	62.62	$	56.13
Equity and Assets Ratios:
Return on average assets		0.18%		0.91%		1.08%		1.11%		1.23%
Return on average equity		1.68%		8.70%		11.24%		12.35%		13.11%
Equity to assets ratio		10.73%		10.75%		10.37%		9.58%		9.35%
Dividend payout ratio		84.10%		16.93%		13.65%		12.57%		11.79%

3

4

NET INCOME, TOTAL EXPENSES, TOTAL INCOME

5

COMPOSITION OF LOANS AT DECEMBER 31, 2009

COMPOSITION OF DEPOSITS AT DECEMBER 31, 2009

6

LOANS, DEPOSITS, AND ASSETS

7

COMMUNITYCORP AND SUBSIDIARY

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 has branches in Ravenel, and Ridgeland, South Carolina. The Company’s primary market area includes Colleton, Jasper and Charleston Counties. Depository accounts are insured by the Federal Deposit Insurance Corporation up to the maximum amount permitted by law. The Bank, which received its charter on October 11, 1988 and opened for business on May 1, 1989, is dedicated to providing prompt, efficient, personal service to its customers. The Bank offers a full range of deposit services for individuals and businesses. Deposit products include checking accounts, savings accounts, certificates of deposit, money market accounts, and IRA’s.

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

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, 2009, the Company had forty-two full-time employees and five part time employees.

This discussion and analysis is intended to assist the reader in understanding the financial condition and results of operations of the Company and its subsidiary, the Bank. 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 POLICIES

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

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

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

8

COMMUNITYCORP AND SUBSIDIARY

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, 2009 was $300,474, or $1.28 per share, compared to $1,491,661, or $6.22 per share, for the year ended December 31, 2008, resulting in a decrease of $1,191,187.

Defaults by borrowers increased substantially in 2009, resulting in the recording of higher provisions for credit losses and higher net charge-offs. For the year ended December 31, 2009, we recorded a provision for loan losses of $1,083,000 compared to $400,000 for the year 2008. Our net charge offs for the comparable periods were $1,011,297 and $347,682, respectively.

Our 2009 operating results, compared to 2008, were also negatively impacted by the $461,935 write down of our investment securities for being other than temporarily impaired and the $277,932 increase in our federal deposit insurance premiums.

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 average-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 average-assets.

9

COMMUNITYCORP AND SUBSIDIARY

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

NET INTEREST INCOME (continued)

Net interest income for 2009 was $5,462,772 compared to $5,745,097 for 2008, a decrease of $282,325, or 4.91%. The decrease was mainly attributable to the decrease in the average balance of our average-assets, which decreased by 4.32%, while our average interest-bearing liabilities decreased only 1.83%

For 2009 average average-assets totaled $148,954,149 with an annualized average yield of 5.88% compared to $155,678,535 and 6.40%, respectively, for 2008. Average interest-bearing liabilities totaled $131,579,436 with an annualized average cost of 2.50% for 2009 compared to $129,211,486 and 3.26%, respectively, for 2008.

Our net interest margin and net interest spread was 3.67% and 3.38%, respectively, for 2009 compared to 3.69% and 3.14% respectively for 2008.

Our annualized yield on average average-assets decreased 52 basis points for 2009 compared to 2008, while our annualized average cost of our interest-bearing liabilities decreased 76 basis points for 2009 compared to 2008. These decreases were reflective of the decreasing interest rate environment during 2009.

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

Because loans often provide a higher yield than other types of average-assets, one of our goals it to maintain our loan portfolio as the largest component of total average-assets. Loans comprised 77.65% and 72.33% of average average-assets for December 31, 2009 and 2008, respectively. Loan interest income for the years ended December 31, 2009 and 2008 was $7,668,804 and $8,322,422, respectively. The annualized average yield on loans was 6.63% and 7.39% for 2009 and 2008, respectively. Average balances of loans increased to $115,658,689 during 2009, an increase of $3,061,854 over the average of $112,596,835 during 2008. The decrease in the annualized yield on loans is mainly attributable to the decline in market interest rates and to the significant increase of $663,615 in net loans charged off. Fixed rate loans averaged approximately 97% of our loan portfolio for 2008 and 2009

Investment securities averaged $27,322,011, or 18.34% of average average-assets, for December 31, 2009, compared to $33,916,234, or 21.79% of average average-assets, for 2008. Interest earned on investment securities amounted to $1,029,475 for the year ended December 31, 2009, compared to $1,460,722 for the same period last year. Investment securities yielded 3.77% and 4.31% for the period ended December 31, 2009 and 2008, respectively.

Total interest expense for the years ended December 31, 2009 and 2008 was $3,290,075 and $4,212,875, respectively. The largest component of interest expense is interest on deposit accounts. Interest expense on deposit accounts was $3,290,068 and $4,207,282, for the years ended December 31, 2009 and 2008, respectively. The average balance of interest bearing deposits increased to $131,578,477 for the year ended December 31, 2009, from $128,880,436 during the same period last year. The annualized average cost of deposits was 2.50% for the year ended December 31, 2009, compared to 3.26% for the same period in 2008.

For the year ended December 31, 2009 and 2008, the total annualized average cost of funds was 2.50% and 3.26%, respectively.

10

COMMUNITYCORP AND SUBSIDIARY

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

NET INTEREST INCOME (continued)

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

Average Balances, Income, Expenses, and Rates

	2009				2008
	Average Balance		Income/ Expense	Yield/ Rate	Average Balance		Income/ Expense	Yield/ Rate
Assets:
Average-assets:
Loans (2)	$115,658,689		$7,668,804	6.63%	$112,596,835		$8,322,422	7.39%
Securities, taxable (1)	14,589,666		532,772	3.65	24,172,428		1,069,573	4.43
Securities, tax-exempt (1)	12,370,484		462,881	3.74	9,278,463		353,366	3.80
Nonmarketable equity securities	361,861		33,822	9.35	465,343		37,783	8.17
Federal funds sold	4,473,449		7,918	0.18	8,954,126		166,567	1.87
Time deposits with other banks	1,500,000		46,650	3.11	211,340		8,261	3.79
Total average-assets	148,954,149		8,752,847	5.88	155,678,535		9,957,972	6.40
Cash and due from banks	12,828,752				4,814,779
Allowance for loan losses	(2,025,013	)			(1,932,510	)
Premises and equipment	3,028,163				2,998,557
Accrued interest	1,137,478				988,802
Other assets	1,052,138				805,184
Total assets	$164,975,667				$163,353,347
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Interest-bearing deposits	$131,578,477		$3,290,068	2.50%	$128,880,436		$4,207,282	3.26%
Short-term borrowings	959		7	0.73	331,050		5,593	1.81
Total interest-bearing liabilities	131,579,436		3,290,075	2.50	129,211,486		4,212,875	3.26
Noninterest-bearing deposits	14,225,344				15,439,997
Accrued interest	915,074				1,273,749
Other liabilities	372,698				291,509
Shareholders’ equity	17,883,115				17,130,606
Total liabilities and shareholders’ equity	$164,975,667				$163,353,347
Net interest spread				3.38%				3.14%
Net interest income			$5,462,772				$5,745,097
Net interest margin				3.67%				3.69%

(1) Averages for securities are stated at their carrying amount.

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

11

COMMUNITYCORP AND SUBSIDIARY

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 average-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

	2009 Compared With 2008												2008 Compared With 2007
	Variance Due to Changes in               Volume/												Variance Due to Changes in          Volume/
(Dollars in thousands)	Volume			Rate			Rate			Total			Volume			Rate			Rate			Total
Earning-assets
Loans	$	226		$	(857	)	$	(23	)	$	(654	)	$	288		$	(228	)	$	(8	)	$	52
Securities, taxable		(425	)		(188	)		76			(537	)		(166	)		(80	)		11			(235	)
Securities, tax-exempt		117			(5	)		(2	)		110			13			(4	)		-			9
Nonmarketable equity securities		(8	)		5			(1	)		(4	)		7			9			3			19
Federal funds sold		(84	)		(152	)		77			(159	)		14			(282	)		(9	)		(277	)
Time deposits with other banks		49			(1	)		(10	)		38			20			(7	)		(15	)		(2	)
Total interest income		(125	)		(1,198	)		117			(1,206	)		176			(592	)		(18	)		434
Interest-Bearing Liabilities
Interest-bearing deposits		88			(985	)		(21	)		(918	)		36			(581	)		(4	)		(549	)
Short-term borrowings		(6	)		(4	)		4			(6	)		(4	)		(6	)		(3	)		(5	)
Total interest expense		82			(989	)		(17	)		(924	)		40			(587	)		(7	)		(554	)
Net interest income	$	(207	)	$	(209	)	$	134		$	(282	)	$	136		$	(5	)	$	(11	)	$	120

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 manage the risk and minimize the impact on net interest income of rising or falling interest rates.

12

COMMUNITYCORP AND SUBSIDIARY

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, 2009. The table may not be indicative of the Company’s rate sensitivity position at other points in time.

Interest Sensitivity Analysis

(Dollars in thousands)	Within Three Months			After Three Through Twelve Months			After One Through Five Years			Greater Than Five Years		Total
Assets
Earning-assets:
Federal funds sold and securities purchased under agreements to resell	$	2,030		$	-		$	-		$	-	$	2,030
Time deposits in other banks		500			750			250					1,500
Investment securities		231			265			4,312			20,679		25,487
Loans (1)		22,320			34,789			56,488			151		113,748
Total earning-assets		25,081			36,804			61,050			20,830		142,765
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
Demand		23,351			-			-			-		23,351
Savings and money market		16,645			-			-			-		16,445
Time		23,044			61,520			7,941			24		92,529
Total interest-bearing deposits and liabilities		63,040			61,520			7,941			24		132,525
Period gap	$	(37,959	)	$	(25,716	)	$	53,109		$	20,806
Cumulative gap	$	(37,959	)	$	(63,675	)	$	(10,566	)	$	10,240
Ratio of cumulative gap to total earning-assets		(26.59)%			(44.60)%			(7.40)%			7.17%

(1) Excludes nonaccrual loans.

The above table reflects the balances of average-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

COMMUNITYCORP AND SUBSIDIARY

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 average-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 in the consolidated statement of income. Loan losses and recoveries are charged to the allowance. Charge-offs to the allowance are made when all or a portion of the loan is confirmed as a loss based on our review of the loan, through possession of the underlying security, or through a troubled debt restructuring transaction. Likewise, recoveries offset these increases through credits to the allowance.

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

The methodology for assessing the adequacy of the allowance establishes both an allocated and unallocated component of the allowance. The allocated component is based principally on current loan grades and historical loss rates. The unallocated component is the result of the portion of the assessment that estimates probable losses in the portfolio that are not fully captured in the allocated allowance. This analysis includes, but is not necessarily limited to, industry concentrations, 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 1.76% and 1.74% of total loans at December 31, 2009 and 2008 respectively. The allowance for loan losses at December 31, 2009 is reflective of the results of our allowance model methodology. We monitor and evaluate the adequacy of the allowance and loss exposure in the loan portfolio by considering the borrowers’ financial conditions and other factors in the unallocated component of the allowance. Accordingly, we believe the allowance as of December 31, 2009 is adequate, based on our assessment of probable losses, and available facts and circumstances then prevailing.

14

COMMUNITYCORP AND SUBSIDIARY

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

PROVISION AND ALLOWANCE FOR LOAN LOSSES (continued)

The provision for loan losses is the charge to operating earnings that management feels is necessary to maintain the allowance for possible loan losses at an adequate level. For the year ended December 31, 2009, the provision charged to expense was $1,083,000 as compared to $400,000 for the same period in 2008.

Allowance for Loan Losses

	Year ended December 31,
	2009			2008
Total loans outstanding at end of year	$	116,458,480		$	113,704,520
Average loans outstanding	$	115,658,689		$	112,596,835
Balance of allowance for loan losses at beginning of period	$	1,981,637		$	1,929,319
Loan losses:
Real estate - construction		104,327			-
Real estate - mortgage		48,043			-
Commercial and industrial		791,786			261,094
Consumer		108,907			102,037
Total loan losses		1,053,063			363,131
Recoveries of previous loan losses:
Real estate - construction		-			-
Real estate - mortgage		-			-
Commercial and industrial		17,048			1,030
Consumer		24,718			14,419
Total recoveries		41,766			15,449
Net charge-offs		(1,011,297	)		(347,682	)
Provision charged to operations		1,083,000			400,000
Balance of allowance for loan losses at end of year	$	2,053,340		$	1,981,637
Ratios:
Net charge-offs to average loans outstanding		0.87%			0.31%
Net charge-offs to loans at end of year		0.87%			0.31%
Allowance for loan losses to average loans		1.78%			1.76%
Allowance for loan losses to loans at end of year		1.76%			1.74%
Net charge-offs to allowance for loan losses		49.25%			17.55%
Net charge-offs to provisions for loan losses		93.38%			86.92%
Risk Elements in the Loan Portfolio
The following table sets forth our nonperforming assets at the dates indicated:
December 31,	2009			2008
Nonaccrual loans	$	2,710,494		$	1,975,835
Total loans impaired not in nonaccrual		6,047,788			2,736,203
Loans 90 days or more past due and still accruing interest		2,480			2,951
Total impaired and nonperforming loans		8,760,762			4,714,989
Other real estate owned		340,000			75,000
Total impaired and nonperforming assets	$	9,100,762		$	4,789,989
Nonperforming assets to period end loans		7.81%			4.21%

15

COMMUNITYCORP AND SUBSIDIARY

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

PROVISION AND ALLOWANCE FOR LOAN LOSSES (continued)

The following tables summarize information on impaired loans at and for the years ended December 31, 2009 and 2008.

	2009		2008
Impaired loans with specific allowance	$	2,426,363	$	1,836,987
Impaired loans with no specific allowance		6,331,909		2,875,051
Total impaired loans – year end	$	8,758,272	$	4,712,038
Related specific allowance – year end	$	760,103	$	275,548
Average recorded investment in impaired loans – year end		6,475,817		3,940,498
Impaired loans included in nonaccrual		2,710,494		1,975,835

Interest income on impaired loans other than nonaccrual loans is recognized on an accrual basis. Interest income on nonaccrual loans is recognized only as collected. During 2009 and 2008, interest income recognized on nonaccrual loans was $18,687 and $10,000, respectively. If the nonaccrual loans had been accruing interest at their original contracted rates, related income would have been $167,968 and $89,000 for 2009 and 2008, respectively.

At December 31, 2009 real estate or other collateral secured practically all of the loans that were considered impaired. 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 our 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 years ended December 31, 2009 was $116,870 and $690,787, respectively. The decrease in the 2009 other incomes is mostly attributable to the write down of our investment securities for being other than temporarily impaired. Before the write downs, other income for 2009 is $578,805 compared to $690,787 for 2008, resulting in a net decrease of $111,982. This decrease is also due in part to the $40,000 loss on the sale of other real estate owned and the decrease of $54,799 in our service charges on deposit accounts. The decrease in service charges is attributable to the closing of problematic deposit accounts.

Noninterest Expense. Total noninterest expense for years ended December 31, 2009 and 2008 was $4,027,863 and $3,844,714, respectively. This represented an increase in noninterest expense of $183,149, or 4.76%. Salaries and employee benefits decreased $101,354, or 5.04%, from $2,011,830 for 2008 to $1,910,476 for 2009. For 2009, other operating expense was $1,495,807, or $264,888 higher than for 2008. This increase is due in part to the $277,932 increase in our federal deposit insurance premiums and to the $58,599 increase in our professional fees. During 2009, like all federally insured banks, the Federal Deposit Insurance Corporation levied a special premium assessment on our deposits and drastically increased our premiums for deposit insurance. The increase in our professional fees is due largely to the cost of complying with the provisions of section 404 of the Sarbanes-Oxley Act. Net occupancy and equipment expense increased from $601,965 for 2008 to $621,580 for 2009. An increase of $19,615, or 3.26%.

16

COMMUNITYCORP AND SUBSIDIARY

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

NONINTEREST INCOME AND EXPENSE - (continued)

Income Taxes. Our income tax expense for 2009 was $168,305, a decrease of $531,204 from the 2008 expense of $699,509. The effective tax rates for the years ended December 31, 2009 and 2008 were 35.90% and 31.92%, respectively. The increase in the effective rates is due mainly to the establishment of a valuation allowance for our deferred tax asset relating to the capital loss carry forward.

AVERAGE-ASSETS

Loans. Loans are the largest category of average-assets and typically provide higher yields than other types of average-assets. Associated with the higher loan yields are the inherent credit and liquidity risks which management attempts to control and counterbalance. Loans averaged $115,658,689 in 2009 compared to $112,596,835 in 2008, an increase of $3,061,854, or 2.72%. Total loans were $116,458,480 and $113,704,520 at December 31, 2009 and 2008, respectively. Fixed rates loans comprised 97% and 98% of our loan portfolio at December 31, 2009 and 2008, respectively.

Our ratio of loans to deposits was 79.39% at December 31, 2009 as compared to 78.03% at December 31, 2009. 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. We have concentrated on maintaining quality in the loan portfolio while continuing to increase the deposit base.

We extend credit primarily to consumers and small businesses in Walterboro, Ravenel and Ridgeland, South Carolina, and to customers in surrounding areas. Our 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 2009. We believe 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, due to the current depressed economy, is currently weak in our market area.

We consider a loan to be impaired when, based upon current information and events. We believe it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Our 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 we are 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, the loan is removed from the portfolio through a charge-off to the allowance for loan losses.

17

COMMUNITYCORP AND SUBSIDIARY

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

AVERAGE-ASSETS (continued)

The following table sets forth the composition of the loan portfolio by category at December 31, 2009 and 2008 and highlights our general emphasis on commercial and mortgage lending.

Loan Portfolio Composition

	2009				2008
	Amount		Percent   of Total		Amount		Percent   of Total
Commercial and industrial	$71,750,588		61.60	%	$68,540,891		60.28	%
Real estate
Construction	3,256,857		2.80		4,564,879		4.01
Mortgage	31,601,663		27.14		31,204,675		27.44
Consumer and other loans	9,849,372		8.46		9,394,075		8.26
Total loans	116,458,480		100.00	%	113,704,520		100.00	%
Allowance for loan losses	(2,053,340	)			(1,981,637	)
Net loans	$114,405,140				$111,722,883

Commercial and industrial loans increased $3,209,697, or 4.68% from $68,540,891 at December 31, 2008. Real estate loans, including construction and mortgage loans, decreased $911,034, or 2.55% to $34,858,520 at December 31, 2009. Consumer and all other loans decreased $455,297, or 4.86% to $9,849,372 at December 31, 2009.

Maturities and Sensitivity of Loans to Changes in Interest Rates

The following table summarizes the loan maturity distribution, by type, at December 31, 2009 and related interest rate characteristics:

	One Year or Less		Over One Year Through Five Years		Over Five Years		Total
Real estate - construction	$	2,863,496	$	393,361	$	-	$	3,256,857
Real estate – mortgage		6,506,170		24,410,010		685,483		31,601,663
Commercial and industrial		31,692,162		39,549,512		508,913		71,750,587
Consumer and other		3,102,701		6,674,013		72,659		9,849,373
	$	44,164,529	$	71,026,896	$	1,267,055	$	116,458,480
Loans maturing after one year with:
Fixed interest rates							$	69,153,452
Floating interest rates								3,140,499
							$	72,293,951

18

COMMUNITYCORP AND SUBSIDIARY

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

AVERAGE-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.

Federal Funds Sold. Federal funds sold, averaged $4,473,449 in 2009, compared to $8,954,126 in 2008. At December 31, 2009 and 2008, federal funds sold were $2,030,000 and $13,146,000, respectively. These funds are a source of our liquidity and are generally invested in an earning capacity on an overnight basis.

Investment Securities. The investment securities portfolio is a significant component of the Company’s total average-assets. Total investment securities, stated at carrying amount, averaged $27,322,011 in 2009, compared to $33,916,234 in 2008. At December 31, 2009, the carrying value of the securities portfolio was $25,487,298. Securities designated as available-for-sale totaled $24,620,177 and were recorded at estimated fair value. Securities designated as held-to-maturity totaled $564,821 and were recorded at amortized cost. Securities designated as nonmarketable equity securities totaled $302,300 at December 31, 2009. Our investment objectives include maintaining and investing in a portfolio of high quality and highly liquid investments with competitive returns. Based on these objectives, our investments primarily consist of obligations of government-sponsored enterprises and obligations of states and local governments.

Investment Portfolio. The following tables summarize the carrying value of investment securities at December 31, 2009 and 2008 and the weighted average yields of those securities at December 31, 2009.

Investment Securities Portfolio Composition

	2009		2008
Available-for-Sale (1)
Government-sponsored enterprises	$	4,947,534	$	11,554,710
Obligations of states and local governments		12,653,121		8,330,464
Other		200,000		446,356
		17,800,655		20,331,530
Mortgage-backed securities		6,819,521		7,483,745
Total available-for-sale securities	$	24,620,177	$	27,815,275
Held-to-Maturity (1)
Obligations of states and local governments	$	564,821	$	1,319,596

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

19

COMMUNITYCORP AND SUBSIDIARY

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

AVERAGE-ASSETS (continued)

Investment Securities Maturity Distribution and Yields

Available-for-Sale

December 31, 2009	Within One Year				After One But Within Five Years				After Five But Within Ten Years				Over Ten Years
(Dollars in thousands)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Government-sponsored enterprises (1)	$	-	-	%	$	2,675	3.78	%	$	1,788	3.45	%	$	485	4.25	%
Obligations of states and local governments		231	4.30	%		1,537	3.73	%		7,506	3.89	%		3,379	4.18	%
Other		-	-	%		-	-	%		200	6.25	%		-	-	%
Total available-for-sale securities	$	231	4.30	%	$	4,212	3.76	%	$	9,494	3.86	%	$	3,864	4.19	%
Held-to-Maturity
December 31, 2009	Within One Year				After One But Within Five Years				After Five But Within Ten Years				Over Ten Years
(Dollars in thousands)	Amount		Yield (1)		Amount		Yield (1)		Amount		Yield (1)		Amount		Yield (1)
Obligations of states and local governments	$	265	4.00	%	$	100	4.40	%	$	200	4.00	%	$	-	-

(1) Excludes mortgage-backed securities totaling $6,819,521 with a yield of 4.55%.

DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES

Deposits.  Deposits account for practically all of our interest bearing liabilities. Total average deposits increased from $144,320,433 in 2008 to $145,803,821 in 2009. This represents an increase of $1,483,388, or 1.03% from the 2008 amount.

The following table summarizes our average deposits for the years ended December 31, 2009 and 2008.

	2009				2008
	Amount		Percent of Deposits		Amount		Percent of Deposits
Noninterest-bearing demand	$	14,225,344	9.75	%	$	15,439,997	10.70	%
Interest-bearing demand		21,941,597	15.05			21,810,723	15.11
Savings accounts		17,830,612	12.23			15,434,514	10.69
Other time deposits		91,806,268	62.97			91,635,199	63.50
Total deposits	$	145,803,821	100.00	%	$	144,320,433	100.00	%

Our actual deposits at December 31, 2009 and 2008 were $146,687,996 and $145,713,985, respectively, representing an increase of $974,011, or 0.67%.

Core deposits, which exclude certificates of deposit of $100,000 or more, provide a relatively stable funding source for our loan portfolio and other earning-assets. Our core deposits were $95,566,620 and $91,719,814 at December 31, 2009 and 2008, respectively. A stable base of deposits is expected to be our primary source of funding to meet both its short-term and long-term liquidity needs in the future.

20

COMMUNITYCORP AND SUBSIDIARY

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES (continued)

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

The maturity distribution of our time deposits of $100,000 or more at December 31, 2009, is shown in the following table.

	Within Three Months		After Three Through Six Months		After Six Through Twelve Months		After Twelve Months		Total
Certificates of deposit   of $100,000 or more	$	11,755,483	$	17,543,665	$	17,350,542	$	4,471,686	$	51,121,376

Large balance certificates 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. Certificates of deposits that were obtained through brokers were $0 and $3,305,000 at December 31, 2009 and 2008, respectively.

Short-term Borrowings. We did not have any short-term borrowings at December 31, 2009 or 2008. Since 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 for the year 2008 is summarized as follows:

	2008
Average balance during the year	$	308,449
Average interest rate during the year		1.81%
Maximum month-end balance during the year	$	515,000
End of period average interest rate		0.25%

CAPITAL

Total shareholders’ equity increased by $52,235 from $17,693,418 at December 31, 2008 to $17,745,653 at December 31, 2009. The increase is attributable to the sale of treasury stock of $48,400, the increase in other comprehensive income of $210,371 and net income of $300,474. These increases were offset by the purchase of treasury stock during the period of $254,320 and the payment of dividends of $252,690.

21

COMMUNITYCORP AND SUBSIDIARY

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, 2009, management believes that the Bank is well capitalized under the regulatory framework for prompt-corrective action.

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

	Actual		For Capital Adequacy Purposes		To Be Well- Capitalized Under Prompt Corrective Action Provisions
			Minimum		Minimum
	Amount	Ratio	Amount	Ratio	Amount	Ratio
December 31, 2009
Total capital (to risk-weighted assets)	$18,956,794	14.92%	$ 10,165,600	8.00%	$ 12,707,000	10.00%
Tier 1 capital (to risk-weighted assets)	17,368,419	13.67	5,082,800	4.00	7,624,200	6.00
Tier 1 capital (to average assets)	17,368,419	10.48	6,627,400	4.00	8,284,250	5.00
December 31, 2008
Total capital (to risk-weighted assets)	$19,125,823	15.31%	$   9,995,920	8.00%	$12,494,900	10.00%
Tier 1 capital (to risk-weighted assets)	17,563,961	14.06	4,997,960	4.00	7,496,940	6.00
Tier 1 capital (to average assets)	17,563,961	10.84	6,481,960	4.00	8,102,450	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 $500,000,000 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

COMMUNITYCORP AND SUBSIDIARY

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 our market area. Core deposits (total deposits, less time deposits of $100,000 and over) provide a relatively stable funding base. At December 31, 2009 and 2008 core deposits represented 62.15% and 62.95%, respectively of total deposits.

The Bank had available at the end of 2009 unused short-term lines of credit to purchase up to $7,000,000 of federal funds from unrelated correspondent institutions. The Bank also has a credit availability agreement with the Federal Home Loan Bank totaling 15 percent of the Bank’s qualifying assets as of any quarter end. As of December 31, 2009, the available credit totaled $24,809,000 and there were no borrowings outstanding. Any borrowings from the FHLB will be secured by a blanket lien on all of the Bank’s 1-4 family residential first lien mortgage loans and or investment securities.

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

Our 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 us. 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 us would be prohibited if such payment would cause the Bank’s capital to be reduced below applicable minimum regulatory requirements. At December 31, 2009, the Bank’s available undivided profits totaled $14,136,711. Under Federal Reserve Board regulations, the amounts of loans or advances from the Bank to us are also restricted.

We believe that our overall liquidity sources for us and the Bank are adequate to meet our operating needs in the ordinary course of business.

IMPACT OF OFF-BALANCE-SHEET INSTRUMENTS

We are 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. We believe that through various sources of liquidity, they have the necessary resources to meet obligations arising from these financial instruments.

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

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

23

COMMUNITYCORP AND SUBSIDIARY

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

IMPACT OF OFF-BALANCE-SHEET INSTRUMENTS (continued)

Through its operations, the Bank has made contractual commitments to extend credit in the ordinary course of its business activities. These commitments are legally binding agreements to lend money to the Bank’s customers at predetermined interest rates for a specified period of time. At December 31, 2009, the Bank had issued commitments to extend credit of $7,064,287 and standby letters of credit of $825,000 through various types of commercial lending arrangements. Approximately $141,000 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, 2009.

	Within One Month		After One Through Three Months		After Three Through Twelve Months		Within One Year		Greater Than One Year		Total
Unused commitments to extend credit	$	208,608	$	1,708,636	$	3,413,180	$	5,330,424	$	1,733,863	$	7,064,287
Standby letters of credit		25,000		242,000		530,000		797,000		28,000		825,000
Totals	$	233,608	$	1,950,636	$	3,943,180	$	6,127,424	$	1,761,863	$	7,889,287

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

IMPACT OF INFLATION

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

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

IMPACT OF RECENT ACCOUNTING CHANGES

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

24

MANAGEMENT’S ANNUAL REPORT ON INTERNAL

CONTROL OVER FINANCIAL REPORTING

Our Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition, transactions are executed in accordance with appropriate management authorization and accounting records are reliable for the preparation of financial statements in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. Management based this assessment on criteria for effective internal control over financial reporting described in “Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.” Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of the Board of Directors. Based on this assessment, management believes that Communitycorp maintained effective internal control over financial reporting as of December 31, 2009.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report

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 Communitycorp and subsidiary as of December 31, 2009 and 2008 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 audit 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 financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall 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, 2009 and 2008 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.

We were not engaged to examine management’s assertion about the effectiveness of Communitycorp and subsidiary’s internal control over financial reporting as of December 31, 2009, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, and, accordingly, we do not express an opinion thereon.

/s/ Elliott Davis, LLC

Charleston, South Carolina

March 26, 2010

26

COMMUNITYCORP AND SUBSIDIARY

Consolidated Balance Sheets

	December 31,
	2009			2008
Assets:
Cash and cash equivalents:
Cash and due from banks	$	15,664,266		$	3,468,965
Federal funds sold		2,030,000			13,146,000
Total cash and cash equivalents		17,694,266			16,614,965
Time deposits with other banks		1,500,000			1,500,000
Investment securities:
Securities available-for-sale		24,620,177			27,815,275
Securities held-to-maturity (estimated fair value of $572,115 in 2009 and $1,335,226 in 2008)		564,821			1,319,596
Nonmarketable equity securities		302,300			508,435
Total investment securities		25,487,298			29,643,306
Loans receivable		116,458,480			113,704,520
Less allowance for loan losses		(2,053,340	)		(1,981,637	)
Loans receivable, net		114,405,140			111,722,883
Premises and equipment, net		3,089,929			3,028,604
Accrued interest receivable		978,500			1,125,714
Other real estate owned		340,000			75,000
Other assets		1,897,922			874,815
Total assets	$	165,393,055		$	164,585,287
Liabilities:
Deposits:
Noninterest-bearing transaction accounts	$	14,163,321		$	15,652,393
Interest-bearing transaction accounts		23,350,646			21,065,476
Money market savings accounts		3,234,160			3,251,083
Savings		13,411,141			13,191,320
Time deposits $100,000 and over		51,121,376			53,994,171
Other time deposits		41,407,352			38,559,542
Total deposits		146,687,996			145,713,985
Accrued interest payable		701,979			953,278
Other liabilities		257,427			224,606
Total liabilities		147,647,402			146,891,869
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		1,500,000			1,500,000
Capital surplus		1,737,924			1,728,328
Retained earnings		18,440,398			18,392,614
Accumulated other comprehensive income		286,072			75,701
Treasury stock (65,697 shares in 2009 and 63,123 shares in 2008)		(4,218,741	)		(4,003,225	)
Total shareholders’ equity		17,745,653			17,693,418
Total liabilities and shareholders’ equity	$	165,393,055		$	164,585,287

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

27

COMMUNITYCORP AND SUBSIDIARY

Consolidated Statements of Income

	Years Ended December 31,
	2009			2008
Interest income:
Loans, including fees	$	7,668,804		$	8,322,422
Investment securities:
Taxable		532,772			1,069,573
Tax-exempt		462,881			353,366
Nonmarketable equity securities		33,822			37,783
Federal funds sold		7,918			166,567
Time deposits with other banks		46,650			8,261
Total interest income		8,752,847			9,957,972
Interest expense:
Deposits		3,290,068			4,206,029
Short-term borrowings		7			6,846
Total interest expense		3,290,075			4,212,875
Net interest income		5,462,772			5,745,097
Provision for loan losses		1,083,000			400,000
Net interest income after provision for loan losses		4,379,772			5,345,097
Noninterest income:
Service charges on deposit accounts		485,599			540,457
Commissions on credit life insurance		8,477			5,121
Other charges, fees, and commissions		99,809			107,203
Impairment losses on securities available-for-sale		(250,000	)		-
Impairment losses on nonmarketable equity securities		(211,935	)		-
Loss on sale of other real estate owned		(40,000	)		-
Other		24,920			38,006
Total noninterest income		116,870			690,787
Noninterest expenses:
Salaries and employee benefits		1,910,476			2,011,830
Net occupancy and equipment expense		621,580			601,965
Other operating		1,495,807			1,230,919
Total noninterest expenses		4,027,863			3,844,714
Income before income taxes		468,779			2,191,170
Income tax expense		168,305			699,509
Net income	$	300,474		$	1,491,661
Earnings per share:
Weighted-average common shares outstanding		234,849			239,634
Basic	$	1.28		$	6.22

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

28

COMMUNITYCORP AND SUBSIDIARY

Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income

For the years ended December 31, 2009 and 2008

	Common stock			Capital   surplus		Retained   earnings			Accumulated other compre- hensive income (loss)		Treasury   stock, at cost			Total shareholders’ equity
	Shares	Amount
Balance, December 31, 2007	300,000	$	1,500,000	$	1,723,196	$	17,153,490		$	70,928	$	(3,711,213	)	$	16,736,401
Net income							1,491,661								1,491,661
Other comprehensive income, net of tax expense of $5,723										4,773					4,773
Comprehensive income															1,496,434
Cash dividends paid ($1.05 per share)							(252,537	)							(252,537	)
Purchase of treasury stock												(310,880	)		(310,880	)
Sale of treasury stock					5,132							18,868			24,000
Balance, December 31, 2008	300,000		1,500,000		1,728,328		18,392,614			75,701		(4,003,225	)		17,693,418
Net income							300,474								300,474
Other comprehensive income, net of tax expense of $110,806										210,371					210,371
Comprehensive income															510,845
Cash dividends paid ($1.07 per share)							(252,690	)							(252,690	)
Purchase of treasury stock												(254,320	)		(254,320	)
Sale of treasury stock					9,596							38,804			48,400
Balance, December 31, 2009	300,000	$	1,500,000	$	1,737,924	$	18,440,398		$	286,072	$	(4,218,741	)	$	17,745,653

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

29

COMMUNITYCORP AND SUBSIDIARY

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2009			2008
Cash flows from operating activities:
Net income	$	300,474		$	1,491,661
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,083,000			400,000
Depreciation expense		252,982			229,227
Premium amortization less discount accretion on investment securities		86,140			32,014
Other than temporary impairment of securities available-for-sale		250,000			-
Other than temporary impairment of nonmarketable equity securities		211,935			-
Loss on sale of other real estate owned		40,000			-
Deferred income tax expense		22,099			56,838
Amortization of loan fees and costs		(493	)		(30,121	)
Decrease in accrued interest receivable		147,214			172,232
Decrease in accrued interest payable		(251,299	)		(814,392	)
Increase in other assets		(1,045,206	)		(205,519	)
Increase (decrease) in other liabilities		(77,985	)		31,429
Net cash provided by operating activities		1,018,861			1,363,369
Cash flows from investing activities:
Proceeds from maturities of securities available-for-sale		16,763,990			26,279,054
Purchases of securities available-for-sale		(13,585,080	)		(19,530,889	)
Proceeds from maturities of securities held-to-maturity		756,000			500,000
Purchases of nonmarketable equity securities		(5,800	)		(161,178	)
Increase in time deposits with other banks		-			(1,500,000	)
Proceeds from sale of other real estate owned		185,000			-
Net (increase) decrease in loans to customers		(4,254,764	)		500,297
Purchases of premises and equipment		(314,307	)		(268,712	)
Net cash provided by (used) for investing activities		(454,961	)		5,818,572
Cash flows from financing activities:
Net increase in demand deposits, interest-bearing transaction accounts and savings accounts		998,996			1,587,195
Net increase (decrease) in time deposits		(24,985	)		4,532,478
Net decrease in short-term borrowings		-			(3,068,000	)
Cash dividends paid		(252,690	)		(252,537	)
Purchase of treasury stock		(254,320	)		(310,880	)
Sale of treasury stock		48,400			24,000
Net cash provided by financing activities		515,401			2,512,256
Net increase in cash and cash equivalents		1,079,301			9,694,197
Cash and cash equivalents, beginning of year		16,614,965			6,920,768
Cash and cash equivalents, end of year	$	17,694,266		$	16,614,965
Cash paid during the year for:
Income taxes	$	357,200		$	765,700
Interest		3,541,374			5,027,267
Supplemental non cash activities
Changes in unrealized gains on securities available-for-sale	$	210,371		$	4,773
Foreclosures on loans		490,000			75,000

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

30

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for losses on loans, including valuation allowances for impaired loans, and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the value of 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, 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. 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 may change in the near term.

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

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

Nonmarketable Equity Securities – At December 31, 2009 and 2008, non-marketable equity securities consist of the following:

	December 31,
	2009		2008
Federal Home Loan Bank	$	296,300	$	290,500
Silverton Financial Services, Inc.		-		211,935
Other Community Banks		6,000		6,000
Total	$	302,300	$	508,435

31

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Nonmarketable Equity Securities – continued

The stocks are carried at cost because they have no quoted market value and no ready market exists; however, redemption of this stock has historically been at par value. 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.

Impairment of Investment Securities – Declines in the fair value of individual securities classified as either held-to-maturity or available-for-sale below their amortized cost that are deemen to be other-than-temorary result in write-downs included in operations as realized losses. In estimating other-than temporary impairment, manage considers (1) the length of time and the extend to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for an anticipated recovery in fair value.

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 allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charger to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific, general, and unallocated components. The specific component relates to loans that are classified as either doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.

32

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Allowance for Loan Losses (the “Allowance”) –continued

Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are the subject of a restructuring agreement.

All cash receipts on impaired loans are applied to principal until such time as the principal is brought current. After principal has been satisfied, future cash receipts are applied to interest income, to the extent that any interest has been foregone.

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. At of December 31, 2009 and 2008 the Bank did not have any loans held for sale. Recognition of deferred fees and costs is discontinued on nonaccrual loans until they return to accrual status or are charged-off.

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.

The Company makes loans to individuals and small businesses for various personal and commercial purposes principally in Colleton, Charleston, and Jasper counties South Carolina. The Company’s loan portfolio is not concentrated in loans to any single borrower or a relatively small number of borrowers. Additionally, management is not aware of any concentrations of loans to classes of borrowers or industries that would be similarly affected by economic conditions.

In addition to monitoring potential concentrations of loans to particular borrowers or groups of borrowers, industries and geographic regions, management monitors exposure to credit risk from concentrations of lending products and practices such as loans that subject borrowers to substantial payment increases (e.g. principal deferral periods, loans with initial interest-only periods, etc), and loans with high loan-to-value ratios. Management has determined that there is no concentration of credit risk associated with its lending policies or practices. Additionally, there are industry practices that could subject the Company to increased credit risk should economic conditions change over the course of a loan’s life. For example, the Company makes variable rate loans and fixed rate principal-amortizing loans with maturities prior to the loan being fully paid (i.e. balloon payment loans). These loans are underwritten and monitored to manage the associated risks. Therefore, management believes that these particular practices do not subject the Company to unusual credit risk.

The Company’s investment portfolio consists principally of obligations of the United States, its agencies or its corporations and general obligation municipal securities. In the opinion of management, there is no concentration of credit risk in its investment portfolio. The Company places its deposits and correspondent accounts with and sells its federal funds to high quality institutions. Management believes credit risk associated with correspondent accounts is not significant.

33

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

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

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

FairValue Measurements - The Company follows the guidance for Financial Instruments and Fair Value Measurements and Disclosures. This guidance permits entities to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This guidance clarifies that fair value is an exit price, representing the amount that would be received to sell and asset or paid to transfer a liability in an orderly transaction between market participants. Under this guidance, fair value measurements are not adjusted for transaction costs. This guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

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

Advertising - Advertising, promotional, and other business development costs generally are expensed as incurred. External costs incurred in producing media advertising are expensed the first time the advertising takes place. External costs relating to direct mailing costs are expensed in the period in which the direct mailings are sent. Expenses charged for advertising were $39,668 and $45,834 at December 31, 2009 and 2008, respectively.

Income Taxes - Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. In addition, deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We recognize interest and penalties related to income tax matters in income tax expense.

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 $87,894 and $72,572 in 2009 and 2008, 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.

34

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Retirement and Deferred Compensation Plans - (continued)

Additionally, 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. The total amount deferred and unpaid under this plan was $425,456 and $385,238 at December 31, 2009 and 2008, respectively. Expenses charged to earnings for the salary deferral plan were $29,000 and $30,295 in 2009 and 2008, 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.

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,
	2009			2008
Net unrealized gains on available-for-sale securities arising during the period	$	321,177		$	10,496
Reclassification adjustment for loss realized in net income		–			–
Net unrealized gains on securities		321,177			10,496
Tax effect		(110,806	)		(5,723	)
Net-of-tax amount	$	210,371		$	4,773

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 standby 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 June 2009, the Financial Accounting Standards Board (“FASB”) issued guidance which restructured generally accepted accounting principles (“GAAP”) and simplified access to all authoritative literature by providing a single source of authoritave nongovernmental GAAP. The guidance is presented in a topically organized structure referred to as the FASB Accounting Standards Codification (“ASC”). The new structure is effective for interim or annual periods ending after September 15, 2009. All existing accounting standards have been superseded and all other accounting literature not included is considered nonauthoritative.

The FASB issued new accounting guidance on accounting for transfers of financial assets in June 2009. The guidance limits the circumstances in which a financial asset should be derecognized when the transferor has not

35

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Recent Accounting Pronouncements – continued - transferred the entire financial asset by taking into consideration the transferor’s continuing involvement. The standard requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. The concept of a qualifying special-purpose entity is no longer applicable. The standard is effective for the first annual reporting period that begins after November 15, 2009, for interim periods within the first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. The Company does not expect the guidance to have any impact on the Company’s financial statements. The ASC was amended in December, 2009, to include this guidance.

Guidance was issued in June 2009 requiring a company to analyze whether its interest in a variable interest entity (“VIE”) gives it a controlling financial interest that should be included in consolidated financial statements. A company must assess whether it has an implicit financial responsibility to ensure that the VIE operates as designed when determining whether it has the power to direct the activities of the VIE that significantly impact its economic performance, making it the primary beneficiary. Ongoing reassessments of whether a company is the primary beneficiary are also required by the standard. This guidance amends the criteria to qualify as a primary beneficiary as well as how to determine the existence of a VIE. The standard also eliminates certain exceptions that were previously available. This guidance is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. Comparative disclosures will be required for periods after the effective date. The Company does not expect the guidance to have any impact on the Company’s financial position. An update was issued in December, 2009, to include this guidance in the ASC.

An update was issued in October, 2009 to provide guidance requiring companies to allocate revenue in multi-element arrangements. Under this guidance, products or services (deliverables) must be accounted for separately rather than as a combined unit utilizing a selling price hierarchy to determine the selling price of a deliverable. The selling price is based on vendor-specific evidence, third-party evidence or estimated selling price. The amendments in the update are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 with early adoption permitted. The Company does not expect the update to have an impact on its financial statements.

In October, 2009, updated guidance was issued to provide for accounting and reporting for own-share lending arrangements issued in contemplation of a convertible debt issuance. At the date of issuance, a share-lending arrangement entered into on an entity’s own shares should be measured at fair value in accordance with prior guidance and recognized as an issuance cost, with an offset to additional paid-in capital. Loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs. The amendment also requires several disclosures including a description and the terms of the arrangement and the reason for entering into the arrangement. The effective dates of the amendment are dependent upon the date the share-lending arrangement was entered into and include retrospective application for arrangements outstanding as of the beginning of fiscal years beginning on or after December 15, 2009. The Company has no plans to issue convertible debt and, therefore, does not expect the update to have an impact on its financial statements.

In January, 2010, guidance was issued to alleviate diversity in the accounting for distributions to shareholders that allow the shareholder to elect to receive their entire distribution in cash or shares but with a limit on the aggregate amount of cash to be paid. The amendment states that the stock portion of a distribution to shareholders that allows them to elect to receive cash or shares with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance. The amendment is effective for interim and annual periods ending on or after December 15, 2009 and had no impact on the Company’s financial statements.

Also in January, 2010, an amendment was issued to clarify the scope of subsidiaries for consolidation purposes. The amendment provides that the decrease in ownership guidance should apply to (1) a subsidiary or group of assets that is a business or nonprofit activity, (2) a subsidiary that is a business or nonprofit activity that is transferred to an equity method investee or joint venture, and (3) an exchange of a group of assets that constitutes a business or nonprofit activity for a noncontrolling interest in an entity. The guidance does not apply to a decrease in ownership in transactions related to sales of in substance real estate or conveyances of oil and gas mineral rights. The update is

36

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Recent Accounting Pronouncements – continued -effective for the interim or annual reporting periods ending on or after December 15, 2009 and had no impact on the Company’s financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Reclassifications - Certain captions and amounts in the consolidated financial statements of 2008 were reclassified to conform with the 2009 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, 2009 and 2008 were $648,000 and $756,000, respectively. These requirements were satisfied by vault cash.

NOTE 3 - INVESTMENT SECURITIES

Securities Available-for-Sale

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

	Amortized Cost		Gross Unrealized				Fair Value
			Gains		Losses
December 31, 2009
Government-sponsored enterprises	$	11,550,964	$	244,051	$	27,959	$	11,767,056
Obligations of state and local governments		12,432,461		247,181		26,521		12,653,121
Other		200,000		-		-		200,000
Total	$	24,183,425	$	491,232	$	54,480	$	24,620,177
December 31, 2008
Government-sponsored enterprises	$	18,786,403	$	260,935	$	8,883	$	19,038,455
Obligations of state and local governments		8,463,297		50,340		183,173		8,330,464
Other		450,000		-		3,644		446,356
Total	$	27,699,700	$	311,275	$	195,700	$	27,815,275
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, 2009 and December 31, 2008.
	December 31, 2009				December 31, 2008
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Less Than 12 Months
Government-sponsored enterprises	$	1,874,183	$	27,959	$	505,611	$	8,883
Obligations of state and local governments		887,972		17,701		3,742,860		148,416
Other		-		-		196,356		3,644
		2,762,155		45,660		4,444,827		160,943
12 Months or More
Obligations of state and local governments		191,180		8,820		205,243		34,757
Obligations of state and local governments	$	2,953,335	$	54,480	$	4,650,070	$	195,700

37

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 3 - INVESTMENT SECURITIES - continued

There were a total ten available-for-sale securities that were in a loss position at December 31, 2009. Of these securities, one was in a loss position of twelve months or more, which consisted of an obligation of a state and local government. 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 does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities before recovery of their amortized costs. Management evaluates investment securities in a loss position based on length of impairment, severity of impairment and other factors. Based on this evaluation, management determined that impairment related to certain securities were not temporary in nature. Other then temporary impairment losses were $461,935 during 2009.

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, 2009
					Amortized Cost		Fair Value
Due in one year or less					$	230,069	$	230,691
Due after one year but within five years						4,145,437		4,212,194
Due after five years but within ten years						9,356,260		9,494,132
Due after ten years						3,864,556		3,863,639
						17,596,322		17,800,656
Mortgage-backed securities						6,587,103		6,819,521
Total					$	24,183,425	$	24,620,177
Securities Held-To-Maturity
The amortized cost and estimated fair values of securities held-to-maturity were:
	Amortized Cost		Gross Unrealized				Fair Value
			Gains		Losses
December 31, 2009 -
Obligations of state and local governments	$	564,821	$	7,294	$	–	$	572,115
December 31, 2008 -
Obligations of state and local governments	$	1,319,596	$	15,630	$	–	$	1,335,226
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, 2009
					Amortized Cost		Fair Value
Due in one year or less					$	264,973	$	265,623
Due after one year but within five years						99,848		100,931
Due after five years but within ten years						200,000		205,561
Total					$	564,821	$	572,115

At December 31, 2009 and 2008, investment securities with an amortized cost of $17,599,545 and $19,589,952, respectively, and a fair value of $17,917,819 and $19,682,825, 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, 2009 and 2008.

38

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 4 - LOANS RECEIVABLE

Loans consisted of the following:

	December 31,
	2009			2008
Real estate – construction	$	3,256,857		$	4,564,879
Real estate – mortgage		31,601,663			31,204,675
Commercial and industrial		71,750,588			68,540,891
Consumer and other		9,849,372			9,394,075
Total gross loans	$	116,458,480		$	113,704,520
The loan portfolio consisted of loans having :
Variable rates loans	$	3,802,991		$	1,817,200
Fixed rates		112,655,489			111,887,320
Total gross loans	$	116,458,480		$	113,704,520
Included in the gross loans above are:
Nonaccrual loans	$	2,710,494		$	1,975,835
Loans past due 90 days still accruing interest		2,480			2,951
The Company identifies impaired loans through its 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 it is more likely than not that all outstanding principal and interest are expected to be collected. Loans are not considered impaired if a minimal delay occurs and all amounts due including accrued interest at the contractual interest rate for the period of delay are expected to be collected.
The following tables summarize information on impaired loans at and for the years ended December 31, 2009 and 2008.
	2009			2008
Impaired loans with specific allowance	$	2,426,363		$	1,836,987
Impaired loans with no specific allowance		6,331,909			2,875,051
Total impaired loans – year end	$	8,758,272		$	4,712,038
Related specific allowance – year end	$	760,103		$	275,548
Average recorded investment in impaired loans – year end		6,475,817			3,940,498
Impaired loans included in nonaccrual		2,710,494			1,975,835
Interest income on impaired loans other than nonaccrual loans is recognized on an accrual basis. Interest income on nonaccrual loans is recognized only as collected. During 2009 and 2008, interest income recognized on nonaccrual loans was $18,687 and $10,000, respectively. If the nonaccrual loans had been accruing interest at their original contracted rates, related income would have been $167,968 and $89,000 for 2009 and 2008, respectively.
Transactions in the allowance for loan losses are summarized below:
	Years ended December 31,
	2009			2008
Balance, beginning of year	$	1,981,637		$	1,929,319
Provision charged to operations		1,083,000			400,000
Recoveries on loans previously charged-off		41,766			15,449
Loans charged-off		(1,053,063	)		(363,131	)
Balance, end of year	$	2,053,340		$	1,981,637

39

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 4 – LOANS RECEIVABLE - continued

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

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

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

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

	December 31,
	2009		2008
Commitments to extend credit	$	7,064,287	$	10,580,736
Standby letters of credit		825,000		1,112,932

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, 2009, the Company was not committed to lend additional funds to borrowers having loans in nonaccrual status.

NOTE 5 - PREMISES AND EQUIPMENT

Premises and equipment consisted of the following:

	December 31,
	2009			2008
Land	$	710,605		$	710,605
Building and land improvements		2,581,459			2,568,105
Furniture and equipment		2,642,455			2,345,656
Total		5,934,519			5,624,366
Less, accumulated depreciation		(2,844,590	)		(2,595,762	)
Premises and equipment, net	$	3,089,929		$	3,028,604

Depreciation expense totaled $252,982 and $229,227 in 2009 and 2008, respectively.

40

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 6 - DEPOSITS

At December 31, 2009, the scheduled maturities of time deposits were as follows:

Maturing in	Amount
2010	$	84,563,791
2011		7,150,313
2012		604,254
2013		8,000
2014		178,370
After five years		24,000
Total	$	92,528,728

Included in total time deposits at December 31, 2009 and 2008 were brokered time deposits of $0 and $3,305,000, respectively.

NOTE 7 - RELATED PARTY TRANSACTIONS

Certain parties (principally certain directors and officers of the Company, their immediate families and business interests) were loan customers of, and had other transactions in the normal course of business with the Company. Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than normal risk of collectibility. The aggregate dollar amount of loans to related parties was $4,530,648 and $4,810,058 at December 31, 2009 and 2008, respectively. During 2009 and 2008, $608,274 and $1,233,697 of new loans were made to related parties, respectively, and repayments totaled $887,684 and $1,592,949, respectively.

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 during 2009 and 2008 was $1,225 and $3,019, respectively.

NOTE 8 - SHORT-TERM BORROWINGS

At December 31, 2009 and 2008, the Company did not have any securities sold under agreements to repurchase. During 2009, there were no transactions relating to securities sold under agreements to repurchase. Information concerning these securities for 2008 is summarized as follows:

Year ended December 31, 2008	2008
Average balance during the year	$	308,449
Average interest rate during the year		1.81%
Maximum month-end balance during the year	$	515,000
End of period weighted average interest rate		-

NOTE 9 - UNUSED LINES OF CREDIT

The Bank had available at the end of 2009 unused short-term lines of credit to purchase up to $7,000,000 of federal funds from unrelated correspondent institutions. The Bank also has a credit availability agreement with the Federal Home Loan Bank totaling 15 percent of the Bank’s qualifying assets as of any quarter end. As of December 31, 2009, the available credit totaled $24,809,000 and there were no borrowings outstanding. Any borrowings from the FHLB will be secured by a blanket lien on all of the Bank’s 1-4 family residential first lien mortgage loans and/or investment securities and the Federal Home Loan Bank stock that has a carrying value of $296,300 as of December 31, 2009.

41

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

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, 2009, 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 and should be disclosed.

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

NOTE 11 - SHAREHOLDERS’ EQUITY

At December 31, 2009 and 2008, the Company had 65,697 and 63,123 shares, respectively held in treasury stock. During 2009 and 2008, the Company purchased 3,179 and 3,886 shares respectively, and sold 605 and 300 shares respectively.

The ability of the Company to pay cash dividends is dependent upon receiving cash in the form of dividends from the Bank. However, certain restrictions exist regarding the ability of the Bank to transfer funds to Communitycorp in the form of cash dividends. Dividends to the Company are payable only from the undivided profits of the Bank. At December 31, 2009, the Bank’s undivided profits were $14,136,711. The Bank is authorized to pay cash dividends up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Commissioner of Banking provided that the Bank received a composite rating of one or two at the last Federal or State regulatory examination. Under Federal Reserve Board regulations, the amounts of loans or advances from the Bank to the parent company are also restricted.

NOTE 12 - OTHER OPERATING EXPENSES

Other operating expenses are summarized as follows:

Years ended December, 31	2009		2008
Stationary, printing, and postage	$	192,730	$	217,832
Federal deposit insurance premiums		336,387		58,455
Professional fees		346,113		287,514
Directors’ fees		69,300		66,500
Telephone expenses		74,832		73,531
ATM surcharges		80,176		63,000
Other		396,269		464,087
Total	$	1,495,807	$	1,230,919

42

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 13 - INCOME TAXES

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

Years ended December, 31	2009		2008
Currently payable:
Federal	$	132,685	$	575,544
State		13,521		67,127
Total current		146,206		642,671
Deferred income tax expense		22,099		56,838
Income tax expense	$	168,305	$	699,509

The components of deferred tax assets and deferred tax liabilities are as follows:

December 31,	2009			2008
Deferred tax assets:
Allowance for loan losses	$	579,046		$	578,024
Deferred compensation		144,655			130,981
Capital loss carryforward		72,058			-
Nonaccrual loan interest income		29,773			26,711
Other		11,773			-
Total deferred tax assets		837,305			735,716
Less, valuation allowance		(70,358	)		-
Net deferred tax assets		766,947			735,716
Deferred tax liabilities:
Securities available for sale		150,679			39,873
Accumulated depreciation		200,272			162,657
Other		51,240			35,525
Total deferred tax liabilities		402,191			238,055
Net deferred tax asset recognized	$	364,756		$	497,661

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. As of December 31, 2009, management has determined that it is more likely than not that the total deferred tax asset will be realized except for the deferred tax asset associated with the capital loss carryforward and, accordingly, has established a valuation allowance only for this item. Net deferred tax assets are included in other assets at December 31, 2009 and 2008.

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	2009			2008
Tax expense at statutory rate	$	159,385		$	744,998
State income tax, net of federal income tax benefit		8,923			44,304
Tax-exempt interest income		(160,377	)		(122,621	)
Disallowed interest expense		20,794			16,802
Increase in valuation allowance		70,358			-
Other, net		69,222			16,026
Total	$	168,305		$	699,509

It is the Company’s policy to recognize interest and penalties associated with uncertain tax positions as components of income taxes. The Company had analyzed the tax positions taken or expected to be taken in its tax returns and concluded that it has no liability related to uncertain tax positions. Their federal and state tax returns are subject to examination for the years 2006, 2007 and 2008.

43

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The three levels of inputs used to measure fair value are as follows:

Level 1	Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2	Valuation is based upon quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.
Level 3	Valuation is generated from model-based techniques that use at least one significant assumption based on unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Assets Measured at Fair Value on a Recurring Basis

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring basis.

Securities Available-for-Sale - Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those securities traded on an active exchange, such as the New York Stock Exchange, as well as U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets, and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds, and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

The table below presents the Company’s assets measured at fair value on a recurring basis as of December 31, 2009, and December 31, 2008, aggregated by the level in the fair value hierarchy within which those measurements fall.

	Total		Level 1	Level 2		Level 3
December 31, 2009
Available for sale securities	$	24,620,177	$        -	$	24,620,177	$	-
December 31, 2008
Available for sale securities	$	27,815,275	$        -	$	27,815,275	$	-

There were no liabilities carried at fair value at December 31, 2009 or December 31, 2008.

44

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS – continued

Assets Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These instruments are not measured at fair value on an ongoing basis, but subject to fair value in certain circumstances, such as when there is evidence of impairment that may require write-downs. The write-downs of the Company’s more significant assets or liabilities, which are measured on a nonrecurring basis are based on the lower of amortized or estimated fair value.

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring basis.

Impaired Loans - The Company is predominantly an asset-based lender with real estate serving as collateral on a substantial majority of loans. Loans that are deemed impaired are primarily valued on a nonrecurring basis at the fair values of the underlying real estate collateral. Such fair values are obtained using independent appraisals, which the Company considers to be Level 2 inputs.

Other Real Estate Owned – Other real estate owned consists of assets acquired in settlement of loans and is carried at the lower of carrying value or fair value on a non-recurring basis. The fair value is dependent primarily upon independent appraisals, which the Company considers Level 2 inputs.

The table below presents the Company’s assets measured at fair value on a nonrecurring basis as of December 31, 2009, and December 31, 2008, aggregated by the level in the fair value hierarchy within which those measurements fall

December 31, 2009	Total		Level 1		Level 2		Level 3
Impaired loans	$	8,758,272	$	-	$	8,758,272		-
Other real estate owned		340,000		-		340,000		-
Total assets at fair value	$	9,098,272	$	-	$	9,098,272	$	-
December 31, 2008
Impaired loans	$	4,712,038	$	-	$	4,712,038	$	-
Other real estate owned		75,000		-		75,000		-
Total assets at fair value	$	4,787,038	$	-	$	4,787,038	$	-

There were no liabilities carried at fair value at December 31, 2009 or December 31, 2008.

Fair Value Disclosures

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. Premise and equipment, accrued interest receivable, other assets, accrued interest payable and other liabilities are not considered financial instruments. The following methods and assumptions were used to estimate the fair value of significant financial instruments:

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

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

45

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS – continued

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.

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

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

	December 31				December 31
	2009				2008
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and due from banks	$	15,664,266	$	15,664,266	$	3,468,965	$	3,468,965
Federal funds sold		2,030,000		2,030,000		13,146,000		13,146,000
Time deposits with other banks		1,500,000		1,500,000		1,500,000		1,500,000
Securities available-for-sale		24,620,177		24,620,177		27,815,275		27,815,275
Securities held-to-maturity		564,821		572,115		1,319,596		1,335,226
Nonmarketable equity securities		302,300		302,300		508,435		508,435
Loans receivable, gross		116,458,480		115,567,742		113,704,520		115,087,126
Financial Liabilities:
Demand deposit, interest-bearing transaction, money market, and savings accounts	$	54,159,268	$	54,159,268		$53,160,272		$53,160,272
Time deposits		92,528,728		92,710,544		92,553,713		93,215,467

NOTE 15 – SUBSEQUENT EVENTS

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Nonrecognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring through the date the financial statements were issued and no subsequent events occurred requiring accrual or disclosure.

46

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 16 - 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.

As of December 31, 2009 and 2008, management believes that the Bank is well capitalized under the regulatory framework for prompt-corrective action.

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

	Actual			For Capital Adequacy Purposes			To Be Well- Capitalized Under Prompt Corrective Action Provisions
				Minimum			Minimum
	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2009
Total capital (to risk-weighted assets)	$	18,956,794	14.92%	$	10,165,600	8.00%	$	12,707,000	10.00%
Tier 1 capital (to risk-weighted assets)		17,368,419	13.67		5,082,800	4.00		7,624,200	6.00
Tier 1 capital (to average assets)		17,368,419	10.48		6,627,400	4.00		8,284,250	5.00
December 31, 2008
Total capital (to risk-weighted assets)	$	19,125,823	15.31%	$	9,995,920	8.00%	$	12,494,900	10.00%
Tier 1 capital (to risk-weighted assets)		17,563,961	14.06		4,997,960	4.00		7,496,940	6.00
Tier 1 capital (to average assets)		17,563,961	10.84		6,481,600	4.00		8,102,450	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 $500,000,000 in consolidated assets.

47

COMMUNITYCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 17 - COMMUNITYCORP (PARENT COMPANY ONLY)

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

Condensed Balance Sheets

	December 31,
	2009			2008
Assets
Cash	$	81,497		$	44,089
Investment in banking subsidiary		17,654,491			17,639,662
Non-marketable equity securities		6,000			6,000
Other assets		3,665			3,667
Total assets	$	17,745,653		$	17,693,418
Shareholders’ equity	$	17,745,653		$	17,693,418
Condensed Statements of Income
	Years ended December 31,
	2009			2008
Income
Dividends from banking subsidiary	$	496,000		$	490,000
Other income		17			39
Total income		496,017			490,039
Expenses		-			145
Income before income taxes and equity in undistributedearnings of banking subsidiary		496,017			489,894
Income tax expense (benefit)		2			(45	)
Equity in undistributed earnings of banking subsidiary		(195,541	)		1,001,722
Net income	$	300,474		$	1,491,661
Condensed Statements of Cash Flows
	Years ended December 31,
	2009			2008
Cash flows from operating activities
Net income	$	300,474		$	1,491,661
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of banking subsidiary		195,541			(1,001,722	)
(Increase) decrease in other assets		3			(47	)
Net cash provided by operating activities		496,018			489,892
Cash flows from financing activities
Cash dividends paid		(252,690	)		(252,537	)
Purchases of treasury stock		(254,320	)		(310,880	)
Sale of treasury stock		48,400			24,000
Net cash used by financing activities		(458,610	)		(539,417	)
Increase (decrease) in cash		37,408			(49,525	)
Cash, beginning of year		44,089			93,614
Cash, ending of year	$	81,497		$	44,089

48

COMMUNITYCORP AND SUBSSIDIARY

BOARD OF DIRECTORS

George W. Cone		J. Barnwell Fishburne
Attorney		Owner, Fishburne & Co
McLeod, Fraser & Cone		Real Estate
Steven Murdaugh		W. Roger Crook
Attorney		Chief Executive Officer
Peters, Murdaugh, Eltzroth &Derrick, PA		and President
		Bank of Walterboro
Harold M. Robertson		Peden B. McLeod
Retired		Chairman of the Board
		Attorney
		McLeod, Fraser & Cone
J. Reaves McLeod		Harry L. Hill
Attorney		Retired
McLeod, Fraser & Cone
	OFFICERS
W. Roger Crook	Cynthia Mills	James M. Bunton Jr.
Chief Executive Officer	Branch Manager	Loan Officer
and President
Gwendolyn P. Bunton	M. Ellison Young	Lawton Huggins
Vice President and Cashier	Vice President	Loan Officer
Lynn H. Murdaugh		Joanne Herndon
Assistant Vice President		Branch Manager
and Administrative Assistant
Bruce Tate		William Fowler
Loan Officer		Loan Officer
Dodd Hulsey		Pan Nelson
Loan Officer		Internal Auditor
	STAFF MEMBERS
Annette Lyons		Joy Koth
Charity Weaver		Sharon Milligan
Danielle Mock		Melanie Todd
Casey Beach		Debra Bowers
Carolyn Brant		Lynn Hiott
Dorothy Brunson		Lindsey Turner
Natalie Powers		Cathy Hutchison
Jennifer Crosby		Pam O’Quinn
Betty Ford		Kelly Strickland
Melissa T. Smyly		Jeanne Raven
Sarah Herndon		Tracy Valentine
Sharon Hillier		Candice Kubik
Carolyn Rahn		Rose Walker
Stephanie Kelly		Jessica Pahl
Kathy Breland		Erin Leming
Stephanie Strickland		Louie Whidden
Melissa McMillan	Melanie Tanner	Brittany Adams

49

COMMUNITYCORP AND SUBSSIDIARY

CORPORATE DATA

ANNUAL MEETING:

The Annual Meeting of Shareholders of Communitycorp will be held at 6 p.m. on Wednesday, April 28, 2010 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 $80.00 during the past two years. There were 549 shareholders of record as of December 31, 2009.

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-K

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-K) 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

COMMUNITYCORP AND SUBSSIDIARY

SERVICES

All Day Banking

American Express Travelers Checks

ATM Service

Bank By Mail

Business Checking

Canceled Checks Returned with Statement

Cashiers Checks

Certificates of Deposit

Christmas Clubs

Collection Items

Commercial Loans

Debit Cards

Direct Deposits

Discount Brokerage Service

Drive-In Service

Individual Retirement Accounts

Interest Checking

Internet Banking

Letters of Credit

Money Market Accounts

Money Orders

Mortgage Loans

Night Depository

Overdraft Protection

Personal Checking

Personal Lines of Credit

Personal Loans

Regular Savings

Safe Deposit Boxes

Senior Checking

Treasury, Tax & Loan Deposits

U.S. Savings Bonds

Visa and Master Card

Wire Transfers

§

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

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

6225 Savannah Highway, Ravenel, S.C. 29470

8058 East Main Street, Ridgeland, SC 29936

Member FDIC

51