Community Capital Corporation

Abbeville Capital Corporation (“Abbeville Capital”) and Community Capital Corporation (“Community Capital”) entered into a merger agreement on October 15, 2003. This agreement calls for a merger of Abbeville Capital and Community Capital, with Community Capital surviving the merger.

You, as shareholders of Abbeville Capital, are being asked to vote upon and approve this merger at a shareholder meeting to be held on February 19, 2004. The approval of the holders of at least two-thirds of the shares of Abbeville Capital common stock outstanding as of January 2, 2004, which is the record date for the Abbeville Capital shareholder meeting, is required to complete the merger. We urge you to read the following proxy statement/prospectus carefully, including the risk factors beginning on page 15, before making your decision about how to vote on the merger.

Under the merger agreement and plan of merger, you will receive one of the following forms of payment in exchange for each of your shares of Abbeville Capital common stock:

Cash will be paid in lieu of any fractional share interest of Community Capital common stock.

The exchange ratio will fluctuate, depending on the market price of Community Capital common stock. The exchange ratio will be 4.6419 shares of Community Capital common stock for each share of Abbeville Capital common stock if the average daily closing trading price per share of Community Capital common stock for the twenty consecutive trading days ending on the third trading day immediately preceding the merger is less than or equal to $13.60. The exchange ratio will be 3.0946 shares of Community Capital common stock for each share of Abbeville Capital common stock if the average daily closing trading price per share of Community Capital common stock for this period is greater than or equal to $20.40. If the average daily closing trading price per share of Community Capital common stock for this time period is between $13.60 and $20.40, the number of shares of Community Capital common stock exchangeable for each share of Abbeville Capital common stock will be determined by dividing $63.13 by the average daily trading price.

You may elect the form of payment to receive for each of your shares of Abbeville Capital common stock, subject to a maximum of 564,559 shares of Community Capital common stock and $7.5 million of cash to be issued and paid to the Abbeville Capital shareholders as merger consideration. Abbeville Capital shareholders are unlikely to elect this exact mix of merger consideration. As a result, the merger agreement provides rules, which are described in the proxy statement/prospectus, to allocate the stock and cash forms of consideration based on the elections made by Abbeville Capital shareholders. Accordingly, you probably will not receive a portion of the merger consideration in the form you elect.

and any proration, will be reduced and the shareholder will receive additional Community Capital common stock instead. Whether the tax-related adjustment will be made, and the magnitude of the adjustment, if made, will be based on a number of factors, including the trading price per share of Community Capital common stock at the time the merger is completed (which may be different from the average daily ending trade price per share of Community Capital common stock used for calculating the exchange ratio), the amount of cash paid in lieu of fractional shares, the number of shares for which dissenters’ rights are exercised, and the amount of cash distributed to the Abbeville Capital shareholders by Abbeville Capital between August 18, 2003 and the date the merger is completed. Due to these limitations on the amount of stock and cash to be paid as merger consideration, we cannot ensure that you will receive the form of merger consideration you elect.

Because the merger will qualify as a tax-free reorganization for federal tax purposes, you will not be subject to federal income tax liability on the stock you receive in the merger. Nevertheless, you will be subject to federal income tax liability to the extent you receive cash as merger consideration. These general federal income tax consequences associated with the merger are described in more detail in the proxy statement/prospectus and have been opined on by the accounting firm of Elliott Davis, LLC. You will, however, need to consult your own tax advisor to determine the specific tax consequences to you.

Community Capital common stock is listed on the American Stock Exchange under the trading symbol “CYL.” On August 15, 2003, which was the last trading day prior to the initial announcement of the merger, the price of Community Capital common stock closed at $17.10 per share, and on January 2, 2004, the price of Community Capital common stock closed at $20.00. The price of Community Capital common stock, however, may fluctuate before you receive the stock merger consideration after completion of the merger. Any fluctuation will change the value of the shares of Community Capital common stock that you receive in the merger.

Please carefully consider the risk factors outlined under “ Risk Factors” beginning on page 15.

Your vote is very important. The board of directors of Abbeville Capital has unanimously adopted the merger agreement and recommends that you vote FOR approval of the merger.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Community Capital common stock to be issued under the proxy statement/prospectus or determined if the proxy statement/prospectus is accurate, adequate, or complete. Any representation to the contrary is a criminal offense.

This document serves as a prospectus of the offering of Community Capital common stock to the Abbeville Capital shareholders in exchange for their Abbeville Capital shares. You should note that the securities that Community Capital is offering are not savings or deposit accounts or other obligations of any bank or savings association and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

This proxy statement/prospectus is dated January 16, 2004, and was first mailed or otherwise delivered to Abbeville Capital shareholders on or about January 20, 2004.

Abbeville Capital Corporation will hold a special meeting of its shareholders at the offices of The Bank of Abbeville located at 203 S. Main Street, Abbeville, South Carolina, at 6:00 p.m., local time, on February 19, 2004 for the following purposes:

(1) Approval of Merger Agreement and Plan of Merger. To consider and vote on a proposal to approve the merger agreement dated October 15, 2003, between Community Capital Corporation and Abbeville Capital Corporation, and the related plan of merger, pursuant to which Abbeville Capital Corporation will merge into Community Capital Corporation, with Community Capital Corporation being the surviving corporation.

(2) Other Business. To transact such other business as may properly come before the shareholder meeting or any adjournments of the meeting.

The merger is described more fully in the proxy statement/prospectus attached to this notice.

Record holders of Abbeville Capital common stock at the close of business on January 2, 2004 will receive notice of and may vote at the shareholder meeting, including any adjournments of the meeting. Approval of the merger agreement and plan of merger at the shareholder meeting will require the affirmative vote of the holders of at least two-thirds of the Abbeville Capital common stock outstanding on the record date.

Abbeville Capital shareholders will have dissenters’ rights under Article 13 of the South Carolina Business Corporation Act of 1988 with respect to the proposed merger. The procedures to exercise dissenters’ rights are summarized in, and a copy of Article 13 of the South Carolina Business Corporation Act of 1988 is attached as Appendix D to, the proxy statement/prospectus. Strict compliance with Article 13 of the South Carolina Business Corporation Act of 1988 is required to exercise dissenters’ rights.

Your vote is very important. Whether or not you plan to attend the shareholder meeting, please take the time to vote by completing and mailing the enclosed proxy card. If you sign, date, and mail your proxy card without indicating how you want to vote, we will vote your proxy in favor of the merger agreement and plan of merger. If you do not either return your signed proxy card or attend and vote in favor of the merger agreement and plan of merger at the shareholder meeting, the effect will be the same as a vote against the merger.

By Order of the Board of Directors

/s/ THOMAS D. SHERARD, JR.
Thomas D. Sherard, Jr. President

No one has been authorized to provide you with any information other than the information included in this proxy statement/prospectus and the documents that are referred to herein, and you should not rely on other information as being authorized by Community Capital or Abbeville Capital.

This proxy statement/prospectus has been prepared as of January 16, 2004. Changes in the affairs and business of Community Capital Corporation and Abbeville Capital may have occurred since that date and are not reflected in this proxy statement/prospectus.

THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BUSINESS AND FINANCIAL INFORMATION ABOUT COMMUNITY CAPITAL AND ABBEVILLE CAPITAL THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS PROXY STATEMENT/PROSPECTUS.

YOU CAN OBTAIN ADDITIONAL, FREE COPIES OF THE INFORMATION DESCRIBED ABOVE OR ADDITIONAL COPIES OF THIS PROXY STATEMENT/PROSPECTUS, OR YOU CAN ASK QUESTIONS ABOUT THE MERGER, BY WRITING OR CALLING:

TO OBTAIN TIMELY DELIVERY OF THE DOCUMENTS, YOU MUST REQUEST THE INFORMATION BY FEBRUARY 12, 2004.

Q: What am I being asked to vote on at the meeting of Abbeville Capital shareholders?

Abbeville Capital’s board of directors is not aware of any other business to be considered at the meeting.

A. The merger cannot be completed unless the holders of at least a two-thirds of the outstanding shares of Abbeville Capital common stock vote in favor of the merger agreement and plan of merger. The Abbeville Capital board of directors unanimously recommends that you vote FOR approval of the merger agreement and plan of merger. If you do not either return your signed proxy card or attend and vote in favor of the merger agreement and plan of merger at the shareholder meeting, the effect will be the same as a vote against the merger.

A. Holders of Abbeville Capital common stock are eligible to vote their shares of Abbeville Capital common stock at the shareholder meeting if they were holders of record of those shares at the close of business on January 2, 2004.

A: This document serves as Abbeville Capital’s proxy statement and as Community Capital’s prospectus. As a proxy statement, this document is being provided to Abbeville Capital shareholders because Abbeville Capital’s board of directors is soliciting their proxies to vote to approve the merger agreement and plan of merger. As a prospectus, this document is being provided to Abbeville Capital shareholders by Community Capital because Community Capital is offering them shares of Community Capital common stock, in addition to cash, in exchange for their shares of Abbeville Capital common stock if the merger is completed.

A: You may elect to receive cash, shares of Community Capital common stock, or a combination of cash and shares of Community Capital common stock. For each share of Abbeville Capital common stock, you will receive one of the following forms of payment of the merger consideration:

Cash will be paid in lieu of any fractional share interest of Community Capital common stock.

Capital common stock if the average daily closing trading price per share of Community Capital common stock for the twenty consecutive trading days ending on the third trading day immediately preceding the merger is less than or equal to $13.60. The exchange ratio will be 3.0946 shares of Community Capital common stock for each share of Abbeville Capital common stock if the average daily closing trading price per share of Community Capital common stock for this period is greater than or equal to $20.40. If the average daily closing trading price per share of Community Capital common stock for this time period is between $13.60 and $20.40, the number of shares of Community Capital common stock exchangeable for each share of Abbeville Capital common stock will be determined by dividing $63.13 by the average daily trading price.

It may also be necessary to adjust the total amount of cash to be received by Abbeville Capital shareholders in order for the merger to qualify as a tax-free reorganization for federal tax purposes and to permit delivery of the requisite tax opinion pursuant to the merger agreement and plan of merger. See “Description of the Merger – Allocation of the Merger Consideration.”

A: If you exchange your shares of Abbeville Capital common stock solely for Community Capital common stock, you should not recognize any gain or loss (except with respect to the cash you receive instead of a fractional share) for U.S. federal income tax purposes. If you exchange your shares of Abbeville Capital common stock solely for cash, you should recognize gain or loss on the exchange. If you exchange your shares of Abbeville Capital common stock for a combination of Community Capital common stock and cash, you should recognize gain, but not loss, on the exchange to the extent of the lesser of cash received or gain realized in the exchange. See “Description of the Merger – Expected Federal Tax Consequences of the Merger” beginning on page 37 of the proxy statement/prospectus.

THIS TAX TREATMENT MAY NOT APPLY TO ALL ABBEVILLE CAPITAL SHAREHOLDERS. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE MERGER’S TAX CONSEQUENCES THAT ARE PARTICULAR TO YOU.

A. If the merger agreement and the plan of merger are approved by Abbeville Capital shareholders, the merger will be completed as soon as possible after the satisfaction or waiver of the conditions to the merger, which are described in this proxy statement/prospectus. Community Capital and Abbeville Capital currently anticipate that the merger will be completed during the first quarter of 2004.

A. Unless you will be attending and voting in person at the shareholder meeting, you should indicate on your proxy card how you want to vote and sign, date, and mail the proxy card in the enclosed envelope as soon as possible.

If you sign, date, and mail your proxy card and do not indicate how you want to vote, your proxy card will be voted FOR approval of the merger agreement and plan of merger. Failing to sign and send in your proxy card or attend and vote in person at the meeting will have the same effect as a vote against the merger.

Q: If my shares are held by a broker, will the broker vote my shares for me?

A. Your broker will vote your shares of stock only if you provide instructions to the broker about how to vote. You should instruct your broker how to vote your shares in accordance with the directions your broker provides. Failure to provide instructions to your broker will result in your shares not being voted, which will have the same effect as a vote against the merger.

A. Yes. If you mailed your proxy card, you can change your vote in any of the following ways:

All written notices of revocation and other communications with respect to revocation of proxies should be sent to:

A. No. After the merger is completed, Community Capital will send you written instructions and transmittal materials for exchanging your Abbeville Capital stock certificates for the merger consideration of cash and/or shares of Community Capital common stock. You should carefully review those materials and return them as instructed, together with your stock certificates representing Abbeville Capital common stock. You should not send your stock certificates to Abbeville Capital, Community Capital, or Community Capital’s exchange agent until you receive those written materials.

A. Yes. If you vote against or abstain from voting on the merger and properly exercise your dissenters’ rights prior to the shareholder meeting, you will have the right to receive a cash payment equal to the fair value of your shares of Abbeville Capital common stock. To exercise this right, you must strictly comply with Article 13 of the South Carolina Business Corporation Act of 1988, a copy of which is attached as Appendix D to this proxy statement/prospectus and which is summarized below in “Dissenters’ Rights.” If you wish to exercise dissenters’ rights, please read this information carefully. You must take affirmative steps to preserve these rights.

This summary highlights selected information from this proxy statement/prospectus relating to the merger and may not include all of the information that is important to you. To get a more complete description of the proposed merger, you should carefully read this entire document. For more information about Community Capital and Abbeville Capital, see “Where You Can Find More Information” on page 116. We have included page references in this summary to the headings later in this proxy statement/prospectus where you can find more detailed information about the topics summarized below.

Community Capital is a South Carolina corporation formed in 1988 as a bank holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended. Community Capital currently has no operations and conducts no business other than ownership and operation of CapitalBank, a state bank chartered under the laws of South Carolina, headquartered in Greenwood, South Carolina.

For the year ended December 31, 2002, Community Capital’s net income and diluted earnings per share totaled approximately $4,602,000 and $1.26, respectively, compared to approximately $4,478,000 and $1.26 per share, respectively, for the year ended December 31, 2001. At December 31, 2002, Community Capital had total assets of $380,765,000 loans of $288,842,000 deposits of $276,561,000 and stockholders’ equity of $44,408,000 compared to total assets of $340,682,000 loans of $248,390,000 deposits of $258,330,000 and stockholders’ equity of $39,273,000 at December 31, 2001.

For the nine months ended September 30, 2003, Community Capital’s net income and diluted earnings per share were approximately $3,976,000 and $1.08, respectively, compared to approximately $3,329,000 and $.91 per share, respectively, for the nine months ended September 30, 2002. At September 30, 2003, Community Capital had total assets of $394,847,000 loans of $308,884,000 deposits of $301,700,000 and stockholders’ equity of $44,616,000.

For a more detailed description of Community Capital and its business, please see the section of this document entitled “Community Capital Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Information about Community Capital.”

Abbeville Capital is a South Carolina corporation formed in 1997 to serve as the holding company for The Bank of Abbeville. Abbeville Capital is a bank holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended. Abbeville Capital currently has no operations and conducts no business other than ownership and operation of The Bank of Abbeville, a state bank chartered under the laws of South Carolina, located in Abbeville, South Carolina.

For the year ended December 31, 2002, Abbeville Capital’s net income and diluted earnings per share totaled $917,000 and $3.86, respectively, compared to $735,000 and $3.09 per share, respectively, for the year ended December 31, 2001. At December 31, 2002, Abbeville Capital had total assets of $68,030,000, loans of $38,230,000, deposits of $53,043,000, and stockholders’ equity of $7,478,000 compared to total assets of $67,713,000, loans of $36,347,000, deposits of $50,620,000 and stockholders’ equity of $6,737,000 at December 31, 2001.

For the nine months ended September 30, 2003, Abbeville Capital’s net income and diluted earnings per share for the period were $689,000 and $2.90, respectively, compared to $711,000 and $2.99 per share, respectively, for the nine months ended September 30, 2002. At September 30, 2003, Abbeville Capital had total assets of $69,923,000, loans of $38,565,000, deposits of $53,238,000 and stockholders’ equity of $7,705,000.

For a more detailed description of Abbeville Capital and its business, please see the sections of this document entitled “Abbeville Capital Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Information about Abbeville Capital.”

Pursuant to the merger agreement and related plan of merger, Abbeville Capital will merge into Community Capital, with Community Capital being the surviving corporation. After the merger, the combined company will conduct its business under the name “Community Capital Corporation.” Additionally, after completion of the merger, Community Capital intends to merge The Bank of Abbeville into CapitalBank.

What Abbeville Capital Shareholders Will Receive in the Merger (see page 22)

Under the merger agreement and plan of merger, you will receive one of the following forms of payment of the merger consideration in exchange for each of your shares of Abbeville Capital common stock:

Elections by Abbeville Capital shareholders are also subject to possible adjustment in order for the merger to qualify as a tax-free reorganization for federal tax purposes and to permit delivery of the requisite tax opinion pursuant to the merger agreement and plan of merger. See “Description of the Merger – Allocation of the Merger Consideration.”

No fractional shares of Community Capital common stock will be issued in connection with the merger. Instead, cash will be paid in lieu of any fractional share of Community Capital common stock to which any Abbeville Capital shareholder would be entitled upon completion of the merger. The cash paid will be an amount equal to the shareholder’s fractional interest multiplied by the exchange ratio.

Community Capital common stock, which has a par value of $1.00, is listed on the American Stock Exchange under the symbol “CYL.” On August 15, 2003, which was the last trading day prior to the initial announcement of the merger of the price of Community Capital common stock closed at $17.10 per share, and on January 2, 2004, the price of Community Capital common stock closed at $20.00. The price of Community Capital stock, however, may fluctuate before you receive the stock merger consideration after completion of the merger. Any fluctuation will change the value of the shares of Community Capital common stock that you receive in the merger.

Abbeville Capital shareholders who vote against or abstain from voting on the merger and properly exercise their dissenters’ rights prior to the shareholder meeting will have the right to receive a cash payment equal to the fair value of their shares of Abbeville Capital common stock. Any payment of fair value will be in lieu of the merger consideration provided for in the merger agreement and could be more than, the same as, or less valuable than the agreed upon merger consideration. To exercise these rights, you must strictly comply with Article 13 of the South Carolina Business Corporation Act of 1988, a copy of which is attached as Appendix D to this proxy statement/prospectus and which is summarized below in “Dissenters’ Rights.” If you wish to exercise dissenters’ rights, please read this information carefully. You must take affirmative steps to preserve these rights.

The Abbeville Capital board of directors has unanimously adopted the merger agreement and the related plan of merger and believes that the proposed merger is fair to the Abbeville Capital shareholders and is in their best interests. The Abbeville Capital board unanimously recommends that you vote FOR approval of the merger agreement and related plan of merger.

Opinion of The Orr Group that the Merger is Fair, from a Financial Point of View, to Abbeville Capital’s Shareholders (see page 28)

In deciding to approve the merger agreement and plan of merger, Abbeville Capital’s board of directors considered an oral opinion from its financial advisor, The Orr Group, that the merger consideration is fair, from a financial point of view, to the Abbeville Capital shareholders. The updated opinion of The Orr Group, dated December 2, 2003, is attached as Appendix B and incorporated by reference into this proxy statement/prospectus. We encourage you to read this opinion in its entirety. Pursuant to The Orr Group’s engagement agreement, Abbeville Capital agreed to pay The Orr Group a fee in the amount of $150,000 in connection with the proposed merger, of which $37,500 Abbeville Capital paid to The Orr Group upon execution of the merger agreement. The balance of the fee is due at the time the merger is consummated and is contingent upon the consummation of the merger. Further, Abbeville Capital has agreed to reimburse The Orr Group for legal and other reasonable expenses incurred in connection with its engagement and to indemnify The Orr Group and its affiliates, directors, agents, employees and controlling persons in connection with certain matters related to rendering its opinion, including liabilities under securities laws.

Because the merger will qualify as a tax-free reorganization for federal income tax purposes, you will not be subject to federal income tax liability on the stock you receive in this merger. Nevertheless, you will be subject to federal income tax liability to the extent you receive cash as merger consideration. These general federal income tax consequences associated with the merger are described in more detail below and have been opined over by the accounting firm of Elliott Davis, LLC. This tax opinion has been delivered to Abbeville Capital and Community Capital and is included as Appendix C to this proxy statement/prospectus. You will, however, need to consult your own tax advisor to determine the specific tax consequences to you.

Community Capital currently pays quarterly dividends at an annualized rate of $.48 per share of Community Capital common stock. Community Capital, however, may change this policy at any time, based upon business conditions, its financial condition and earnings, or other factors. Abbeville Capital currently pays annual dividends of $1.50 per share of Abbeville Capital common stock.

The persons who were directors and executive officers of Community Capital before the merger will continue as directors and executive officers after the merger. In addition, Thomas D. Sherard, Jr., President and a director of Abbeville Capital, and Patricia P. Howie, an executive officer and director of Abbeville Capital, will all enter into employment agreements with, and become officers of CapitalBank.

After the merger is completed, Joseph L. Savitz, Jr., a current member of the board of directors of Abbeville Capital, is also expected to be elected as a member of the board of directors of Community Capital.

Interests of Abbeville Capital’s Executive Officers and Directors in the Merger (see page 36)

Abbeville Capital’s executive officers and directors have certain interests in the merger that are in addition to their interests as shareholders of Abbeville Capital generally. Abbeville Capital’s board of directors was aware of these interests and considered them, among other matters, in approving and recommending for shareholder approval the merger agreement and plan of merger.

On the record date for the Abbeville Capital shareholder meeting, executive officers and directors of Abbeville Capital and their immediate family members and affiliated entities had voting power over 32,130 outstanding shares of Abbeville Capital common stock, which constitutes approximately 13.5% of the outstanding shares of Abbeville Capital common stock and approximately 20.2% of the outstanding shares necessary to approve the merger. The affirmative vote of two-thirds of the shares of Abbeville Capital common stock outstanding as of the record date is required to complete the merger. It is expected that the executive officers and directors of Abbeville Capital will vote their shares in favor of the merger agreement and plan of merger, but they have not contractually agreed to do so.

On the record date, Community Capital’s executive officers and directors owned no shares of Abbeville Capital common stock. On the record date, Community Capital owned 3,025 shares of Abbeville Capital common stock, other than in a fiduciary capacity for others. This total of 3,025 shares constitutes approximately 1.3% of the outstanding shares of Abbeville Capital common stock and approximately 1.9% of the outstanding shares necessary to approve the merger.

Regulatory Approval and Other Conditions to the Merger (see pages 33 and 109)

Community Capital and Abbeville Capital have agreed to use their reasonable best efforts to obtain all regulatory approvals required to consummate the transactions contemplated by the merger agreement, which include approval from the Federal Reserve Board, the Federal Deposit Insurance Company, and the South Carolina State Board of Financial Institutions. Community Capital filed applications with these regulatory bodies seeking such approval in December 2003. The merger cannot proceed in the absence of these regulatory approvals. Although Community Capital and Abbeville Capital expect to obtain these required regulatory approvals, there can be no assurance as to if and when they will be obtained.

Community Capital and Abbeville Capital are not aware of any other material governmental approvals or actions that are required prior to the parties’ consummation of the merger. If any additional governmental approvals or actions are required, the parties currently contemplate seeking such approvals or taking such actions.

In addition to the required regulatory approvals, the merger can be completed only if certain other conditions, including the following, are met or waived:

Community Capital and Abbeville Capital have agreed to use their reasonable efforts to obtain the required regulatory consents and satisfy all closing conditions to the merger.

Abbeville Capital and Community Capital may mutually agree to terminate the merger agreement and not proceed with the merger. In addition, either Abbeville Capital or Community Capital may terminate the merger agreement, without the consent of the other, upon the occurrence of the following events:

Abbeville Capital also may terminate the merger agreement if its board of directors determines, based upon the advice of counsel, that another acquisition proposal involving Abbeville Capital or any of its subsidiaries constitutes a superior proposal to the merger, from a financial point of view, and Abbeville Capital thereafter enters into a definitive agreement for the consummation of the superior acquisition proposal, provided that Abbeville Capital may terminate the merger agreement for this reason only if it complies with certain prior notice conditions.

Abbeville Capital has agreed to pay a termination fee to Community Capital of $450,000 plus certain out-of-pocket expenses of Community Capital described in the merger agreement that is attached as Appendix A to this proxy statement/prospectus. This fee is payable by Abbeville Capital to Community Capital if either party terminates the merger agreement upon the determination, that another acquisition proposal involving Abbeville Capital or any of its subsidiaries constitutes a superior proposal to the merger, from a financial point of view, and Abbeville Capital then within one year enters into a definitive agreement for the consummation of the superior proposal. Alternatively, in the event Abbeville Capital or any of its subsidiaries receives another acquisition proposal and Abbeville Capital’s board of directors fails to recommend or continue recommending approval of the merger with Community Capital to Abbeville Capital’s shareholders, resulting in a failure to obtain the required shareholder approval, and within one year Abbeville Capital then enters into a definitive agreement for the consummation of the other acquisition, Abbeville Capital has agreed to pay a fee of $450,000 to Community Capital, plus certain out-of-pocket expenses of Community Capital described in the merger agreement that is attached as Appendix A to this proxy statement/prospectus.

Additionally, if the merger agreement is terminated by either Community Capital or Abbeville Capital due to a breach by the other party of any of its representations and warranties or, in any material respect, its covenants contained in the merger agreement, the terminating party will be entitled to reimbursement from the other party of its costs and expenses relating to the merger and entering into the merger agreement.

Upon completion of the merger, shareholders of Abbeville Capital will become shareholders of Community Capital. Community Capital’s articles of incorporation, as amended, and bylaws will govern shareholder rights as Community Capital shareholders. Because of differences in the articles of incorporation and bylaws of Community Capital and Abbeville Capital, your rights as an Abbeville Capital shareholder prior to completion of the merger will not be the same as your rights as a Community Capital shareholder after completion of the merger. In particular, Community Capital offers anti-takeover protections to its shareholders that you do not have as an Abbeville Capital shareholder.

Shares of Community Capital common stock are listed on the American Stock Exchange under the symbol “CYL.” On August 15, 2003, which was the last trading day prior to the initial announcement of the merger, the price of Community Capital common stock closed at $17.10 per share, and on January 2, 2004, Community Capital common stock closed at $20.00 per share. Of course the market price of Community Capital common stock will fluctuate prior to and after completion of the merger. You should obtain current stock price quotations for Community Capital common stock.

The following consolidated financial data for the nine months ended September 30, 2003 and 2002 is derived from Community Capital’s 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, included elsewhere herein.

The following consolidated financial data for the five years ended December 31, 2002 is derived from Community Capital’s consolidated financial statements and other data. The financial statements for the year ended December 31, 2002, 2001, and 2000 were audited by Elliott Davis, LLC, independent auditors. The financial statements for the years ended December 31, 1999, and 1998 were audited by other auditors whose reports expressed unqualified opinions on those statements. The selected consolidated financial data should be read in conjunction with Community Capital’s consolidated financial statements, including the accompanying notes, included in pages F-26 through F-60 of this proxy statement/prospectus.

Securities held-to-maturity are stated at amortized cost, and securities available-for-sale are stated at fair value.

Loans are stated before the allowance for loan losses and include loans held for sale.

All share and per-share data have been adjusted to reflect the 5% common stock dividends in September 1998, June 2000 and June 2001.

Noninterest expense divided by the sum of tax equivalent net interest income and noninterest income, excluding gains and losses on sales of assets and the writedown of intangible assets related to the sale of those assets.

Nonperforming loans and nonperforming assets do not include loans past due 90 days or more that are still accruing interest.

The following consolidated financial data for the nine months ended September 30, 2003 and 2002 is derived from Abbeville Capital’s unaudited 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, included elsewhere herein.

The following consolidated financial data for the five years ended December 31, 2002 is derived from Abbeville Capital’s consolidated financial statements and other data. The financial statements for the years ended December 31, 2002 and 2001 were audited by Elliott Davis, LLC, independent auditors. The financial statements for the years ended December 31, 2000, 1999, and 1998 were audited by other auditors whose reports expressed unqualified opinions on those statements. The selected consolidated financial data should be read in conjunction with Abbeville Capital’s consolidated financial statements, including the accompanying notes, included in pages F-1 through F-25 of this proxy statement/prospectus.

The following unaudited pro forma combined condensed balance sheet as of September 30, 2003 and unaudited pro forma combined statements of income for the nine months ended September 30, 2003 and the year ended December 31, 2002 combine the historical financial statements of Community Capital and Abbeville Capital. The pro forma combined condensed statements give effect to the proposed merger of Abbeville Capital into Community Capital as if the merger occurred on September 30, 2003 with respect to the balance sheet and on January 1, 2003 or January 1, 2002, respectively, with respect to the statements of income for the nine months ended September 30, 2003 and the year ended December 31, 2002, respectively. The pro forma combined condensed statements give effect to the proposed merger under the purchase method of accounting.

The purchase method of accounting requires that all of Abbeville Capital assets and liabilities be adjusted to their estimated fair market values as of the date of acquisition. For purposes of the pro forma combined condensed statements, fair market value of September 30, 2003 assets and liabilities has been estimated by management of Community Capital using market information on September 30, 2003. Accordingly, these adjustments are only approximations. Upon consummation of the merger, Community Capital will make adjustments as of the date of consummation based on more precise appraisals and estimates.

The pro forma combined condensed statements also contain adjustments based on assumed interest rates and estimates by Community Capital management regarding changes in revenues and expenses that management believes will be achieved after consummation of the merger. Of course, there can be no assurance that such changes will be of the magnitude estimated or that they will occur at all.

The pro forma financial statements are provided for informational purposes. The pro forma combined condensed statements of income are not necessarily indicative of actual results that would have been achieved had the merger been consummated at the beginning of the periods presented, and is not indicative of future results.

Each Abbeville Capital shareholder who votes in favor of the merger may be choosing to invest in Community Capital common stock. You should consider the following matters in deciding how to vote. You also should consider the other information included in this document.

The merger agreement provides that shareholders of Abbeville Capital may elect to receive cash, Community Capital common stock, or a combination of cash and Community Capital common stock, as calculated in accordance with the merger agreement. The elections made by Abbeville Capital shareholders will be subject to adjustment in accordance with the allocation and proration procedures set forth in the merger agreement. Accordingly, a shareholder of Abbeville Capital may not be sure, at the time the shareholder votes on whether to adopt the merger agreement, of the exact consideration the shareholder will receive in exchange for the shareholder’s shares of Abbeville Capital common stock. These adjustments could result in, among other things, tax consequences that differ from those that would have resulted had you received the exact form of merger consideration you elect.

The value of your stock merger consideration will vary with changes in Community Capital’s common stock price.

Each share of Abbeville Capital common stock will be converted into the right to receive cash and/or shares of Community Capital common stock. The price of Community Capital common stock when the merger takes place may vary from its price on the date of this proxy statement/prospectus and on the date of Abbeville Capital’s shareholder meeting. Changes in the price of Community Capital common stock may result from changes in the business, operations, or prospects of Community Capital or Abbeville Capital, regulatory considerations, general market and economic conditions, and other factors. At the time of Abbeville Capital’s shareholder meeting, you will not know the exact value of the stock merger consideration you will receive when the merger is completed.

The value of shares of Community Capital common stock may decline after the merger is completed before you receive your shares of Community Capital common stock.

There will be a time period after the merger is completed before you receive certificates representing any Community Capital common stock to be paid to you as merger consideration. Until you receive your certificates, you will not be able to sell your shares of Community Capital common stock on the open market and thus will not be able to avoid losses resulting from any decline in the price of Community Capital common stock during this interim period.

A lack of acquisition history could cause Community Capital to have difficulty in integrating Abbeville Capital into its operations.

The merger will be the first acquisition of another banking institution by Community Capital in its history. Thus, anticipating all of the challenges that will be presented by the integration of another banking institution into Community Capital’s operations may be more difficult. The successful integration of the management and staff, as well as the technical operations such as reporting systems and data processing, will be important to the future operations of the combined entity that will result from the merger. Substantial difficulties could be encountered, including the following:

A loss of services of Thomas D. Sherard, Jr., Patricia P. Howie, or other key personnel could have a material negative impact upon the future success of the acquired operations of Abbeville Capital.

The success of Community Capital after the merger in growing its business profitably in the Abbeville, South Carolina market will be highly dependent upon the business relationships established there by Mr. Sherard, Ms. Howie, and other current employees of Abbeville Capital. Although Community Capital will enter into employment agreements with Mr. Sherard and Ms. Howie, and will offer employment to other key employees of Abbeville Capital, there can be no assurance that the services of these individuals will be available to Community Capital for any specified period. The loss of Mr. Sherard, Ms. Howie, or a significant number of other Abbeville Capital employees could materially and adversely affect Community Capital’s ability to operate successfully in the Abbeville, South Carolina market.

Directors and executive officers of Abbeville Capital and The Bank of Abbeville may have interests that are different from or in addition to your interests as a shareholder of Abbeville Capital.

When considering the recommendations of the board of directors of Abbeville Capital, you should be aware that some members of the Abbeville Capital board of directors and some executive officers of Abbeville Capital may have interests in the merger that are different from, or in addition to, your interests as shareholders.

For example, Mr. Sherard and Ms. Howie will become officers of, and will enter into employment agreements with, CapitalBank that provide them with significant benefits, including base salary and stock options over several years. Mr. Sherard and Ms. Howie will also receive bonuses for services to Abbeville Capital in connection with the merger. Mr. Sherard and Ms. Howie have previously entered into Salary Continuation Agreements and Split Dollar Agreements with Bank of Abbeville that will be assumed in the merger by Community Capital. Additionally, Joseph L. Savitz, Jr., who is currently a member of the Abbeville Board of Directors will become a member of the Board of Directors of Community Capital. See “Description of the Merger – Interests of Abbeville Capital’s Executive Officers and Directors in the Merger.”

You will have less influence as a shareholder of Community Capital than as a shareholder of Abbeville Capital.

The shareholders of Abbeville Capital currently have the right to control Abbeville Capital through their ability to elect the board of directors of Abbeville Capital and vote on other matters affecting Abbeville Capital. The merger will transfer control of Abbeville Capital to Community Capital. After completion of the merger and assuming an exchange ratio based upon a price of $20.00 per share of Community Capital common stock, the shares of Community Capital common stock received by former Abbeville Capital shareholders will total approximately 11.05% of Community Capital’s outstanding common stock. Consequently, the Abbeville Capital shareholders who become shareholders of Community Capital will exercise much less influence over the management and policies of Community Capital than they currently exercise over the management and policies of Abbeville Capital.

Changes in Interest Rates Could Adversely Affect Community Capital’s Results of Operations and Financial Condition.

Like most banks, Community Capital’s earnings depend substantially on “rate differentials,” which are the differences between the rates it earns on loans, securities, and other earning assets, and the interest rates it pays on deposits and other borrowings. These rates are highly sensitive to many factors that are beyond Community Capital’s control, including general economic conditions and the policies of various governmental and regulatory authorities. Frequently the maturities of assets and liabilities are not balanced, and an increase or decrease in interest rates could have a material adverse effect Community Capital’s net interest margin, results of operations, and financial condition.

Changes in interest rates can have differing effects on our volume of mortgage loans originated. In periods of declining interest rates, such as have occurred recently, demand for mortgage loans typically increases,

particularly for mortgage loans related to refinancing of existing loans. The refinancing of existing loans currently comprises approximately 41% of Community Capital’s loan volume. In periods of rising interest rates, demand for mortgage loans typically declines. Community Capital’s income from our mortgage banking division would significantly decrease following a decline in demand for mortgage loans in South Carolina, which is the area in which we originate our mortgage loans.

As with Abbeville Capital, Community Capital’s earnings are significantly affected by its ability to properly originate, underwrite, and service loans. Community Capital could sustain losses if it incorrectly assesses the creditworthiness of its borrowers or fails to detect or respond to a deterioration in asset quality in a timely manner. Problems with asset quality could cause Community Capital’s interest income and net interest margin to decrease and its provisions for loan losses to increase, which could materially adversely affect its results of operations and financial condition.

The banking industry in Community Capital’s market area is highly competitive. Community Capital competes with many different financial and financial service institutions, including:

A substantial number of the commercial banks in Community Capital’s market area are branches or subsidiaries of much larger organizations affiliated with statewide, regional, or national banking companies, and as a result may have greater resources and lower cost of funds. Additionally, Community Capital faces competition from de novo community banks, including those with senior management who were previously with other local banks or those controlled by investor groups with strong local business and community ties.

These competitors aggressively solicit customers within their market area by advertising through direct mail, the electronic media, and other means. Many of these competitors have been in business longer than Community Capital and Abbeville Capital, and are substantially larger than either institution or the combined entity that will result from the merger. These competitors may offer services, such as international banking services, that Community Capital and Abbeville Capital can offer only through correspondents, if at all. Additionally, larger competitors have greater capital resources and, consequently, higher lending limits.

Changes in Economic Conditions Could Adversely Affect Community Capital’s Results of Operation and Financial Condition.

Community Capital’s profitability depends on the profitability of its bank subsidiary, whose operating results and asset quality may be significantly affected by national and local economic conditions. Community Capital makes loans primarily to borrowers who are located in South Carolina and secure these loans in substantial part with real estate collateral located in the area. Community Capital is subject to adverse changes in general economic conditions in the United States such as inflation, recession, and high levels of unemployment, consumer credit, and bankruptcies. Community Capital is also subject to unfavorable changes in economic conditions affecting its markets that may have a material adverse effect on its results of operations and financial

condition. Such changes could result from numerous factors beyond Community Capital’s control, including a reduction in real estate values, business closings or layoffs, inclement weather, natural disasters, and adverse trends or events affecting various industry groups such as agriculture, real estate and real estate development, and construction.

While Community Capital’s asset quality ratios have not been significantly impacted by the prevailing economic slowdown in the national and local economies, it has seen an increase in bankruptcy filings, layoff announcements, and business closings in its market area. Considerable uncertainty continues regarding the economy and the potential for adverse effects from the continued threat of terrorism and other geo-political events. Therefore, there can be no assurance that a continuation or worsening of this slowdown will not ultimately have an adverse impact on Community Capital’s borrowers or Community Capital’s financial condition and results of operation.

Community Capital depends on the services of William G. Stevens, its President and Chief Executive Officer. The loss of the services of Mr. Stevens could have a material adverse effect on its results of operations and financial condition. Community Capital is also dependent on a number of other key officers who have important customer relationships or are instrumental to its operations. The loss of these individuals could have a material adverse effect on its results of operations and financial condition.

Community Capital is subject to extensive government regulation and supervision under various state and federal laws, rules, and regulations, including rules and regulations of the Board of Governors of the Federal Reserve, the FDIC, and the South Carolina State Board of Financial Institutions. These laws and regulations are designed primarily to protect depositors, borrowers, and the Bank Insurance Fund of the FDIC and to further certain social policies. Consequently, they may impose limitations on Community Capital that may not be in its shareholders’ best interests. Unlike Abbeville Capital, Community Capital has a class of stock registered with the Securities and Exchange Commission under Section 12(b) of the Securities Exchange Act of 1934 and is therefore subject to extensive regulation by the Securities and Exchange Commission. Recently adopted federal securities laws and regulations have significantly increased the time and expense burdens on companies, like Community Capital, that are required to make periodic filings with the Securities and Exchange Commission. Many of the recently adopted rules have not yet gone fully into effect and the time and expense burdens are expected to increase. Such increased burdens could adversely affect the profitability of Community Capital. Community Capital is subject to changes in federal and state laws, regulations, governmental policies, capital requirements, and accounting principles. The effects of any such potential changes cannot be predicted, but they could have a material adverse effect on Community Capital’s results of operations and financial condition.

This proxy statement/prospectus, including the documents referred to herein, include certain forward-looking statements about the financial condition, results of operations and business of Community Capital, including the benefits of the proposed merger with Abbeville Capital, the expected impact of the proposed merger on Community Capital’s earnings per share, the receipt of regulatory approvals for the merger, and the anticipated tax consequences of the merger. Such forward-looking statements and information are based on management’s beliefs, assumptions, and expectations of our future economic performance, taking into account information currently available and are not guarantees of future performance. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” and similar expressions identify forward-looking statements. Such statements reflect Community Capital’s current views of future events and are subject to certain risks, uncertainties, and assumptions that may cause actual results or outcomes to vary materially from management’s expectations.

Some of the important factors that could cause actual results of operation or financial condition to differ materially from expectations include, but are not limited to: (1) the challenges, costs, and complications associated with the continued development of our branches and our proposed plan to be the survivor of a merger with Abbeville Capital; (2) the potential that loan charge-offs may exceed the allowance for loan losses or that such allowance will be increased as a result of factors beyond our control; (3) our dependence on senior management; (4) competition from existing financial institutions operating in our market areas as well as the entry into such areas of new competitors with greater resources, broader branch networks, and more comprehensive services; (5) adverse conditions in the stock market, the public debt market, and other capital markets (including changes in interest rate conditions); (6) changes in deposit rates, the net interest margin, and funding sources; (7) inflation, interest rate, market, and monetary fluctuations; (8) risks inherent in making loans, including repayment risks and value of collateral; (9) the strength of the United States economy in general and the strength of the local economies in which we conduct operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on our loan portfolio and allowance for loan losses; (10) fluctuations in consumer spending and saving habits; (11) the demand for our products and services; (12) technological changes, including without limitation our conversion to a new core processing system and outsourcing of our data processing functions on or about November 15, 2003 that may, among other items, require replacement or upgrades to our network components; (13) the challenges and uncertainties in the implementation of our expansion and development strategies; (14) the ability to increase market share; (15) the adequacy of expense projections and estimates of impairment loss; (16) the impact of changes in accounting policies by the Securities and Exchange Commission; (17) unanticipated regulatory or judicial proceedings; (18) the potential negative effects of future legislation affecting financial institutions (including without limitation laws concerning taxes, banking, securities, and insurance); (19) the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (20) the timely development and acceptance of products and services, including products and services offered through alternative delivery channels such as the Internet; (21) the impact on our business, as well as on the risks set forth above, of various domestic or international military or terrorist activities or conflicts; (22) other factors described in this report and in other reports we have filed with the Securities and Exchange Commission; and (23) our success at managing the risks involved in the foregoing.

Factors that could affect the expected impact of the proposed merger include: (1) the possibility that the transaction does not close due to failure to receive required approvals or satisfy other conditions; (2) the ability of Community Capital to successfully integrate Abbeville Capital’s operations; and (3) the creditworthiness of Abbeville Capital’s borrowers and the ability to retain Abbeville Capital’s deposit and loan customer base following consummation of the transaction.

Should one or more of the foregoing risks materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described in the forward-looking statements. These and other material risk factors relating to the merger and Community Capital’s operations are more fully described in this proxy statement/prospectus under the caption “Risk Factors.”

Abbeville Capital is furnishing this proxy statement/prospectus to the holders of Abbeville Capital common stock as of the record date described below in connection with a proxy solicitation by the Board of Directors of Abbeville Capital, which will use the proxies at a special meeting of Abbeville Capital shareholders to be held at the offices of The Bank of Abbeville located at 203 South Main Street, Abbeville, South Carolina, at 6:00 p.m., local time, on February 19, 2004.

Abbeville Capital’s board of directors is not aware of any other business to be considered at this shareholder meeting.

The Abbeville Capital board of directors fixed the close of business on January 2, 2004 as the record date for determining the Abbeville Capital shareholders entitled to notice of and to vote at the shareholder meeting of Abbeville Capital shareholders. Only holders of Abbeville Capital common stock of record on the books of Abbeville Capital at the close of business on January 2, 2004, have the right to receive notice of and to vote at the shareholder meeting. On the record date, 237,615 shares of Abbeville Capital common stock were issued and outstanding and held by approximately 465 holders of record. At the shareholder meeting, Abbeville Capital shareholders will have one vote for each share of Abbeville Capital common stock owned on the record date.

A quorum of Abbeville Capital shareholders is required to hold the shareholder meeting. A quorum will exist when the holders of a majority of the outstanding shares of Abbeville Capital common stock entitled to vote on the merger are present at the meeting. To determine whether a quorum is present, Abbeville Capital will count all shares of Abbeville Capital common stock present at the shareholder meeting either in person or by proxy, whether or not the shares are actually voted for any matter.

Approval of the merger agreement and related plan of merger will require the affirmative vote of the holders of at least two-thirds of the outstanding shares of Abbeville Capital common stock.

Brokers who hold shares in their name for customers who are the beneficial owners of the shares may not vote those shares at the shareholder meeting or give a proxy to vote those shares at the shareholder meeting without specific instructions from their customers. Any abstentions, nonvoting shares, or “broker non-votes” will have the same effect as a vote against approval of the merger agreement and plan of merger.

Properly executed proxies that Abbeville Capital receives before the vote at the shareholder meeting that have not been revoked before the shareholder meeting will be voted in accordance with the instructions indicated on the proxies. Any proxy received with no instructions indicated will be voted FOR approval of the merger agreement and related plan of merger, and the proxy holder may vote the proxy in its discretion as to any other matter that may properly come before the shareholder meeting. If necessary, the proxy holder may vote in favor of a proposal to adjourn the shareholder meeting to permit further solicitation of proxies, unless a proxy instructed a vote against approval of the merger agreement and plan of merger. If you do not either return your signed proxy card or attend and vote in favor of the merger agreement and plan of merger at the shareholder meeting, the effect will be the same as a vote against the merger.

A shareholder of Abbeville Capital who has given a proxy may revoke it at any time prior to the Abbeville Capital shareholder meeting by:

All written notices of revocation and other communications with respect to revocation of proxies should be sent to:

As of the record date for the Abbeville Capital shareholder meeting, executive officers and directors of Abbeville Capital and their immediate family members and affiliated entities had voting power over 32,130 outstanding shares of Abbeville Capital common stock, which constitutes approximately 13.5% of the outstanding shares of Abbeville Capital common stock and approximately 20.2% of the outstanding shares necessary to approve the merger. The affirmative vote of two-thirds of the shares of Abbeville Capital common stock outstanding as of the record date is required to approve the merger. It is expected that the executive officers and directors of Abbeville Capital will vote their shares in favor of the merger agreement and plan of merger, but they have not contractually agreed to do so. On the record date, Community Capital’s executive officers and directors owned no shares of Abbeville Capital common stock. On the record date, Community Capital owned 3,025 shares of Abbeville Capital common stock other than in a fiduciary capacity for others. This total of 3,025 shares constitutes approximately 1.9% of the outstanding shares necessary to approve the merger.

Representatives of Elliott Davis, LLC are expected to be present at the Abbeville Capital shareholder meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.

Directors, officers, employees and agents of Abbeville Capital will solicit proxies, either by mail, in person, by telephone, or other means. They will receive no additional compensation for such services. Although Abbeville Capital does not currently expect to do so, it may engage one or more proxy solicitation firms to assist it in the delivery of proxy materials and solicitation of completed proxies. Abbeville Capital also may make arrangements with brokerage firms and other custodians, nominees, and fiduciaries, if any, for the forwarding of solicitation materials to the beneficial owners of Abbeville Capital common stock held of record by these persons. Abbeville Capital shall bear the cost of this proxy solicitation.

Shareholders who vote against or abstain from voting on the merger and properly exercise their dissenters’ rights prior to and after the Abbeville Capital shareholder meeting will have the right to receive a cash payment equal to the fair value of their shares of Abbeville Capital common stock. To exercise these rights, shareholders must strictly comply with Article 13 of the South Carolina Business Corporation Act of 1988, a copy of which is attached as Appendix D to this proxy statement/prospectus and which is summarized below in “Dissenters’ Rights.” If you wish to exercise dissenters’ rights, please read this information carefully. You must take affirmative steps to preserve these rights.

Abbeville Capital’s board of directors has unanimously adopted the merger agreement and related plan of merger, and it believes that completion of the merger is in the best interests of Abbeville Capital and its shareholders. Abbeville Capital’s board of directors unanimously recommends that you vote FOR approval of the merger agreement and the related plan of merger.

The following describes material aspects of the merger. This description is not a complete description of all the terms and conditions of the merger agreement. This description is qualified in its entirety by the appendices attached to this proxy statement/prospectus, including the merger agreement and related plan of merger, copies of which are attached as Appendix A and incorporated by reference into this proxy statement/prospectus. You should read the appendices in their entirety.

Abbeville Capital will be acquired by and merged into Community Capital, with Community Capital being the surviving corporation. The merger will be completed pursuant to the terms of the merger agreement and related plan of merger. Subsequent to the merger, Community Capital intends to merge The Bank of Abbeville, the banking subsidiary of Abbeville Capital, into Community Capital’s banking subsidiary, CapitalBank.

The amount of Community Capital common stock and cash to be paid as merger consideration is subject to adjustment based on the trading value of Community Capital’s common stock prior to completion of the merger.

A maximum of 564,559 shares of Community Capital common stock and $7.5 million of cash will be issued and paid to the Abbeville Capital shareholders as merger consideration. Abbeville Capital shareholders are unlikely to elect this exact mix of merger consideration, in which case the exchange agent will allocate among the Abbeville Capital shareholders the stock and cash merger consideration pursuant to the allocation procedures. Accordingly, you probably will not receive a portion of the merger consideration in the form you elect. These allocations could result in, among other things, tax consequences that differ from those that would have resulted had you received the exact form of merger consideration you elect.

In order for the merger to qualify as a tax-free reorganization for federal tax purposes and to permit delivery of the requisite tax opinion pursuant to the merger agreement and plan of merger, the aggregate amount of cash (i) paid to all Abbeville Capital shareholders including dissenters, (ii) paid in lieu of fractional shares, and (iii) distributed by Abbeville Capital to the Abbeville Capital shareholders between August 18, 2003 and the date the merger is completed, cannot exceed 50% of the total fair market value of all of the shares of Community Capital common stock and cash delivered by Community Capital to Abbeville Capital’s shareholders. As a result, all elections by Abbeville Capital shareholders are subject to an additional adjustment by Community Capital to reduce the total amount of cash to be received in the merger to the extent necessary to preserve this reorganization status and not exceed the 50% threshold. If the tax-related adjustment were necessary, the amount of cash an Abbeville Capital shareholder would have received, after taking into account such holder’s election and any proration, will be reduced and the shareholder will receive additional Community Capital common stock instead. Whether the tax-related adjustment will be made, and the magnitude of the adjustment, if made, will be based on a number of factors, including the trading price per share of Community Capital common stock at the time the merger is completed (which may be different from the average daily ending trade price per share of Community Capital common stock used for calculating the exchange ratio), the amount of cash paid in lieu of fractional shares, the number of shares for which dissenters’ rights are exercised, and the amount of cash distributed to the Abbeville Capital shareholders by Abbeville Capital between August 18, 2003 and the date the merger is completed. Due to these limitations on the amount of stock and cash to be paid as merger consideration, we cannot ensure you will receive the form of merger consideration you elect.

Community Capital has appointed Registrar & Transfer Company as its exchange agent in connection with the merger. At the effective time of the merger, Community Capital will deposit with the exchange agent, for the benefit of Abbeville Capital shareholders, certificates representing shares of Community Capital common stock and cash to be issued or paid as merger consideration, subject to the allocation procedures described above in “Allocation of the Merger Consideration.”

In accordance with the allocation procedures, upon completion of the merger, Abbeville Capital shareholders will be entitled to elect to receive for each share of Abbeville Capital common stock either cash, shares of Community Capital common stock, or a combination of cash and shares of Community Capital common stock.

All shareholder elections must be made on the election form to be provided by Community Capital’s exchange agent. Upon completion of the merger, Community Capital’s exchange agent will provide the election forms to persons who are holders of Abbeville Capital common stock at the time the merger is completed. To be effective, an election form must be properly completed, accompanied by the stock certificate(s) in respect of which the election is being made, and received by the exchange agent no later than the election deadline specified in the election form. This election deadline will not be less than 20 business days after the form is mailed to Abbeville Capital shareholders.

Abbeville Capital shareholders should not deliver their stock certificates to Abbeville Capital, Community Capital, or Community Capital’s exchange agent until they receive the election form.

Community Capital will pay cash to Abbeville Capital shareholders in lieu of issuing any fractional shares of Community Capital common stock.

Abbeville Capital shareholders who wish to exercise dissenters’ rights must follow the procedures required by Article 13 of the South Carolina Business Corporation Act of 1988. See “Dissenters’ Rights.”

After Abbeville Capital shareholders surrender to the exchange agent their duly endorsed stock certificates representing Abbeville Capital common stock, the exchange agent will mail to those shareholders:

Community Capital is not obligated to deliver the stock certificates or other consideration to any former Abbeville Capital shareholder until that shareholder has properly surrendered its Abbeville Capital stock certificates. Whenever a dividend or other distribution with a record date after the date on which the merger is completed is declared by Community Capital on its common stock, the declaration will include dividends or other distributions on all shares of Community Capital common stock that may be issued in connection with the merger. Community Capital, however, will not pay any dividend or other distribution that is payable to any former Abbeville Capital shareholder until the shareholder has properly surrendered its Abbeville Capital stock certificates.

If any Abbeville Capital shareholder’s stock certificate has been lost, stolen, or destroyed, Community Capital’s exchange agent will pay the merger consideration and such dividends or distributions only upon the shareholder’s submission of an affidavit claiming the certificate to be lost, stolen, or destroyed and the posting of a bond as indemnity against any claim that may be made with respect to the certificate.

At the time the merger becomes effective, the stock transfer books of Abbeville Capital will be closed, and no transfer of shares of Abbeville Capital common stock by any shareholder will be made or recognized. If certificates representing shares of Abbeville Capital common stock are presented for transfer after the merger becomes effective, they will be canceled and exchanged, as applicable, for payment of the merger consideration and any undelivered dividends or distributions on Community Capital common stock declared after the merger.

Elections may be revoked or changed upon written notice to the exchange agent prior to the election deadline. If a shareholder revokes an election form and does not properly make a new election by the election deadline in respect of the shares of Abbeville Capital common stock covered by the revoked election form, it will be deemed that the holder did not make any election in respect of those shares. The exchange agent may use its reasonable discretion to determine whether any election, revocation, or change has been properly or timely made, and any good faith decisions of the exchange agent will be binding and conclusive. Neither Community Capital nor the exchange agent is under any obligation to notify any person of any defect in an election form.

Neither Abbeville Capital or Community Capital (or their respective boards of directors) nor their financial advisors make any recommendation as to whether you should choose Community Capital common stock or cash for your shares of Abbeville Capital common stock. You should consult with your own financial advisor about this decision.

In 1997, the board of directors of Community Capital began to discuss various strategic means of expanding its franchise. The board determined that the company could grow through branch acquisitions, whole bank acquisitions, or de novo branching, and that Community Capital would pursue opportunities as they arose.

William G. Stevens, the Chief Executive Officer of Community Capital, has known members of the executive management team of Abbeville Capital socially and professionally for many years. Around 1997, Mr. Stevens informally discussed Community Capital’s general overall expansion ideas with Thomas D. Sherard, Jr., the Chief Executive Officer of Abbeville Capital, with no specific timetable or schedule.

On April 1, 1999, Mr. Sherard advised Mr. Stevens that Abbeville Capital had entered into a merger agreement between Abbeville Capital and FLAG Financial Corporation of La Grange, Georgia. Because in Community Capital’s opinion the FLAG offer was insufficient and because Community Capital had always had a vague interest in acquiring Abbeville Capital because of its close proximity, Community Capital’s board of directors decided to make a competing offer to acquire Abbeville Capital.

Community Capital engaged JC Bradford & Company as financial advisors, and on June 15, 1999 presented a proposed letter of intent to acquire Abbeville Capital for a proposed purchase price of $10,000,000. Abbeville Capital received additional unsolicited offers, but rejected all of them in favor of the then existing agreement with FLAG Financial. On the day of the called shareholders’ meeting to consider the proposed merger with FLAG Financial, the parties agreed to terminate the proposed merger prior to the vote.

Community Capital continued to have a friendly relationship with the management and board of directors of Abbeville Capital. Informally, from time to time Mr. Stevens reminded Mr. Sherard that if Abbeville Capital desired to sell at any time, then Community Capital would appreciate the opportunity to be considered as a potential acquirer.

In May 2001, Community Capital’s board of directors instructed Mr. Stevens to determine if Abbeville Capital had an interest in merger discussions. On August 22, 2001, Mr. Stevens met with Mr. Sherard to discuss the possibilities of merging the two companies. Mr. Sherard reported that Abbeville Capital was not soliciting acquisition proposals, but recognized that the board of directors had a responsibility to review and respond to offers as they were presented. During the summer of 2001, the two companies continued discussions and outlined their respective ideas as to the possible strategic directions of their respective companies.

On August 28, 2001, several representatives of both companies met to discuss various pricing models and alternatives, along with general ideas as to board membership and executive management. Both parties determined that they needed to meet with their respective boards before further discussions could continue.

On September 7, 2001, the board of directors of Community Capital had a special meeting and approved the general outline of the merger and instructed management to move forward with appropriate consultants and prepare an agreement for presentation to Abbeville Capital’s board of directors. The management of Community Capital prepared pro forma information reflecting a proposed purchase price of $12.68 million, of which 50% would be paid with the common stock of Community Capital and 50% in cash. This information was forwarded to Abbeville Capital’s board of directors in anticipation of their board meeting on September 14, 2001. The board of directors of Abbeville Capital on September 14, 2001 voted to discontinue all negotiations due to the uncertainty and turmoil in the United States as a result of the terrorist attacks that occurred on September 11, 2001.

On May 27, 2003, the board of directors of Community Capital determined that Community Capital should seek strategic growth through de novo branching as well as potential acquisitions of smaller banks in Community Capital’s geographic footprint. On June 25, 2003 Mr. Stevens met with Mr. Sherard to discuss the possibility of merging the two companies. During this discussion, Mr. Stevens and Mr. Sherard briefly discussed two times book value as a general discussion target price. A brief discussion on possible mix of the stock and cash percentages occurred, and Mr. Stevens suggested that each party consider a mix of 50 percent cash and 50 percent stock as the form of merger consideration.

Mr. Sherard agreed to inform the board of directors of Abbeville Capital. At a directors meeting on June 27, 2003, the board of directors of Abbeville Capital agreed to engage an investment banking company, and Mr. Sherard contacted The Orr Group.

Community Capital’s management selected Sterne Agee & Leach as investment bankers to represent Community Capital, subject to board approval, which was obtained on June 18, 2003.

On July 16, 2003, a representative of Sterne Agee & Leach met with the board of directors of Community Capital and presented a proposed model to be used if the transaction went forward. This model reflected a total purchase price of $13.6 million with a 50 percent cash and 50 percent stock mix. Management was instructed to forward the model to Abbeville Capital on July 17, 2003.

Around August 7, 2003, Mr. Sherard informed Mr. Stevens that the board of directors of Abbeville Capital would consider further discussions only if the price were at least $15 million. Community Capital’s management in conjunction with Sterne Agee & Leach prepared several models using up to 60 percent cash in the transaction to be presented to the board of directors of Community Capital.

At a special meeting of the Community Capital board of directors on August 4, 2003, these various models were discussed, and the board authorized Mr. Stevens to negotiate with Mr. Sherard a transaction of up to $15 million and a combination of cash and stock that would be permissible as a tax-free reorganization for federal tax purposes. On August 6, 2003, officers of Community Capital met with officers of Abbeville Capital to present the models. During that meeting Mr. Sherard offered his opinion that Abbeville Capital’s board of directors would probably accept a $15 million purchase price consisting of 50% stock and 50% cash.

On August 19, 2003, the board of directors of Abbeville Capital met and approved a letter of intent to enter into the transaction. Both parties made a joint announcement as to the letter of intent. A Form 8-K was filed by Community Capital on August 19, 2003 announcing the execution of the letter of intent on August 19, 2003.

On October 14, 2003, the board of directors of each company approved the definitive merger agreement. A Form 8-K was filed by Community Capital on October 16, 2003 announcing the execution of the merger agreement on October 15, 2003.

Community Capital’s board of directors deliberated and approved the merger agreement and plan of merger at a meeting of the board held on October 15, 2003. In reaching its determination to approve and adopt the merger agreement and plan of merger, Community Capital’s board of directors consulted with Community Capital’s management and legal advisors and considered a number of factors. The following is a discussion of information and factors considered by Community Capital’s board of directors in reaching this determination. This discussion is not intended to be exhaustive, but includes the material factors considered by Community Capital’s board of directors. In the course of its deliberations with respect to the merger, Community Capital’s board of directors discussed the anticipated impact of the merger on Community Capital, Community Capital’s shareholders, and various other constituencies. Community Capital’s board of directors did not identify any material disadvantages expected to result from the merger during these discussions. In reaching its determination to approve the merger agreement and plan of merger, Community Capital’s board of directors did not assign any relative or specific weights to the factors considered in reaching such determination, and individual members of Community Capital’s board of directors may have given differing weights to different factors.

The Community Capital board of directors considered various factors, including the following, in helping to make its determination to vote in favor of the merger:

The Community Capital board of directors also reviewed the terms of the merger agreement and plan of merger, including the amount and form of consideration to be received by Abbeville Capital shareholders in the merger, as well as the general impact that the merger could be expected to have on the constituencies served by Community Capital, including its customers, employees, and communities.

Abbeville Capital’s Reasons for the Merger; Recommendation of the Board of Directors

In reaching its determination that the merger and the merger agreement and plan of merger are fair to, and in the best interest of, Abbeville Capital and its shareholders, Abbeville Capital’s board of directors consulted with its consultants and counsel, as well as with Abbeville Capital’s management, and considered a number of factors, including, without limitation, the following:

Abbeville Capital’s board of directors did not assign any specific or relative weight to the foregoing factors in their considerations.

Based on a thorough evaluation of these factors, Abbeville Capital’s board of directors believes the merger is in the best interests of Abbeville Capital and the Abbeville Capital shareholders. Abbeville Capital’s board of directors unanimously recommends that Abbeville Capital shareholders vote “FOR” approval of the merger agreement and plan of merger.

The board of directors of Abbeville Capital retained The Orr Group to act as financial advisor in connection with the merger and to render a written opinion to the board of directors of Abbeville Capital that the merger consideration (the “Merger Consideration”) to be received by the shareholders of Abbeville Capital as set forth in the merger agreement was fair, from a financial point of view, to the Abbeville Capital shareholders.

Pursuant to The Orr Group’s engagement agreement dated July 2, 2003, The Orr Group on October 14, 2003 rendered its oral opinion to the board of directors of Abbeville Capital as to the fairness, from a financial point of view, of the Merger Consideration to the stockholders of Abbeville Capital. The Orr Group subsequently confirmed its opinion in writing as of December 2, 2003, which is attached as Appendix B hereto and should be read in its entirety with respect to the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by The Orr Group in connection with its opinion. Abbeville Capital’s stockholders are urged to read the opinion in its entirety.

The Orr Group, located in Winston-Salem, North Carolina, is an investment banking firm that specializes in providing investment banking advisory services to financial institutions. The Orr Group’s principals have over 75 years of combined banking experience and have been involved in numerous bank related mergers and acquisitions. No limitations were imposed by Abbeville Capital upon The Orr Group with respect to rendering its opinion.

The Orr Group’s opinion to Abbeville Capital’s board of directors is directed only to the Merger Consideration as defined in the merger agreement and does not address the fairness, from a financial point of view, of any change in the merger consideration that may be agreed upon by Abbeville Capital and Community Capital in the future. The Orr Group’s opinion does not constitute a recommendation to any stockholder of Abbeville Capital as to how such stockholder should vote at the Abbeville Capital Special Meeting of Shareholders.

(ii) Reviewed the historical and current financial position and results of operations of Abbeville Capital and Community Capital;

(iii) Reviewed certain publicly available information concerning Abbeville Capital including Annual Reports for each of the years in the three year period ended December 31, 2002;

(iv) Reviewed certain publicly available information concerning Community Capital including Annual Reports on Form 10-K for each of the years in the three year period ended December 31, 2002;

(v) Reviewed certain available financial forecasts concerning the business and operations of Abbeville Capital and Community Capital that were prepared by management of Abbeville Capital and Community Capital, respectively;

(vi) Participated in discussions with certain officers and employees of Abbeville Capital to discuss the past and current business operations, financial condition and prospects of Abbeville Capital and Community Capital, as well as matters we believe relevant to our inquiry;

(vii) Reviewed certain publicly available operating and financial information with respect to other companies that we believe to be comparable in certain respects to Abbeville Capital and Community Capital;

(viii) Reviewed the current and historical relationships between the trading levels of Abbeville Capital’s common stock and Community Capital’s common stock and the historical and current market for the common stock of Abbeville Capital, Community Capital and other companies that we believe to be comparable in certain respects to Abbeville Capital or Community Capital;

(ix) Reviewed the nature and terms of certain other acquisition transactions that we believe to be relevant; and

In The Orr Group’s review and analysis, The Orr Group assumed and relied upon the accuracy and completeness of all of the financial and other information provided to The Orr Group or that was publicly available, and has not attempted independently to verify nor assumed responsibility for verifying any such information. With respect to the financial projections, The Orr Group assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of Abbeville Capital or Community Capital, as the case may be, and The Orr Group expresses no opinion with respect to such forecasts or the assumptions on which they are based. The Orr Group has not made or obtained, or assumed any responsibility for making or obtaining, any independent evaluations or appraisals of any of the assets (including properties and facilities) or liabilities of Abbeville Capital or Community Capital.

The Orr Group employed a variety of analyses, of which some are briefly summarized below. The analyses outlined below do not represent a complete description of the analyses performed by The Orr Group. The Orr Group believes that it is necessary to consider all analyses as a whole and that relying on a select number of the analyses, without considering the whole, could create a misunderstanding of the opinion derived from them. In addition, The Orr Group may have deemed various assumptions more or less probable than other assumptions, so that the ranges of valuations resulting from any particular analysis should not be taken to be The Orr Group’s view of the entire analysis as a whole.

The Orr Group compared the financial performance data of Abbeville Capital with a peer group of thirty-six publicly-traded banking companies that as of October 9, 2003 operated in the U.S., had total assets of equal to or less than $200 million, a return on average assets (ROAA) greater than 0.6%, and tangible common equity (TCE) between 6.5% and 13.5%. The peer group included the following:

The results of the analysis involve complex considerations of the selected companies and Abbeville Capital. The Orr Group compared performance indicators of Abbeville Capital with the median performance of the selected peer group. The performance indicators utilized by The Orr Group were for the quarter ending June 30, 2003. The comparison of indicators included the following:

The Orr Group reviewed data of selected transactions involving pending and completed bank merger transactions that it deemed pertinent to an analysis of the merger. The transactions selected were mergers that were pending or completed from August, 2001 through October 9, 2003 and where the selling bank had assets between $50 million and $200 million and LTM ROAA’s greater than or equal to 1.0% and less than or equal to 2.0%. From these transactions, The Orr Group selected six groups for comparison purposes:

The Orr Group compared the median pricing ratios of the comparable transactions to the pricing ratios of the merger. The pricing ratios included price to book, price to tangible book, price to earnings per share for the latest twelve months and the franchise premium to core deposit ratio. A summary of the analysis is included in the following table:

The Orr Group performed a dividend discount analysis to estimate a range of present values per share of Abbeville Capital’s common stock, assuming Abbeville Capital continued to operate as a stand-alone entity. The Orr Group discounted five years of estimated cash flows for Abbeville Capital based on projected growth rates and capital requirements. The Orr Group derived a range of terminal values by applying multiples ranging from 10 times to 12 times estimated forward net income for the terminal year 2007. The present value of the estimated excess cash flows and terminal value was calculated using discount rates ranging from 10% to 14%, which The Orr Group viewed as the appropriate range of discount rates for a company with Abbeville Capital’s risk characteristics. The analysis yielded a range of stand-alone, fully diluted values for Abbeville Capital’s stock of approximately $40.30 to $54.10, with a mid-point of $46.70. The Orr Group included the discount dividend analysis because it is a widely used valuation methodology; however the results of such methodology are highly dependent upon numerous assumptions.

In its contribution analysis, The Orr Group compared the pro forma financial contribution of Abbeville Capital to the combined company, particularly in terms of earnings contribution, to the pro forma ownership of Abbeville Capital shareholders in the combined company’s shareholder base. The contribution analysis did not take into account any merger adjustments or cost savings as a result of the merger. The contribution analysis revealed that Abbeville Capital was contributing 15.1%, 14.8% and 14.5% of the 2004, 2005 and 2006 pro forma estimated net income respectively. This was compared to the pro forma ownership for Abbeville Capital shareholders of 17.7% in the combined company assuming the transaction was an all stock transaction. The actual ownership will be less due to the fact that part of the consideration will be in the form of cash.

The Orr Group analyzed the financial impact of the merger on the estimated earnings per share for Community Capital. Based on Community Capital’s common stock trading at $19.00 per share and with anticipated synergies, the merger would be accretive to Community Capital’s GAAP earnings per share in 2004.

No company or transaction used in the above analyses as a comparison is identical to Abbeville Capital, Community Capital or the merger. Accordingly, an analysis of the results of the foregoing involves complex considerations and judgments concerning differences in financial growth and operating characteristics of the companies and other factors that could affect the public trading value of the companies to which they are being compared. Mathematical analysis in and of itself does not necessarily provide meaningful intercompany comparisons.

Pursuant to The Orr Group’s engagement agreement, Abbeville Capital agreed to pay The Orr Group a fee in the amount of $150,000 in connection with the proposed merger, of which $37,500 Abbeville Capital paid to The Orr Group upon execution of the merger agreement. The balance of the fee is due at the time the merger is consummated and is contingent upon the consummation of the merger. Further, Abbeville Capital has agreed to reimburse The Orr Group for legal and other reasonable expenses incurred in connection with its engagement and to indemnify The Orr Group and its affiliates, directors, agents, employees and controlling persons in connection with certain matters related to rendering its opinion, including liabilities under securities laws.

THE WRITTEN OPINION OF THE ORR GROUP TO ABBEVILLE CAPITAL IS ATTACHED AS APPENDIX B TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION OF THE ABBEVILLE CAPITAL FAIRNESS OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX B. ABBEVILLE CAPITAL STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY THE ORR GROUP IN CONNECTION WITH RENDERING ITS OPINION.

Subject to the conditions to the obligations of the parties to complete the merger, the merger will become effective on the date and at the time of the filing of the articles of merger with the South Carolina Secretary of State. Abbeville Capital and Community Capital will use their reasonable efforts to cause all conditions and obligations to be performed or fulfilled by them so that the merger shall be consummated. Abbeville Capital and Community Capital anticipate that the merger will become effective in the first quarter of 2004. However, delays in completion of the merger could occur.

Community Capital and Abbeville Capital are required to complete the merger only after the satisfaction of various conditions, which are set forth in Article IX of the merger agreement attached as Appendix A to this proxy statement/prospectus. These conditions include the following:

The foregoing is a summary of the applicable closing conditions. You should refer to the merger agreement for a complete listing of the conditions to completion of the merger.

Abbeville Capital and Community Capital have agreed in the merger agreement to use their reasonable efforts to perform or fulfill all conditions and obligations required to be performed or fulfilled by them under the merger agreement so that the merger will be completed.

There are no assurances as to whether or when all of the conditions to the merger can or will be satisfied or waived. Except in limited circumstances, if all conditions for the merger have not been satisfied or waived on or before August 31, 2004, the board of directors of either Abbeville Capital or Community Capital Corporation may terminate the merger agreement and abandon the merger. See “— Waiver, Amendment and Termination of the Merger Agreement; Termination Fee.”

The merger is subject to approval by the Federal Reserve Board pursuant to Section 3(a)(5) of the Bank Holding Company Act of 1956, as amended. For 30 days after Federal Reserve Board approval of the merger, the U.S. Department of Justice may challenge the merger on antitrust grounds.

In reviewing a transaction under the Bank Holding Company Act, the Federal Reserve Board also considers the financial condition, managerial resources, and future prospects of the companies and their subsidiary banks and the convenience and needs of the communities to be served. Consideration of financial condition generally focuses on capital adequacy and debt levels, and consideration of managerial resources includes a review of the competency, experience, and integrity of the officers, directors, and principal shareholders of the companies and their subsidiary banks.

The analysis of convenience and needs issues includes the parties’ performance under the Community Reinvestment Act of 1977, as amended. Under the Community Reinvestment Act, the Federal Reserve Board must take into account the record of performance of each of the parties to a merger and their subsidiaries in meeting the needs of the entire community, including the low- and moderate-income neighborhoods in which they operate. Each of Community Capital’s and Abbeville Capital’s subsidiary banks has a “satisfactory” rating under the Community Reinvestment Act.

As noted above, the merger may not be consummated until at least 30 days after Federal Reserve Board approval, during which time the U.S. Department of Justice may challenge the merger on antitrust grounds. The commencement of an antitrust action by the Department of Justice would stay the effectiveness of Federal Reserve Board approval of the merger, unless a court specifically orders otherwise. In reviewing the merger, the Department of Justice could analyze the merger’s effect on competition differently from the Federal Reserve Board, and, thus, the Department of Justice could possibly reach a different conclusion than the Federal Reserve Board regarding the merger’s competitive effects. Additionally, private persons or state attorneys general could file antitrust actions, irrespective of the approvals of the Federal Reserve Board or the Department of Justice.

In addition to approvals required for the merger, a condition to completion of the merger is that all approvals necessary for the merger of CapitalBank and The Bank of Abbeville be obtained. Specifically, the approvals of the South Carolina State Board of Financial Institutions and the Federal Deposit Insurance Corporation are required for the merger of the two banks. Although Community Capital and Abbeville Capital expect to obtain these required regulatory approvals, there can be no assurance as to if and when they will be obtained.

Before or at the time of completion of the merger, Abbeville Capital or Community Capital may waive any default in the performance of any term of the merger agreement by the other party or may waive or extend the time for the compliance or fulfillment by the other party of any and all of that party’s obligations under the merger agreement. In addition, either party may waive any of the conditions precedent to its obligations under the merger agreement. No waiver or extension will be valid or permitted, however, if it would result in a violation of any law or governmental regulation. To be effective, a waiver must be in writing and signed by the waiving party. In addition, to the extent permitted by law, the parties to the merger agreement may amend the agreement by a writing signed by both parties.

At any time before completion of the merger, the boards of directors of Community Capital and Abbeville Capital may agree in writing to terminate the merger agreement. In addition, either Abbeville Capital’s board of directors or Community Capital’s board of directors may terminate the merger agreement in any of the following circumstances:

Abbeville Capital may terminate the merger agreement if its board of directors determines, based upon the advice of counsel, that another acquisition proposal constitutes a superior proposal to the merger, from a financial point of view, provided that Abbeville Capital may not terminate the merger agreement for this reason unless,

Abbeville Capital has agreed to pay a termination fee to Community Capital of $450,000 plus the out-of-pocket expenses of Community Capital described in the merger agreement that is attached as Appendix A to this proxy statement/prospectus. This fee is payable by Abbeville Capital to Community Capital if either party terminates the merger agreement upon the determination, that another acquisition proposal involving Abbeville Capital or any of its subsidiaries constitutes a superior proposal to the merger, from a financial point of view, and Abbeville Capital then within one year enters into a definitive agreement for the consummation of the superior proposal. Alternatively, in the event Abbeville Capital or any of its subsidiaries receives another acquisition proposal and Abbeville Capital’s board of directors fails to recommend or continue recommending approval of the merger to Abbeville Capital’s shareholders, resulting in a failure to obtain the required shareholder approval, and within one year Abbeville Capital then enters into a definitive agreement for the consummation of the acquisition, Abbeville Capital has agreed to pay a fee of $450,000 to Community Capital, plus the out-of-pocket expenses of Community Capital described in the merger agreement that is attached as Appendix A to this proxy statement/prospectus.

Additionally, if the merger agreement is terminated by either Community Capital or Abbeville Capital due to a breach by the other party of any of its representations and warranties or, in any material respect, any of its covenants contained in the merger agreement, the terminating party will be entitled to reimbursement from the other party of its costs and expenses relating to the merger and entering into the merger agreement.

Before the merger becomes effective, the merger agreement requires Abbeville Capital and its subsidiaries to conduct their business only in the ordinary course substantially in the same manner as conducted at the time of signing of the merger agreement and, except in cases where Community Capital has given prior written consent, imposes specific limitations on the operations of Abbeville Capital during this period. The specific restrictions are listed in Article VII of the merger agreement, which is attached as Appendix A to this proxy statement/prospectus.

Abbeville Capital also has agreed that neither it nor any of its affiliates or representatives will directly or indirectly solicit, initiate, or encourage any other proposal for the acquisition of Abbeville Capital or its subsidiaries or participate in any discussion or negotiations to facilitate such an acquisition proposal. Nevertheless, in the event that Abbeville Capital or any of its subsidiaries receives another acquisition proposal from an unaffiliated party and the board of directors of Abbeville Capital concludes that a reasonable likelihood exists that it constitutes a superior proposal to the merger, from a financial point of view, Abbeville Capital may, subject to a confidentiality agreement and provided that neither Abbeville Capital nor any of its representatives solicited, initiated, or encouraged the other proposal, furnish information in response to a request for information made in connection with the other proposal. It also may enter into negotiations in furtherance of the other proposal. However, Abbeville Capital can take these actions only if its board of directors has determined, based on the written advice of outside counsel, that failing to take the action would violate the board’s fiduciary duties. Unless the merger agreement has been terminated, the board of directors of Abbeville Capital must notify Community Capital immediately of any and all communications regarding or in anticipation of an acquisition proposal and of any acquisition proposal that is made. Additionally, unless the merger agreement has been terminated, Abbeville Capital will keep Community Capital promptly advised of all developments relating to any acquisition proposal or anticipated acquisition proposal.

The merger is not expected to change the present management team or board of directors of Community Capital or CapitalBank except as follows: Community Capital and CapitalBank have agreed to enter into an employment agreement with Thomas D. Sherard, Jr., the President of Abbeville Capital, at the time the merger is completed. Under this employment agreement, Mr. Sherard will serve as an Executive Vice President of CapitalBank. Also upon completion of the merger, Patricia P. Howie, who is currently an officer of Abbeville Capital, will enter into an employment agreement with Community Capital and CapitalBank. Ms. Howie will serve as a Senior Vice President of CapitalBank. The terms of these employment agreements are summarized below in “—Interests of Abbeville Capital’s Executive Officers and Directors in the Merger—Employment Agreements.”

After the merger is completed, Joseph L. Savitz, Jr., a current member of the board of directors of Abbeville Capital, is expected to be elected as a director of Community Capital. After his initial term of not less than two years, Mr. Savitz will be subject to the same nomination and election procedures as the other directors of the board.

Information concerning the current management of Community Capital is included under the heading “Information about Community Capital.” For additional information regarding the interests of Abbeville Capital’s management and directors in the merger, see “— Interests of Abbeville Capital’s Executive Officers and Directors in the Merger.”

Interests of Abbeville Capital’s Executive Officers and Directors in the Merger

General. Abbeville Capital’s executive officers and directors have certain interests in the merger that are in addition to their interests as shareholders of Abbeville Capital generally, Abbeville Capital’s board of directors was aware of these interests and considered them, among other matters, in approving and recommending shareholder approval of the merger agreement and plan of merger.

Employment Agreements. At the time of completion of the merger, Thomas D. Sherard, Jr., the current President and a director of Abbeville Capital, will enter into a five-year employment agreement with Community Capital and CapitalBank providing for an initial annual salary of $90,891.69, and an initial grant of options to purchase 6,000 shares of Community Capital common stock. Mr. Sherard will serve as an Executive Vice President of CapitalBank. The employment agreement also provides that, to compensate Mr. Sherard for his services to Abbeville Capital in connection with the merger, Mr. Sherard is to receive a lump sum cash bonus of $70,000 no later than six months after the closing of the merger.

At the time of completion of the merger, Patricia P. Howie, currently an executive officer and a director of Abbeville Capital, will enter into a three-year employment agreement with Community Capital and CapitalBank providing for an initial annual salary of $70,011.18, and an initial grant of options to purchase 4,000 shares of Community Capital common stock. Ms. Howie will serve as a Senior Vice President of CapitalBank. Also, the employment agreement provides that, to compensate Ms. Howie for her services to Abbeville Capital in connection with the merger, Ms. Howie is to receive a lump sum cash bonus of $50,000 no later than six months after the closing of the merger.

Mr. Sherard and Ms. Howie will be entitled to participate in any and all employee benefit programs and compensation plans from time to time maintained by Community Capital and its subsidiaries and available to officers of CapitalBank. In addition, Mr. Sherard will be provided an automobile. Mr. Sherard and Ms. Howie will be entitled to paid vacation in accordance with CapitalBank’s policy for its executives.

Pursuant to their respective employment agreements with Community Capital and CapitalBank, Mr. Sherard and Ms. Howie will agree during the term of their respective employment agreements and for a period of one year after termination of their respective employment, not to compete with Community Capital or its subsidiaries within the counties of Abbeville and Anderson, South Carolina.

Mr. Sherard and Ms. Howie have entered into Salary Continuation Agreements with The Bank of Abbeville. Under these agreements, if Mr. Sherard or Ms. Howie dies prior to reaching age 65, Mr. Sherard or Ms. Howie estate will receive a lump sum payment of $8,360 or $8,347, respectively, based on accrual formulas calculated as of May 2004. As of May 2004, if Mr. Sherard or Ms. Howie are disabled or are terminated prior to reaching age 65 for reasons other than death, disability, cause, or a change in control, Mr. Sherard or Ms. Howie are entitled to annual payments of $2,739 and $2,378, respectively, for fifteen years following attaining age 65, respectively. The amount of these annual payments increases as years of service (and thus annual compensation) increase, with Mr. Sherard and Ms. Howie being entitled to annual installments of $53,300 and $40,000, respectively, beginning on June 2020 and June 2018, respectively. Following a change in control of The Bank of Abbeville, like that contemplated by the proposed merger of The Bank of Abbeville into CapitalBank, Mr. Sherard and Ms. Howie no longer need to wait until May 2020 or May 2018, respectively, to be vested in a larger amount. Instead, due to the change in control, Mr. Sherard and Ms. Howie are entitled to payments beginning at age 65 as follows: $53,300 per year for fifteen years for Mr. Sherard, and $40,000 per year for fifteen years for Ms. Howie.

Abbeville Capital Board of Directors. After the merger is completed, Joseph L. Savitz, Jr., a member of the board of directors of Abbeville Capital, is expected to be elected as a director of Community Capital. During fiscal year 2003, each of Community Capital’s directors received a fee of $100 for attending each regular and special board or committee meetings. Each of Community Capital’s directors is also a director of CapitalBank. During fiscal year 2003, each director of CapitalBank received a retainer fee of $300 per month. Community Capital, or CapitalBank, as applicable, also reimburses directors for out-of-pocket expenses reasonably incurred by them in the discharge of their duties as directors of Community Capital or of CapitalBank. For a more detailed understanding of how Community Capital’s directors are compensated, please see the “Compensation of Directors” information contained under the heading “Information About Community Capital.”

Directors and Officers Insurance. Community Capital also has agreed to maintain, for a period of at least three years after completion of the merger, Abbeville Capital’s existing directors’ and officers’ liability insurance policy or a comparable policy.

Interests of Community Capital’s Executive Officers and Directors in the Merger

The following discussion summarizes the material anticipated United States federal income tax consequences of the merger to Abbeville Capital shareholders who hold their shares of Abbeville Capital common stock as capital assets. This discussion does not address the tax consequences of transactions effectuated prior or subsequent to, or concurrently with, the merger (whether or not such transactions are undertaken in connection with the merger). In addition, this discussion does not address all of the federal income tax consequences that may be important to each taxpayer in light of its particular circumstances, nor does this discussion address the federal income tax consequences that may be applicable to taxpayers subject to special treatment under the Internal Revenue Code, such as:

No information is provided in this document or the tax opinions referred to below with respect to the tax consequences, if any, of the merger under applicable foreign, state, local, and other tax laws. This discussion and the tax opinions are based upon the provisions of the Internal Revenue Code, applicable Treasury regulations, administrative rulings and judicial decisions, all as in effect as of the date of this proxy statement/prospectus. There can be no assurance that future legislative, administrative or judicial changes or interpretations, which changes could apply retroactively, will not affect the accuracy of this discussion or the statements or conclusions set forth in the tax opinions referred to below.

In connection with the filing of the registration statement of which this proxy statement/prospectus is a part, Community Capital and Abbeville Capital have received an opinion of Elliott Davis, LLC attached as Appendix C to this proxy statement/prospectus, that, as of the date of such opinion, if certain factual circumstances exist, the merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code and that Community Capital and Abbeville Capital will each be a party to that reorganization.

The opinion of Elliott Davis, LLC regarding the merger has relied on (1) representations and covenants made by Community Capital and Abbeville Capital, including those contained in certificates of officers of Community Capital and Abbeville Capital, and (2) specified assumptions, including an assumption regarding the completion of the merger in the manner contemplated by the merger agreement and plan of merger. In addition, the opinion of Elliott Davis, LLC has assumed the absence of changes to the anticipated facts or changes in law between the date of this proxy statement/prospectus and the closing date. If any of those representations, covenants, or assumptions is inaccurate, the tax consequences of the merger could differ from those described in the opinion that Elliott Davis, LLC has delivered.

The opinion of Elliott Davis, LLC does not bind the Internal Revenue Service and does not preclude the IRS or the courts from adopting a contrary position. Community Capital and Abbeville Capital do not intend to obtain a ruling from the IRS on the tax consequences of the merger. If the IRS were to assert successfully that the merger is not a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, then each Abbeville Capital shareholder would be required to recognize gain or loss equal to the difference between (i) the sum of the fair market value of the Community Capital common stock and the amount of cash received in the exchange and (ii) the shareholder’s adjusted tax basis in the Abbeville Capital stock surrendered for such consideration. Such gain or loss would be a capital gain or loss, provided that such shares of Abbeville Capital common stock were held as capital assets by the shareholder at the effective time of the merger. Such capital gain or loss recognized would be long-term capital gain or loss if the Abbeville Capital shareholder’s holding period for the Abbeville Capital common stock was more than one year. In such event, an Abbeville Capital shareholder’s total initial tax basis in the Community Capital common stock received would be equal to its fair market value at the effective time of the merger, and the shareholder’s holding period for the Community Capital common stock would begin on the day after the merger.

Assuming that the merger qualifies as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, neither Community Capital nor Abbeville Capital will recognize any gain or loss as a result of the merger. The federal income tax consequences of the merger qualifying as a reorganization to a particular Abbeville Capital shareholder will vary depending primarily on whether the shareholder exchanges his or her

Abbeville Capital common stock solely for Community Capital common stock (except for cash received instead of a fractional share of Community Capital common stock), solely for cash, or for a combination of Community Capital common stock and cash. In the event an Abbeville Capital shareholder makes an election to receive solely cash or a combination of Community Capital common stock and cash, such shareholder will not know the extent to which the shareholder’s elected form of merger consideration will be given effect. Regardless of whether an Abbeville Capital shareholder elects to receive Community Capital common stock, cash, or a combination of Community Capital common stock and cash, the federal income tax consequences to such shareholder will depend on the actual merger consideration received by the shareholder.

Abbeville Capital Shareholders Receiving Only Community Capital Common Stock. No gain or loss will be recognized by a holder of Abbeville Capital common stock as a result of the surrender of shares of Abbeville Capital common stock solely in exchange for shares of Community Capital common stock pursuant to the merger (except with respect to cash received instead of fractional shares of Community Capital common stock, as discussed below). The aggregate tax basis of the shares of Community Capital common stock received in the merger (including any fractional shares of Community Capital common stock deemed received) will be the same as the aggregate tax basis of the shares of Abbeville Capital common stock surrendered in exchange for the Community Capital common stock. The holding period of the shares of Community Capital common stock received (including any fractional shares of Community Capital common stock deemed received) will include the holding period of shares of Abbeville Capital common stock surrendered in exchange for the Community Capital common stock, provided that such shares were held as capital assets of the shareholder at the effective time of the merger.

Abbeville Capital Shareholders Receiving Only Cash. A holder of Abbeville Capital common stock that does not receive any shares of Community Capital common stock pursuant to the merger (and is not treated as constructively owning, after the merger, Community Capital common stock held by certain family members and entities affiliated with the holder under the Internal Revenue Code) will generally recognize gain or loss equal to the difference between the amount of cash received and the holder’s adjusted tax basis in the shares of Abbeville Capital common stock exchanged in the merger. Such gain or loss will be a capital gain or loss, provided that such shares of Abbeville Capital common stock were held as capital assets by the shareholder at the effective time of the merger. Such capital gain or loss will be a long-term capital gain or loss to the extent that, at the effective time of the merger, the holder has a holding period in such Abbeville Capital common stock of more than one year. The Internal Revenue Code contains limitations on the extent to which a taxpayer may deduct capital losses from ordinary income.

Abbeville Capital Shareholders Receiving Both Cash and Community Capital Common Stock. If a holder of Abbeville Capital common stock receives both Community Capital common stock and cash (other than cash in lieu of a fractional interest in Community Capital common stock) in the merger, that holder will recognize gain, if any, equal to the lesser of

Any recognized gain could be taxed as a capital gain or a dividend. Such gain will generally be capital gain (provided that such shares of Abbeville Capital common stock were held as capital assets by the shareholder at the effective time of the merger), unless the holder’s exchange of Abbeville Capital common stock for cash and Community Capital common stock “has the effect of the distribution of a dividend” after giving effect to the constructive ownership rules of the Internal Revenue Code, in which case such gain might be treated as ordinary income. Any capital gain recognized generally will be long-term capital gain to the extent that, at the effective time of the merger, the holder has a holding period in the Abbeville Capital common stock exchanged in the merger of more than one year. Because the determination of whether a cash payment will be treated as having the effect of a dividend depends primarily upon the facts and circumstances of each Abbeville Capital shareholder, Abbeville Capital shareholders are urged to consult their own tax advisors regarding the tax treatment of any cash received in the merger.

The aggregate tax basis of the shares of Community Capital common stock received in the merger (including any fractional shares of Community Capital common stock deemed received) will be the same as the aggregate tax basis of the shares of Abbeville Capital common stock surrendered in exchange for such Community Capital common stock in the merger, increased by the amount of gain recognized in the exchange (whether characterized as capital gain or a dividend) and reduced by the amount of cash received in the exchange. The holding period of the shares of Community Capital common stock received (including any fractional share of Community Capital common stock deemed received) will include the holding period of shares of Abbeville Capital common stock surrendered in exchange for the Community Capital common stock, provided that such shares were held as capital assets of the shareholder at the effective time of the merger. An Abbeville Capital shareholder who receives a combination of Community Capital common stock and cash in exchange for his or her Abbeville Capital common stock will not be permitted to recognize any loss for federal income tax purposes.

Section 1.368-3 of the Treasury Regulations requires each shareholder who receives shares of Community Capital common stock shares pursuant to the merger to attach to his or her federal income tax return for the taxable year in which the merger occurs a complete statement of all facts pertinent to the non-recognition of gain or loss on the merger. Shareholders should consult their own tax advisors regarding this disclosure requirement.

An Abbeville Capital shareholder’s federal income tax consequences will also depend on whether his or her shares of Abbeville Capital common stock were purchased at different times at different prices. If they were, the Abbeville Capital shareholder could realize gain with respect to some of the shares of Abbeville Capital common stock and loss with respect to other shares. Such Abbeville Capital shareholder would have to recognize such gain to the extent such shareholder receives cash with respect to those shares in which the shareholder’s adjusted tax basis is less than the amount of cash plus the fair market value at the effective time of the merger of the Community Capital common stock received, but could not recognize loss with respect to those shares in which the Abbeville Capital shareholder’s adjusted tax basis is greater than the amount of cash plus the fair market value at the effective time of the merger of the Community Capital common stock received. Any disallowed loss would be included in the adjusted basis of the Community Capital common stock. Such Abbeville Capital shareholder is urged to consult his or her own tax advisor respecting the tax consequences of the merger to that shareholder.

Cash Instead of Fractional Shares. Holders of Abbeville Capital common stock who receive cash instead of a fractional share of Community Capital common stock will be treated as having received the fractional share in the merger and then as having the fractional share redeemed by Community Capital in exchange for the cash actually distributed instead of the fractional share, with such redemption qualifying as an exchange under Section 302 of the Internal Revenue Code. Accordingly, such holders will generally recognize gain or loss equal to the difference between the tax basis of the holder’s Abbeville Capital common stock allocable to that fractional share and the amount of cash received. The gain or loss generally will be capital gain or loss and long-term capital gain or loss if the Abbeville Capital stock exchanged has been held for more than one year.

Backup Withholding. A holder of Abbeville Capital common stock may be subject, under certain circumstances, to backup withholding at a rate of 30.5% with respect to the amount of cash, if any, received in the merger, including cash received instead of fractional shares, unless the holder provides proof of an applicable exemption or correct taxpayer identification number and otherwise complies with applicable requirements of the backup withholding rules. Any amount withheld under the backup withholding rules is not additional tax and may be refunded or credited against the holder’s federal income tax liability, so long as the required information is furnished to the IRS.

THE PRECEDING SUMMARY DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER. ACCORDINGLY, ABBEVILLE CAPITAL SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS, AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.

Community Capital will account for the merger as a purchase transaction for accounting and financial reporting purposes. Under the purchase method, Community Capital will record at fair value the acquired assets and assumed liabilities of Abbeville Capital. To the extent the total purchase price exceeds the fair value of the net tangible and identifiable intangible assets acquired, Community Capital will record goodwill. Under current accounting standards, any goodwill will be included as an asset on Community Capital’s consolidated balance sheet after the merger is completed and will not be amortized against earnings. Thereafter, the goodwill will be evaluated at least annually to determine if there is any impairment in the value of the goodwill. Any impairment and resulting write-down of goodwill will be included in Community Capital’s consolidated results of operations for periods after the merger is completed. Financial statements of Community Capital issued after completion of the merger will reflect the impact of Abbeville Capital, but past periods shown will not be restated to reflect Abbeville Capital’s historical financial position or results of operations.

The merger agreement provides that each of the parties will pay all of its own expenses in connection with the transactions contemplated by the merger agreement, except in situations where the merger agreement is terminated, as described above in “—Waiver, Amendment and Termination of the Merger Agreement; Termination Fee.”

Article 13 (entitled “Dissenters’ Rights”) of the South Carolina Business Corporation Act of 1988 sets forth the rights of Abbeville Capital shareholders who dissent from the merger. The following is a summary of the material terms of the statutory procedures to be followed by holders of Abbeville Capital common stock in order to dissent from the merger and perfect dissenters’ rights under the South Carolina Business Corporation Act of 1988, as amended (the “South Carolina Act”). The following summary does not purport to be a complete statement of the provisions of the South Carolina Act relating to the rights of dissenting shareholders and is qualified in its entirety by reference to Article 13 of the South Carolina Act, a copy of which is attached to this proxy statement/prospectus as Appendix D. If you intend to exercise your dissenters’ rights, you should review carefully Appendix D and consult with legal counsel so that you can be in strict compliance with Article 13 of the South Carolina Act. This proxy statement/prospectus does not grant any rights to dissenters that are in addition to or in any way modify the rights of dissenters under Article 13 of the South Carolina Act. The only rights of dissent for shareholders are those provided by Article 13 of the South Carolina Act.

If you elect to exercise a right to dissent and demand appraisal under Article 13, you must satisfy each of the following conditions:

If the above requirements are not satisfied and the merger is completed, you will not be entitled to payment for your Abbeville Capital shares under the provisions of Article 13 of the South Carolina Act.

For purposes of this summary of dissenters’ rights, the term “corporation” refers to Abbeville Capital prior to completion of the merger or Community Capital as the surviving corporation upon completion of the merger.

The demand notice must be executed by the holder of record of shares of common stock as to which dissenters’ rights are to be exercised. A beneficial owner may assert dissenters’ rights only if it (i) notifies the corporation in writing of the name and address of the holder of record, if known to the beneficial owner, and (ii) dissents with respect to all shares of common stock of which it is the beneficial owner or over which it has the power to direct the vote. A record owner, such as a broker, who holds shares of common stock as a nominee for others may exercise dissenters’ rights with respect to the shares held for all or less than all beneficial owners of shares as to which it is the record owner, provided the record owner dissents with respect to all shares of common stock beneficially owned by any one person. In this case, the demand notice submitted by the broker, as record owner, must set forth the name and address of the shareholder who is objecting to the merger and demanding payment for its shares.

If the merger is approved by Abbeville Capital’s shareholders, the corporation will be required to mail by registered or certified mail, return receipt requested, a written dissenters’ notice to all shareholders who have satisfied the above requirements. The dissenters’ notice must be sent no later than 10 days after shareholder approval of the merger is obtained, and it must:

A shareholder who receives a dissenters’ notice must demand payment (a “first demand for payment”) and deposit the shareholder’s share certificates in accordance with the terms of the dissenters’ notice. A shareholder who demands payment and deposits its share certificates retains all other rights of a shareholder until those rights are canceled or modified by the merger. A shareholder who does not demand payment or deposit its share certificates where required, each by the date set forth in the dissenters’ notice, is not entitled to payment for its shares under the South Carolina Act. As soon as the merger is completed, or within 60 days after receipt of a demand for payment, the corporation is required to pay each dissenting shareholder who complied with the requirements of Article 13 of the South Carolina Act the amount it estimates to be the fair value of such shareholder’s shares, plus interest accrued from the effective date of the merger to the date of payment. The payment must be accompanied by:

If the merger is not consummated within 60 days after the date set for demanding payment and depositing share certificates, Abbeville Capital must, pursuant to the South Carolina Business Act, return the deposited certificates. If the merger is consummated after returning the deposited certificates, Abbeville Capital must send a new dissenters’ notice and repeat the payment demand procedure.

A shareholder may notify the corporation in writing of the shareholder’s own estimate of the fair value of the shareholder’s shares of Abbeville Capital common stock and amount of interest due and demand payment (a “second demand for payment”) of the excess of the shareholder’s estimate of the fair value of the shareholder’s shares over the amount previously paid by the corporation if:

A shareholder waives the right to make a second demand for payment unless the shareholder makes the demand in writing within 30 days of the date the corporation’s made or offered payment of its estimate of fair value. A shareholder who fails to make its second demand for payment within such 30-day period will be deemed to have withdrawn its dissent and demand for payment.

If a second demand for payment remains unsettled, the corporation shall commence a proceeding within 60 days after receiving the second demand for payment, by filing a complaint with the South Carolina Circuit Court located in Greenwood County, South Carolina to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within such 60-day period, the corporation shall pay the dissenter whose second demand for payment remains unsettled the amount demanded. In such an appraisal proceeding, the court will determine all costs of the proceeding and assess the costs as it finds equitable. The proceeding is to be tried as in other civil actions. However, the dissenting shareholder will not have the right to a trial by jury. The court also may assess the fees and expenses of counsel and experts for the respective parties, in the amounts the court finds equitable, as follows:

If the court finds that the services of counsel for any dissenting shareholder were of substantial benefit to other dissenting shareholders and that the fees for those services should not be assessed against the corporation, the court may award to the counsel reasonable fees to be paid out of the amounts awarded the dissenting shareholders who were benefited.

The merger agreement provides that it is a condition to Community Capital’s obligation to complete the merger that dissenters’ rights shall not have been exercised with respect to more than 10% of Abbeville Capital’s common stock.

To the extent that you receive shares of Community Capital common stock in the merger, you will become subject to Community Capital’s articles of incorporation and bylaws instead of Abbeville Capital’s articles of incorporation and bylaws. References in this proxy statement/prospectus to Community Capital’s articles of incorporation are to its articles of incorporation, as amended, and its bylaws, as amended; and references to Abbeville Capital’s articles of incorporation and bylaws are to its articles of incorporation, as amended, and its amended and restated bylaws. Accordingly, as summarized below, differences exist between the rights of Abbeville Capital shareholders and those of Community Capital shareholders. Community Capital and Abbeville Capital are South Carolina corporations subject to the South Carolina Act. The following summary is general, is not intended to be a complete statement of all differences that may, under given situations, be material to shareholders, and is qualified in its entirety by reference to the South Carolina Act, Community Capital’s articles of incorporation and bylaws, and Abbeville Capital’s articles of incorporation and bylaws.

The provisions of Community Capital’s articles of incorporation and bylaws described below under the headings, “Authorized Capital Stock,” “Amendment of Articles of Incorporation and Bylaws,” “Election of Directors,” “Removal of Directors,” “Shareholder Nominations,” “Shareholder Proposals,” and “Mergers, Consolidations, and Sales of Assets,” “Consideration of Other Constituencies,” and the provisions of the South Carolina Act described under the headings “Control Share Acquisition Provisions,” “Business Combinations with Interested Shareholders,” and “Dissenters’ Rights,” are referred to herein as the “protective provisions.” In general, one purpose of the protective provisions is to assist Community Capital’s board of directors in playing a role in connection with attempts to acquire control of Community Capital, so that the board of directors can protect the interests of Community Capital and its shareholders as appropriate under the circumstances, including, if the board of directors determines that a sale of control is in the best interests of Community Capital and its shareholders, by enhancing the board of directors’ ability to maximize the value to be received by the shareholders upon a sale.

Although Community Capital’s management believes that the protective provisions are beneficial to Community Capital’s shareholders, the protective provisions also may tend to discourage some takeover bids. As a result, shareholders may be deprived of opportunities to sell some or all of their shares at prices that represent a premium over prevailing market prices. On the other hand, defeating undesirable acquisition offers can be a very expensive and time-consuming process. To the extent that the protective provisions discourage undesirable proposals, Community Capital may be able to avoid those expenditures of time and money.

The protective provisions also may discourage open market purchases by a potential acquirer. Open market purchases could temporarily increase the market price of Community Capital common stock, enabling shareholders to sell their shares at a price higher than that which otherwise would prevail. In addition, the protective provisions may decrease the market price of Community Capital common stock by making the stock less attractive to persons who invest in anticipation of price increases from potential acquisition attempts. The protective provisions also may make it more difficult and time consuming for a potential acquirer to obtain control of Community Capital by replacing the board of directors and management. Furthermore, the protective provisions may make it more difficult for Community Capital’s shareholders to replace the board of directors or management, even if a majority of the shareholders believes such replacement is in the best interests of Community Capital. As a result, the protective provisions may tend to perpetuate the incumbent board of directors and management.

Community Capital. Community Capital’s authorized capital stock consists of 10,000,000 shares of common stock, par value $1.00 per share, and 2,000,000 shares of a special class of stock, par value $1.00 per

share, the rights and preferences of which may be designated as the board of directors may determine. As of September 30, 2003, 3,440,899 shares of Community Capital common stock were outstanding and held of record by approximately 1,200 shareholders of record, and 74,471 shares were reserved for issuance under Community Capital’s stock option plans and dividend reinvestment plan. No shares of the special class of stock are outstanding. Community Capital’s shareholders do not have preemptive rights. Preemptive rights give shareholders the right to purchase additional shares of common stock upon subsequent issuances of common stock or of rights to purchase common stock.

The authorized but unissued shares of Community Capital common stock may be issued from time to time for adequate consideration consisting of any tangible or intangible property or benefit to Community Capital and for any valid corporate purpose, including stock splits, stock dividends, employee benefit and compensation plans, acquisitions, and public or private sales for cash. Shares could be used to dilute the stock ownership of persons seeking to obtain control of Community Capital. In addition, the sale of a substantial number of shares of common stock to persons who have an understanding with Community Capital about the voting of the shares, or the distribution or declaration of a dividend of shares or the right to receive shares of common stock to current shareholders, may have the effect of discouraging or increasing the cost of unsolicited attempts to acquire control of Community Capital.

In addition, Community Capital’s board may issue, without any action by Community Capital shareholders, shares of Community Capital’s special stock, in one or more series, with voting and other rights as the board of directors may determine from time to time. Among other potential uses, the board could use special stock to dilute the stock ownership of persons seeking to obtain control of Community Capital or in connection with a shareholder rights plan, as a defensive measure against unwanted takeover attempts.

Abbeville Capital. Abbeville Capital’s authorized capital stock consists of 1,000,000 shares of common stock, par value $5.00 per share. As of November 26, 2003, 237,615 shares of common stock were issued and outstanding and held of record by approximately 455 shareholders of record. Like Community Capital’s shareholders, Abbeville Capital’s shareholders do not have preemptive rights.

Abbeville Capital’s articles of incorporation do not authorize any preferred or special stock and thus do not provide its shareholders with this form of protection against hostile takeovers. However and similar to Community Capital, the authorized but unissued shares of Abbeville Capital common stock may be issued from time to time to dilute the stock ownership of persons seeking to obtain control of Abbeville Capital or to persons who have an understanding with Abbeville Capital about the voting of the shares or to current shareholders, which may have the effect of discouraging or increasing the cost of unsolicited attempts to acquire control of Abbeville Capital.

Community Capital. The South Carolina Act provides that a corporation’s board of directors may adopt minor amendments to a corporation’s articles of incorporation without a shareholder vote. A corporation may make other amendments to its articles of incorporation if the board of directors recommends the amendment to the shareholders, and such amendment receives the requisite shareholder approval. Unless a corporation’s articles of incorporation provides otherwise, such amendments must be approved by two-thirds of all votes entitled to be cast on the matter, as well as two-thirds of the votes entitled to be cast on the matter within each voting group entitled to vote as a separate voting group on the amendment. Community Capital’s articles of incorporation do not alter the default provisions of the South Carolina Act except to require an affirmative vote of shareholders holding 80% of the stock entitled to vote thereon to amend provisions of its articles of incorporation relating to the following issues:

If 80% of the directors approve amendments pertaining to the articles of incorporation listed above, then only a two-thirds affirmative vote of shareholders is needed to approve the amendments.

Community Capital’s bylaws may be adopted, amended, or repealed by a majority vote of its board of directors unless: (a) shareholders in adopting, amending, or repealing a particular bylaw expressly provide that the board may not adopt, amend, or repeal that bylaw or any bylaw on that subject; (b) the bylaw fixes a supermajority shareholder quorum or voting requirement; (c) the bylaw fixes a supermajority director quorum or voting requirement if such requirement was originally adopted by the shareholders; or (d) the bylaw increases or decreases the size of the board by more than thirty percent the number of directors last approved by the shareholders. Community Capital’s bylaws may also be amended by a majority vote of shareholders.

Abbeville Capital. Abbeville Capital’s articles of incorporation do not alter the default provisions of the South Carolina Act. Abbeville Capital’s bylaws may be adopted, amended, or repealed by a majority vote of its board of directors unless: (a) shareholders in adopting, amending, or repealing a particular bylaw expressly provide that the board may not adopt, amend, or repeal that bylaw or any bylaw on that subject; (b) the bylaw fixes a supermajority shareholder quorum or voting requirement; (c) the bylaw fixes a supermajority director quorum or voting requirement if such requirement was originally adopted by the shareholders; (d) the bylaw provides for the management of Abbeville Capital otherwise than by its board or its executive committee; (e) the bylaw classifies or staggers the election of directors; or (f) the bylaw denies, limits, or impairs the power of shareholders to alter, amend, or repeal bylaws or adopt new bylaws. Abbeville Capital’s bylaws may also be amended by a majority vote of shareholders.

Community Capital. The size of Community Capital’s board is currently fixed by the directors at fifteen directors and may be increased or decreased from time to time except that no decrease in the number of directors can shorten the term of any incumbent director. Additionally, the South Carolina Act only permits shareholders to increase or decrease the size of the board by more than thirty percent the number of directors last approved by the shareholders. The South Carolina Act and Community Capital’s bylaws also permit the board of directors to fill a vacancy on the board even if such vacancy results from an increase in the number of directors; provided, however, that no person may be elected to fill a vacancy created by such person’s removal pursuant to Community Capital’s bylaws. Because the Community Capital board may generally increase the number of directors and fill vacancies, it could elect directors friendly to management in the event of a non-negotiated takeover attempt. The Merger Agreement requires that the board increase the number of members from fifteen to sixteen and fill the vacancy by appointing Joseph L. Savitz, Jr.

Community Capital’s articles of incorporation also provide that, as long as the size of the board consists of nine or more members, the board is divided into three staggered classes, with each class as nearly equal in size as possible. Because approximately one-third of the members of a classified board of directors would be elected each year, two annual meetings would be necessary to change a majority of the members of the board. By potentially delaying the time within which an acquirer could obtain control of the board, the existence of a staggered board could discourage potential mergers, tender offers, or hostile takeover attempts.

Each Community Capital shareholder generally is entitled to one vote for each share of Community Capital stock held and is not entitled to cumulative voting rights in the election of directors. With cumulative voting, a shareholder has the right to cast a number of votes equal to the total number of the holder’s shares multiplied by the number of directors to be elected. The shareholder has the right to cast all of the holder’s votes in favor of

one candidate or to distribute its votes among any of the candidates. Directors are elected by a plurality of the total votes cast by all shareholders. With cumulative voting, minority shareholders may possibly obtain representation on the board of directors. Without cumulative voting, the holders of more than 50% of a corporation’s voting stock have the ability to elect all of its directors. As a result, the remaining shareholders may not be able to elect any of the directors. The absence of cumulative voting, therefore, could make it more difficult for a shareholder who acquires less than a majority of the shares of common stock of a corporation to obtain representation on its board of directors.

Abbeville Capital. The size of Abbeville Capital’s board of directors is nine directors and may be increased or decreased from time to time within the range of eight and twelve directors by a majority of the board at a special or regular meeting, except that: (a) notice of the proposed increase or decrease must be given at least two days before the meeting, and (b) no decrease in the number of directors can shorten the term of any incumbent director. The South Carolina Act and Abbeville Capital’s bylaws also permit the board of directors to fill a vacancy on the board even if such vacancy results from an increase in the number of directors. This flexibility to increase board size and fill vacancies means that, like Community Capital, Abbeville Capital could elect directors friendly to management in the event of a non-negotiated takeover attempt. However, unlike Community Capital, Abbeville Capital’s articles of incorporation do not provide for the anti-takeover protective measure of a staggered board of directors.

Also unlike Community Capital, to be eligible for election as a director of Abbeville Capital, persons (other than those serving as directors as of August 25, 1997) must: (a) be a shareholder of Abbeville Capital owning unencumbered and unpledged shares in Abbeville Capital having an aggregate par value of at least five hundred dollars; (b) maintain his or her personal residence within a fifty mile radius of the main office of Abbeville Capital; (c) not be directly or indirectly interested as a ten percent or greater shareholder in any banking corporation, affiliate, or subsidiary thereof or bank holding company or other financial institution engaged in business in South Carolina; (d) not be a director, officer, agent, or employee of any other banking corporation, affiliate, or subsidiary thereof or bank holding company engaged in business in South Carolina; and (e) be of good moral character. Additionally, at age 75, a member of Abbeville Capital’s board must resign as a director.

Each Abbeville Capital shareholder is generally entitled to one vote for each share of Abbeville Capital common stock held. However, unlike Community Capital’s shareholders, Abbeville Capital shareholders are entitled to cumulate their votes for director.

Community Capital. A Community Capital director may be removed with or without cause. However, a director may only be removed without cause by the vote of the holders of eighty percent of the shares then entitled to vote, and a director may be removed with cause either by a vote of the holders of a majority of the shares then entitled to vote or by a majority vote of the directors at a meeting at which only the removal and replacement of the director in question shall be considered. Being able to remove directors for cause upon the requisite vote of directors eliminates delay and expenses associated with seeking shareholder approval.

Abbeville Capital. The shareholders of Abbeville Capital can remove any or all directors of Abbeville Capital with or without cause upon a vote of the holders of a majority of the shares then entitled to vote; provided, however, that an Abbeville Capital director may not be removed if the number of votes sufficient to elect the director under cumulative voting is voted against the director’s removal. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove the director. A director may be removed by the shareholders only at a meeting called for the purpose of removing the director, and the meeting notice must state that at least one of the purposes of the meeting is removal of the director.

Community Capital. For the purpose of determining shareholders entitled to vote at any meeting of shareholders, or entitled to receive dividends or other distributions, or in connection with any other proper purpose requiring a determination of shareholders, Community Capital’s board shall by resolution fix a record date that is not more than fifty and not less than ten days prior to the date on which the activity requiring such determination is to occur.

Abbeville Capital. In accordance with the South Carolina Act, Abbeville Capital’s record date may not be more than seventy days before the meeting or action requiring a determination of shareholders.

Community Capital. Under the South Carolina Act, Community Capital may indemnify a past or present director against liability incurred in a proceeding if (a) the director acted in good faith, (b) the director reasonably believed (i) in the case of conduct in his or her official capacity with the corporation, that his or her conduct was in its best interest, and (ii) in all other cases, that his or her conduct was at least not opposed to its best interest, and (iii) in the case of any criminal proceedings, the director had no reasonable cause to believe his or her conduct was unlawful. Permitted indemnification in connection with a proceeding by or in the right of the company is limited under the South Carolina Act to reasonable expenses incurred in connection with the proceedings. The South Carolina Act requires Community Capital to indemnify a director who is wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director is a party as a Community Capital director against reasonable expenses incurred by the director in connection with the proceeding.

However, the South Carolina Act prohibits Community Capital from indemnifying a director (a) in connection with a proceeding by or in the right of Community Capital in which the director is adjudged liable to Community Capital, or (b) in connection with any other proceeding charging improper personal benefit to the director, whether or not involving action in the director’s official capacity, in which the director is adjudged liable on the basis that personal benefit was improperly received by the director.

Under the South Carolina Act, an officer is entitled to the benefit of the same mandatory indemnification provision applicable to directors, but in addition, a corporation may indemnify and advance expenses to an officer who is not a director to the extent, consistent with public policy, provided by the corporation’s articles of incorporation, the corporation’s bylaws, general or specific action of the board of directors, or contract.

Community Capital’s articles of incorporation provide that every person who was or is a party to, or is threatened to be made a party to, or is otherwise involved in, any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that the person, or a person of whom such person is the legal representative is or was a director or officer of Community Capital or is or was serving at the request of Community Capital, or for Community Capital’s benefit as a director or officer of another corporation, or as Community Capital’s representative in a partnership, joint venture, trust, or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under and pursuant to the South Carolina Act against all expenses, liabilities, and losses (including without limitation attorneys’ fees, judgments, fines, and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection with the proceedings. This right of indemnification, which is also set forth in Community Capital’s bylaws, is provided as a contractual right that may be enforced in any manner desired by the person.

The South Carolina Act and Community Capital’s articles of incorporation and bylaws permit the company to maintain directors and officers liability insurance, which Community Capital does currently maintain.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Community Capital pursuant to the foregoing provisions, or otherwise, Community Capital has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event

that a claim for indemnification against such liabilities (other than the payment by Community Capital of expenses incurred or paid by a director, officer or controlling person of Community Capital in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Community Capital will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Abbeville Capital. Abbeville Capital’s bylaws permit and require indemnification in accordance with the South Carolina Act as outlined above, except that its bylaws do not permit the determination that indemnification is permissible to be made by a majority vote of a committee duly designated by the board, all as more specifically outlined in § 33-8-550(b) of the South Carolina Act.

Community Capital. Any nomination by shareholders of individuals for election to Community Capital’s board of directors must be made by delivering written notice of the nomination to the secretary of Community Capital at least thirty days but not more than sixty days prior to the annual meeting of shareholders at which directors are to be elected, unless such requirement is waived in advance of the meeting by the affirmative vote of eighty percent of the directors.

Abbeville Capital. Abbeville Capital’s articles and bylaws do not contain any provisions regarding shareholder nominations for directors.

Community Capital. Community Capital’s bylaws require timely advance written notice of any proposals to be presented at an annual meeting of shareholders. For a notice to be timely, it must be received at Community Capital’s principal offices at least sixty days, but not more than ninety days, prior to the anniversary date of the immediately preceding annual meeting of shareholders. The notice must give: (a) a brief description of the business desired to be brought before the annual meeting (including the specific proposal(s) to be presented) and the reasons for conducting such business at the annual meeting; (b) the name and address, as they appear on Community Capital’s books, of the shareholder(s) proposing such business; (c) the class and number of shares that are held beneficially, but not held of record, by the proposing shareholder(s) as of the record date for the annual meeting, if such date has been made publicly available, or as of a date within ten days of the effective date of the notice by the proposing shareholder(s) if the record date has not been made publicly available, and (d) any interest of the proposing shareholder(s) in such business.

Abbeville Capital. Abbeville Capital’s articles of incorporation and bylaws do not provide for or restrict the submission of proposals by shareholders for any new business to be taken up at any annual or special meeting of shareholders.

Community Capital. Under the South Carolina Act, a plan of merger must generally be approved by the affirmative vote of the holders of at least two-thirds of the votes entitled to be cast on the plan regardless of the class or voting group to which the shares belong and two-thirds of the votes entitled to be cast on the plan within each voting group entitled to vote as a separate voting group on the plan. A corporation’s articles of incorporation may require a lower or higher vote for approval, but the required vote must be at least a majority of the votes entitled to be cast on the plan by each voting group entitled to vote separately on the plan.

Under the South Carolina Act, authorization of the sale, lease, exchange, or other disposition of all or substantially all of the property of a corporation, other than in the usual and regular course of business, or to

voluntarily dissolve the corporation, requires the affirmative vote of at least two-thirds of all the votes entitled to be cast on the transaction. A corporation’s articles of incorporation may require a lower or higher vote for approval, but the required vote must be at least a majority of all the votes entitled to be cast on the transaction.

Community Capital’s articles of incorporation alter the default rules of South Carolina law to require the affirmative vote of 80% of the outstanding stock of Community Capital entitled to vote for approval of the following actions (unless 80% of the directors of Community Capital have approved the action or unless the transactions are solely between Community Capital and another entity fifty percent or more of the voting equity interests of which is owned by Community Capital):

Abbeville Capital. Abbeville Capital’s articles of incorporation do not alter the default rules of the South Carolina Act respecting mergers, consolidations, or sales of assets.

Community Capital. Community Capital is also currently subject to the South Carolina business combination statute, which with a few exceptions, places restrictions on mergers, consolidations, sales of assets, liquidations, reclassifications or other similar kinds of transactions with or between a resident domestic corporation with shares registered under Section 12 of the Exchange Act and any person who owns beneficially 10% or more of the voting power of the outstanding voting shares of the resident domestic corporation. The statute prohibits specified “business combinations” with “interested shareholders” unless stated conditions are satisfied. An “interested shareholder” is any person (other than the corporation or any of its subsidiaries) that (i) beneficially owns 10% or more of the corporation’s outstanding voting shares or (ii) at any time within the preceding two-year period beneficially owned 10% of the voting power of the corporation’s outstanding shares and is an affiliate or associate of the corporation. Excluded from the statute’s coverage is any “business combination” with any person that beneficially owned in excess of 10% of the corporation’s voting shares prior to April 23, 1988.

Covered business combinations with interested shareholders or an affiliate or associate of an interested shareholder include, among other transactions:

Covered business combinations are prohibited for two years after an interested shareholder becomes interested unless the board of directors of the corporation approved of the business combination before the interested party became interested.

Community Capital has not opted out of coverage of these South Carolina business combination provisions.

Abbeville Capital. Abbeville Capital is not subject to the South Carolina laws discussed above related to business combinations with interested shareholders.

Community Capital. The South Carolina control share acquisition law applies to several categories of South Carolina corporations, including any South Carolina corporation, such as Community Capital, that has a class of voting shares registered with the Securities Exchange Commission under Section 12 of the Exchange Act, has a principal place of business, its principal office or substantial assets in South Carolina, and has a specified shareholder presence in South Carolina. The control share law is designed to protect applicable companies from some types of acquisitions in which a person, entity, or group seeks to gain voting control.

Unless a corporation has opted out of the provisions of the South Carolina statute before the control share acquisition in question through an amendment to its articles of incorporation or bylaws, control shares of the corporation acquired in a control share acquisition have no voting rights unless and until granted by resolution approved by a majority of the shares of each voting group, excluding all “interested shares.” “Interested shares” are shares of the corporation voted by an acquiring person or a member of a group with respect to a control share acquisition, any officer of the corporation, or any employee of the corporation who is also a director of the corporation.

If authorized by such a corporation’s articles of incorporation or bylaws before a control share acquisition has occurred, control shares acquired in a control share acquisition may under some circumstances be subject to redemption by the corporation at the fair value thereof. Unless otherwise provided in such a corporation’s articles of incorporation or bylaws before a control share acquisition has occurred, if control shares acquired in a control share acquisition are accorded full voting rights that will constitute a majority or more of all voting power, all shareholders of the corporation have dissenters’ rights to receive fair value for their shares.

For purposes of the South Carolina control share acquisition law, “control shares” are shares, the acquisition of which would give a person, acting alone or with a group, the power to exercise one of the following amounts of voting power in an election of directors:

For purposes of the law, a “control share acquisition” means the acquisition, directly or indirectly, by any person of ownership of, or the power to direct the exercise of voting power with respect to, issued and outstanding control shares. Among certain other circumstances, a control share acquisition is deemed not to occur when the share acquisition is pursuant to a merger or plan of share exchange where the corporation is a party to the agreement of merger or plan of share exchange. Accordingly, the statute would not, by its terms, apply to the merger.

Community Capital has not opted out of coverage of these South Carolina control share acquisition provisions.

Abbeville Capital. Abbeville Capital is not subject to the South Carolina control share acquisition law.

Community Capital. Community Capital’s articles of incorporation provide that the board of directors, when evaluating any proposed business combination with Community Capital, shall give due consideration to all relevant factors, including without limitation, the social, legal, environmental, and economic effects on the employees, customers, suppliers, and other constituencies of Community Capital, and of its subsidiary, on the communities and geographical areas in which Community Capital and its subsidiary operate or are located, and on any of the businesses and properties of Community Capital or any of its subsidiary, as well as such other factors as the directors deem relevant, and not only the consideration being offered in relation to the then current market price for Community Capital’s outstanding shares, but also in relation to the then current value of Community Capital in a freely-negotiated transaction and in relation to the board of directors’ estimate of the future value of Community Capital (including the unrealized value of its properties and assets) as an independent going concern.

Abbeville Capital. Abbeville Capital’s articles of incorporation do not address consideration of other constituencies in connection with evaluating business combinations.

Community Capital. Under the South Carolina Act, shareholders of a corporation who do not consent to certain major corporate transactions, including a merger, may, under varying circumstances, be entitled to dissenters’ rights pursuant to which such shareholders may receive cash in the amount of the fair market value of their shares in place of the consideration which otherwise would have been received in the transaction. Unless the articles of incorporation or bylaws provides otherwise, such dissenters’ rights are not available in certain circumstances, including without limitation: (a) to shareholders of a surviving corporation if shareholder approval is not required, or (b) as to any class of stock which is listed either on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. Because both of these exceptions are met for Community Capital, holders of Community Capital common stock do not have dissenters’ rights in connection with the merger.

Abbeville Capital. A summary of dissenters’ rights under the South Carolina Act is set forth under “Dissenters’ Rights,” and these statutory provisions are attached to this proxy statement/prospectus as Appendix D.

Community Capital common stock is listed for trading on the American Stock Exchange under the symbol “CYL.” As of January 2, 2004, Community Capital had 1,171 holders of record representing approximately 2,400 beneficial owners. The following table sets forth the high and low sales prices for Community Capital common stock as reported on the American Stock Exchange, and cash dividends declared per share of Community Capital common stock, for the periods indicated:

On January 2, 2004 the closing price of Community Capital common stock was $20.00 per share. On August 15, 2003, which was the last trading day prior to the public announcement of the merger, the closing price of Community Capital common stock was $17.10 per share and the trailing 20-trading day average closing price was $17.23 per share.

The holders of Community Capital common stock are entitled to receive dividends when and if declared by Community Capital’s board of directors out of funds legally available for the payment of dividends. Although Community Capital currently intends to continue to pay quarterly cash dividends on Community Capital common stock, there can be no assurance that Community Capital’s dividend policy will remain unchanged after completion of the merger. The declaration and payment of dividends after the merger will depend on business conditions, operating results, capital and reserve requirements, and Community Capital board’s consideration of other relevant factors. The principal source of funds for the payment of dividends by Community Capital is dividends from CapitalBank.

There is no established public trading market for shares of Abbeville Capital common stock, which is inactively traded in private transactions. Therefore, reliable information is not available about the prices at which shares of Abbeville Capital common stock have been bought and sold. As of January 2, 2004, Abbeville Capital common stock was held of record by approximately 465 persons. The following table sets forth the cash dividends declared per share of Abbeville Capital common stock, for the periods indicated:

Community Capital and Abbeville Capital are each legal entities separate and distinct from their subsidiaries, and their revenues depend in significant part on the payment of dividends from their respective subsidiary banks. Community Capital’s and Abbeville Capital’s subsidiary banks are subject to legal restrictions on the amount of dividends they are permitted to pay. See “Certain Regulatory Considerations.”

The following discussion should be read in conjunction with the preceding “Selected Financial Data” of Abbeville Capital and Abbeville Capital’s Financial Statements and the Notes thereto appearing on pages F-2 through F-25, as well as other information included in this proxy statement/prospectus. In addition to historical information, this discussion and analysis contains “forward-looking statements” relating to, without limitation, future economic performance, plans, and objectives of management for future operations, and projections of revenues and other financial items that are based on the beliefs of Abbeville Capital’s management, as well as assumptions made by and information currently available to Abbeville Capital’s management. The words “expect,” “estimate,” “anticipate,” and “believe,” as well as similar expressions, are intended to identify forward-looking statements. Abbeville Capital’s actual results may differ materially from the results discussed in the forward-looking statements, and Abbeville Capital’s operating performance each quarter is subject to various risks and uncertainties.

Abbeville Capital was organized in 1997 to serve as the holding company for the Bank of Abbeville (the “Bank”). Its corporate headquarters are currently located in Abbeville, South Carolina. The principal business of the Bank of Abbeville is to provide banking services to the community of Abbeville and the surrounding markets. The Bank of Abbeville is a state chartered bank, and its deposits are insured by the Federal Deposit Insurance Corporation.

Comparison of the Nine Months Ended September 30, 2003 to Nine Months Ended September 30, 2002

For the nine months ended September 30, 2003, net interest income decreased $78,915, or 4.03%, to $1,878,675 as compared to $1,957,590 for the same period in 2002. The net interest margin realized on earning assets decreased to 3.80% for the nine months ended September 30, 2003 from 4.06% for the same period in 2002. The interest rate spread also decreased by 18 basis points to 3.53% at September 30, 2003 from 3.71% at September 30, 2002.

Net interest income decreased from $662,136 for the quarter ending September 30, 2002 to $616,483 for the quarter ending September 30, 2003. This represents a decrease of $45,653, or 6.89%. The net interest margin realized on earning assets decreased from 4.12% for the quarter ended September 30, 2002 to 3.74 % for the quarter ended September 30, 2003. The interest rate spread was 3.79 % at September 30, 2002 and 3.48 % at September 30, 2003. Decreases in net interest income resulted primarily from the maturity of investment securities and the investment of the proceeds in lower yielding instruments.

The provision for loan losses is the charge to operating earnings that management believes is necessary to maintain the allowance for loan losses at an adequate level. For the nine months ended September 30, 2003 and 2002, the provision charged to expense was $0 and $55,000, respectively. For the quarters ended September 30, 2003 and 2002, the provision charged to expense was $0 and $25,000, respectively. There were no additional provisions charged to earnings to increase the allowance for loan losses since our loan portfolio had minimal growth during the first nine months of 2003. There are risks inherent in making all loans, including risks with respect to the period of time over which loans may be repaid, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers, and, in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral. Abbeville Capital maintains an allowance for loan losses based on, among other things, historical experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality. Management’s judgment about the adequacy of the allowance is based upon a number of assumptions about future events, which it believes to be reasonable, but which may not prove to be accurate. Thus, there is a risk that chargeoffs in future periods could

exceed the allowance for loan losses or that substantial additional increases in the allowance for loan losses could be required. Additions to the allowance for loan losses would result in a decrease of Abbeville Capital’s net income and, possibly, its capital

Noninterest income during the nine months ended September 30, 2003 was $545,713, an increase of $102,818 from $442,895 during the comparable period in 2002. The increase is due primarily to increases in service charges on deposit accounts, earnings on the cash surrender value of life insurance, and gains realized on the sales of securities. Service charges increased $40,119 to $435,240 for the nine months ended September 30, 2003. Earnings on the cash value of life insurance during the nine months ended September 30, 2003 were $19,953. This amount was included in other income and resulted from our purchases of cash surrender life policies purchased during the third quarter of 2003. In addition, we recognized $21,376 in gains on sales of securities available for sale during the first nine months of 2003 as compared to $625 during the same period in 2002. For the quarter ended September 30, 2003, noninterest income increased $27,294, or 15.72%, from $173,633 for the same period in 2002. This increase was primarily due to the earnings on the cash value life insurance.

Total noninterest expense for the nine months ended September 30, 2003 was $1,490,960, or 8.73%, higher than the $1,371,286 amount for the nine months ended September 30, 2002. The largest increase was in salaries and employee benefits, which increased from $633,359 at September 30, 2002 to $716,005 for the nine months ended September 30, 2003. This increase was due to normal pay raises over the prior year and $7,593 in expense associated with a salary continuation plan implemented during the third quarter of 2003. Other operating expenses also increased $36,037 to $528,726 during the nine months ended September 30, 2003 as compared to the same period in 2002. This increase was due to normal increases in operating the Bank.

For the quarter ended September 30, 2003, noninterest expense increased $32,548, or 6.88%, over the same period in 2002. The largest increase between the quarters ended September 30, 2003 and September 30, 2002 was in salaries and employee benefits, which increased $36,070, or 16.93%. This increase was associated with normal pay raises and costs associated with the salary continuation plan.

The income tax provision for the nine months ended September 30, 2003 was $244,537 as compared to $262,886 for the same period in 2002. The effective tax rates were 26.19% and 26.98% during the nine months ended September 30, 2003 and September 30, 2002, respectively. The effective tax rates were 24.26% and 27.99% for the quarter ended September 30, 2003 and September 30, 2002, respectively.

The combination of the above factors resulted in net income for the nine months ended September 30, 2003 of $688,891 as compared to $711,313 for the same period in 2002. This represents a decrease of $22,422 or 3.15%. For the quarter ended September 30, 2003, net income was $236,330 or $6,988 lower than the $243,318 for the quarter ended September 30, 2002. The decrease in both periods is primarily a result of the decline in our net interest margin.

Comparison of Year Ended December 31, 2002 to Year Ended December 31, 2001

In 2002, net interest income was $2,602,881, compared to $2,335,811 for 2001, an increase of $267,070 or 11.43%. The declining interest rate environment resulted in decreased interest income in all categories of assets and decreased interest expense from all sources of funds. The improvement in the 2002 period was primarily attributable to an increase in our net interest margin. The average rate realized on interest-earning assets decreased to 6.36% in 2002 from 7.41% in 2001, while the average rate paid on interest-bearing liabilities decreased to 2.65% in 2002 from 4.20% in 2001.

The net interest spread and net interest margin were 3.71% and 4.04%, respectively, in 2002, compared to 3.21% and 3.71% in 2001.

The provision for loan losses is the charge to operating earnings that we feel is necessary to maintain the allowance for loan losses at an adequate level. For 2002 and 2001, the provision was $86,000 and $30,500, respectively. The allowance for loan losses was 1.01% and 1.03% at December 31, 2002 and 2001, respectively. Based on present information, we believe the allowance for loan losses is adequate at December 31, 2002 to meet presently known and inherent losses in the loan portfolio.

Total noninterest income in 2002 was $644,496, an increase of $237,048 compared to $407,448 in 2001. The largest increase was in service charges on deposit accounts which increased $218,444, or 63.32%, over the previous year. This increase was primarily a result of an increase in income from NSF charges. NSF charges increased $222,997 or 83.59% in 2002 as compared to 2001. This is a result of income generated from the new Automatic Overdraft Privilege Program implemented in April 2002. Other income also increased, up 48.80% from $39,998 in 2001 to $59,518 in 2002. The increase in other income was primarily related to an increase of $10,773 in checkcard income from 2001 to 2002.

Total noninterest expense in 2002 was $1,904,297, an increase of $271,798, or 16.65%, when compared to 2001. Salaries and benefits increased $56,400 to $861,522 in 2002 from $805,122 in 2001. The largest increase was in other operating expenses which increased from $578,599 in 2001 to $705,939 in 2002, an increase of $127,340 or 22.01%. This increase was related to the amortization of software costs and expenses associated with the new Automatic Overdraft Privilege Program. The Bank purchased new hardware and software in late 2001 for our core operating system, resulting in amortization for 2002 of $79,546 as compared to $15,624 in 2001. In addition, we implemented the Automatic Overdraft Privilege Program in April 2002 and incurred expenses in 2002 of $76,740, as compared to none in 2001. Furniture and equipment expense increased $79,571, or 54.08% to $226,701 in 2002. As mentioned, this increase was primarily as a result of additional depreciation on the new data processing hardware and an increase in annual maintenance contracts.

In 2002 and 2001, the effective income tax rate was 27.02% and 31.95%, respectively, and the income tax provision was $339,653 and $345,186, respectively.

The combination of the above factors resulted in net income of $917,427 in 2002 compared to $735,074 in 2001. This was an increase of $182,353 or 24.81% over the prior year. The increase in net interest income and noninterest income contributed to the increase in net income.

Comparison of Year Ended December 31, 2001 to Year Ended December 31, 2000

In 2001, net interest income was $2,335,811, compared to $2,222,411 for 2000, an increase of $113,400 or 5.10%. The improvements in the 2001 period was primarily attributable to an increase in our volume of earning assets. The average rate realized on interest-earning assets decreased to 7.41% from 7.65%, while the average rate paid on interest-bearing liabilities decreased to 4.20% from 4.47% in 2001 and 2000, respectively.

The net interest spread and net interest margin were 3.21% and 3.71%, respectively, in 2001, compared to 3.18% and 3.72% in 2000.

The provision for loan losses is the charge to operating earnings that we feel is necessary to maintain the allowance for loan losses at an adequate level. For 2001 and 2000, the provision was $30,500 and $80,000, respectively. The allowance for loan losses was 1.03% at December 31, 2001 and 2000.

Total noninterest income in 2001 was $407,448, an increase of $24,612 compared to $382,836 in 2000. The largest increase was in service charges on deposit accounts which increased $28,553, or 9.02%, over the previous year. This increase was primarily due to an increase in deposits over the two periods.

Total noninterest expense in 2001 was $1,632,499, an increase of $104,135, or 6.81%, when compared to 2000. The largest increase was in salaries and employee benefits, which increased $42,982, or 5.64%, to $805,122. This increase was a result of normal pay increases. Furniture and equipment expense and other operating expenses increased $15,513 and $33,861, respectively. These increases were primarily due to increased depreciation and amortization associated with our hardware and software upgrade in November 2001.

The provision for income taxes was $345,186 and $275,593 in 2001 and 2000, respectively. The effective income tax rate in 2001 and 2000 was 31.95% and 27.65%, respectively.

The combination of the above factors resulted in net income of $735,074 in 2001 compared to $721,290 in 2000. This was an increase of $13,784, or 1.91%, over the prior year. The increase in net interest income and noninterest income contributed to the increase in net income.

The largest component of Abbeville Capital’s net income is its net interest income, which is the difference between the income earned on assets and interest paid on deposits and borrowings used to support such assets. Net interest income is determined by the yields earned on Abbeville Capital’s interest-earning assets and the rates paid on its interest-bearing liabilities, the relative amounts of interest-earning assets and interest-bearing liabilities, and the degree of mismatch and the maturity and repricing characteristics of its interest-earning assets and interest-bearing liabilities. Net interest income divided by average interest-earning assets represents Abbeville Capital’s net interest margin.

The previous table sets forth, for the periods indicated, certain information related to Abbeville Capital’s average balance sheet and our average yields on assets and average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been derived from the daily balances throughout the periods indicated.

The following tables set forth the effect that the varying levels of earning assets and interest-bearing liabilities and the applicable rates have had on changes in net interest income from 2001 to 2002 and 2000 to 2001.

Abbeville Capital 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 Abbeville Capital is the measurement of Abbeville Capital’s interest sensitivity “gap,” which is the positive or negative dollar difference between assets and liabilities that are subject to interest rate repricing within a given period of time. Interest rate sensitivity can be managed by repricing assets or liabilities, selling securities available-for-sale, replacing an asset or liability at maturity, or adjusting the interest rate during the life of an asset or liability. Managing the amount of assets and liabilities repricing in this same time interval helps to hedge the risk and minimize the impact on net interest income of rising or falling interest rates.

The following table sets forth Abbeville Capital’s interest rate sensitivity at December 31, 2002.

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 Abbeville Capital 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. Securities sold under agreements to repurchase are reflected at the maturity date of each repurchase agreement, which ranges from one to thirty days. Advances from the Federal Home Loan Bank are reflected at their contractual maturity date.

Abbeville Capital generally would benefit from increasing market rates of interest when it has an asset-sensitive gap position and generally would benefit from decreasing market rates of interest when it is liability-sensitive. Abbeville Capital is cumulative liability-sensitive over the one month to twelve month time frame. However, Abbeville Capital’s gap analysis is not a precise indicator of its interest-sensitivity position. The analysis presents only 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. For example, rates paid on a substantial portion of core deposits may change contractually within a relatively short time frame, but those rates are viewed by management as significantly less interest-sensitive than market-based rates such as those paid on noncore deposits. Accordingly, management believes a liability-sensitive gap position is not as indicative of Abbeville Capital’s true interest-sensitivity as it would be for an organization which depends to a greater extent on purchased funds to support earning assets. Net interest income may be impacted by other significant factors in a given interest rate environment, including changes in the volume and mix of earning assets and interest-bearing liabilities.

Abbeville Capital has developed policies and procedures for evaluating the overall quality of its credit portfolio and the timely identification of potential problem credits. On a quarterly basis, Abbeville Capital’s Board of Directors reviews and approves the appropriate level for Abbeville Capital’s allowance for loan losses based upon management’s recommendations, the results of the internal monitoring and reporting system, and an analysis of economic conditions in its market. The objective of management has been to fund the allowance for loan losses at an amount based on our internal risk rating system.

Additions to the allowance for loan losses, which are expensed as the provision for loan losses on Abbeville Capital’s income statement, are made periodically to maintain the allowance at an appropriate level based on management’s analysis of the losses inherent in the loan portfolio. Loan losses and recoveries are charged or credited directly to the allowance. The amount of the provision is a function of the level of loans outstanding, the level of nonperforming loans, historical loan loss experience, the amount of loan losses actually charged against the reserve during a given period, and current and anticipated economic conditions.

Abbeville Capital’s allowance for loan losses is based upon judgments and assumptions of risk elements in the portfolio, future economic conditions, and other factors affecting borrowers. The process of determining the amount of the allowance includes identification and analysis of loss potential in various portfolio segments utilizing a credit risk grading process and specific reviews and evaluations of significant problem credits. In addition, management monitors the overall portfolio quality through observable trends in delinquency, charge-offs, and general and economic conditions in the service area. The adequacy of the allowance for loan losses and the effectiveness of Abbeville Capital’s monitoring and analysis system are also reviewed periodically by the banking regulators and Abbeville Capital’s independent auditors.

Based on present information and an ongoing evaluation, management considers the allowance for loan losses to be adequate to meet presently known and inherent losses in the loan portfolio. Management’s judgment about the adequacy of the allowance is based upon a number of assumptions about future events, which it

believes to be reasonable but which may or may not be accurate. Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the allowance for loan losses will not be required. The Bank does not allocate the allowance for loan losses to specific categories of loans but evaluates the adequacy on an overall portfolio basis utilizing a risk grading system.

The following table sets forth certain information with respect to the Bank’s allowance for loan losses and the composition of charge-offs and recoveries for the years ended December 31, 2002, 2001 and 2000.

The following table sets forth the Bank’s nonperforming assets for the dates indicated.

Accrual of interest is discontinued on a loan when management believes, after considering economic, business conditions, and collection efforts, that the borrower’s financial condition is such that the collection of interest is doubtful. A delinquent loan is generally placed in nonaccrual status when it becomes 90 days or more past due. When a loan is placed in nonaccrual status, all interest, which has been accrued on the loan but remains

unpaid, is reversed and deducted from current earnings as a reduction of reported interest income. No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain. When a problem loan is finally resolved, there may ultimately be an actual write down or charge-off of the principal balance of the loan which would necessitate additional charges to earnings. For all periods presented, the additional interest income, which would have been recognized into earnings if the Bank’s nonaccrual loans had been current in accordance with their original terms, is immaterial.

At December 31, 2002, the Bank reviewed its loan portfolio to identify any criticized or classified loans through its internal review mechanisms. The results of this internal review process are considered in determining management’s assessment of the adequacy of the allowance for loan losses. The overall objective of the Bank has been to maintain the allowance for loan losses at an amount based on the internal review mechanism.

The largest component of noninterest income is service charges on deposit accounts, which totaled $563,427 in 2002, a 63.32% increase over the 2001 amount of $344,983. The $218,444 increase in service charges on deposit accounts is primarily attributable to the $222,997 increase in NSF charges. This increase was attributable to additional income generated from the Automatic Overdraft Privilege Program implemented in April 2002. Service charges during 2001 increased 9.02% from $316,430 in 2000. Other income increased during the years ended December 31, 2002, 2001 and 2000 as a result of increases in various deposit products such as checkcards.

The following table sets forth the principal components of noninterest income for the years ended December 31, 2002, 2001 and 2000.

Noninterest expense increased $271,798 or 16.65% to $1,904,297 in 2002 from $1,632,499 in 2001. Salaries and employee benefits increased $56,400, or 7.01%, from $805,122 in 2001, to $861,522 for 2002. Furniture and equipment expense increased $79,571 during 2002, to $226,701, from the 2001 amount of $147,130. This increase is partially attributable to an increase in depreciation expense from 2001 to 2002 resulting from the purchases of new data processing hardware. Other operating expenses increased $127,340, or 22.01%, to $705,939 in 2002 from $578,599 in 2001. The largest increase within this category was amortization expense for software, which increased $63,922 to $79,546 in 2002 from $15,624 during 2001. This was due to the software conversion during 2001. Abbeville Capital’s efficiency ratio was 58.65% in 2002, compared with 59.51% in 2001.

Noninterest expense increased $104,135 or 6.81% to $1,632,499 in 2001 from $1,528,364 in 2000. Salaries and employee benefits increased $42,982, or 5.64%, from $805,122 in 2000, to $762,140 for 2001. Furniture and equipment expense increased $15,513 during 2001, to $147,130, from the 2000 amount of $131,617. Other operating expenses increased $33,861, or 6.22%, to $578,599 in 2001 from $544,738 in 2000. Abbeville Capital’s efficiency ratio was 59.51% in 2001, compared with 58.44% in 2000.

The following table sets forth the primary components of noninterest expense for the years ended December 31, 2002, 2001 and 2000.

During the first nine months of 2003, total assets increased $1,893,060 or 2.71%, when compared to December 31, 2002. The primary source of growth in assets was the cash surrender value life insurance which totaled $1,517,679 at September 30, 2003. Federal funds sold increased $3,612,000 from December 31, 2002 to $8,646,000 at September 30, 2003. Total investment securities decreased $3,201,573 to $17,858,482 at September 30, 2003. Securities sold under agreements to repurchase increased $1,594,474 from $3,992,842 at December 31, 2002 to $5,587,316 at September 30, 2003.

Loans are the largest category of earning assets and typically provide higher yields than the other types of earning assets. Associated with the higher loan yields are the inherent credit and liquidity risks which management attempts to control and counterbalance.

Abbeville Capital’s loan growth remained stable during the first nine months of 2003. Gross loans increased $250,373, or 0.65%, during the period. Balances within the major loans receivable categories as of September 30, 2003 and December 31, 2002 are as follows:

Loans averaged $37,022,181 in 2002 compared to $35,850,446 in 2001, an increase of $1,171,735, or 3.27%. At December 31, 2002, total loans were $38,333,368 compared to $36,366,359 at December 31, 2001.

The increase in loans during 2002 was primarily due to the steady growth of the Bank. The following table sets forth the composition of the loan portfolio by category at the dates indicated and highlights the Bank’s general emphasis on consumer and mortgage lending.

The Bank’s loan portfolio is largely comprised of real estate mortgage loans. At December 31, 2002, real estate mortgage loans totaled $20,781,801 and represented 54.24% of the total loan portfolio, compared to $22,971,009, or 63.20%, at December 31, 2001.

In the context of this discussion, a “real estate mortgage loan” is defined as any loan, other than loans for construction purposes, secured by real estate, regardless of the purpose of the loan. It is common practice for financial institutions in the Bank’s market area to obtain a security interest in real estate whenever possible, in addition to any other available collateral. This collateral is taken to reinforce the likelihood of the ultimate repayment of the loan and tends to increase the magnitude of the real estate loan portfolio component.

Residential mortgage loans decreased $3,488,705, or 22.33%, to $12,135,062 at December 31, 2002, from $15,623,767 at December 31, 2001. Residential real estate loans consist of first and second mortgages on single or multi-family residential dwellings. Nonresidential mortgage loans, which include commercial loans and other loans secured by multi-family properties and farmland, increased $591,777, or 8.05%, to $7,939,019 at December 31, 2002, from $7,347,242 at December 31, 2001.

Commercial and industrial loans increased $2,114,805, or 151.92%, to $3,506,849 at December 31, 2002, from $1,392,044 at December 31, 2001. The Bank continues to focus on real estate and consumer lending rather than commercial and industrial lending.

Consumer loans increased $2,045,265, or 17.66%, to $13,626,296 at December 31, 2002, from $11,581,031 at December 31, 2001. Consumer lending continues to be an important focus of the Bank’s loan portfolio.

The Bank of Abbeville has a single office located in Abbeville, SC and primarily lends to residents of the area and local businesses. The Bank does not engage in any foreign lending.

The repayment of loans in the loan portfolio as they mature is also a source of liquidity for the Bank. The following table sets forth the Bank’s loans maturing within specified intervals at December 31, 2002.

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 this treatment presents fairly the maturity and repricing structure of the loan portfolio shown in the above table.

The investment securities portfolio is a significant component of the Bank’s total earning assets. Investment securities decreased from $21,060,055 at December 31, 2002 to $17,858,482 at September 30, 2003. The decrease can be attributed to the maturities of several available-for-sale securities during the first nine months of the year. The proceeds from these maturities were reinvested in federal funds sold and used to purchase the cash surrender value life insurance policies. Abbeville Capital’s investment securities designated as available-for-sale at September 30, 2003 totaled $10,034,376. Held-to-maturity securities totaled $7,581,242 at September 30, 2003.

Total securities averaged $21,975,754 in 2002, compared to $21,317,605 in 2001. At December 31, 2002, the total securities portfolio was $21,060,055. All securities designated as available-for-sale were recorded at their estimated fair market value of $12,601,378 at December 31, 2002. Securities designated as held-to-maturity were recorded at their amortized cost and totaled $8,179,513 at December 31, 2002. Nonmarketable equity securities were recorded at cost and totaled $279,164 at December 31, 2002.

The following table sets forth the book value of the securities held by the Bank at the dates indicated.

The following table sets forth the scheduled maturities and average yields of available-for-sale and held-to-maturity securities held at December 31, 2002.

Other attributes of the securities portfolio, including yields and maturities, are discussed above in “—Net Interest Income—Interest Sensitivity.”

Short-term investments, which consist primarily of federal funds sold, averaged $5,371,341 in 2002, compared to $5,714,857 in 2001. At December 31, 2002, short-term investments totaled $5,034,000. These funds are an important source of the Bank’s liquidity. Federal funds are generally invested in an earning capacity on an overnight basis.

At September 30, 2003, total deposits had increased by $195,006 or 0.37%, from December 31, 2002. The largest increases were in money market accounts and interest-bearing demand deposits, which increased $1,066,334 or 27.68% and $1,057,133 or 11.81%, respectively, from December 31, 2002 to September 30, 2003. These were offset by a decrease in time deposits of $2,265,003 or 6.88%. Expressed in percentages, noninterest-bearing demand deposits decreased 6.66% and interest-bearing accounts increased 0.99%.

Balances within the major deposit categories as of September 30, 2003 and December 31, 2002 are as follows:

Average interest-bearing liabilities increased $721,945, or 1.30%, to $56,082,570 in 2002, from $55,360,625 in 2001. Average interest-bearing deposits increased $916,895, or 1.97%, to $47,391,291 in 2002, from $46,474,396 in 2001.

Average total deposits increased $1,147,875, or 2.27%, to $51,806,913 during 2002, from $50,659,038 during 2001. At December 31, 2002, total deposits were $53,042,865 compared to $50,619,635 a year earlier, an increase of 4.79%.

The following table sets forth the deposits of the Bank by category at the dates indicated.

Core deposits, which exclude certificates of deposit of $100,000 or more, provide a relatively stable funding source for the Bank’s loan portfolio and other earning assets. The Bank’s core deposits increased $508,201 in 2002 due to the continued growth of the Bank.

Deposits, and particularly core deposits, have been the Bank’s primary source of funding and have enabled the Bank to meet successfully both its short-term and long-term liquidity needs. The Bank’s average loan-to-deposit ratio was 71.46% in 2002, and 70.77% in 2001. The maturity distribution of the Bank’s certificates of deposit $100,000 or more at December 31, 2002, is set forth in the following table:

Approximately 29.21% of the Bank’s time deposits over $100,000 had scheduled maturities within three months, and 56.53% had maturities within six months. Large certificate of deposit customers tend to be extremely sensitive to interest rate levels, making these deposits less reliable sources of funding for liquidity planning purposes than core deposits.

Securities sold under agreements to repurchase totaled $5,587,316 at September 30, 2003, an increase of $1,594,474 or 39.93% higher than the December 31, 2002 balance of $3,992,842. Securities sold under agreements to repurchase mature on a daily basis.

Borrowed funds consist of short-term borrowings in the form of securities sold under agreements to repurchase. Average short-term borrowings were $5,691,279 in 2002, compared to $5,886,229 in 2001. At December 31, 2002 the Bank had securities sold under agreements to repurchase totaling $3,992,842. The average balance in 2002 related mostly to securities sold under agreements to repurchase with several customers. These agreements are typically for one day periods. Although management may from time to time use short-term borrowings as a secondary funding source, core deposits will continue to be the Bank’s primary funding source.

Advances from the Federal Home Loan Bank of Atlanta to us were $3,000,000 as of December 31, 2002. The advance bears a fixed rate of interest of 6.02% and matures November 4, 2004.

Abbeville Capital and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. For bank holding companies with less than $150 million in consolidated assets, such as the Bank’s, the requirements apply on a bank only basis. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on Abbeville Capital’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Abbeville Capital 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 classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by the federal banking agencies 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. The regulatory minimum requirements are 4% for Tier 1 and 8% for total risk-based capital.

The bank is also required to maintain capital at a minimum level based on total average assets, which is known as the leverage ratio. Only the strongest banks are allowed to maintain capital at the minimum requirement of 3%. All others are subject to maintaining ratios at least 1% to 2% above the minimum.

The following table summarizes the capital ratios of the Bank and the regulatory minimum requirements at December 31, 2002 and 2001:

Liquidity needs are met by Abbeville Capital through scheduled maturities of loans and investments on the asset side and through pricing policies on the liability side for interest-bearing deposit accounts. The level of liquidity is measured by the loan-to-total borrowed funds ratio, which was at 62.38% at September 30, 2003 and 63.83% at December 31, 2002.

Securities available-for-sale, which totaled $10,034,376 at September 30, 2003, serves as a ready source of liquidity. Abbeville Capital also has lines of credit available with correspondent banks to purchase federal funds for periods from one to seven days. At September 30, 2003, unused lines of credit totaled $2,000,000. Abbeville Capital also has a borrowing arrangement where we can borrow up to 10% of the Bank’s total assets or approximately $7,000,000 at September 30, 2003. As of September 30, 2003, we had borrowed $3,000,000 under this arrangement.

Total shareholders’ equity increased from $7,478,172 at December 31, 2002 to $7,705,010 at September 30, 2003. The increase is due to net income for the period of $688,891, partially offset by dividends of $356,422. Shareholder’s equity was also decreased by the $105,630 decrease in the fair value of securities available-for-sale, net of deferred taxes.

The following table summarizes the Bank’s risk-based capital at September 30, 2003:

Shareholders’ equity was increased by net income of $917,427 during the year ended December 31, 2002. Due to changes in the market rates of interest, the fair value of our securities available-for-sale increased, which had the effect of increasing shareholders’ equity by $97,073, net of the deferred taxes, when compared to December 31, 2001. Total equity was reduced by cash dividends paid which totaled $273,257.

For the near term, maturities and sales of securities available-for-sale are expected to be a primary source of liquidity as we deploy these funds into loans to achieve the desired mix of assets and liabilities. We also expect to build our deposit base. Advances from the Federal Home Loan Bank will also continue to serve as a funding source, at least for the near future. Short-term borrowings by the bank are not expected to be a primary source of liquidity for the near term; however, we have approximately $2,000,000 of unused lines of credit to purchase federal funds.

Abbeville Capital has adopted various accounting policies that govern the application of accounting principles generally accepted in the United States in the preparation of our financial statements. Our significant accounting policies are described in the footnotes to the consolidated financial statements at December 31, 2002 as filed on our annual report. Certain accounting policies involve significant judgments and assumptions by us that have a material impact on the carrying value of certain assets and liabilities. We consider these accounting policies to be critical accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Because of the nature of the judgments and assumptions we make, actual results could differ from these judgments and estimates that could have a material impact on our carrying values of assets and liabilities and our results of operations.

Abbeville Capital believes the allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation of our consolidated financial statements. Refer to the portion of this discussion that addresses our allowance for loan losses for a description of our processes and methodology for determining our allowance for loan losses

Unlike most industrial companies, the assets and liabilities of financial institutions such as Abbeville Capital are primarily monetary in nature. Therefore, interest rates have a more significant effect on Abbeville Capital’s performance than do the effects of changes in the general rate of inflation and change in prices. In addition, interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. As discussed previously, management seeks to manage the relationships between interest sensitive assets and liabilities in order to protect against wide interest rate fluctuations, including those resulting from inflation.

Abbeville Capital is not aware of any current recommendations by regulatory authorities, which, if they were to be implemented, would have a material effect on liquidity, capital resources, or operations.

The following discussion should be read in conjunction with the preceding “Selected Financial Data” of Community Capital and Community Capital’s Financial Statements and the Notes thereto appearing on pages F-26 through F-60, as well as other information included in this proxy statement/prospectus. The financial information provided below has been rounded in order to simplify its presentation. However, the ratios and percentages provided below are calculated using the detailed financial information contained in the Financial Statements, the Notes thereto and the other financial data for Community Capital included elsewhere in this proxy/prospectus.

Certain of the statements contained in this proxy/prospectus relating to Community Capital that are not historical facts are forward-looking statements subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Community Capital cautions readers of this proxy/prospectus that such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Community Capital to be materially different from those expressed or implied by such forward-looking statements. Although Community Capital believes that its expectations of future performance are based on reasonable assumptions within the bounds of its knowledge of its business and operations, Community Capital has no assurance that actual results will not differ materially from its expectations.

Community Capital serves as a bank holding company for CapitalBank. CapitalBank was formed on January 1, 2001 during a restructuring that consolidated Community Capital’s operations into a single subsidiary. CapitalBank operates thirteen branches throughout South Carolina. CapitalBank offers a full range of banking services, including a wealth management group featuring a wide array of financial services, with personalized attention, local decision making, and strong emphasis on the needs of individuals and small to medium-sized businesses.

Comparison of the Nine Months Ended September 30, 2003 to Nine Months Ended September 30, 2002

For the nine months ended September 30, 2003, net interest income, the major component of Community Capital’s net income, was $10,937,000 compared to $10,844,000 for the same period of 2002, an increase of $93,000 or 0.86%. For the three months ended September 30, 2003, net interest income was $3,675,000 compared to $3,644,000 for the comparable period of 2002. The average rate realized on interest-earning assets decreased to 6.10% from 6.95%, while the average rate paid on interest-bearing liabilities decreased to 2.15% from 2.78% for the nine month periods ended September 30, 2003 and 2002, respectively.

The net interest spread and net interest margin were 3.95% and 4.22%, respectively, for the nine month period ended September 30, 2003, compared to 4.17% and 4.56% for the nine month period ended September 30, 2002.

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 nine months ended September 30, 2003 and 2002, the provision was $243,000 and $663,000, respectively. For the three months ended September 30, 2003 and 2002, the provision for loan losses was $100,000 and $340,000, respectively. Community Capital’s nonperforming loans totaled $1,682,000 at September 30, 2003 compared to $2,308,000 at September 30, 2002. Criticized and classified loans have decreased from $16,836,000 at September 30, 2002 to $11,874,000 at September 30, 2003. During the twelve month period ending September 30, 2003, loans increased $18,857,000 or 6.50%, and combined, these numbers reflect the improvement in the overall loan portfolio. The allowance for loan losses was 1.42% of total loans at September 30, 2003, as compared to 1.48% at September 30, 2002.

Risks are inherent in making all loans, including risks with respect to the period of time over which loans may be repaid, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers, and, in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral. Community Capital maintains an allowance for loan losses based on, among other things, historical experience regarding among other items trends in the amount of criticized and classified loans and the amount of total outstanding loans, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality. Community Capital’s judgment about the adequacy of the allowance is based upon a number of assumptions about future events, which Community Capital believes to be reasonable, but which may not prove to be accurate. Thus, charge-offs in future periods could exceed the allowance for loan losses, or substantial additional increases in the allowance for loan losses could be required. Additions to the allowance for loan losses would result in a decrease of Community Capital’s net income and possibly, Community Capital’s capital. Based on present information, Community Capital believes the allowance for loan losses is adequate at September 30, 2003 to meet presently known and inherent risks in the loan portfolio.

Total noninterest income for the nine months ended September 30, 2003 was $5,468,000, an increase of $2,264,000, or 70.66% compared to $3,204,000 for the nine months ended September 30, 2002. Total noninterest income for the quarter ended September 30, 2003 increased $1,851,000, or 167.97% to $2,953,000, compared to $ 1,102,000 at September 30, 2002.

Community Capital realized a gain on the sale of nonmarketable equity securities of $1,350,000 for the nine months ended September 30, 2003 and $1,311,000 for the quarter ended September 30, 2003 compared to no gains for the same periods in 2002. Gains on the sales of securities available for sale for the nine months ended September 30, 2003 were $24,000 compared to $106,000 for the nine months ended September 30, 2002. Community Capital also realized a gain on the sale of fixed assets of $29,000 during the third quarter of 2003 compared to no gains in 2002.

Residential mortgage origination fees increased 111.09% to $1,028,000 from $487,000 for the nine months ended September 30, 2003, compared to the nine months ended September 30, 2002 and increased 198.09% to $468,000 from $157,000 for the three months ended September 30, 2003, compared to the three months ended September 30, 2002. Mortgage originations have increased because of more customers refinancing their mortgages due to low interest rates. If market interest rates experience a substantial and prolonged increase, however, such increase could reduce Community Capital’s customers’ desire to borrow money from Community Capital or adversely affect their ability to repay their outstanding loans by increasing their credit costs. In periods of rising interest rates, demand for mortgage loans typically declines. Community Capital’s income from Community Capital’s mortgage origination fees would significantly decrease following a decline in demand for mortgage loans. Any of these events could adversely affect Community Capital’s results of operations or financial condition.

Service charge income decreased $161,000, or 8.40% from the nine months ended September 30, 2002 to the nine months ended September 30, 2003 and $68,000, or 10.18% from the three months ended September 30, 2002 to the three months September 30, 2003.

The income from fiduciary activities increased $81,000, or 40.30% from the nine month period ended September 30, 2002 to the nine month period ended September 30, 2003, and $29,000, or 36.25% from the three month period ended September 30, 2002 to the three month period ended September 30, 2003. Commissions on the sale of mutual funds increased $90,000, or 169.81% from the nine months ended September 30, 2002 to the nine months ended September 30, 2003 and $45,000, or 160.71% for the three months ended September 30, 2002 to the three months ended September 30, 2003.

Other operating income increased $416,000 from the nine months ended September 30, 2002 to the nine months ended September 30, 2003 and $181,000 from the three months ended September 30, 2003 compared to the three months ended September 30, 2003. The increase is partially due to income realized on BOLI (Bank Owned Life Insurance) that was purchased in August 2002. Also included in other operating income was

$109,000 resulting from MetLife’s acquisition of General American Life Insurance Company, a mutual company. By virtue of Community Capital’s ownership of General American policies, Community Capital received a pro rata portion of the purchase price of the mutual company.

Total noninterest expense for the first nine months of 2003 was $10,711,000, an increase of $1,905,000, or 21.63%, when compared to the first nine months of 2002. The primary reasons for the increase were the prepayment penalty expense of $786,200 associated with the early extinguishment of Federal Home Loan Bank debt and $224,000 associated with the early termination of a computer mainframe lease due to a software conversion. Both of these charges are included in other operating expenses. For the quarter ended September 30, 2003, noninterest expense was $4,388,000, an increase of $1,388,000, or 46.27%, over the comparable period of 2002.

The primary component of noninterest expense is salaries and benefits, which were $5,288,000, and $4,771,000 for the nine months ended September 30, 2003 and 2002, respectively and $1,849,000 and $1,661,000 for the three months ending September 30, 2003 and 2002, respectively. These increases are due to staff increases from the opening of new branches. In addition to the opening of a new branch in Greenville, South Carolina in December 2002, Community Capital also opened a new branch in Clinton, South Carolina in April 2003. Net occupancy expense increased $124,000 for the nine month period ending September 30, 2003, an increase of 17.37% over the related period in 2002. These increases are also due to increases from the opening of new branches. The amortization of intangible assets decreased $43,000, or 14.24% to $259,000 for the nine months ended September 30, 2003 and 2002 respectively, and $2,000, or 2.22% for the three months ending September 30, 2003 and 2002. Other operating expenses increased $1,370,000 or 55.83% to $3,824,000 for the nine months ended September 30, 2003, as compared to the same period in 2002. As noted above, a large portion of the increase was associated with the prepayment penalty on the extinguishment of FHLB advances and the write-off of a lease obligation due to a software conversion. Expenses associated with the opening of new branches also led to operating expense increases.

For the nine months ended September 30, 2003 and 2002, the effective income tax rate was 27.06% and 27.30%, respectively, and the income tax provision was $1,475,000 and $1,250,000, respectively. For the quarter ended September 30, 2003, the effective tax rate was 28.74% compared to 27.03% for the third quarter of 2002.

The combination of the above factors resulted in net income of $3,976,000 for the nine months ended September 30, 2003 compared to $3,329,000 for the comparable period in 2002. For the quarter ended September 30, 2003, net income was $1,525,000, an increase of $499,000 when compared to the third quarter of 2002. The gain on sale of nonmarketable equity securities and reduced provision for loan losses were the primary reasons for the increase in net income for the nine month and three month periods ended September 30, 2003.

Comparison of Year ended December 31, 2002 with year ended December 31, 2001

Net interest income increased $1.1 million, or 8.47%, to $14.4 million in 2002 from $13.3 million in 2001. The increase in net interest income was due primarily to an increase in the volume of average loans and the decrease in yields on average interest bearing liabilities. Average earning assets decreased $13.7 million, or 3.96%, and average interest-bearing liabilities decreased $18.5 million, or 6.04%, due primarily to the sale of the five branches in 2001.

Community Capital’s tax equivalent net interest spread and tax equivalent net interest margin were 4.14% and 4.50%, respectively, in 2002 compared to 3.58% and 4.08% in 2001. The increase in the net interest spread was primarily the result of the decrease in yields on interest-bearing liabilities used to fund loans and securities. Yields on interest-bearing liabilities decreased from 4.46% in 2001 to 2.70% in 2002. Yields on interest-earning assets decreased 120 basis points. However, yields on interest-bearing liabilities decreased 176 basis points.

The provision for loan losses was $773,000 in 2002 compared to $1.9 million in 2001. The significant amount charged to the provision in 2001 was primarily the result of management’s efforts to fund the allowance

for potential problem loans and to protect against a deteriorating economy. Community Capital’s allowance for loan losses was 1.48% of total loans outstanding at December 31, 2002. In addition, the provision was funded to maintain the allowance for loan losses at a level sufficient to cover known and inherent losses in the loan portfolio.

Noninterest income decreased $5.6 million, or 55.12%, to $4.5 million in 2002 from $10.1 million in 2001, which was primarily attributable to the premium on the branches sold to Enterprise Bank in 2001. The premium totaled $5.8 million. Service charges on deposit accounts increased $450,000, or 21.15% to $2.6 million in 2002. Residential mortgage origination fees decreased $96,000, or 11.68% to $726,000 in 2002 from $822,000 in 2001. Mortgage originations have declined as rates leveled off and as fewer customers are refinancing their mortgages.

Noninterest income in 2002 included $106,000 from the gain on sales of securities available for sale, whereas, noninterest income for 2001 included $290,000 from the gain on sales of nonmarketable equity securities. Income from fiduciary activities increased $150,000, or 114.50% to $281,000 in 2002 from $131,000 in 2001. Commissions on the sale of mutual funds increased $74,000, or 231.25% to $106,000 in 2002 compared to $32,000 in 2001.

Noninterest expense decreased $3.2 million, or 21.26%, to $11.9 million in 2002 from $15.1 million in 2001. The primary component of noninterest expense was salaries and employee benefits, which decreased $104,000, or 1.59%, to $6.4 million in 2002 from $6.5 million in 2001. Many of the categories of expenses decreased in 2002 compared to 2001 because of the sale of the branches to Enterprise Bank in 2001. Other categories of expenses decreased due to the sale of the branches and improved efficiency from the consolidation of the subsidiary banks. Net occupancy expense was $697,000 in 2002 compared to $749,000 in 2001, and furniture and equipment expense was $1.0 million in 2002 compared to $1.4 million in 2001. Another significant decrease in noninterest expense was in the amortization of intangible assets. Total amortization of intangible assets was $346,000 in 2002, as compared to $2.4 million in 2001. This significant decrease was also due to the sale of the five branches to Enterprise Bank. Community Capital’s efficiency ratio was 61.45% in 2002 compared to 72.71% in 2001.

Net income increased $124,000, or 2.77%, to $4.6 million in 2002 from $4.5 million in 2001. Basic earnings per share were $1.34 in 2002, compared to $1.31 in 2001. Diluted earnings per share were $1.26 in 2002, compared to $1.26 in 2001. Return on average assets during 2002 was 1.28% compared to 1.19% during 2001, and return on average equity was 10.93% during 2002 compared to 11.68% during 2001.

Comparison of Year ended December 31, 2001 with year ended December 31, 2000

Net interest income increased $200,000, or 1.53%, to $13.3 million in 2001 from $13.1 million in 2000. The increase in net interest income was due primarily to an increase in net interest margin. Average earning assets decreased $18.9 million, or 5.19%, and average interest-bearing liabilities decreased $23.7 million, or 7.17%, due primarily to the sale of the five branches.

Community Capital’s tax equivalent net interest spread and tax equivalent net interest margin were 3.58% and 4.08%, respectively, in 2001 compared to 3.36% and 3.83% in 2000. The increase in the net interest spread was primarily the result of the decrease in yields on interest-bearing liabilities used to fund loans and securities. Yields on interest-bearing liabilities decreased from 5.03% in 2000 to 4.46% in 2001. Yields on interest-earning assets decreased 35 basis points. However, yields on interest-bearing liabilities decreased 57 basis points.

The provision for loan losses was $1.9 million in 2001 compared to $471,000 in 2000. The significant amount charged to the provision in 2001 was primarily the result of management’s efforts to fund the allowance for potential problem loans and to protect against a deteriorating economy. Community Capital’s allowance for loan losses was 1.63% of total loans outstanding at December 31, 2001. In addition, the provision was funded to maintain the allowance for loan losses at a level sufficient to cover known and inherent losses in the loan portfolio.

Noninterest income increased $6.8 million, or 206.06%, to $10.1 million in 2001 from $3.3 million in 2000, which was primarily attributable to the premium on the branches sold to Enterprise Bank. The premium totaled $5.8 million. Service charges on deposit accounts increased $422,000, or 24.74%, to $2.1 million in 2001. Residential mortgage origination fees increased $319,000, or 63.41% to $822,000 in 2001. Noninterest income in 2001 included $290,000 from the gain on sales of nonmarketable equity securities as compared to no gains in 2000. Noninterest income for the year ended December 31, 2000 included $150,000 from the gain on the sale of Community Trust Company.

Noninterest expense increased $1.1 million, or 7.86%, to $15.1 million in 2001 from $14.0 million in 2000. The primary component of noninterest expense was salaries and employee benefits, which decreased $265,000, or 3.90%, to $6.5 million in 2001 from $6.8 million in 2000. The decrease is attributable to a decrease in the number of employees due to the sale of the branches to Enterprise Bank. Other categories of expenses decreased due to the sale of the branches and improved efficiency from the consolidation of the subsidiary banks. Net occupancy expense was $749,000 in 2001 compared to $880,000 in 2000, and furniture and equipment expense was $1.4 million in 2001 compared to $1.6 million in 2000. The most significant increase in noninterest expense was in the amortization of intangible assets. Community Capital recorded amortization of intangible assets related to the sale of branches to Enterprise Bank of $1.9 million. Total amortization of intangible assets was $2.4 million in 2001, as compared to $612,000 in 2000. Community Capital’s efficiency ratio was 72.71% in 2001 compared to 81.75% in 2000.

Net income increased $2.8 million, or 164.71%, to $4.5 million in 2001 from $1.7 million in 2000. Basic earnings per share were $1.31 in 2001, compared to $0.48 in 2000. Diluted earnings per share were $1.26 in 2001, compared to $0.48 in 2000. Return on average assets during 2001 was 1.19% compared to 0.41% during 2000, and return on average equity was 11.68% during 2001 compared to 4.57% during 2000.

The largest component of Community Capital’s net income is Community Capital’s net interest income, which is the difference between the income earned on assets and interest paid on deposits and borrowings used to support such assets. Net interest income is determined by the yields earned on Community Capital’s interest-earning assets and the rates paid on Community Capital’s interest-bearing liabilities, the relative amounts of interest-earning assets and interest-bearing liabilities and the degree of mismatch and the maturity and repricing characteristics of Community Capital’s interest-earning assets and interest-bearing liabilities. Net interest income divided by average interest-earning assets represents Community Capital’s net interest margin.

The previous table sets forth, for the periods indicated, certain information related to Community Capital’s average balance sheet and Community Capital’s average yields on assets and average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been derived from the daily balances throughout the periods indicated.

The following table sets forth the effect that the varying levels of earning assets and interest-bearing liabilities and the applicable rates have had on changes in net interest income from 2002 to 2001 and 2001 to 2000.

Community Capital monitors and manages the pricing and maturity of Community Capital’s assets and liabilities in order to diminish the potential adverse impact that changes in interest rates could have on Community Capital’s net interest income. The principal monitoring technique Community Capital employs is the measurement of Community Capital’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 the same time interval helps to hedge the risk and minimize the impact on net interest income of rising or falling interest rates.

The following table sets forth Community Capital’s interest rate sensitivity at December 31, 2002.

The above table reflects the balances of interest-earning assets and interest-bearing liabilities at the earlier of their repricing or maturity dates. Overnight federal funds are reflected at the earliest pricing interval due to the immediately available nature of the instruments. Debt securities are reflected at each instrument’s ultimate maturity date. 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 that give Community Capital 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. Other short-term borrowings consist of federal funds purchased and securities sold under agreements to repurchase. Federal funds purchased are reflected at the earliest pricing interval because funds can be repriced daily. Securities sold under agreements to repurchase are reflected at the maturity date of each repurchase agreement that generally matures

within one day. Advances from the Federal Home Loan Bank are reflected at their contractual maturity dates. Obligations under capital leases are reflected at each payment date.

Community Capital generally would benefit from increasing market rates of interest when Community Capital has an asset-sensitive gap position and generally would benefit from decreasing market rates of interest when Community Capital is liability sensitive. Community Capital is liability sensitive within the one year period. However, Community Capital’s gap analysis is not a precise indicator of Community Capital’s interest sensitivity position. The analysis presents only 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. For example, rates paid on a substantial portion of core deposits may change contractually within a relatively short time frame, but those rates are viewed by Community Capital as significantly less interest-sensitive than market-based rates such as those paid on non-core deposits. Accordingly, Community Capital believes a liability-sensitive gap position is not as indicative of Community Capital’s true interest sensitivity as it would be for an organization that depends to a greater extent on purchased funds to support earning assets. Net interest income may be impacted by other significant factors in a given interest rate environment, including changes in the volume and mix of earning assets and interest-bearing liabilities.

Community Capital has developed policies and procedures for evaluating the overall quality of Community Capital’s credit portfolio and the timely identification of potential problem credits. On a quarterly basis, the Board of Directors reviews and approves the appropriate level for CapitalBank’s allowance for loan losses based upon Community Capital’s recommendations, the results of the internal monitoring and reporting system, analysis of economic conditions in its markets, and a review of historical statistical data for both Community Capital and other financial institutions.

Additions to the allowance for loan losses, which are expensed as the provision for loan losses on Community Capital’s income statement, are made periodically to maintain the allowance at an appropriate level based on Community Capital’s analysis of the potential risk in the loan portfolio. Loan losses and recoveries are charged or credited directly to the allowance. The amount of the provision is a function of the level of loans outstanding, the level of nonperforming loans, historical loan loss experience, the amount of loan losses actually charged against the reserve during a given period, and current and anticipated economic conditions.

Community Capital’s allowance for loan losses is based upon judgments and assumptions of risk elements in the portfolio, future economic conditions, and other factors affecting borrowers. The process includes identification and analysis of loss potential in various portfolio segments utilizing a credit risk grading process and specific reviews and evaluations of significant problem credits. In addition, Community Capital monitors the overall portfolio quality through observable trends in delinquency, charge offs, and general and economic conditions in the service area. The adequacy of the allowance for loan losses and the effectiveness of Community Capital’s monitoring and analysis system are also reviewed periodically by the banking regulators and Community Capital’s independent auditors.

Based on present information and an ongoing evaluation, Community Capital considers the allowance for loan losses to be adequate to meet presently known and inherent risks in the loan portfolio. Community Capital’s judgment as to the adequacy of the allowance is based upon a number of assumptions about future events that Community Capital believes to be reasonable but that may or may not be valid. Thus, Community Capital has no assurance that charge offs in future periods will not exceed the allowance for loan losses or that additional increases in the allowance for loan losses will not be required. Community Capital does not allocate the allowance for loan losses to specific categories of loans but evaluates the adequacy on an overall portfolio basis utilizing a risk grading system.

The following table sets forth certain information with respect to Community Capital’s allowance for loan losses and the composition of charge offs and recoveries for each of the last five years.

The following table sets forth Community Capital’s nonperforming assets for the dates indicated.

Accrual of interest is discontinued on a loan when Community Capital believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that the collection of interest is doubtful. A delinquent loan is generally placed in nonaccrual status when it becomes 90 days or more past due. When a loan is placed in nonaccrual status, all interest that has been accrued on the loan but

remains unpaid is reversed and deducted from current earnings as a reduction of reported interest income. No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain. When a problem loan is finally resolved, Community Capital may ultimately write-down or charge off of the principal balance of the loan that would necessitate additional charges to earnings. For all periods presented, the additional interest income, which would have been recognized into earnings if Community Capital’s nonaccrual loans had been current in accordance with their original terms, is immaterial.

Total nonperforming assets increased to $2.0 million at December 31, 2002, from $1.7 million at December 31, 2001. This amount consists primarily of nonaccrual loans that totaled $1.9 million at December 31, 2002. Nonperforming assets were 0.70% of total loans at December 31, 2002. The allowance for loan losses to period end nonperforming assets was 209.6% at December 31, 2002.

At December 31, 2002, through Community Capital’s internal review mechanisms, Community Capital had identified $3.4 million of criticized loans and $9.4 million of classified loans. The results of this internal review process are the primary determining factor in Community Capital’s assessment of the adequacy of the allowance for loan losses.

Community Capital’s criticized loans decreased from $9.2 million at December 31, 2001 to $3.4 million at December 31, 2002. The decrease was due to the improvement in credit quality of several large loans that allowed Community Capital to upgrade these loans. Total classified loans decreased from $10.5 million at December 31, 2001 to $9.4 million at December 31, 2002. Community Capital is committed to addressing potential problem loans.

Noninterest income decreased $5.6 million, or 55.12%, to $4.5 million in 2002 from $10.1 million in 2001, which was primarily attributable to the gain recognized on the sale of the five branches to Enterprise Bank in 2001. The premium on this sale totaled $5.8 million. Community Capital had $106,000 in gains on the sale of securities available for sale, whereas in 2001 Community Capital realized a gain of $290,000 on the sales of nonmarketable equity securities. Residential mortgage origination fees decreased $96,000, or 11.68% to $726,000 in 2002 from $822,000 in 2001. Mortgage originations have declined as rates leveled off and as fewer customers are refinancing their mortgages. Income from fiduciary activities increased $150,000, or 114.50% to $281,000 in 2002 from $131,000 in 2001. Commissions on the sale of mutual funds increased $74,000, or 231.25% to $106,000 in 2002 compared to $32,000 in 2001.

The following table sets forth, for the periods indicated, the principal components of noninterest income:

Noninterest expense decreased $3.2 million, or 21.26%, to $11.9 million in 2002 from $15.1 million in 2001. The primary component of noninterest expense was salaries and benefits, which decreased $104,000, or 1.59%, to $6.4 million in 2002 from $6.5 million in 2001. Many of the categories of expenses decreased in 2002 compared to 2001 because of the sale of the branches to Enterprise Bank in 2001. Net occupancy expense was $697,000 in 2002 compared to $749,000 in 2001, and furniture and equipment expenses was $1.0 million in 2002 compared to $1.4 million in 2001. Another significant decrease in noninterest expense was in the amortization of intangible assets. Total amortization of intangible assets was $346,000 in 2002, as compared to $2.4 million in 2001. Community Capital recorded amortization of intangible assets related to the sale of branches to Enterprise Bank of $1.9 million in 2001. Community Capital’s efficiency ratio was 61.45% in 2002 compared to 72.71% in 2001.

The following table sets forth, for the periods indicated, the primary components of noninterest expense:

Community Capital’s income tax expense was $1.7 million, a decrease of $217,000 from the 2001 amount of $1.9 million. The slight decrease was partially due to the decrease in income before taxes.

During the first nine months of 2003, total assets increased $14,082,000, or 3.70%, when compared to December 31, 2002. Community Capital experienced an increase of 6.94% in the loan area during the first nine months of 2003; however, this growth was partially offset by a decrease in securities of $9,056,000 from December 31, 2002 to September 30, 2003. Proceeds from maturities and calls of securities were used to fund loan growth. On the liability side, total deposits increased $25,139,000, or 9.09%, to $301,700,000 at September 30, 2003. Federal funds purchased and securities sold under agreements to repurchase decreased $12,265,000 to $13,585,000 at September 30, 2003 from December 31, 2002. This decrease was primarily attributable to an increase in deposits that resulted in the need for less federal funds purchased. Advances from the Federal Home Loan Bank increased $1,310,000 from December 31, 2002 as Community Capital restructured Community Capital’s advances with them. The decrease in obligations under capital leases was partially due to the early write-off of Community Capital’s computer mainframe lease due to a software conversion.

Loans receivable increased $20,042,000, or 6.94%, since December 31, 2002. The majority of Community Capital’s loan growth was in real estate loans. Real estate loans increased $16,606,000 or 7.55% to $236,427,000 at September 30, 2003 from December 31, 2002. Balances within the major loan receivable categories as of September 30, 2003 and December 31, 2002 are as follows:

Although the real estate loan receivable category accounts for the majority of Community Capital’s total loans receivable, rising mortgage loan interest rates could slow the volume of activity within this loan receivable category.

Loans are the largest category of earning assets and typically provide higher yields than the other types of earning assets. Associated with the higher yields are the inherent credit and liquidity risks that Community Capital attempt to control and counterbalance. Loans averaged $274.4 million in 2002 compared to $259.6 million in 2001, an increase of $14.8 million, or 5.7%. At December 31, 2002, total loans were $288.8 million compared to $248.3 million at December 31, 2001. The following table sets forth the composition of the loan portfolio by category at the dates indicated and highlights Community Capital’s general emphasis on mortgage lending.

The principal component of Community Capital’s loan portfolio is real estate mortgage loans. At December 31, 2002, this category totaled $227.9 million and represented 78.2% of the total loan portfolio, compared to $183.5 million, or 72.8%, at December 31, 2001.

In the context of this discussion, a “real estate mortgage loan” is defined as any loan, other than loans for construction purposes, secured by real estate, regardless of the purpose of the loan. Financial institutions in Community Capital’s market areas typically obtain a security interest in real estate, whenever possible, in addition to any other available collateral. This collateral is taken to reinforce the likelihood of the ultimate repayment of the loan and tends to increase the magnitude of the real estate loan portfolio component.

Real estate construction loans decreased $203,000, or 1.53%, to $13.0 million at December 31, 2002, from $13.3 million at December 31, 2001. Residential mortgage loans, which are the largest category of Community Capital’s loans, increased $30.2 million, or 24.31%, to $154.3 million at December 31, 2002, from $124.1 million at December 31, 2001. Residential real estate loans consist of first and second mortgages on single or multi-family residential dwellings. Nonresidential mortgage loans, which include commercial loans and other loans secured by multi-family properties and farmland, increased $14.2 million or 23.89%, to $73.6 million at December 31, 2002 from $59.4 million at December 31, 2001. The overall increase in real estate lending was attributable to the continued demand for residential and commercial real estate loans in Community Capital’s markets. CapitalBank has been able to compete favorably for residential mortgage loans with other financial institutions by offering fixed rate products having three and five year call provisions.

Commercial and industrial loans decreased $2.8 million, or 8.52%, to $30.6 million at December 31, 2002, from $33.4 million at December 31, 2001.

Consumer and other loans decreased $401,000, or 2.20%, to $17.8 million at December 31, 2002, from $18.2 million at December 31, 2001.

Community Capital’s loan portfolio reflects the diversity of Community Capital’s markets. CapitalBank’s thirteen branches are located from the northern Midlands of South Carolina through the Upstate. Primary market areas include Anderson, Belton, Clemson, Greenwood, Newberry and Saluda. The economies of these markets are varied and represent different industries including medium and light manufacturing, higher education, regional health care, and distribution facilities. These areas are expected to remain stable with continual growth. The diversity of the economy creates opportunities for all types of lending. CapitalBank does not engage in foreign lending.

The repayment of loans in the loan portfolio as they mature is also a source of Community Capital’s liquidity. The following table sets forth Community Capital’s loans maturing within specified intervals at December 31, 2002.

The information presented in the above table is based on the contractual maturities of the individual loans, including loans that 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, Community Capital believes this treatment presents fairly the maturity and repricing structure of the loan portfolio shown in the above table.

Investment securities decreased 16.23% to $46,756,000 at September 30, 2003. The decrease was due to a decrease in securities available-for-sale and nonmarketable equity securities. Securities available for sale decreased $7,643,000 to $42,453,000 at September 30, 2003. Proceeds from the maturities, sales and calls of securities were used to fund loan growth. Nonmarketable equity securities decreased $1,373,000 to $3,793,000 at September 30, 2003. The decrease was the result of the sale of all of Community Capital’s stock in another community bank and the sale of the majority of Community Capital’s stock in a correspondent financial institution.

Total securities averaged $57.2 million in 2002, compared to $83.8 million in 2001 and $110.2 million in 2000. At December 31, 2002, the total securities portfolio was $55.8 million. Securities designated as available-for-sale totaled $50.1 million and were recorded at estimated fair value. Securities designated as held-to-maturity totaled $550,000 and were recorded at amortized cost. The securities portfolio also includes nonmarketable equity securities totaling $5.2 million that are carried at cost because they are not readily marketable or have no quoted market value. These include investments in Federal Reserve Bank stock, Federal Home Loan Bank stock, the stock of four unrelated financial institutions, and the stock of a financial services company that offers Internet banking.

The following table sets forth the book value of the securities held by Community Capital at the dates indicated.

The following table sets forth the scheduled maturities and average yields of securities held at December 31, 2002.

Other attributes of the securities portfolio, including yields and maturities, are discussed above in “—Net Interest Income—Interest Sensitivity.”

Short-term investments, which consist primarily of federal funds sold and interest-bearing deposits with other banks, averaged $261,000 in 2002, compared to $2.1 million in 2001 and $87,000 in 2000. At December 31, 2002, short-term investments totaled $39,000. These funds are a source of Community Capital’s liquidity. Federal funds are generally invested in an earning capacity on an overnight basis.

Purchases of fixed assets during the first nine months of 2003 totaled $648,000. Of this amount, $316,000 of these purchases was in the third quarter of 2003. Total fixed assets, net of depreciation, decreased $241,000 during the first nine months of 2003. Community Capital’s conversion to a new core processing system and outsourcing of its data processing functions on or about November 15, 2003 may, among other items, require replacement of upgrades to Community Capital’s network components.

Total deposits increased $25,139,000, or 9.09%, from December 31, 2002. During the first nine months of 2003, CapitalBank offered a jumbo checking product as part of interest-bearing checking. These accounts were offered for a limited time with checking balances of a minimum of $100,000 and paid interest at 3.00%. Of the $29,033,000 increase in interest bearing checking accounts, approximately $21,000,000 was attributable to the jumbo checking product. Expressed in percentages, noninterest-bearing deposits increased 18.09% and interest bearing deposits increased 8.02%.

Balances within the major deposit categories as of September 30, 2003 and December 31, 2002 are as follows:

In an effort to increase core deposits in certain targeted market areas, Community Capital offered in the first quarter of 2003 interest rates of 3% (as opposed to market rates of approximately 1%) on interest-bearing checking accounts opened in such targeted areas with a minimum opening balance of $100,000. Community Capital guaranteed this interest rate through December 31, 2003. From December 31, 2002 to September 30, 2003, interest-bearing checking account balances increased by $29,033,000, as reflected above.

Average interest-bearing liabilities decreased $18.5 million, or 6.03%, to $288.4 million in 2002, from $306.9 million in 2001. Average interest-bearing deposits decreased $25.1 million, or 9.57%, to $237.1 million in 2002, from $262.2 million in 2001.

Average total deposits decreased $24.3 million, or 8.42%, to $264.1 million during 2001, from $288.4 million during 2001. At December 31, 2002, total deposits were $276.6 million compared to $258.3 million a year earlier, an increase of 7.06%.

Core deposits, which exclude certificates of deposit of $100,000 or more, provide a relatively stable funding source for Community Capital’s loan portfolio and other earning assets. Community Capital’s core deposits increased $15.8 million to $234.5 million at December 31, 2002.

Deposits, and particularly core deposits, have historically been Community Capital’s primary source of funding and have enabled Community Capital to meet successfully Community Capital’s short-term and long-term liquidity needs. Community Capital anticipates that such deposits will continue to be Community Capital’s primary source of funding in the future. Community Capital’s loan-to-deposit ratio was 105.41% at December 31, 2002, and 97.53% at the end of 2001. The maturity distribution of Community Capital’s time deposits of $100,000 or more at December 31, 2002 is set forth in the following table.

Approximately 32.2% of Community Capital’s time deposits of $100,000 or more had scheduled maturities within three months and 51.3% had maturities within six months. Large certificate of deposit customers tend to be extremely sensitive to interest rate levels, making these deposits less reliable sources of funding for liquidity planning purposes than core deposits. Some financial institutions partially fund their balance sheets using large certificates of deposit obtained through brokers. These brokered deposits are generally expensive and are unreliable as long-term funding sources. Accordingly, Community Capital does not solicit brokered deposits.

Borrowed funds consist of short-term borrowings and advances from the Federal Home Loan Bank. Short-term borrowings are primarily federal funds purchased from correspondent banks and securities sold under agreements to repurchase.

Average short-term borrowings were $19.2 million in 2002, an increase of $9.1 million from 2001. Federal funds purchased from correspondent banks averaged $13.9 million in 2002. At December 31, 2002, federal funds purchased totaled $21.2 million. Securities sold under agreements to repurchase averaged $5.3 million in 2002. At December 31, 2002, securities sold under agreements to repurchase totaled $4.61 million.

Advances from the Federal Home Loan Bank of Atlanta to Community Capital were $32,450,000 as of September 30, 2003. In order to better manage Community Capital’s asset liability position, Community Capital prepaid three advances totaling $10,500,000 during the quarter ending September 30, 2003. Community Capital then obtained two new advances totaling $11,900,000 during the quarter. The following advances from Federal Home Loan Bank have scheduled maturities greater than one year:

Average Federal Home Loan Bank advances during 2002 were $31.2 million compared to $31.4 million during 2001, a decrease of $200,000. Advances from the Federal Home Loan Bank are collateralized by one-to-four family residential mortgage loans and Community Capital’s investment in Federal Home Loan Bank stock. At December 31, 2002, borrowings from the Federal Home Loan Bank were $31.1 million compared to $31.3 million a year earlier. Although Community Capital expects to continue using short-term borrowing and Federal Home Loan Bank advances as secondary funding sources, core deposits will continue to be Community Capital’s primary funding source.

The Federal Reserve Board and bank regulatory agencies require bank holding companies and financial institutions to maintain capital at adequate levels based on a percentage of assets and off-balance-sheet exposures, adjusted for risk weights ranging from 0% to 100%. Under the risk-based standard, capital is classified into two tiers. Community Capital’s Tier 1 capital consists of common shareholders’ equity, excluding the unrealized gain (loss) on available-for-sale securities, minus intangible assets. Community Capital’s Tier 2

capital consists of the allowance for loan losses subject to certain limitations. A bank holding company’s qualifying capital base for purposes of its risk-based capital ratio consists of the sum of its Tier 1 and Tier 2 capital. The regulatory minimum requirements are 4% for Tier 1 and 8% for total risk-based capital.

Community Capital and CapitalBank are also required to maintain capital at a minimum level based on average total assets (as defined), which is known as the leverage ratio. Only the strongest bank holding companies and banks are allowed to maintain capital at the minimum requirement of 3%. All others are subject to maintaining ratios 1% to 2% above the minimum.

The following table summarizes Community Capital’s capital ratios and the regulatory minimum requirements at September 30, 2003:

Community Capital and CapitalBank exceeded the Federal Reserve’s fully phased-in regulatory capital ratios at December 31, 2002, 2001, and 2000, as set forth in the following table.

Shareholders’ equity was increased by the $2,687,000 proceeds from the exercise of stock options and net income of $3,976,000. These increases were offset to a large extent by the purchase of treasury stock during the nine-month period ending September 30, 2003. Community Capital purchased 371,580 shares of treasury stock for $5,535,000. Shareholders’ equity was also decreased by $743,000 paid to shareholders for cash dividends. Due to changes in the market rates of interest, the fair value of Community Capital’s securities available-for-sale decreased, which had the effect of decreasing shareholders’ equity by $177,000 net of the deferred taxes for the nine months ended September 30, 2003 when compared to December 31, 2002.

For the near term, maturities and sales of securities available-for-sale are expected to be a primary source of liquidity as Community Capital deploys these funds into loans to achieve the desired mix of assets and liabilities.

Community Capital also expects to build its deposit base. Advances from the Federal Home Loan Bank and the Bankers Bank will also continue to serve as a funding source, at least for the near future. Community Capital has the ability to receive an additional $56,056,000 in advances under the term of Community Capital’s agreement with the Federal Home Loan Bank. Short-term borrowings by CapitalBank are not expected to be a primary source of liquidity for the near term; however, Community Capital has approximately $43,386,000 of unused lines of credit to purchase federal funds.

Liquidity management involves monitoring Community Capital’s sources and uses of funds in order to meet Community Capital’s day-to-day cash flow requirements while maximizing profits. Liquidity represents the ability of a company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Without proper liquidity management, Community Capital would not be able to perform the primary function of a financial intermediary and would, therefore, not be able to meet the needs of the communities Community Capital serves.

Liquidity management is made more complex because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of the investment portfolio is very predictable and subject to a high degree of control at the time investment decisions are made. However, net deposit inflows and outflows are far less predictable and are not subject to nearly the same degree of control.

Community Capital’s loans-to-assets ratio and loans-to-funds ratio increased from 2001 to 2002. The loans-to-assets ratio at December 31, 2002 was 76.56% compared to 73.95% at December 31, 2001, and the loans-to-funds ratio at December 31, 2002 was 87.40% compared to 84.81% at December 31, 2001. The amount of advances from the Federal Home Loan Bank was approximately $31.1 million at December 31, 2002 compared to $31.3 million at December 31, 2001. Community Capital expects to continue using these advances as a source of funding. Additionally, Community Capital had approximately $35.8 million of unused lines of credit for federal funds purchases and $50.1 million of securities available-for-sale at December 31, 2002 as sources of liquidity. Community Capital also has the ability to receive an additional $29.4 million in advances under the term of Community Capital’s agreement with the Federal Home Loan Bank.

Community Capital depends on dividends from CapitalBank as Community Capital’s primary source of liquidity. The ability of CapitalBank to pay dividends is subject to general regulatory restrictions that may, but are not expected to, have a material impact on the liquidity available to Community Capital. Community Capital paid stock dividends in September 1998, June 2000, and May 2001 and may do so in the future. Community Capital has paid cash dividends on a quarterly basis since September 2001 and anticipate continuing to do so.

Through the operations of CapitalBank, Community Capital has made contractual commitments to extend credit in the ordinary course of Community Capital’s business activities. These commitments are legally binding agreements to lend money to Community Capital’s customers at predetermined interest rates for a specified period. At September 30, 2003, Community Capital had issued commitments to extend credit of $51,545,000 and standby letters of credit of $596,000 through various types of commercial lending arrangements. Approximately $22,370,000 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 September 30, 2003.

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

Unlike most industrial companies, the assets and liabilities of financial institutions such as Community Capital and CapitalBank are primarily monetary in nature. Therefore, interest rates have a more significant effect on Community Capital’s performance than do the effects of changes in the general rate of inflation and change in prices. In addition, interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. As discussed previously, Community Capital seeks to manage the relationships between interest sensitive assets and liabilities in order to protect against wide interest rate fluctuations, including those resulting from inflation.

Community Capital has adopted various accounting policies that govern the application of accounting principles generally accepted in the United States in the preparation of Community Capital’s financial statements. Community Capital’s significant accounting policies are described in the footnotes to the consolidated financial statements at December 31, 2002 as filed on Community Capital’s annual report on Form 10-K/A and with this proxy/prospectus. Certain accounting policies involve significant judgments and assumptions by Community Capital that have a material impact on the carrying value of certain assets and liabilities. Community Capital considers these accounting policies to be critical accounting policies. The judgments and assumptions Community Capital uses are based on historical experience and other factors, which Community Capital believes to be reasonable under the circumstances. Because of the nature of the judgments and assumptions Community Capital makes, actual results could differ from these judgments and estimates that could have a material impact on Community Capital’s carrying values of assets and liabilities and Community Capital’s results of operations.

Community Capital believes the allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation of Community Capital’s consolidated financial statements. Refer to the portion of this discussion that addresses Community Capital’s allowance for loan losses for a description of Community Capital’s processes and methodology for determining Community Capital’s allowance for loan losses.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-based Compensation—Transition and Disclosure”, an amendment of FASB Statement No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure provisions of SFAS No. 123 and Accounting Pronouncement Board (“APB”) Opinion No. 28, “Interim Financial Reporting”, to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While SFAS No. 148 does not amend SFAS No. 123 to require companies to account for employee stock options using the fair value method, the disclosure provisions of SFAS No. 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of SFAS No. 123 or the intrinsic value method of APB Opinion No. 25. The provisions of SFAS No. 148 are effective for annual financial statements for fiscal years ending after December 15, 2003, and for financial reports containing condensed financial statements for interim period beginning after December 15, 2002. Community Capital has adopted the disclosure provisions of SFAS No. 148, which had no impact on Community Capital’s financial condition or operating results.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts and loan commitments that relate to the origination of mortgage loans held for sale, and for hedging activities under SFAS No. 133. SFAS No. 149 is generally effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS No. 149 will not have a material impact on Community Capital’s financial condition or operating results.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. SFAS No. 150 is generally effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on Community Capital’s financial condition or operating results.

In June 2003, the American Institute of Certified Public Accountants (AICPA) issued an exposure draft of a proposed Statement of Position (SOP), Allowance for Credit Losses. The proposed SOP addresses the recognition and measurement by creditors of the allowance for credit losses related to all loans, as that term is defined in SFAS No. 114, Accounting by Creditors for Impairment of a Loan. The proposed SOP provides that the allowance for credit losses reported on a creditor’s balance sheet should consist only of (1) a component for individual loan impairment recognized and measured pursuant to FASB Statement No. 114 and (2) one or more components of collective loan impairment recognized pursuant to FASB Statement No. 5, Accounting for Contingencies, and measured in accordance with the guidance in the proposed SOP. The provisions of the proposed SOP would be effective for financial statements for fiscal years beginning after December 15, 2003, with earlier application permitted. The effect of initially applying the provisions of the proposed SOP would be reported as a change in accounting estimate. Comments on the exposure draft are due by September 19, 2003. Community Capital has not determined the effect on its financial condition or operating results related to the adoption of this proposed SOP, but such effect would most likely be material.

On November 4, 1999, the U.S. Senate and House of Representatives each passed the Gramm-Leach-Bliley Act, previously known as the Financial Services Modernization Act of 2000. President Clinton signed the Act into law in November 1999. Among other things, the Act repeals the restrictions on banks affiliating with securities firms contained in Sections 20 and 32 of the Glass-Steagall Act. The Act also creates a new “financial holding company” under the Bank Holding Company Act, which will permit holding companies to engage in a statutorily provided list of financial activities, including insurance and securities underwriting and agency activities, merchant banking, and insurance company portfolio investment activities. The Act also authorizes activities that are “complementary” to financial activities. The Act is intended to grant to community banks certain powers as a matter of right that larger institutions have accumulated on an ad hoc basis. Nevertheless, the Act may have the result of increasing the amount of competition that Community Capital faces from larger institutions and other types of companies. Community Capital cannot predict the full effect that the Act will have on it.

From time to time, various bills are introduced in the United States Congress with respect to the regulation of financial institutions. Certain of these proposals, if adopted, could significantly change the regulation of banks and the financial services industry. Community Capital cannot predict whether any of these proposals will be adopted or, if adopted, how these proposals would affect it.

Other than the recently issued accounting standards and industry developments discussed above, Community Capital is not aware of any current recommendations by regulatory authorities, which, if they were to be implemented, would have a material effect on liquidity, capital resources, or operations.

Abbeville Capital. Abbeville Capital is a South Carolina corporation formed in 1997 to serve as the holding company for The Bank of Abbeville. Abbeville Capital is a bank holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended. Abbeville Capital currently has no operations and conducts no business other than ownership and operation of The Bank of Abbeville, a state bank chartered under the laws of South Carolina, located in Abbeville, South Carolina. Abbeville Capital’s principal executive offices are located at 203 S. Main Street, Abbeville, South Carolina 29620, and its telephone number is (864) 366-9676.

Abbeville Capital does not, as an entity, engage in separate business activities of a material nature apart from the activities it performs for The Bank of Abbeville. The primary activities of Abbeville Capital are to provide assistance in the management and coordination of The Bank of Abbeville’s financial resources and to provide capital and public relations services for The Bank of Abbeville. The Bank of Abbeville has a board of directors separate from that of Abbeville Capital and operates under the day-to-day management of its own officers. The Bank of Abbeville formulates its own policies with respect to banking and business matters.

As a bank holding company, Abbeville Capital is subject to regulation by the Federal Reserve Board in accordance with the requirements set forth in the Bank Holding Company Act and by the rules and regulations promulgated under this Act by the Federal Reserve Board. See “Certain Regulatory Considerations” beginning of page 109 of the proxy statement/prospectus.

The Bank of Abbeville. The Bank of Abbeville is a South Carolina banking corporation with its main office in Abbeville, South Carolina. The bank was originally chartered in 1987 under the laws of South Carolina. As a South Carolina banking corporation, The Bank of Abbeville is subject to regulation by the South Carolina State Board of Financial Institutions and the FDIC. Some of the rules and regulations applicable to The Bank of Abbeville are summarized in “Certain Regulatory Considerations” beginning of page 109 of the proxy statement/prospectus.

The Bank of Abbeville provides a wide range of retail and commercial banking services. Deposit services include checking, savings, money market, time deposit, and individual retirement accounts. Loan services include various types of real estate, consumer, commercial, industrial, and agricultural loans. The Bank of Abbeville also provides direct deposit services, wire transfer facilities, ATMs, Internet banking, and debit cards (with access to local, state, and nationwide networks). Deposits of The Bank of Abbeville are insured by the FDIC. The majority of The Bank of Abbeville’s loan portfolio consists of real estate and commercial loans, while consumer deposits comprise the majority of its deposit base.

The Bank of Abbeville considers its primary market to be Abbeville and Anderson Counties, South Carolina. The Bank of Abbeville uses one location for its banking operations. The Bank of Abbeville owns the main office facility. The Bank of Abbeville’s management considers this facility to be adequate for the current operations of the bank.

Abbeville Capital is a bank holding company and primarily conducts its operations through its subsidiary, The Bank of Abbeville. Abbeville Capital employs two executive officers. However, these two employees also conduct the business of The Bank of Abbeville and therefore are compensated as employees of The Bank of Abbeville. As of November 26, 2003, The Bank of Abbeville had 22 full-time equivalent employees (including the two executive officers of Abbeville Capital), none of whom is represented by a collective bargaining agreement.

The Bank of Abbeville has had, in the ordinary course of business, banking transactions with some of its officers and directors and with officers and directors of Abbeville Capital. All loan transactions with officers and directors of Abbeville Capital, its bank subsidiary, and their related and affiliated parties, have been in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing for comparable transactions with other loan customers of Abbeville Capital and have not included more than the normal risk of collectibility associated with the Abbeville Capital’s other banking transactions or other unfavorable features.

Abbeville Capital and The Bank of Abbeville are involved in routine legal proceedings occurring in the ordinary course of business that, in the aggregate, are not believed by management of these companies to be material to the consolidated financial condition and results of operation of Abbeville Capital.

The following table sets forth certain information known to Abbeville Capital regarding the beneficial ownership of its common stock as of January 2, 2004. Information is presented for (i) each shareholder who was the beneficial owner of more than five percent of our outstanding common stock; (ii) each of Abbeville Capital’s directors, each nominee for director, and each of Abbeville Capital’s executive officers, individually; and (iii) all of Abbeville Capital’s directors and executive officers, as a group. Except as otherwise specified in the notes to the following table, each of the individuals named in the table has indicated to Abbeville Capital that the individual has sole voting and investment power with respect to all shares of Abbeville Capital common stock reflected as being beneficially owned by that individual.

Legislation and Securities Exchange Commission rules adopted in 2002 have significantly increased, and will continue to increase, the regulatory burdens on audit firms that audit the financial statements of companies that are subject to the reporting requirements of the Securities Exchange Act of 1934. Consequently, many smaller audit firms are deciding to limit their audit practice to companies that are not subject to the 1934 Act. Tourville, Simpson & Caskey, L.L.P., which served as Abbeville Capital’s principal independent accountant since 1992 is one such firm. Accordingly, effective January 2, 2003, Tourville, Simpson & Caskey, L.L.P. resigned as Abbeville Capital’s principal independent public accountant. The Board of Directors, upon recommendation of the Audit Committee, engaged Elliott Davis, LLC on January 2, 2003 to audit financial statements for the year ended December 31, 2002 and for the year ending December 31, 2003. We have not consulted Elliott Davis, LLC regarding any of the matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.

Tourville, Simpson & Caskey, L.L.P.’s reports on Abbeville Capital’s financial statements for each of the years ended December 31, 2001 and 2000 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles. Abbeville Capital had no disagreements with Tourville, Simpson & Caskey, L.L.P. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Tourville, Simpson & Caskey, L.L.P.’s satisfaction, would have caused it to make reference to the subject matter of the disagreement in its reports.

As of the record date for the Abbeville Capital shareholder meeting, 25,000 securities were available for future issuance under equity compensation plans approved by security holders, but no options, warrants, or other rights to acquire shares of Abbeville Capital common stock were outstanding pursuant to such plans. As of the record date for the Abbeville Capital shareholder meeting, no securities were available for future issuance under equity compensation plans not approved by security holders.

On October 16, 2003, Community Capital announced its results of operations for the nine months ended September 30, 2003. Net income and diluted earnings per share for the period were approximately $3,976,000 and $1.08, respectively, compared to approximately $3,329,000 and $.91 per share, respectively, for the nine months ended September 30, 2002. At September 30, 2003, Community Capital had total assets of $394,847,000 loans of $308,884,000 deposits of $301,700,000 and stockholders’ equity of $44,616,000. At September 30, 2003, Community Capital Corporation had approximately 150 full-time employees.

Community Capital’s principal activities include the taking of demand and time deposits and the making of loans, secured and unsecured, to individuals, associations, partnerships, and corporations. The majority of Community Capital’s customers are individuals and small businesses. No material part of its business is dependent on a single customer or a few customers whose loss would have an adverse effect on its business. No material portion of Community Capital’s business is seasonal. Community Capital conducts its banking business from 13 offices located in Abbeville, Laurens, Newberry, Saluda, Greenville, Pickens, Greenwood, and Anderson counties in South Carolina.

Community Capital’s principal executive offices are located at 1401-C Highway 72, Post Office Box 218, Greenwood, South Carolina 29649, and its telephone number is (864) 941-8200.

Community Capital was formed in 1988 to serve as a holding company for Greenwood National Bank, which later changed its name to Greenwood Bank & Trust. In 1994 Community Capital made the decision to expand beyond Greenwood County by creating an organization of independent banks in four additional markets. In June 1995, Community Capital opened Clemson Bank and Trust in Clemson, South Carolina. In 1996 and 1997, Community Capital opened Community Bank and Trust, The Bank, and Mid State Bank. Community Capital formed a separate trust organization in 1997 known as Community Trust Company. In May 2000, Community Trust Company was sold. During 1997 and 1998, Community Capital also acquired several Carolina First branches.

As discussed, on January 1, 2001, Community Capital merged the five subsidiary banks into one bank charter known as CapitalBank. Community Capital made the decision to restructure the organization into one bank in order to improve operational efficiencies, provide new opportunities for employees, and improve service to customers. Customers are able to receive the benefit of being able to transact business at any of CapitalBank’s branches, through the ATM network, and through the Internet banking products. Additionally, Community Capital believes that the new centralized credit function provides additional controlled decisions while

streamlining the credit process. Centralized deposit pricing supports management’s strategy from market to market. Community Capital also believes that the name recognition has enhanced Community Capital’s business.

On January 29, 2001, CapitalBank, the new bank subsidiary, announced that it had signed a definitive agreement with Enterprise Bank of South Carolina to sell its five branch offices located in Barnwell, Blackville, Williston, Springfield and Salley, South Carolina. On May 14, 2001, CapitalBank sold the five branches, which had approximately $67.1 million in deposits.

Community Capital was formed principally in response to perceived opportunities resulting from takeovers of several South Carolina-based banks by large southeastern regional bank holding companies. In many cases, when these consolidations occur, local boards of directors are dissolved, and local management is relocated or terminated. Community Capital believes this situation creates favorable opportunities for new community banks with local management and local directors. Management believes that such banks can be successful in attracting individuals and small to medium-sized businesses as customers who wish to conduct business with a locally owned and managed institution that demonstrates an active interest in their business and personal financial affairs.

At December 31, 2002, CapitalBank had banking locations in Greenwood, Clemson, Abbeville, Belton, Greenville, Honea Path, Anderson, Newberry, and Saluda, South Carolina.

The following table sets forth certain information concerning CapitalBank at December 31, 2002:

CapitalBank offers a full range of commercial banking services, including checking and savings accounts, NOW accounts, IRA accounts, and other savings and time deposits of various types ranging from money markets to long-term certificates of deposit. CapitalBank also offers a full range of consumer credit and short-term and intermediate-term commercial and personal loans. CapitalBank conducts residential mortgage loan origination activities pursuant to which mortgage loans are sold to investors in the secondary markets. CapitalBank does not retain servicing of such loans.

CapitalBank also offers trust and related fiduciary services. Discount securities brokerage services are available through a third-party brokerage service that has contracted with CapitalBank.

Through CapitalBank, Community Capital offers a range of lending services, including real estate, consumer, and commercial loans, to individuals and small business and other organizations that are located in or conduct a substantial portion of their business in CapitalBank’s market areas. Community Capital’s total loans at December 31, 2002, totaled $288.8 million, or 83.14% of total earning assets. The interest rates charged on loans vary with the degree of risk, maturity, and amount of the loan, and are further subject to competitive pressures, availability of funds, and government regulations. Community Capital has no foreign loans or loans for highly leveraged transactions.

Community Capital’s primary focus has been on commercial and installment lending to individuals and small to medium-sized businesses in its market areas, as well as residential mortgage loans. These loans totaled approximately $204.9 million, and constituted approximately 70.27% of Community Capital’s loan portfolio, at December 31, 2002.

The following table sets forth the composition of Community Capital’s loan portfolio for each of the five years in the period ended December 31, 2002.

Certain credit risks are inherent in the loan making process. These include prepayment risks, risks resulting from uncertainties in the future value of collateral, risks resulting from changes in economic and industry conditions, and risks inherent in dealing with individual borrowers. In particular, longer maturities increase the risk that economic conditions will change and adversely affect collectibility. Community Capital attempts to minimize loan losses through various means and use standardized underwriting criteria. During 2002, these means included the use of policies and procedures that impose officer and customer lending limits and require loans in excess of certain limits to be approved by the Board of Directors of CapitalBank.

Community Capital has a continuous loan review process designed to promote early identification of credit quality problems. All loan officers are charged with the responsibility of reviewing all past due loans in their respective portfolios. CapitalBank establishes watch lists of potential problem loans.

The principal sources of funds for CapitalBank are core deposits, consisting of demand deposits, interest-bearing transaction accounts, money market accounts, saving deposits, and certificates of deposit. Transaction accounts include checking and negotiable order of withdrawal (NOW) accounts that customers use for cash management and that provide CapitalBank with a source of fee income and cross-marketing opportunities, as well as a low-cost source of funds. Time and savings accounts also provide a relatively stable source of funding. The largest source of funds for CapitalBank is certificates of deposit. Primarily customers in CapitalBank’s market areas hold certificates of deposit in excess of $100,000. Senior management of CapitalBank, subject to approval by Community Capital’s management, sets deposit rates weekly. Management believes that the rates CapitalBank offers are competitive with other institutions in CapitalBank’s market areas.

CapitalBank generally competes with other financial institutions through the selection of banking products and services offered, the pricing of services, the level of service provided, the convenience and availability of

services, and the degree of expertise and the personal manner in which services are offered. South Carolina law permits statewide branching by banks and savings institutions, and many financial institutions in the state have branch networks. Consequently, commercial banking in South Carolina is highly competitive. South Carolina law also permits regional interstate banking whereby out-of-state banks and bank holding companies are allowed to acquire and merge with South Carolina banks and bank holding companies, as long as the South Carolina South Carolina State Board of Financial Institutions of Financial Institutions gives prior approval for the acquisition or merger. Many large banking organizations currently operate in the market areas of CapitalBank, several of which are controlled by out-of-state ownership. In addition, competition between commercial banks and thrift institutions (savings institutions and credit unions) has been intensified significantly by the elimination of many previous distinctions between the various types of financial institutions and the expanded powers and increased activity of thrift institutions in areas of banking that previously had been the sole domain of commercial banks. Recent legislation, together with other regulatory changes by the primary regulators of the various financial institutions, has resulted in the almost total elimination of practical distinctions between a commercial bank and a thrift institution. Consequently, competition among financial institutions of all types is largely unlimited with respect to legal ability and authority to provide most financial services. See “Government Supervision and Regulation.”

CapitalBank faces increased competition from both federally-chartered and state-chartered financial and thrift institutions, as well as credit unions, consumer finance companies, insurance companies and other institutions in CapitalBank’s market areas. Some of these competitors are not subject to the same degree of regulation and restriction imposed upon CapitalBank. Many of these competitors also have broader geographic markets and substantially greater resources and lending limits than CapitalBank and offer certain services that CapitalBank does not currently provide. In addition, many of these competitors have numerous branch offices located throughout the extended market areas of CapitalBank that Community Capital believe may provide these competitors with an advantage in geographic convenience that CapitalBank does not have at present. Such competitors may also be in a position to make more effective use of media advertising, support services, and electronic technology than can CapitalBank.

Including the employees of CapitalBank, Community Capital had as of March 2003 in the aggregate 138 full-time employees and 22 part-time employees.

Community Capital operates out of an approximately 3,000 square foot building located on approximately one acre of land leased from a third party in Greenwood, South Carolina. At December 31, 2002, CapitalBank operated thirteen full service branches in South Carolina, three of which are located in Greenwood and one of which is located in each of Anderson, Newberry, Belton, Greenville, Clemson, Saluda, Prosperity, Honea Path, and Calhoun Falls. Of CapitalBank’s branches, seven are located on land owned by CapitalBank, four are located on land owned by Community Capital and leased to CapitalBank, one is located on land CapitalBank leases from one of Community Capital’s former directors, and one is located on land CapitalBank leases from a third party.

Community Capital and CapitalBank are parties to legal proceedings that have arisen in the ordinary course of Community Capital’s respective businesses. None of these proceedings is expected to have a material effect on Community Capital’s consolidated financial condition.

The following table sets forth, as of the end of December 31, 2002, certain information relating to Community Capital’s compensation plans (including individual compensation arrangements) under which Community Capital’s common stock is authorized for issuance.

Market risk is the risk of loss from adverse changes in market prices and rates. Community Capital’s market risk arises principally from interest rate risk inherent in Community Capital’s lending, deposit, and borrowing activities. Management actively monitors and manages its interest rate risk exposure. In addition to other risks that Community Capital manages in the normal course of business, such as credit quality and liquidity, management considers interest rate risk to be a significant market risk that could potentially have a material effect on Community Capital’s financial condition and results of operations. The information contained in the section captioned “Community Capital Management’s Discussion and Analysis of Financial Condition and Results of Operations – Net Interest Income” is incorporated herein by reference. Other types of market risks, such as foreign currency risk and commodity price risk, do not arise in the normal course of Community Capital’s business activities.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Legislation and Securities Exchange Commission rules adopted in 2002 have significantly increased, and will continue to increase, the regulatory burdens on audit firms that audit the financial statements of companies that are subject to the reporting requirements of the Securities Exchange Act of 1934. Consequently, many smaller audit firms are deciding to limit their audit practice to companies that are not subject to the 1934 Act. Tourville, Simpson & Caskey, L.L.P., which served as Community Capital’s principal independent accountant since Community Capital’s inception, is one such firm. Accordingly, effective January 2, 2003, Tourville, Simpson & Caskey, L.L.P. resigned as Community Capital’s principal independent public accountant. The Board of Directors, upon recommendation of the Audit Committee, engaged Elliott Davis, LLC on January 2, 2003 to audit financial statements for the year ended December 31, 2002 and for the year ending December 31, 2003. Community Capital has not consulted Elliott Davis, LLC regarding any of the matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.

Tourville, Simpson & Caskey, L.L.P.’s reports on Community Capital’s financial statements for each of the years ended December 31, 2001 and 2000 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles. Community Capital had no disagreements with Tourville, Simpson & Caskey, L.L.P. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Tourville, Simpson & Caskey, L.L.P.’s satisfaction, would have caused it to make reference to the subject matter of the disagreement in its reports.

Tourville, Simpson & Caskey, L.L.P. dissolved upon the filing of a Notice of Dissolution with the South Carolina Secretary of State on December 31, 2002 and was therefore unable to issue its consent in connection with our registration statement on Form S-4 filed on December 2, 2003. To resolve this issue, Elliott Davis, LLC re-audited the consolidated financial statements for Community Capital for the years ended December 31, 2001 and 2000. The Independent Auditors’ Report issued by Elliott Davis, LLC for Community Capital for such years is set forth at page F-26 of the proxy statement/prospectus.

Set forth below is the age and certain biographical information with respect to each of Community Capital’s directors:

David P. Allred, MD, 64, has served as Community Capital’s Chairman of the Board since June 2001 and Chairman of the Board of CapitalBank since May 2001. He is a retired doctor of internal medicine who was in private practice in Saluda, North Carolina from April 1994 until April 1998 and was in private practice in Beaufort, South Carolina from July 1990 to December 1993. From September 1988 to July 1990, the Medical University of South Carolina employed him. From August 1971 through August 1988, he was in private medical practice in Greenwood, South Carolina. He has served as one of Community Capital’s directors since its inception in April 1988.

Harold Clinkscales, Jr., 50, has served as President and owner of Southern Burglar and Fire Alarm Company, Inc. since 1974. He has served as one of Community Capital’s directors since January 2000.

Patricia E. Hartung, 49, has served as the Executive Director of the Upper Savannah Council of Governments since March 1990 and served as its Assistant Director from August 1984 to March 1989. She has served as one of Community Capital’s directors since its inception in April 1988.

Wayne Q. Justesen, Jr., 57, has been employed by Greenwood Mills, Inc., a textile manufacturer, since 1978 and has served as Secretary and General Counsel of Greenwood Mills, Inc. since 1983. He has served as one of Community Capital’s directors since its inception in April 1988.

B. Marshall Keys, 52, has owned and operated Palmetto Insurance Associates, L.L.C. of Anderson in Belton, South Carolina for over six years. He has served as one of Community Capital’s directors since May 2000.

Clinton C. Lemon, Jr., 59, has served as Chairman and Chief Executive Officer of Southern Tank Transport in Harleyville, South Carolina since 1989. Mr. Lemon has served as one of Community Capital’s directors since March 1997.

Miles Loadholt, 60, has served as Senior Partner of Ness, Motley, Loadholt, Richardson & Poole since 1968. He has served as one of Community Capital’s directors since May 1999.

Thomas C. Lynch, Jr., 67, served as a pharmacist and President of Lynch Drug Company, a retail pharmacy in Clemson, South Carolina, from 1963 until its sale to Eckerd Drug, Inc. in January 1997. Mr. Lynch has served as one of Community Capital’s directors since June 1995.

H. Edward Munnerlyn, 60, has served as President and owner of Munnerlyn Company, a corporate apparel and uniforms company, since January 1989. Prior to 1989 he was employed by Greenwood Mills, Inc., for twenty years and was Executive Vice President when he left Greenwood Mills, Inc. in 1988. He has served as one of Community Capital’s directors since its inception in April 1988 and is the Chairman of the Audit Committee of the Board of Directors.

George B. Park, 53, has served as President and Chief Executive Officer of Otis S. Twilley Seed Company, Inc., a mail order seed company, since August 1993 and as President and owner of GeoSeed, a seed distribution company, since August 1993. Prior to 2002, Mr. Park also served as Interim Chief Executive Officer and Managing Director of K. Sahin Zaden, B.V., a flower seed breeding and production company. Prior to 1989, he was co-owner, Vice President and Corporate Secretary of George W. Park Seed Company. He has served as one of Community Capital’s directors since its inception in April 1988.

George D. Rodgers, 59, has been the owner of Palmetto Insurance Associates, L.L.C. of Anderson and its predecessor in Clemson, South Carolina since 1985. Mr. Rodgers has served as one of Community Capital’s directors since June 1995.

Charles J. Rogers, 70, has served as Community Capital’s Chairman Emeritus since April 2001 and served as Community Capital’s Chairman of the Board of Directors from January 1989 through June 2001. He served as Chairman of the Board of Directors of Community Capital’s wholly owned bank subsidiary, CapitalBank, from January 2001 through May 2001. He has served as President of The Organizational Paths Company, a consulting firm for organizational strategies, since July 1993. Mr. Rogers served as team leader of the Greenwood Plant of the Monsanto Chemical Company from 1982 until June 1993. He has served as one of Community Capital’s directors since its inception in April 1988. Mr. Rogers served on the Management Committee of Innova Communications, LLC, a South Carolina limited liability company that filed for bankruptcy with the United States Bankruptcy Court for the District of South Carolina as of May 9, 2001, from June 2000 until he resigned in December 2001. The Order confirming Innova’s Plan of Reorganization was entered on May 8, 2002, and the Final Decree was entered on January 3, 2003.

Thomas E. Skelton, Ph.D., 72, served as Professor of Entomology at Clemson University from 1969 until his retirement on June 30, 1997. He served as the head of the Clemson University Entomology Department from June 1992 through June 1995 and as Interim Dean of the College of Agriculture, Forestry and Life Sciences from July 1995 through August 1996. Dr. Skelton is General Partner of SVT Properties and co-owner of Skelton Properties, both of which are real estate investment companies. Dr. Skelton has served as one of Community Capital’s directors since June 1995.

William G. Stevens, 58, has served as Community Capital’s President and Chief Executive Officer and as one of its directors since its inception in April 1988, and has also served as President and Chief Executive Officer of CapitalBank from 1989 until May 1998 and from January 1, 2001 until the present. NCNB National Bank of South Carolina (formerly Bankers Trust) employed Mr. Stevens for eighteen years prior to 1987.

Lex D. Walters, Ph.D., 65, has served as President of Piedmont Technical College since 1968. He has served as one of Community Capital’s directors since its inception in April 1988.

Mr. Brewer has served as Community Capital’s Chief Financial Officer, Executive Vice President, and Secretary since July 1, 2000, and he has also served as the Chief Financial Officer, Senior Vice President, and Secretary of CapitalBank since January 1, 2001. He served as Community Capital’s Controller, and Controller of its subsidiaries, from 1997 until 2000. The Federal Deposit Insurance Corporation employed Mr. Brewer for five years prior to 1997.

The following table summarizes for each of the indicated years the compensation earned by Community Capital’s President and Chief Executive Officer and by each of Community Capital’s other executive officers whose annual compensation from Community Capital for all services provided to such subsidiaries or Community Capital during any of the indicated years exceeded $100,000.

In the above-listed chart, amounts included under the heading “Salary” for Mr. Stevens in 2002, 2001, and 2000 include aggregate director compensation of $6,500, $5,900, and $3,000 respectively. Amounts included under the heading “All Other Compensation” for Mr. Stevens and Mr. Brewer in 2002 include (i) $675 and $432, respectively, of premiums for life insurance provided by Community Capital for the benefit of each officer, and (ii) $4,952 and $5,180, respectively, in Community Capital’s contributions to its 401(k) plan for the account of each officer. The share amounts under the heading “Long-Term Compensation Awards” have been adjusted to reflect the impact of a stock dividend in 2000 and 2001.

The following table sets forth certain information with respect to options to purchase Community Capital’s common stock granted from January 1, 2003 through September 30, 2003 to the officers included in the Summary Compensation Table above. Community Capital granted no stock appreciation rights to any of its executive officers or other employees.

The following table sets forth certain information with respect to unexercised options to purchase Community Capital’s common stock held at September 30, 2003 by the officers included in the Summary Compensation Table above.

Employment Contracts, Termination of Employment, and Change-in-Control Arrangements

Community Capital and CapitalBank (f/k/a Greenwood Bank & Trust) have entered into a Split Dollar Agreement with William G. Stevens as of November 16, 1998. This agreement is summarized below, but this summary is qualified in its entirety by reference to the Split Dollar Agreement, a copy of which is available from Community Capital or from its public filing of a Form 10-K with the Securities Exchange Commission as of March 31, 2002. Under the Split Dollar Agreement, Mr. Stevens is the owner of a life insurance policy, the premiums of which shall be paid by Community Capital. If the proceeds of the policy become payable by reason of Mr. Stevens’s death, Community Capital has a right to receive the proceeds in an amount equal to the total death benefit payments under the policy less $2,580,000, which shall be Mr. Stevens’s death benefit. Either Mr. Stevens or Community Capital may terminate the Split Dollar Agreement, subject to certain provisions, by giving the other party prior written notice. In the event of a change in control in Community Capital, the Split Dollar Agreement becomes nonterminable by Community Capital or its successor.

Community Capital has entered into an Employment Agreement with R. Wesley Brewer as of June 28, 2000. This agreement is summarized below, but this summary is qualified in its entirety by reference to the Employment Agreement, a copy of which is available from Community Capital or from its public filing of a Form 10-Q with the Securities and Exchange Commission as of August 14, 2000. Under the Employment Agreement, Mr. Brewer is given duties and authority typical of a chief financial officer, and Community Capital is obligated to pay him an annual salary, which shall be reviewed each anniversary of the date of the Employment Agreement. In addition, Community Capital shall provide other benefits (e.g. health, dental, life, and disability insurance; participation in pension plans; and paid leave), if any, that are reasonably comparable to Community Capital’s other senior executives. Mr. Brewer’s agreement has a term of three years. Community Capital may terminate Mr. Brewer’s employment for “cause,” as defined in the Employment Agreement, and Mr. Brewer may, with or without cause, terminate the Employment Agreement upon sixty days prior written notice to Community Capital. All compensation shall be discontinued and forfeited as of the effective date of such termination.

CapitalBank has also entered into a Split Dollar Agreement with R. Wesley Brewer as of October 17, 2002. This agreement is summarized below, but this summary is qualified in its entirety by reference to the Split Dollar Agreement, a copy of which is available from Community Capital or from its public filing of a Form 10-Q with the Securities Exchange Commission as of November 13, 2002. Under the Split Dollar Agreement, as long as

Mr. Brewer continues to be employed by Community Capital until the earliest of August 31st following his sixty-second birthday, the date of termination of employment on account of disability, or the date of a change of control, he has the right to designate a beneficiary of any remaining death proceeds of an insurance policy owned by CapitalBank on his life. The remaining proceeds are those proceeds remaining following the payout to CapitalBank of death proceeds equal to the greater of: (a) the cash surrender value of the policy; (b) the aggregate premiums paid on the policy by CapitalBank less any outstanding indebtedness to the insurer; or (c) the total death proceeds less the split dollar amount, which is fifty percent of the difference between the total policy death proceeds and the policy cash surrender value at the date of Mr. Brewer’s death.

CapitalBank has also entered into Salary Continuation Agreements with R. Wesley Brewer and William G. Stevens as of October 17, 2002. These agreements are summarized below, but this summary is qualified in its entirety by reference to the Salary Continuation Agreements, a copy of which are available from Community Capital or from its public filing of a Form 10-Q with the Securities Exchange Commission as of November 13, 2002. Under the Salary Continuation Agreements, upon the retirement of Mr. Brewer or Mr. Stevens or CapitalBank’s change in control, CapitalBank is obligated to pay Mr. Brewer and Mr. Stevens forty percent and forty-nine and forty-five one hundredths percent, respectively, of their average annual compensation, calculated by combining their total annual base salary paid plus bonus earned within a period of time specified in the Salary Continuation Agreements. CapitalBank is obligated to make these percentage payments annually in twelve equal monthly installments for twenty-one years following Mr. Brewer’s attaining the age of sixty-two and eighteen years following Mr. Stevens’s attaining the age of sixty-five. Based on Mr. Brewer’s and Mr. Stevens’s compensation as of September 30, 2003, the annual payment for retirement or change in control would currently be $149,346 and $171,593, respectively. In the event of death or disability, CapitalBank is obligated to pay Mr. Brewer and Mr. Stevens, in lieu of any other benefit under the Salary Continuation Agreements, a lump sum benefit within ninety days of the death or termination of employment, respectively. If Mr. Brewer died or was terminated as a result of a disability as of December 31, 2002, the lump sum payment due him or his beneficiaries would have been $0 and $4,815, respectively. If Mr. Stevens died or was terminated as a result of disability as of December 31, 2002, the lump sum payment due him or his beneficiaries would have been $0 and $103,671, respectively. In the event of termination of employment for reasons other than death, disability, retirement, change in control, or termination for cause, Community Capital is obligated to pay annually Mr. Brewer and Mr. Stevens an amount tied to their annual compensation in twelve equal monthly installments for twenty-one years following Mr. Brewer’s attaining the age of sixty-two and eighteen years following Mr. Stevens’s attaining the age of sixty-five (the “Other Termination Payments”). These Other Termination Payments vest ten percent for each year of service with CapitalBank (or its predecessor), which means that as of the date hereof Mr. Stevens’s is already fully vested while Mr. Brewer is only sixty percent vested. Based on Mr. Brewer’s and Mr. Stevens’s compensation as of September 30, 2003, the annual Other Termination Payments would currently be $2,556 and $20,098, respectively. As discussed more fully above and in the Salary Continuation Agreements, the above-described benefits are determined primarily by average final compensation, but not by years of service.

Since January 2003, each of Community Capital’s directors receives a fee of $100 for attending each regular and special board or committee meetings. Its Chairman of the Board receives a retainer fee of $500 per month. The Chairmen of Community Capital’s Audit and Compensation Committees receive a retainer fee of $200 per month. The Chairmen of its Nominating, Board Governance, and Capital Committees receive a retainer fee of $50 per month. Each of Community Capital’s directors is also a director of CapitalBank. Since January 2003, each director of CapitalBank receives a retainer fee of $300 per month, except for the Chairman of the Board, who receives a retainer fee of $500 per month. The Chairmen of CapitalBank’s Asset/Liability and Wealth Management Committee receive a retainer fee of $50 per month, and the Chairman of CapitalBank’s Loan Committee receives a retainer fee $200 per month. Community Capital, or CapitalBank, as applicable, also reimburses directors for out-of-pocket expenses reasonably incurred by them in the discharge of their duties as directors of Community Capital or of CapitalBank.

CapitalBank, in the ordinary course of its business, makes loans to and has other transactions with Community Capital’s directors and officers and their associates (“Affiliated Persons”). All loans, other extensions of credit, and other transactions between Affiliated Persons and CapitalBank or Community Capital are made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unaffiliated third parties and do not involve more than the normal risk of collectibility or present other unfavorable features. CapitalBank expects to continue to enter into transactions in the ordinary course of business on similar terms with such Affiliated Persons. The aggregate dollar amounts of such loans outstanding to Affiliated Persons of CapitalBank were approximately $1,225,965 at September 30, 2003.

Community Capital purchases various types of insurance from Palmetto Insurance Associates, L.L.C. of Anderson, a South Carolina limited liability company owned in part by two of its directors. Community Capital paid insurance premiums to such company in the amounts of $139,000, $65,000, and $75,000 in 2002, 2001, and 2000, respectively. Community Capital believes that the terms of its policies with such company are no more or less favorable to Community Capital than similar policies that would be obtainable through arms’ length negotiations with companies not owned in whole or in part by related parties. Indeed, the charges for the majority of such insurance coverages are determined by competitive bids.

The following table sets forth certain information known to Community Capital regarding the beneficial ownership of its common stock as of September 30, 2003. Information is presented for each shareholder who was the beneficial owner of more than five percent of Community Capital outstanding common stock. The shareholder named in the table has indicated in its Schedule 13D filed with the Securities and Exchange Commission as of September 30, 2003 that such shareholder shares voting and dispositive power with respect to all shares of Community Capital common stock reflected as being beneficially owned by that shareholder with Tontine Management, L.L.C., the general partner of such shareholder, and Jeffrey L. Gendell, the managing member of such general partner. We are relying upon information set forth in the above-described Schedule 13D and do not know or have reason to believe that such information is not complete or accurate or that a statement or amendment should have been filed and was not.

The following table sets forth certain information known to Community Capital regarding the beneficial ownership of its common stock as of September 30, 2003. Information is presented for (i) each of Community Capital’s directors, each nominee for director, and each of Community Capital’s executive officers, individually, and (ii) all of Community Capital’s directors and executive officers, as a group. Except as otherwise specified in

the notes to the following table, each of the shareholders named in the table has indicated to Community Capital that such shareholder has sole voting and investment power with respect to all shares of Community Capital common stock reflected as being beneficially owned by that shareholder.

Section 16(a) of the 1934 Act requires Community Capital’s directors and executive officers to file reports of holdings and transactions in its securities with the Securities and Exchange Commission. On the basis of Community Capital’s records and other information, Community Capital believes that all filing requirements under Section 16(a) of the 1934 Act applicable to its officers and directors were satisfied with respect to Community Capital fiscal year ended December 31, 2002 except Harold Clinkscales, who inadvertently failed to file three reports relating to five transactions, two of which related to small acquisitions by his children and three of which related to small gifts to Mr. Clinkscales children from a non-affiliate and a gift by Mr. Clinkscales to a non-affiliate. Mr. Clinkscales corrected these omissions by filing a Form 5 on January 16, 2003.

All shares of Community Capital common stock received by holders of Abbeville Capital common stock will be freely transferable upon completion of the merger by those Abbeville Capital shareholders not deemed to be “affiliates” of Abbeville Capital under federal securities laws. “Affiliates” generally are defined as persons or entities who control, are controlled by, or are under common control with Abbeville Capital at the time of the Abbeville Capital shareholder meeting. Generally, executive officers, directors, and 10% or greater shareholders of an entity and certain of their family members and related interests are considered that entity’s affiliates.

Rule 145 promulgated under the Securities Act of 1933, as amended, restricts the sale of Community Capital common stock received in the merger by affiliates of Abbeville Capital. Under the rule, during the one-year period following the consummation of the merger, affiliates of Abbeville Capital may resell publicly Community Capital common stock received by them in the merger within limitations as to the amount of Community Capital common stock sold in any three-month period and as to the manner of sale, as provided in Rule 144 promulgated under the Securities Act of 1933. After the one-year period, affiliates of Abbeville Capital who are not affiliates of Community Capital (and who have not been affiliates for at least three months) may resell their shares without any restrictions on amounts sold or the manner of sale. Additionally, for a period of two years after completion of the merger, Rule 145 requires that, with respect to the resale of Community Capital common stock received in the merger by affiliates of Abbeville Capital at the time the merger is completed, Community Capital shall have filed all the reports required to be filed by it under the Securities Exchange Act of 1934, as amended, during the 12 months preceding the sale. These affiliates also will be permitted to resell Community Capital common stock received in the merger pursuant to an effective registration statement under the Securities Act of 1933 or an available exemption from the Securities Act registration requirements.

Abbeville Capital has agreed to use its reasonable best efforts to cause each person or entity that is an affiliate for purposes of complying with Rule 145 under the Securities Act of 1933 to enter into a written agreement relating to such restrictions on sale or other transfer.

Additionally, shareholders of Abbeville Capital who become affiliates of Community Capital will be subject to the above-described volume and manner of sale limitations on the resale of Community Capital stock, whether obtained in connection with the merger or otherwise, for as long as they remain affiliates of Community Capital and for an additional three months thereafter.

Community Capital, Abbeville Capital, CapitalBank, and The Bank of Abbeville are subject to an extensive collection of state and federal banking laws and regulations that impose specific requirements and restrictions on, and provide for general regulatory oversight with respect to, virtually all aspects of each entity’s operations. These regulations are generally intended to provide protections for depositors and borrowers of CapitalBank and The Bank of Abbeville, rather than for the shareholders of each bank’s holding company. Each of the entities is also affected by government monetary policy and by regulatory measures affecting the banking industry in general. The actions of the Federal Reserve System affect the money supply and, in general, the lending abilities of CapitalBank and The Bank of Abbeville because decisions relating to money supply increase or decrease the cost and availability of funds to the banks. Additionally, the Federal Reserve System regulates the availability of bank credit in order to combat recession and curb inflationary pressures in the economy by open market operations in United States government securities, changes in the discount rate on member bank borrowings, changes in the reserve requirements against bank deposits, and limitations on interest rates that banks may pay on time and savings deposits.

The following discussion sets forth some of the regulatory requirements applicable to bank holding companies and banks and provides certain specific information related to Community Capital and Abbeville Capital and their subsidiaries. These summaries are qualified in their entirety by reference to the applicable statutes and regulations. Additional information is available in the Annual Report of Community Capital on Form 10-K/A for the fiscal year ended December 31, 2002. See “Where You Can Find More Information.” Any change in applicable laws or regulations may have a material adverse effect on the business and prospects of all four entities.

Community Capital and Abbeville Capital are bank holding companies within the meaning of the Bank Holding Company Act of 1956, as amended, and the South Carolina Banking and Branching Efficiency Act of 1996, as amended. As bank holding companies subject to such Acts, Community Capital and Abbeville Capital are required to register with the Board of Governors of the Federal Reserve System and the South Carolina State Board of Financial Institutions. Community Capital and Abbeville Capital must also file with both agencies annual reports and other information regarding their respective business operations and those of their subsidiaries. Community Capital and Abbeville Capital are also subject to periodic examinations by these agencies. The regulatory requirements to which the holding companies are subject also set forth various conditions regarding the eligibility and qualifications of their directors and officers.

The Federal Reserve Board, pursuant to regulation and published policy statements, has maintained that a bank holding company must serve as a source of financial strength to its subsidiary banks. In adhering to the Federal Reserve Board policy, Community Capital or Abbeville Capital may be required to provide financial support to a subsidiary bank at a time when, absent such Federal Reserve Board policy, the respective holding company may not deem it advisable to provide such assistance. Under Federal Bank Holding Company Act of 1956, as amended, the Federal Reserve Board may also require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary, other than a nonbank subsidiary of a bank, upon the Federal Reserve Board’s determination that the activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition.

The Bank Holding Company Act also limits the types of businesses and operations in which a bank holding company and its subsidiaries, other than banking subsidiaries, may engage. In general, permissible activities are limited to the business of banking and activities found by the Federal Reserve Board to be so closely related to banking or to managing or controlling banks as to be a proper incident thereto. In determining whether a

particular activity is permissible, the Federal Reserve Board considers whether the performance of an activity can reasonably be expected to produce benefits to the public (such as greater convenience, increased competition, or gains in efficiency) that outweigh possible adverse effects (such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices). For example, the Federal Reserve Board has deemed permissible: making, acquiring, or servicing loans; leasing personal property; providing certain investment or financial advice; performing certain data processing services; acting as agent or broker in selling credit life insurance and certain other types of insurance in connection with credit transactions by the bank holding company; and certain limited insurance underwriting activities.

Generally, bank holding companies must obtain prior approval of the Federal Reserve Board to engage in any new activity not previously approved by the Federal Reserve Board. However, despite prior approval, the Federal Reserve Board has the power to order a holding company or its subsidiaries to terminate any activity, or terminate its ownership or control of a subsidiary, when the Federal Reserve Board has reasonable cause to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial safety, soundness, or stability of any bank subsidiary of that holding company.

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, eligible bank holding companies in any state are permitted, with Federal Reserve Board approval, to acquire banking organizations in any other state. As such, all existing regional compacts and substantially all regional limitations on interstate acquisitions of banking organizations have been eliminated. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 also removed substantially all of the existing prohibitions on interstate branching by banks. A bank operating in any state is now entitled to establish one or more branches within any other state without, as formerly required, the establishment of a separate banking structure within the other state.

The South Carolina Banking and Branching Efficiency Act of 1996, as amended, permits the acquisition of South Carolina banks and bank holding companies by, and mergers with, out-of-state banks and bank holding companies with the prior approval of the South Carolina State Board of Financial Institutions. The South Carolina Banking and Branching Efficiency Act of 1996, as amended also permits South Carolina state banks, with prior approval of the South Carolina State Board of Financial Institutions, to operate branches outside the State of South Carolina.

Although the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 and the South Carolina Banking and Branching Efficiency Act of 1996 have the potential to increase the number of competitors in the marketplace of CapitalBank and The Bank of Abbeville, we cannot predict the actual impact of such legislation on the competitive positions of such banks.

The Gramm-Leach-Bliley Act (popularly referred to as the Financial Services Modernization Act of 1999 prior to enactment) became effective March 11, 2000. The Gramm-Leach-Bliley Act accomplished a variety of purposes, including facilitating the affiliation among banks, securities firms, and insurance companies and providing privacy protections for customers. Specifically, the Gramm-Leach-Bliley Act (a) amends the Banking Act of 1933 (the Glass-Steagall Act) to repeal the prohibitions against affiliation of any Federal Reserve member bank, such as CapitalBank and The Bank of Abbeville, with an entity engaged principally in securities activities, and to repeal the prohibitions against simultaneous service by any officer, director, or employee of a securities firm as an officer, director, or employee of any member bank; (b) amends the Federal Bank Holding Company Act of 1956, as amended, to permit bank holding companies to own shares in non-banking organizations whose activities have been determined by the Federal Reserve System to be permissible for bank holding companies; (c) creates a new type of bank, wholesale financial institutions (also referred to as “woofies”), that are regulated by the Federal Bank Holding Company Act of 1956, as amended, and are not able to accept insured deposits,

potentially giving holding companies with woofies greater flexibility to engage in non-financial investments; (d) subject to specified exemptions, pre-empts state anti-affiliation laws restricting transactions among insured depository institutions, wholesale financial institutions, insurance concerns, and national banks; (e) amends the Federal Bank Holding Company Act of 1956, as amended, and the Federal Deposit Insurance Act to mandate public meetings concerning proposed large bank mergers and acquisitions; (f) amends the Electronic Fund Transfer Act to mandate certain fee disclosures related to electronic fund transfer services; and (g) imposes certain obligations on financial institutions to protect the privacy and confidentiality of customer nonpublic personal information, including the requirements that financial institutions establish standards for safeguards to protect privacy and confidentiality, provide the standards to customers at the time of establishing the customer relationship and annually during the continuation of the relationship, condition disclosure of the private information to nonaffiliated third parties on the giving of specific disclosures to consumers, and giving consumers the opportunity to prevent such disclosure to third parties.

Although the Gramm-Leach-Bliley Act has the potential to mix commerce and banking and increase the abilities of Community Capital, Abbeville Capital, CapitalBank, and The Bank of Abbeville to diversify into a variety of areas, we cannot predict the actual impact of such legislation on these four entities.

On July 30, 2002, the Sarbanes-Oxley Act of 2002 was signed into law. It mandated sweeping reforms and implemented a number of requirements for public companies like Community Capital. Among the reforms and new requirements are the following:

Though the Sarbanes-Oxley Act will have a meaningful impact on Community Capital’s operations, we do not believe that Community Capital will be affected by Sarbanes-Oxley in ways that are materially different or more onerous than other public companies of similar size and nature.

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 established two insurance funds under the jurisdiction of the FDIC: the Savings Association Fund and the Bank Insurance Fund. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 also imposed, with certain exceptions, a “cross guaranty” on the part of commonly controlled depository institutions such as CapitalBank and The Bank of Abbeville. Under this provision, if one depository institution subsidiary of a multi-bank holding company fails or requires FDIC assistance, the FDIC may assess a commonly controlled depository institution for the estimated losses suffered by the FDIC. The FDIC’s claim is junior to the claims of nonaffiliated depositors, holders of secured liabilities, general creditors, and subordinated creditors, but is superior to the claims of shareholders.

CapitalBank and The Bank of Abbeville are members of the Federal Deposit Insurance Corporation, which currently insures the deposits of each member bank to a maximum of $100,000 per depositor through its Bank Insurance Fund. For this depositor protection, each bank pays a semi-annual statutory assessment and is subject to the rules and regulations of the Federal Deposit Insurance Corporation. The federal banking laws require all insured banks, including CapitalBank and The Bank of Abbeville, to maintain reserves against their checking and transaction accounts (primarily checking accounts, NOW and Super NOW checking accounts). Because reserves must generally be maintained in cash or in non-interest bearing accounts, the effect of the reserve requirements is to increase the respective bank’s cost of funds.

Each of the state banks is also subject to Section 23A of the Federal Reserve Act, which places limits on the amount of loans or extensions of credit to, investments in or certain other transactions with affiliates. In addition, limits are placed on the amount of advances to third parties collateralized by the securities or obligations of affiliates. Most of these loans and certain other transactions must be secured in prescribed amounts.

The state banks are also subject to Section 23B of the Federal Reserve Act, which prohibits an institution from engaging in transactions (including extensions of credit) with certain affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with non-affiliates.

In addition, neither CapitalBank nor The Bank of Abbeville may engage in certain “tie-in” or “tying” arrangements in connection with any extension of credit or the providing of any property or service. Tying is generally defined as any arrangement in which a bank requires a customer who wants one service, such as credit, to buy other products or services from the bank or its affiliates as a condition of receiving the first service.

Community Capital and Abbeville Capital each depend primarily on dividends from their subsidiary banks for cash flow to pay dividends to their shareholders. State and federal statutes and regulations limit the payment of dividends by these subsidiary banks, as well as the payment of dividends by Community Capital and Abbeville Capital to their shareholders. For example, South Carolina state business corporation law requires that dividends may be paid only if such payment would not render the companies insolvent or unable to meet their obligations as they come due. Additionally, all dividends of the state subsidiary banks must be paid out of the respective undivided profits then on hand, after deducting expenses, including losses and bad debts. As members of the Federal Reserve System, CapitalBank and The Bank of Abbeville may not declare a dividend on their respective shares of common stock until their respective surplus equals their respective stated capital, unless there has been transferred to surplus no less than one-tenth of their respective net profits of the preceding two consecutive half-year periods (in the case of an annual dividend). Each bank subsidiary must obtain the approval of the Federal Reserve Board if the total of all dividends declared by it in any calendar year exceeds the total of its net profits for that year combined with its retained net profits for the preceding two years, less any required transfers to surplus. The payment of dividends also may be affected or limited by other federal and state regulatory restrictions and factors, such as the requirement to maintain adequate capital in accordance with other state and federal regulatory guidelines.

The Federal Deposit Insurance Corporation Improvement Act required federal banking agencies to broaden the scope of regulatory corrective action taken with respect to depository institutions that do not meet minimum capital and related requirements and to take such actions promptly in order to minimize losses to the Federal Deposit Insurance Corporation. In connection with this Act, federal banking agencies established capital measures (including both a leverage measure and a risk-based capital measure) and specified for each capital measure the levels at which depository institutions will be considered well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized or critically undercapitalized. If an institution becomes classified as undercapitalized, the appropriate federal banking agency will require the institution to submit an acceptable capital restoration plan and can suspend or greatly limit the institution’s ability to effect numerous actions including capital distributions, acquisitions of assets, the establishment of new branches, and the entry into new lines of business.

Specifically, bank regulators assign a risk weight to each category of assets based generally on the perceived credit risk of the asset class. The risk weights are then multiplied by the corresponding asset balances to determine a “risk-weighted” asset base. The minimum ratio of total risk-based capital to risk-weighted assets is 8.0%. At least half of the risk-based capital must consist of Tier 1 capital, which is comprised of common equity, retained earnings, and certain types of preferred stock and excludes goodwill and various intangible assets. The remainder, or Tier 2 capital, may consist of a limited amount of subordinated debt, certain hybrid capital instruments, and other debt securities, preferred stock, and an allowance for loan losses not to exceed 1.25% of risk-weighted assets. The leverage ratio is a company’s Tier 1 capital divided by its adjusted total assets. The leverage ratio requires a 3.0% Tier 1 capital to adjusted average asset ratio for institutions with the highest regulatory rating of 1. All other institutions must maintain a leverage ratio of 4.0% to 5.0%.

As of December 31, 2002, Community Capital, Abbeville Capital, and their banking subsidiaries exceeded their respective fully phased-in minimum requirements.

The status of Community Capital and Abbeville Capital as registered bank holding companies under the Bank Holding Company Act does not exempt them from certain federal and state laws and regulations applicable to corporations generally, including, without limitation, certain provisions of the federal securities laws. Each of

the entities is under the jurisdiction of the Securities and Exchange Commission and of state securities commissions for matters relating to the offer and sale of their respective securities. Interest and certain other charges collected or contracted for by the subsidiary banks are also subject to state usury laws and certain federal laws concerning interest rates.

The loan operations of the state banks are subject to certain federal laws applicable to credit transactions, such as: the federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; the Community Reinvestment Act of 1977, requiring financial institutions to meet their obligations to provide for the total credit needs of the communities they serve, including investing their assets in loans to low- and moderate-income borrowers; the Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; the Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; the Fair Housing Act, prohibiting discriminatory practices relative to real estate-related transactions, including the financing of housing; and the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The deposit operations of the state banks also are subject to the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that Act, which governs automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; the Truth in Savings Act, requiring depository institutions to disclose the terms of deposit accounts to consumers; and the Expedited Funds Availability Act, requiring financial institutions to make deposited funds available according to specified time schedules and to disclose funds.

The Federal Reserve Board has enforcement authority over bank holding companies and non-banking subsidiaries to forestall activities that represent unsafe or unsound practices or constitute violations of law. It may exercise these powers by issuing cease-and-desist orders or through other actions. The Federal Reserve Board may also assess civil penalties against companies or individuals who violate the Bank Holding Company Act or related regulations in amounts up to $1 million for each day’s violation. The Federal Reserve Board can also require a bank holding company to divest ownership or control of a non-banking subsidiary or require such subsidiary to terminate its non-banking activities. Certain violations may also result in criminal penalties.

The Federal Deposit Insurance Corporation possesses comparable authority under the Federal Deposit Insurance Act, the Federal Deposit Insurance Corporation Improvements Act, and other statutes. In addition, the Federal Deposit Insurance Corporation can terminate insurance of accounts, after notice and hearing, upon a finding that the insured institution is or has engaged in any unsafe or unsound practice that has not been corrected, is in an unsafe and unsound condition to continue operations, or has violated any applicable law, regulation, rule, or order of, or condition imposed by, the appropriate supervisors.

Community Capital’s articles of incorporation currently authorizes the issuance of 10,000,000 shares of Community Capital common stock, $1 par value per share. As of September 30, 2003, 3,440,899 shares of Community Capital common stock were outstanding, and 74,471 shares were reserved for issuance under Community Capital’s stock option plans and dividend reinvestment plan. The capital stock of Community Capital does not represent or constitute a deposit account and is not insured by the Federal Deposit Insurance Corporation, the Bank Insurance Fund, the Savings Association Insurance Fund, or any governmental agency.

Shares of Community Capital common stock may be issued at such time or times and for such consideration as Community Capital’s board of directors may deem advisable, subject to such limitations as may be set forth in the laws of the State of South Carolina, Community Capital’s articles of incorporation or bylaws, or the rules of the American Stock Exchange.

The holders of Community Capital common stock are entitled to receive, to the extent permitted by law, only such dividends as may be declared from time to time by Community Capital’s board of directors out of funds legally available for the payment of dividends. The ability of Community Capital to pay dividends is affected by the ability of its subsidiary bank to pay dividends, which is limited by applicable regulatory requirements and capital guidelines. On September 30, 2003, under such requirements and guidelines, Community Capital’s subsidiary bank had approximately $6 million of funds legally available for the payment of dividends. See “Certain Regulatory Considerations” beginning on page 109 of this proxy statement/prospectus.

In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets, or winding-up of Community Capital, the holders of Community Capital common stock will be entitled to receive all of the remaining assets of Community Capital, of whatever kind, available for distribution to stockholders ratably in proportion to the amount of Community Capital common stock held. Community Capital’s board may distribute in kind to the holders of Community Capital common stock the remaining assets of Community Capital or may sell, transfer, or otherwise dispose of all or any part of the remaining assets to any other person or entity and receive payment therefor in cash, stock, or obligations of another person or entity, and may sell all or any part of the consideration so received and distribute any balance in kind to holders of Community Capital common stock. Neither the merger or consolidation of Community Capital into any other corporation, nor the merger of any other corporation into Community Capital, nor any purchase or redemption of shares of stock of Community Capital of any class, will be deemed to be a dissolution, liquidation, or winding-up of Community Capital for purposes of this paragraph.

For a further description of Community Capital common stock, see “Effect of the Merger on Rights of Shareholders” beginning on page 44 of this proxy statement/prospectus.

As of the date of this proxy statement/prospectus, the Abbeville Capital board of directors knows of no matters that will be presented for consideration at the Abbeville Capital shareholder meeting other than as described in this proxy statement/prospectus. However, if any other matters properly come before the Abbeville Capital shareholder meeting or any adjournment of the meeting and are voted on, each proxy card received by Abbeville Capital will be deemed to confer discretionary authority to the individuals named as proxies therein to vote the shares represented by the proxy as to any additional matters. However, no proxy holder will vote a proxy in favor of adjournment of the shareholder meeting if that proxy instructed a vote against approval of the merger agreement and plan of merger.

Community Capital files annual, quarterly, and current reports, proxy and information statements, and other information with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. You may read and copy this information at the Public Reference Room at the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains an Internet site that contains reports, proxy and information statements, and other information about issuers that file electronically with the Securities and Exchange Commission. The address of that site is http://www.sec.gov.

You may obtain copies of the information incorporated by reference into this proxy statement/prospectus upon written or oral request. The section entitled “Other Information About the Parties” contains information about how requests for information should be made.

All information contained in this proxy statement/prospectus with respect to CapitalBank was supplied by Community Capital and with respect to The Bank of Abbeville was supplied by Abbeville Capital.

Nexsen, Pruet, Jacobs & Pollard, LLC, Columbia, South Carolina will pass upon certain legal matters relating to the issuance of Community Capital common stock as merger consideration.

The consolidated financial statements of Community Capital included in this proxy statement/prospectus for the years ended December 31, 2002, 2001, and 2000 have been audited by Elliott Davis, LLC, independent auditors, as stated in their reports included herein, and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

We have audited the accompanying consolidated balance sheets of Abbeville Capital Corporation and subsidiary as of December 31, 2002 and 2001, and the related consolidated statement of income, changes in shareholders’ equity and comprehensive income, and cash flows for each of the years in the three year period ended December 31, 2002. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of Abbeville Capital Corporation at December 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the years in the three year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

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

Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income

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

Consolidation - Abbeville Capital Corporation, (the Company), and its subsidiary, The Bank of Abbeville (the Bank), provide commercial banking services to domestic markets, principally in Abbeville County, South Carolina. The Company was incorporated on July 1, 1997. The Bank was incorporated on May 1, 1987, and commenced business on May 15, 1987. The Bank is a state chartered bank, and its deposits are insured by the Federal Deposit Insurance Corporation. The consolidated financial statements include the accounts of the parent company and its wholly-owned subsidiary after elimination of all significant intercompany balances and transactions.

Management’s Estimates - The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 loan losses, 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 allowances for losses on loans and foreclosed real estate, management obtains independent appraisals for significant properties. Management must also make estimates in determining the estimated useful lives and methods for depreciating premises and equipment.

While management uses available information to recognize losses on loans and foreclosed real estate, future additions to the allowances 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 allowances for losses on loans and foreclosed real estate. Such agencies may require the Company to recognize additions to the allowances based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the allowances for losses on loans and foreclosed real estate may change materially in the near term.

Investment Securities - Investment securities available-for-sale by the Company include all obligations of United States government agencies and corporations. Management does not actively trade securities classified as available-for-sale but intends to hold these securities for an indefinite period of time and may sell them prior to maturity to achieve certain objectives. These securities are carried at amortized cost and adjusted to their estimated fair value. The unrealized gain or loss is recorded in shareholders’ equity net of the deferred tax effects. 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 in the security. The adjusted cost basis of securities available-for-sale is determined by specific identification and is used in computing the realized gain or loss upon sale.

Investment securities held-to-maturity are those securities which management has the intent and the Company has the ability to hold until maturity. The Company’s policy is to hold to maturity all obligations of counties and municipalities within the state of South Carolina. Securities held-to-maturity are carried at cost and adjusted for amortization of premiums and accretion of discounts, both computed by the straight-line method. 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. The adjusted cost basis of securities held-to-maturity is determined by specific identification and is used in computing the realized gain or loss upon sale.

Nonmarketable Equity Securities - Nonmarketable equity securities include the cost of the Company’s investments in the stock of the Federal Home Loan Bank. The stock has no quoted market value and no ready

market exists. Investment in Federal Home Loan Bank stock is a condition of borrowing from the Federal Home Loan Bank, and the stock is pledged to secure the borrowings. The investment in Federal Home Loan Bank stock was $197,300 and $189,100 at December 31, 2002 and 2001. Dividends received on Federal Home Loan Bank stock are included in interest from nonmarketable equity securities.

The cost of the Company’s investment in the stock of an unrelated financial institution is also included in nonmarketable equity securities. The Company owns less than five percent of the outstanding shares of this institution, and the stock has no quoted market value and no ready market exists. At December 31, 2002 and 2001, the investment in the stock of the unrelated financial institution was $81,864. Dividends received are included in interest from nonmarketable equity securities.

Loans Receivable - Loans receivable are stated at their unpaid principal balance. Interest income on a limited number of installment loans is computed using the sum-of-the-months digits method, the results of which do not vary materially from the level yield method. Interest income on all other loans is computed using the simple interest method and is recorded in the period earned.

When serious doubt exists as to the collectibility of a loan or a loan is 90 days past due, the accrual of interest income is generally discontinued unless the estimated net realizable value of the collateral is sufficient to assure collection of the principal balance and accrued interest. When interest accruals are discontinued, income in the current year is reversed and interest income accrued in prior years is charged to the allowance for loan losses.

Impairment of a loan is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or fair value of the collateral if the loan is collateral dependent. When management determines that a loan is impaired, the difference between the Company’s recorded investment in the related loan and the present value of the expected future cash flows or the fair value of the collateral, is charged to bad debt expense with a corresponding entry to the allowance account. The accrual of interest is discontinued on an impaired loan when management determines that the borrower may be unable to meet payments as they become due.

Loan Fees and Costs - Loan origination and commitment fees and certain direct loan origination costs (principally salaries and employee benefits) are deferred and amortized to income over the contractual lives of the related loans or commitments using the straight line method.

Allowance for Loan Losses - An allowance for loan losses is maintained at a level deemed appropriate by management to provide adequately for known and inherent losses in the loan portfolio. The allowance is based upon a continuing review of past loan loss experience, current and future economic conditions which may affect the borrowers’ ability to pay, and the underlying collateral value of the loans. Loans which are deemed to be uncollectible are charged off and deducted from the allowance. The provision for loan losses and recoveries of loans previously charged off are added to the allowance.

Premises, Furniture and Equipment - Premises, furniture and equipment are stated at cost, less accumulated depreciation. The provision for depreciation is computed by the straight-line method, based on the following estimated useful lives: buildings - 40 years, furniture, and equipment - 5 to 10 years, computer software - 3 years. The cost of assets sold or otherwise disposed of and the related allowance for depreciation are eliminated from the accounts and the resulting gains or losses are reflected in the income statement when incurred. Maintenance and repairs are charged to current expense. The costs of major renewals and improvements are capitalized.

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

Stock-Based Compensation - The Bank has stock-based employee compensation plans which are further described in Note 12. The Bank has not granted any options under these plans. If options are granted, the Bank plans to account for the plans under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations.

Earnings Per Share Amounts - Earnings per share (basic) is computed by dividing net income by the weighted-average number of shares outstanding for the period. Diluted earnings per share is similar to the computation of basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. The dilutive effect of options outstanding under the Company’s stock option plan are reflected in diluted earnings per share by the application of the treasury stock method. See Note 14.

Comprehensive Income - Accounting principles generally require that recognized income, 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:

Statements of Cash Flows - For purposes of reporting cash flows in the financial statements, 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 and federal funds sold. Generally, federal funds are sold for one-day periods.

During 2002, 2001 and 2000 interest paid on deposits and short-term borrowings totaled $1,516,621, $2,406,044 and $2,288,547, respectively. Income tax payments of $301,196, $334,938 and $216,000 were made during 2002, 2001 and 2000, respectively.

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

Off-Balance-Sheet Financial Instruments - In the ordinary course of business, the Company enters 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.

Concentrations of Credit Risk - Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of loans receivable, investment securities, federal funds sold and amounts due from banks. Management is not aware of any concentrations of loans to classes of borrowers or industries that would be similarly affected by economic conditions. Although the Company’s loan portfolio is diversified, a substantial portion of its borrowers’ ability to honor the terms of their loans is dependent on business and economic conditions in Abbeville County and surrounding areas. Management does not believe credit risk is associated with obligations of the United States, its agencies or corporations. The Company has invested in obligations of state and political subdivisions, substantially all within the state of South Carolina. Management believes that the credit risk associated with these securities is limited due to the diversity of the portfolio. The Company places its deposits and correspondent accounts with and sells federal funds to high credit quality financial institutions. By policy, time deposits are limited to amounts insured by the FDIC. Management believes credit risk associated with correspondent accounts is not significant.

Recent Accounting Pronouncements - In October 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 147, Acquisitions of Certain Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9, which brings all business combinations involving financial institutions, except mutual financial institutions, into the scope of SFAS No. 141, Business Combinations. This statement requires that all acquisitions of financial institutions that meet the definition of a business, including acquisitions of part of a financial institution that meet the definition of a business, must be accounted for in accordance with SFAS No. 141 and the related intangibles accounted for in accordance with SFAS No. 142. SFAS No. 147 removes such acquisitions from the scope of SFAS No. 72, Accounting for Certain Acquisitions of Banking or Thrift Institutions. SFAS No. 147 also amends SFAS No. 144 to include in its scope long-term customer relationship intangibles of financial institutions. SFAS No. 147 was effective upon issuance and had no impact on the Company’s financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company adopted this standard effective December 31, 2002.

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

Reclassifications - Certain captions and amounts in the 2001 financial statements were reclassified to conform with the 2002 presentation.

The banking subsidiary is required by regulation to maintain average cash reserve balances with the Federal Reserve Bank computed as a percentage of deposits. At December 31, 2002 and 2001, the required cash reserve balances were approximately $189,000 and $170,000, respectively. These requirements were satisfied by vault cash.

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

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

At December 31, 2002 and 2001, investment securities having amortized costs of $13,053,752, and $12,965,642, respectively, and estimated fair value of $13,501,396 and $13,084,160, respectively, were pledged as collateral to secure public deposits and securities sold under agreements to repurchase and for other purposes as required and permitted by law.

Sales of securities available-for-sale in 2002 were $500,625, resulting in gross realized gains of $625. There were no sales of securities available-for-sale in 2001. Sales of securities available-for-sale in 2000 were $586,266, resulting in gross realized losses of $10,075. There were no sales of securities held-to-maturity in 2002, 2001 or 2000.

The following is a summary of maturities of securities available-for-sale and held-to-maturity as of December 31, 2002. The amortized cost and estimated fair values are based on the contractual maturity dates. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.

The Company identifies impaired loans through its normal internal loan review process. Loans on the Company’s problem loan watch list are considered potentially impaired loans. These loans are evaluated in determining whether all outstanding principal and interest are expected to be collected. 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. At December 31, 2002 and 2001, management has determined that no impairment on loans existed.

At December 31, 2002 and 2001, the Company had nonaccrual loans of approximately $8,330 and $11,518, respectively, for which impairment had not been recognized. The additional interest income, which would have been recognized into earnings if the Company’s nonaccrual loans had been current in accordance with their original terms, is immaterial for all years presented. Loans ninety days or more past due and still accruing interest were $58,311 and $83,842 at December 31, 2002 and 2001, respectively.

Certain parties (principally certain directors and executive 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. Total loans and commitments outstanding to these parties at December 31, 2002 and 2001 were $797,054 and $558,288, respectively.

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 agreements to lend to a customer 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 consolidated balance sheet. 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. The Company uses the same credit policies in making commitments to extend credit as it does for on-balance-sheet instruments. 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.

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

At December 31, 2002, the scheduled maturities of certificates of deposit are as follows:

Overdrawn deposit accounts in the amount of $71,532 and $19,635 were classified as loans as of December 31, 2002 and 2001, respectively.

The Company sold securities under agreements to repurchase which mature within one day. The amounts outstanding at December 31, 2002 and 2001 were $3,992,842 and $6,990,518, respectively. During 2002, the average amount of securities sold under agreements to repurchase was $5,662,902 and the maximum amount outstanding at any month-end during 2002 was $12,814,579. As of December 31, 2002, the par values and market values of the securities pledged to collaterize the repurchase agreements were $9,909,215 and $10,186,365, respectively. The securities underlying the agreements are held by a third-party custodian.

At December 31, 2002, the Company had an unused line of credit to purchase federal funds from other financial institutions totaling $2,000,000. Under the terms of the agreement, the Company may borrow at mutually agreed-upon rates for one to fourteen day periods. No federal funds were purchased during 2002 or 2001.

As of December 31, 2002, advances from the Federal Home Loan Bank were $3,000,000, at a fixed rate of interest at 6.02%, maturing on November 4, 2004.

As collateral, the Company had pledged first mortgage loans on one to four family residential loans aggregating $10,203,099 at December 31, 2002. In addition, the Company’s Federal Home Loan Bank stock is pledged to secure the borrowings.

In the ordinary course of business, the Company may, from time to time, become a party to legal claims and disputes. At December 31, 2002, management and legal counsel were not aware of any pending or threatened litigation or unasserted claims or assessments that could result in losses, if any, that would be material to the financial statements.

Restriction of Payment of Dividends - The ability of the Company to pay cash dividends to shareholders is dependent upon receiving cash in the form of dividends from its banking subsidiary. However, certain restrictions exist regarding the ability of the subsidiary to transfer funds in the form of cash dividends to the Company. State chartered banks are authorized to pay cash dividends up to 100% of net income in any calendar year without obtaining the prior approval of the State Board of Financial Institutions (Board) or the Commissioner of Banking provided that the Bank received a composite rating of one or two at the last examination conducted by the State or Federal regulatory authority. Otherwise, the Bank must file an income and expense report and obtain the specific approval of the Board.

Under Federal Reserve Board regulations, the amounts of loans or advances from the banking subsidiary to the parent company are also restricted.

During 1997, the Company approved the terms of the Company’s Incentive Stock Option Plan of 1997 and Director Non-Qualified Stock Option Plan of 1997, which received shareholders approval on August 25, 1997.

These plans provide for the granting of statutory incentive stock options within the meaning of Section 422 of the Internal Revenue Code, as well as nonstatutory stock options. Stock options are issuable only to employees and directors of the Company and its subsidiaries. The per-share exercise price of options granted may not be less than the fair market value of a share on the date of grant. Options are exercisable on the date of grant and can be exercised within ten years from date of grant. Any options that expire unexercised or are canceled become available for issuance. No options shall be granted under this plan after September 1, 2007.

The Incentive Stock Option Plan of 1997 and Director Non-Qualified Stock Option Plan of 1997 provide for the granting of 17,000 and 8,000 options of the Company’s common stock, respectively. These amounts shall be proportionately and appropriately adjusted in the event of any merger, consolidation, stock dividend, or split-up.

The Company sponsors a tax deferred retirement savings plan (the Plan) under Section 401(k) of the Internal Revenue Code covering substantially all employees. Regular employees of the Company who are 21 years or older, work at least 1,000 hours per year, and who have completed one or more years of service are eligible to participate in the retirement savings plan. The Company may make discretionary nonelective contributions to the Plan based on Company earnings.

Participants may make elective contributions to the Plan with the Company matching 100% of the participant’s contributions up to 4% of eligible employee compensation. Participants are fully vested in both their contributions and the Company’s contributions upon participation.

Retirement plan expense was $27,121, $24,377 and $22,884 for the years ended December 31, 2002, 2001 and 2000, respectively. The Company’s policy is to fund retirement plan contributions as accrued.

Net income per share - basic is computed by dividing net income by the weighted-average number of common shares outstanding. Net income per share - diluted is computed by dividing net income by the weighted-average number of common shares outstanding and dilutive common share equivalents using the treasury stock method. Dilutive common share equivalents include common shares issuable upon exercise of outstanding stock options. There were no dilutive common share equivalents outstanding during 2002, 2001 or 2000; therefore, basic earnings per share and diluted earnings per share were the same.

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 asset to its net realizable value. At December 31, 2002 and 2001, management established valuation allowances of $6,188 and $6,287, respectively.

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:

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 classifications 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 of the Bank consists of common shareholders’ equity, excluding the unrealized gain or loss on securities available-for-sale, minus certain intangible assets. The Bank’s 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. The regulatory minimum requirements are 4% for Tier 1 and 8% for total risk-based capital.

The Bank is also required to maintain capital at a minimum level based on quarterly average assets, which is known as the leverage ratio. Only the strongest banks are allowed to maintain capital at the minimum requirement of 3%. All others are subject to maintaining ratios 1% to 2% above the minimum.

As of December 31, 2002, the most recent notification from the Bank’s primary regulator categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. There are no conditions or events that management believes have changed the Bank’s category.

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

The Federal Reserve Board has similar requirements for bank holding companies. The Federal Reserve guidelines apply to bank holding companies with less than $150,000,000 in consolidated assets on a bank only basis with exceptions that do not apply to the Company.

Presented below are the condensed financial statements for Abbeville Capital Corporation (Parent Company Only).

Condensed Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income

The accompanying consolidated financial statements have been prepared in accordance with the requirements for interim financial statements and, accordingly, they are condensed and omit disclosures, which would substantially duplicate those contained in the most recent annual report to shareholders. The financial statements as of September 30, 2003 and 2002 and for the interim periods then ended are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. The financial information as of December 31, 2002 and 2001 has been derived from the audited financial statements as of that date. For further information, refer to the financial statements and the notes included in Abbeville Capital Corporation’s 2002 Annual Report.

On August 19, 2003, Abbeville Capital Corporation signed a Letter of Intent to an acquisition by Community Capital Corporation. On October 15, 2003, a definitive merger agreement was approved by the Board of Directors of both companies. The total transaction price is valued at $15 million and is anticipated that 50 percent of the merger consideration will be in cash and 50 percent in Community Capital Corporation stock. The merger is subject to regulatory approval and the shareholders of Abbeville Capital Corporation. The transaction is expected to close in the first quarter of 2004.

Comprehensive income includes net income and other comprehensive income, which is defined as nonowner related transactions in equity. The following table sets forth the amounts of other comprehensive income included in equity along with the related tax effect for the three and nine month periods ended September 30, 2003 and 2002.

Accumulated other comprehensive income consists solely of the unrealized gain on securities available for sale, net of the deferred tax effects.

We have audited the accompanying consolidated balance sheets of Community Capital Corporation as of December 31, 2002 and 2001, and the related consolidated statement of income, changes in shareholders’ equity and comprehensive income, and cash flows for each of the years in the three year period ended December 31, 2002. These consolidated financial statements are the responsibility of the Company’s management. Community Capital Corporation’s responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of Community Capital Corporation at December 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the years in the three year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

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

Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income

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

Basis of Presentation - Community Capital (the Company) serves as a bank holding company for CapitalBank (the Bank). The Bank was formed on January 1, 2001, during a restructuring that consolidated the Company’s operations into a single subsidiary. CapitalBank operates thirteen branches throughout South Carolina. The Bank offers a full range of banking services, including a wealth management group featuring a wide array of financial services, with personalized attention, local decision making and strong emphasis on the needs of individuals and small to medium-sized businesses.

The Company was formed in 1988 to serve as a holding company for Greenwood National Bank, which later changed its name to Greenwood Bank & Trust. In 1994 the Company made the decision to expand beyond Greenwood County by creating an organization of independent banks in four additional markets. In June 1995, the Company opened Clemson Bank and Trust in Clemson, South Carolina. In 1996 and 1997, the Company opened Community Bank and Trust, TheBank, and Mid State Bank. The restructuring on January 1, 2001 consolidated these banks into and under CapitalBank. The Company formed a separate trust organization in 1997 known as Community Trust Company. In May 2000, Community Trust Company was sold.

The accounting and reporting policies of the Company reflect industry practices and conform to generally accepted accounting principles in all material respects. The consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates - In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet date and income and expenses for the period. Actual results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, including valuation allowances for impaired loans, the carrying amount of real estate acquired in connection with foreclosures or in satisfaction of loans, and the assumptions used in computing the fair value of stock options granted and the pro forma disclosures required by Statement of Financial Accounting Standards (SFAS) No. 123. Management must also make estimates in determining the estimated useful lives and methods for depreciating premises and equipment.

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

Securities Available-for-sale - Securities available-for-sale by the Company are carried at amortized cost and adjusted to estimated fair value by recording the aggregate unrealized gain or loss in a valuation account. Management does not actively trade securities classified as available-for-sale. 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 in the security. Generally, amortization of premiums and accretion of discounts are charged or credited to earnings on a straight-line basis over the life of the securities. The adjusted cost basis of securities available-for-sale is determined by specific identification and is used in computing the gain or loss from a sales transaction.

Securities Held-To-Maturity - Securities held-to-maturity are those securities which management has the intent and the Company has the ability to hold until maturity. Securities held-to-maturity are carried at cost and

adjusted for amortization of premiums and accretion of discounts, both computed by the straight-line method. 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.

Nonmarketable Equity Securities - Nonmarketable equity securities include the costs of the Company’s investments in the stock of the Federal Reserve Bank and the Federal Home Loan Bank. The stocks have no quoted market value and no ready market exists. Investment in Federal Reserve Bank stock is required for state-chartered member banks. Investment in Federal Home Loan Bank stock is a condition of borrowing from the Federal Home Loan Bank, and the stock is pledged to secure the borrowings. At both December 31, 2002 and 2001, the investment in Federal Reserve Bank stock was $1,037,150. At December 31, 2002 and 2001, the investment in Federal Home Loan Bank stock was $1,808,300 and $2,047,700, respectively.

The Company has invested in the stock of several unrelated financial institutions. The Company owns less than five percent of the outstanding shares of each institution, and the stocks either have no quoted market value or are not readily marketable. At December 31, 2002 and 2001, the investments in the stock of the unrelated financial institutions, at cost, were $1,820,144. The Company also invested in a financial services company that offers Internet banking. The Company’s investment in the stock of this institution was $500,000 at December 31, 2002 and 2001.

Loans receivable - Loans are recorded at their unpaid principal balance. Direct loan origination costs and loan origination fees are deferred and amortized over the lives of the loans as an adjustment to yield. Unamortized net deferred loans costs included in loans at December 31, 2002 and 2001 were $136,053 and $134,008, respectively.

Impaired loans are measured based on the present value of discounted expected cash flows. When it is determined that a loan is impaired, a direct charge to bad debt expense is made for the difference between the net present value of expected future cash flows based on the contractual rate and the Company’s recorded investment in the related loan. The corresponding entry is to a related valuation account. Interest is discontinued on impaired loans when management determines that a borrower may be unable to meet payments as they become due.

Interest income is computed using the simple interest method and is recorded in the period earned. When serious doubt exists as to the collectibility of a loan or a loan is 90 days past due, the accrual of interest income is generally discontinued unless the estimated net realizable value of the collateral is sufficient to assure collection of the principal balance and accrued interest. When interest accruals are discontinued, unpaid accrued interest is reversed and charged against current year income.

Allowance for Loan Losses - Management provides for losses on loans through specific and general charges to operations and credits such charges to the allowance for loan losses. Specific provision for losses is determined for identified loans based upon estimates of the excess of the loan’s carrying value over the net realizable value of the underlying collateral. General provision for loan losses is estimated by management based upon factors including industry loss experience for similar lending categories, actual loss experience, delinquency trends, as well as prevailing and anticipated economic conditions. While management uses the best information available to make evaluations, future adjustment to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. Delinquent loans are charged against the allowance at the time they are determined to be uncollectible. Recoveries are added to the allowance.

Residential Mortgages Held-For-Sale - The Company’s mortgage activities are comprised of accepting residential mortgage loan applications, qualifying borrowers to standards established by investors, funding

residential mortgages and selling mortgages to investors under pre-existing commitments. Funded residential mortgages held temporarily for sale to investors are recorded at cost that approximates the market value. Application and origination fees collected by the Company are recognized as income upon sale to the investor.

Premises and Equipment - Premises and equipment are stated at cost, less accumulated depreciation. Gain or loss on retirement of premises and equipment is recognized in the statements of operations when incurred. Expenditures for maintenance and repairs are charged to expense; betterments and improvements are capitalized. Depreciation charges are computed principally on the straight-line method over the estimated useful lives as follows: building and improvements—40 years; furniture, fixtures and equipment—3 to 15 years.

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

Intangible Assets - Intangible assets consist of goodwill and core deposit premiums resulting from the Company’s acquisitions. The core deposit premiums are being amortized over fifteen years using the straight-line method. Goodwill is being evaluated for impairment on annual basis in accordance with SFAS No. 147.

Stock-Based Compensation - The Company has a stock-based employee compensation plan that is further described in Note 14. The Company accounts for the plan under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all stock options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of Financial Accounting Standards Board (“FASB”) SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

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

Cash Flow Information - 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 depository institutions, interest-bearing deposit accounts, and federal funds sold. Generally, federal funds are sold for one-day periods.

Concentrations of Credit Risk - Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of loans receivable, securities, federal funds sold and amounts due from banks. Management is not aware of any concentrations of loans to classes of borrowers or industries that would be similarly affected by economic conditions. Although the Company’s loan portfolio is diversified, a substantial portion of its borrowers’ ability to honor the terms of their loans is dependent on business and economic conditions in the upstate region of South Carolina. Management does not believe credit risk is associated with obligations of the United States, its agencies or its corporations. The Company places its deposits and correspondent accounts with and sells its federal funds to high credit quality institutions. By policy, time deposits are limited to amounts insured by the Federal Deposit Insurance Corporation. Management believes credit risk associated with correspondent accounts is not significant.

Per-Share Data - Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding for the period. Diluted earnings per share is similar to the computation of basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued using the treasury stock method.

Share and per-share data have been restated to reflect the 5% stock dividends issued in May 2001 and June 2000.

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

Common Stock Owned by the Employee Stock Ownership Plan (ESOP) - ESOP purchases and redemptions of the Company’s common stock are at estimated fair value. Dividends on ESOP shares are charged to retained earnings. All shares held by the ESOP are treated as outstanding for purposes of computing earnings per share.

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

Recent Accounting Pronouncements - In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9, which brings all business combinations involving financial institutions, except mutual financial institutions, into the scope of SFAS No. 141, Business Combinations. This statement requires that all acquisitions of financial institutions that meet the definition of a business, including acquisitions of part of a financial institution that meet the definition of a business, must be accounted for in accordance with SFAS No. 141 and the related intangibles accounted for in accordance with SFAS No. 142. SFAS No. 147 removes such acquisitions from the scope of SFAS No. 72, Accounting for Certain Acquisitions of Banking or Thrift Institutions. SFAS No. 147 also amends SFAS No. 144 to include in its scope long-term customer relationship intangibles of financial institutions. SFAS No. 147 was effective upon issuance and had no material impact on the Company’s financial statements.

In December 2002, the FASB issued SFAS No. 148 Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company adopted this standard effective December 31, 2002 and has included the required disclosures in the footnotes to the financials. The Company has not elected the fair value treatment of stock-based compensation and the adoption of this standard had no impact on its financial position.

Reclassifications - Certain captions and amounts in the 2001 and 2000 financial statements were reclassified to conform with the 2002 presentation.

Accounting for Transfers of Financial Assets - A sale is recognized when the Company relinquishes control over a financial asset and is compensated for such asset. The difference between the net proceeds received and the carrying amount of the financial asset being sold or securitized is recognized as a gain or loss on the sale.

On January 29, 2001, CapitalBank entered into a Purchase and Assumption Agreement to sell certain assets and deposits of five of its branches to Enterprise Bank of South Carolina. The branches included in the transaction were Barnwell, Blackville, Springfield, Salley, and Williston. As of May 14, 2001, CapitalBank sold the five branches, which had approximately $67,100,000 in deposits.

At the closing, and subject to the terms of the Purchase and Assumption Agreement, CapitalBank received from Enterprise Bank a premium of 8.63% on the deposits.

The principal assets and liabilities disposed of in the sale are summarized as follows:

The gain recognized on the sale of the branches totaled $5,791,000 for the year ended December 31, 2001.

The Company is required to maintain average reserve balances computed as a percentage of deposits. At December 31, 2002, the required cash reserves were satisfied by vault cash on hand and amounts due from correspondent banks.

Securities available-for-sale at December 31, 2002 and 2001 consisted of the following:

Securities held-to-maturity as of December 31, 2002 and 2001 consisted of the following:

The following table summarizes the maturities of securities available-for-sale and held-to-maturity as of December 31, 2002, based on the contractual maturities. Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.

Proceeds from sales of securities available-for-sale during 2002 were $5,147,372, resulting in gross realized gains of $105,814. There were no sales of securities available-for-sale in 2001 or 2000. There were no sales of securities held-to-maturity in 2002, 2001, or 2000.

At December 31, 2002 and 2001, securities having amortized costs of approximately $46,403,207 and $51,234,360, respectively, and estimated fair values of $47,849,745 and $51,967,647, respectively, were pledged as collateral for short-term borrowings, to secure public and trust deposits, and for other purposes as required and permitted by law.

At December 31, 2002 and 2001, the Company had sold participations in loans aggregating $14,425,000 and $9,518,000, respectively, to other financial institutions on a nonrecourse basis. Collections on loan participations and remittances to participating institutions conform to customary banking practices.

The Bank accepts residential mortgage loan applications and fund loans of qualified borrowers (see Note 1). Funded loans are sold without recourse to investors at face value under the terms of pre-existing commitments. The Company does not sell residential mortgages having market or interest rate risk. The Company does not service residential mortgage loans for the benefit of others.

At December 31, 2002 and 2001, the Company had pledged approximately $83,489,000 and $41,693,000, respectively, of loans on residential real estate as collateral for advances from the Federal Home Loan Bank (see Note 10).

Loans are defined as impaired when “based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement.” All loans are subject to this criteria except for: “smaller-balance homogeneous loans that are collectively evaluated for impairment” and loans “measured at fair value or at the lower of cost or fair value.” The Company considers its consumer installment portfolio, credit cards, and home equity lines as meeting this criteria. Therefore, the real estate and commercial loan portfolios are primarily subject to possible impairment.

The Company identifies impaired loans through its normal internal loan review process. Loans on the Company’s problem loan watch list are considered potentially impaired loans. These loans are evaluated in determining whether all outstanding principal and interest are expected to be collected. 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. At December 31, 2002 and 2001, management reviewed its problem loan watch list and determined that no impairment on loans existed. At December 31, 2002 and 2001, the Company had nonaccrual loans of approximately $1,893,000 and $1,567,000, respectively, for which impairment had not been recognized.

An analysis of the allowance for loan losses for the years ended December 31, 2002, 2001, and 2000, is as follows:

In the normal course of business, the Company is a party to financial instruments with off-balance-sheet risk. These financial instruments are commitments to extend credit, commitments under credit card arrangements and letters of credit and have elements of risk in excess of the amount recognized in the balance sheet. Commitments to extend credit are agreements to lend to a customer 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 consolidated 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. 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. The Company uses the same credit policies in making commitments to extend credit as it does for on-balance-sheet instruments.

At December 31, 2002 and 2001, the Company had unfunded commitments, including standby letters of credit, of $52,403,000 and $45,676,000, of which $7,704,331 and $2,348,000, respectively, were unsecured. At December 31, 2002, the Company was not committed to lend additional funds to borrowers having loans in nonaccrual status.

Loans sold with limited recourse are 1-4 family residential mortgages originated by the Company and sold to various other financial institutions. Various recourse agreements exist, ranging from forty-five days to twelve months. The Company’s exposure to credit loss in the event of nonperformance by the other party to the loan is represented by the contractual notional amount of the loan. Since none of the loans sold have ever been returned to the Company, the total loans sold with limited recourse amount do not necessarily represent future cash requirements. The Company uses the same credit policies in making loans held for sale as it does for on-balance-sheet instruments. Total loans sold with limited recourse in 2002 were $38,613,000.

Depreciation and amortization expense was $1,101,000, $1,476,000 and $1,638,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

In accordance with SFAS No. 147, the Company evaluated its goodwill and determined that no impairment existed at December 31, 2002 and 2001. Therefore, there was no amortization of goodwill for the year ended December 31, 2002. Amortization expense related to the core deposit premium was $346,000, $2,440,000 and $612,000, for the years ended December 31, 2002, 2001 and 2000, respectively.

At December 31, 2002 and 2001, certificates of deposit of $100,000 or more totaled approximately $42,012,000 and $39,592,000, respectively. Interest expense on these deposits was approximately $1,259,000, $2,231,000, and $2,133,000 in 2002, 2001 and 2000, respectively.

Scheduled maturities of certificates of deposit and other time deposits as of December 31, 2002 were as follows:

NOTE 9 - FEDERAL FUND PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

The Company had federal funds purchased and securities sold under agreements to repurchase which generally mature within one day. At December 31, 2002 and 2001, the securities sold under agreements to repurchase totaled $4,645,000 and $5,062,000, respectively. At December 31, 2002 and 2001, the amortized costs of securities pledged to collateralize the repurchase agreements were $5,283,000 and $6,755,000, respectively, and estimated fair values were $5,457,000 and $6,849,000, respectively. A third-party custodian holds the securities underlying the agreements. At December 31, 2002 and 2001, federal funds purchased were $21,205,000 and $2,402,000, respectively.

Scheduled principal reductions of Federal Home Loan Bank advances are as follows:

As collateral, the Company had pledged first mortgage loans on one to four family residential loans aggregating $83,489,000 (see Note 5) at December 31, 2002. In addition, the Company’s Federal Home Loan Bank stock is pledged to secure the borrowings. Certain advances are subject to prepayment penalties.

The Company declared a 5% stock dividend for shareholders of record on May 30, 2001, June 30, 2000, and September 30, 1998. Amounts equal to the estimated fair value of the additional shares issued have been charged to retained earnings and credited to common stock and capital surplus. Dividends representing fractional shares were paid in cash. Earnings per share, average shares outstanding, treasury shares, employee stock ownership plan shares, and stock option plan shares have been adjusted to reflect the stock dividends for all periods presented.

As of December 31, 2002, the Board of Directors had approved a stock repurchase plan whereby the Company could repurchase up to $5,500,000 of its outstanding shares of common stock. As of December 31, 2002, the Company had purchased 367,875 shares at a cost of $4,111,000.

At December 31, 2002 and 2001, the Company had authorized 2,000,000 shares of a special class of stock, par value $1.00 per share, the rights and preferences of which were to be designated as the Board of Directors should determine. At December 31, 2002 and 2001, no shares of the undesignated stock had been issued or were outstanding.

The Company leases part of a building and land as a branch banking location from a former director. The operating lease has an initial ten-year term, which expires July 31, 2006, and is renewable, at the Company’s option, for four five-year terms at an increased monthly rental. The lease requires monthly payments of $3,500 with an increase to $3,850 per month during the last five years of the initial lease term. The initial lease term ends on July 31, 2006. The monthly payments upon renewal are $4,235. Rental expense under this operating lease agreement was $46,200, $44,100, and $42,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

The Company also leases a building for its Greenville branch location. The operating lease that originated on October 1, 2002 has an initial three year term. The lease is renewable at the Company’s option for three one-year terms at an increased monthly rental. The lease term requires monthly payments of $3,500 per month. The initial lease term ends on September 30, 2005. Rental expense for the year ended December 31, 2002 totaled $10,500.

Future obligations over the primary terms of the remaining long-term leases as of December 31, 2002 are as follows:

Both leases contain options to renew. The cost of such rentals is not included above.

In 2000, the Company restructured two lease agreements for certain data processing equipment. Both rental terms are for sixty months and provide for the lessee to pay certain maintenance costs.

Assets recorded under capital leases and included in premises and equipment were as follows at December 31, 2002:

The Company and the Bank are 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 material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classifications 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 Company and the Bank to maintain minimum ratios (set forth in the table below) 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 of the Company and the Bank 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.

The Company and the Bank are also required to maintain capital at a minimum level based on average assets (as defined), which is known as the leverage ratio. Only the strongest institutions are allowed to maintain capital at the minimum requirement of 3%. All others are subject to maintaining ratios 1% to 2% above the minimum.

As of the most recent regulatory examination, the Bank was deemed well-capitalized under the regulatory framework for prompt corrective action. To be categorized well capitalized, the Bank must maintain total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events that management believes have changed the Bank’s categories.

The following tables summarize the capital ratios and the regulatory minimum requirements of the Company and the Bank at December 31, 2002 and 2001.

On May 27, 1998, the Company terminated its Employee Incentive Stock Option Plan and its Incentive and Nonstatutory Stock Option Plan (the “Plans”). The 1997 Stock Incentive Plan effective replaced these Plans January 1, 1998. Outstanding options issued under the former Plans will be honored in accordance with the terms and conditions in effect at the time they were granted, except that they are not subject to reissuance. At December 31, 2002, there were 164,408 options outstanding that had been issued under the terminated Plans.

The 1997 Stock Incentive Plan provides for the granting of statutory incentive stock options within the meaning of Section 422 of the Internal Revenue Code as well as nonstatutory stock options, stock appreciation rights, or restricted stock of up to 600,000 shares (as amended January 27, 1999), adjusted for stock dividends of the Company’s common stock, to officers, employees, and directors of and consultants for the Company. The Board voted to amend the number of shares available for grant from 2,100,000 to 600,000 in January 1999. Awards may be granted for a term of up to ten years from the effective date of grant. Under this Plan, the Company’s Board of Directors has sole discretion as to the exercise date of any awards granted. The per-share exercise price of incentive stock options may not be less than the fair value of a share of common stock on the date the option is granted. The per-share exercise price of nonqualified stock options may not be less than 50% of the fair value of a share on the effective date of grant. Any options that expire unexercised or are canceled become available for issuance. No awards may be made after January 27, 2008.

During 2002, the Company granted 60,250 options pursuant to the terms of the Company’s 1997 Stock Incentive Plan. The options are exercisable one year from the date of grant at prices ranging between $12.50 and $14.10 per-share and expire during 2007. As of December 31, 2002, there were 111,807 options available for issuance under this Plan.

In calculating the pro forma disclosures, the fair value of options granted is estimated as of the date granted using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants:

The weighted-average fair value of options, calculated using the Black-Scholes option-pricing model, granted during 2002, 2001, and 2000 is $3.21, $4.18, and $2.03, respectively.

A summary of the status of the Company’s stock option plans as of December 31, 2002, 2001, and 2000 and changes during the years ended on those dates is presented below:

Options exercisable at December 31, 2002, 2001, and 2000 were 490,402, 675,281, and 784,390, respectively.

The following table summarizes information about the stock options outstanding under the Company’s plans at December 31, 2002:

Certain parties (primarily certain directors and executive officers, their immediate families and business interests) were loan customers 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 generally do not involve more than

normal risk of collectibility. Total loans and commitments outstanding to related parties at December 31, 2002, 2001 and 2000, were $9,704,027, $9,232,569 and $7,946,301, respectively. During 2002, $1,334,671 of new loans was made to related parties and repayments totaled $863,213. During 2001, $7,854,068 of new loans was made to related parties and repayments totaled $6,567,800.

The Company purchases various types of insurance from agencies that belong to several directors. Amounts paid for insurance premiums were $139,000, $65,000, and $75,000 in 2002, 2001, and 2000, respectively.

In the ordinary course of business, the Company has various outstanding commitments and contingent liabilities that are not reflected in the accompanying consolidated financial statements. In addition, the Company is a defendant in certain claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material adverse effect on the consolidated financial condition of the Company.

The ability of the Company to pay cash dividends to shareholders 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 in the form of cash dividends, loans, or advances to the Company. Dividends are payable only from the retained earnings of the Bank.

Earnings per share—basic is computed by dividing net income by the weighted-average number of common shares outstanding. Earnings per share—diluted is computed by dividing net income by the weighted-average number of common shares outstanding and dilutive common share equivalents using the treasury stock method.

The above computation of diluted earnings per share does not include the following options that were outstanding at year-end since their exercise price was greater than the average market price of the common shares:

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

Deferred tax assets represent the future tax benefit of deductible differences and, if it is more likely than not that a tax asset will not be realized, a valuation allowance is required to reduce the recorded deferred tax assets to net realizable value. Management has determined that it is more likely than not that the entire deferred tax asset at December 31, 2002 will be realized, and accordingly, has not established a valuation allowance. Net deferred tax assets are included in other assets.

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

The Company sponsors a voluntary nonleveraged employee stock ownership plan (ESOP) as part of a 401(k) savings plan covering substantially all full-time employees. The Company matches 75 cents per dollar, up to a maximum of 6% of employee compensation. Company contributions to the savings plan were $187,000, $195,000 and $185,000 in 2002, 2001, and 2000, respectively. The Company’s policy is to fund amounts approved by the Board of Directors. At December 31, 2002 and 2001, the savings plan owned 141,559 and 124,544 shares of the Company’s common stock purchased at an average cost of $12.62 and $8.66 per share, respectively, adjusted for the effects of stock dividends. The estimated value of shares held at December 31, 2002 and 2001 was $2,010,138 and $1,382,181, respectively.

The Company had an Incentive Plan for 2002 that provided incentive pay for outstanding accomplishments of officers and employees of the Company. Cash awards were based upon various performance measures, but primarily net income. Incentive payments accrued at December 31, 2002 totaled $336,984. Incentive payments accrued for the year ended December 31, 2001 totaled $193,012.

The Company has an Executive Supplemental Compensation Plan that provides certain officers with salary continuation benefits upon retirement. The plan also provides for benefits in the event of early retirement, death,

or substantial change of control of the Company. In connection with the Executive Supplemental Compensation Plan, life insurance contracts were purchased on the officers. No insurance premiums were paid in the years ended December 31, 2002, 2001, or 2000.

During 1999, certain officers opted out of the Executive Supplemental Compensation Plan. Under a new agreement, split-dollar life insurance policies were obtained on the lives of these officers. The officers are entitled to all of the benefits of these policies, with the exception of the premiums paid by the Company. There was no expense associated with this plan in 2002, 2001, or 2000. Insurance premiums of $318,000 were paid in each of the years ended December 31, 2002 2001, and 2000, and are included in other assets.

In 2002, the Company purchased Bank Owned Life Insurance (BOLI) Policies on certain key officers of the Company. The cash values of such policies will be used to fund retirement benefits of these officers. The total amount of premiums paid on the policies during the year ended December 31, 2002 totaled $7,500,000. The policies increased their cash values by $136,352 during 2002, resulting in December 31, 2002 cash values totaling $7,636,352.

As of December 31, 2002, the subsidiary bank had unused lines of credit to purchase federal funds from unrelated banks totaling $29,524,000. These lines of credit are available on a one to fourteen day basis for general corporate purposes. The lenders have reserved the right not to renew their respective lines. The Company also has a line of credit to borrow funds from the Federal Home Loan Bank up to 15% of the Bank’s total assets that provided total availability of $35,800,000 at December 31, 2002. As of December 31, 2002, the Bank had borrowed $31,140,000 on this line.

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

The following methods and assumptions were used to estimate the fair value of significant financial instruments:

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

Investment Securities - The fair values of securities held-to-maturity are based on quoted market prices or dealer quotes. For securities available-for-sale, fair value equals the carrying amount that is the quoted market price. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities.

Nonmarketable Equity Securities - Cost is a reasonable estimate of fair value for nonmarketable equity securities because no quoted market prices are available and the securities are not readily marketable. The carrying amount is adjusted for any permanent declines in value.

Loans receivable - For certain categories of loans, such as variable rate loans that 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.

Cash Surrender Value of Life Insurance - The carrying amount is a reasonable estimate of fair value.

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

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

Federal Funds Purchased and Securities Sold Under Agreements to Repurchase - The carrying amount is a reasonable estimate of fair value because these instruments typically have terms of one day.

Advances from the Federal Home Loan Bank - The carrying amounts of variable rate borrowings are reasonable estimates of fair value because they can be repriced frequently. The fair values of fixed rate borrowings are estimated using a discounted cash flow calculation that applies the Company’s current borrowing rate from the Federal Home Loan Bank.

Off-Balance-Sheet Financial Instruments - The contractual amount is a reasonable estimate of fair value for the instruments because commitments to extend credit and standby letters of credit are issued on a short-term or floating rate basis. Commitments to extend credit include commitments under credit card arrangements.

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

Condensed financial statements for Community Capital (Parent Company Only) follow:

Supplemental schedule of noncash investing and financing activities: In 2001 and 2000, the Company declared 5% stock dividends. For the 2001 stock dividend, the Company transferred $1,313,000 from retained earnings and $18,000 from treasury stock to common stock and capital surplus in the amounts of $164,000 and $1,167,000, respectively. In 2000, the Company transferred $1,000,000 from retained earnings and $14,000 from treasury stock to common stock and capital surplus in the amounts of $156,000 and $858,000, respectively. No stock dividends were paid during 2002.

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

Condensed Consolidated Statement of Changes in Shareholders’ Equity and Comprehensive Income for the nine months ended September 30, 2003 and 2002 (Unaudited)

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

The accompanying consolidated financial statements have been prepared in accordance with the requirements for interim financial statements and, accordingly, they are condensed and omit disclosures that would substantially duplicate those contained in the most recent annual report to shareholders. The financial statements as of September 30, 2003 and for the interim periods ended September 30, 2003 and 2002 are unaudited and include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. The financial information as of December 31, 2002 has been derived from the audited financial statements as of that date. For further information, refer to the financial statements and the notes included in our 2002 Annual Report.

Advances from the Federal Home Loan Bank of Atlanta to us were $32,450,000 as of September 30, 2003. Of this amount, the following have scheduled maturities greater than one year:

During the first nine months of 2003, we purchased 218,950 shares of treasury stock at an average price of $13.01 per share through our stock repurchase program. During the third quarter, we purchased an additional block of 152,630 shares at $17.50 per share through a private transaction with a single shareholder. Total treasury stock at September 30, 2003 was 702,522 shares. There were 282,631 options exercised by the employees and directors of the Company with total proceeds of $2,687,000 at an average exercise price of $10.51. On January 15, 2003, the Board of Directors declared a cash dividend of $0.06 per share, which was paid to shareholders on March 7, 2003. On April 16, 2003, the Board of Directors declared a cash dividend of $0.06 per share, which was paid on June 6, 2003. On July 16, 2003, the Board of Directors declared a cash dividend of $0.09 per share, which was paid on August 15, 2003.

We have a stock-based employee compensation plan which is accounted for under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all stock options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share as if we had applied the fair value recognition provisions of Financial Accounting Standards Board (“FASB”) SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

A reconciliation of the numerators and denominators used to calculate basic and diluted earnings per share for the nine and three month periods ended September 30, 2003 and 2002 are as follows:

The following tables set forth the amounts of other comprehensive income included in equity along with the related tax effects for the nine and three month periods ended September 30, 2003 and 2002:

On August 19, 2003, Community Capital signed a Letter of Intent to acquire Abbeville Capital Corporation, the holding company of The Bank of Abbeville. On October 15, 2003, the Board of Directors of both companies approved a definitive merger agreement. The total transaction price is valued at $15 million and is anticipated that 50 percent of the merger consideration will be in cash and 50 percent in our stock. The merger is subject to regulatory approval and the approval of the shareholders of Abbeville Capital Corporation. The transaction is expected to close in the first quarter of 2004.

THIS MERGER AGREEMENT (this “Agreement”) is dated as of the 15th day of October, 2003, by and between COMMUNITY CAPITAL CORPORATION, a South Carolina corporation and a holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended (the “Buyer”); and ABBEVILLE CAPITAL CORPORATION, a South Carolina corporation and a holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended (the “Company”).

The Buyer and the Company desire to effect a merger pursuant to which the Company will merge into the Buyer, with the Buyer being the surviving corporation (the “Holding Company Merger”). In consideration of the Holding Company Merger, the shareholders of the Company will receive shares of common stock of the Buyer and/or cash. It is intended that the Holding Company Merger qualify as a tax-free reorganization under Section 368 of the Code (as defined below). Subsequent to the Holding Company Merger, it is expected that the Buyer Bank and the Company Bank (each, as hereinafter defined) will effect a merger pursuant to which the Company Bank will merge into the Buyer Bank, with the Buyer Bank being the surviving corporation (the “Bank Merger”).

In consideration of the premises and the mutual representations, warranties, covenants, agreements and conditions contained herein, the parties hereto agree as follows:

1.1 Definitions. As used in this Agreement, the following terms have the following meanings:

“Acquisition Proposal” means any offer or proposal by any Person concerning any tender or exchange offer, proposal for a merger, share exchange, recapitalization, consolidation or other business combination involving the Company or any of its subsidiaries or any divisions of any of the foregoing, or any proposal or offer to acquire in any manner, directly or indirectly, a 10% or more equity interest in, or 10% or more of the assets, business or deposits of, the Company or any of its subsidiaries, other than pursuant to the transactions contemplated by this Agreement.

“Acquisition Transaction” means the consummation of any merger, share exchange, recapitalization, consolidation or other business combination involving the Company or any of its subsidiaries or any divisions of the foregoing, or the acquisition in any manner, directly or indirectly, of a 10% or more equity interest in, or 10% or more of the assets, business or deposits of, the Company or any of its subsidiaries, other than pursuant to the transactions contemplated by this Agreement.

“Affiliate” means, with respect to any Person, each of the Persons that directly or indirectly, through one or more intermediaries, owns or controls, or is controlled by or under common control with, such Person, and shall be deemed to include the directors and executive officers of a corporate Person. For the purpose of this Agreement, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through the ownership of voting securities, by contract or otherwise. Without limiting the foregoing, as used with respect to the Company, the term “Affiliates” includes its subsidiaries.

“Assets” means all of the assets, properties, businesses and rights of a Person of every kind, nature, character and description, whether real, Personal or mixed, tangible or intangible, accrued or contingent, whether or not carried on any books and records of such Person, whether or not owned in such Person’s name and wherever located.

“Average Closing Price” means with respect to the Buyer’s Stock, the average of the daily closing sales price thereof on the American Stock Exchange during the 20 consecutive trading day period ending three trading days prior to the Effective Time, as reported in The Wall Street Journal (or, if not reported thereby, any other authoritative source).

“Bank Holding Company Act” means the Bank Holding Company Act of 1956, as amended.

“Bank Merger” has the meaning given to it in the Background Statement hereof.

“Benefit Plans” means all pension, retirement, profit-sharing, deferred compensation, stock option, stock purchase, employee stock ownership, restricted stock, severance pay, vacation, bonus, or other incentive plan, all other written employee programs or agreements, all medical, vision, dental, or other health plans, all life insurance plans, and all other employee benefit plans or fringe benefit plans, including without limitation “employee benefit plans” as that term is defined in Section 3(3) of ERISA maintained by, sponsored in whole or in part by, or contributed to by, a Person or any of its subsidiaries for the benefit of employees, retirees, dependents, spouses, directors, independent contractors, or other beneficiaries and under which employees, retirees, dependents, spouses, directors, independent contractors, or other beneficiaries are eligible to participate.

“Business Day” means any day excluding Saturday, Sunday and any day that is a legal holiday in the State of South Carolina.

“Buyer Bank” means CapitalBank, a South Carolina bank and a wholly owned subsidiary of the Buyer.

“Buyer Financial Statements” means, with respect to the Buyer and its subsidiaries, the consolidated audited statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the years ended December 31, 2002, 2001 and 2000 and consolidated audited balance sheets as of December 31, 2002, 2001 and 2000, as well as the interim unaudited consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the completed fiscal quarters since December 31, 2002 and the consolidated interim balance sheets as of each such quarter.

“Buyer’s Stock” means the common stock of Buyer, $1.00 par value, transactions in which are quoted on the American Stock Exchange.

“Closing” means the closing of the Holding Company Merger, as identified more specifically in Article IV.

“Code” means the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections.

“Company Bank” means The Bank of Abbeville, a South Carolina bank and a wholly owned subsidiary of the Company.

“Company Financial Statements” means, with respect to the Company and its subsidiaries, the consolidated audited statements of operations and comprehensive income, changes in stockholders’ equity and cash flows for the years ended December 31, 2002, 2001 and 2000 and consolidated audited balance sheets as of December 31, 2002, 2001 and 2000, as well as the interim unaudited consolidated statements of statements of operations and comprehensive income, changes in stockholders’ equity and cash flows for each of the completed fiscal quarters since December 31, 2002 and the consolidated interim balance sheets as of each such quarter.

“Consent” means any consent, approval, authorization, clearance, exemption, waiver, or similar affirmation by any Person given or granted with respect to any Contract, Law, Order, or Permit.

“Contract” means any agreement, warranty, indenture, mortgage, guaranty, lease, license or other contract, agreement, arrangement, commitment or understanding, written or oral, to which a Person is a party.

“Costs” means the legal, accounting, investment banking, printing, mailing and other out-of-pocket fees and expenses incurred by the Company Parties or Buyer Parties, as the case may be, in connection with this Agreement and the transactions contemplated herein.

“Default” means (i) any breach or violation of or default under any Contract, Order or Permit (including any noncompliance with restrictions on assignment, where assignment is defined to include a change of control of the parties to this Agreement or any of their subsidiaries or the merger or consolidation of any of them with another Person), (ii) any occurrence of any event that with the passage of time or the giving of notice or both would constitute such a breach or violation of or default under any Contract, Order or Permit, or (iii) any occurrence of any event that with or without the passage of time or the giving of notice would give rise to a right to terminate or revoke, change the current terms of, or renegotiate, or to accelerate, increase, or impose any Liability under, any Contract, Order or Permit.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections.

“ERISA Plan” means any Benefit Plan that is an “employee welfare benefit plan,” as that term is defined in Section 3(l) of ERISA, or an “employee pension benefit plan,” as that term is defined in Section 3(2) of ERISA.

“Environmental Assessment” means any and all soil and groundwater tests, surveys, environmental assessments and other inspections, tests and inquiries conducted by the Buyer or any agent of the Buyer and related to the Real Property of the Company and its subsidiaries.

“Environmental Laws” means any federal, state or local law, statute, ordinance, rule, regulation, permit, directive, license, approval, guidance, interpretation, order or other legal requirement relating to the

protection of human health or the environment, including but not limited to any requirement pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of materials that are or may constitute a threat to human health or the environment. Without limiting the foregoing, each of the following is an Environmental Law: the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq.) (“CERCLA”), the Hazardous Material Transportation Act (49 U.S.C. § 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.) (“RCRA”), the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. § 300 et seq.) and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.) (“OSHA”), as such laws and regulations have been or are in the future amended or supplemented, and each similar federal, state or local statute, and each rule and regulation promulgated under such federal, state and local laws.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System.

“GAAP” means generally accepted accounting principles in the United States as recognized by the American Institute of Certified Public Accountants, as in effect from time to time, consistently applied and maintained on a consistent basis for a Person throughout the period indicated and consistent with such Person’s prior financial practice.

“Governmental Authority” means any nation, province or state, or any political subdivision thereof, and any agency, department, natural Person or other entity exercising executive, legislative, regulatory or administrative functions of or pertaining to government, including Regulatory Authorities.

“HSB” means Haynsworth Sinkler Boyd, P.A., a South Carolina professional corporation.

“Hazardous Material” means any substance or material that either is or contains a substance designated as a hazardous waste, hazardous substance, hazardous material, pollutant, contaminant or toxic substance under any Environmental Law or is otherwise regulated under any Environmental Law, or the presence of which in some quantity requires investigation, notification or remediation under any Environmental Law.

“Holding Company Merger” has the meaning given to it in the Background Statement hereof.

“Holding Company Plan of Merger” has the meaning given to it in Section 2.1(a).

“Howie Employment Agreement” means the Employment Agreement to be entered into at or prior to Closing between the Buyer Bank and Patricia P. Howie, substantially in the form attached hereto as Exhibit B.

“Interim Distributions” has the meaning given to it in Section 7.1(a)(xviii).

“Knapp Employment Agreement” means the Employment Agreement to be entered into at or prior to Closing between the Buyer Bank and C. William Knapp, Jr., substantially in the form attached hereto as Exhibit C.

“Knowledge of the Buyer Parties” means the actual personal knowledge of any of the directors and executive officers of the Buyer and the Buyer Bank.

“Knowledge of the Company Parties” means the actual personal knowledge of any of the directors and executive officers of the Company and the Company Bank.

“Law” means any code, law, ordinance, rule, regulation, reporting or licensing requirement, rule, or statute applicable to a Person or its Assets, Liabilities, business or operations promulgated, interpreted or enforced by any Governmental Authority.

“Liability” means any direct or indirect, primary or secondary, liability, indebtedness, obligation, penalty, cost or expense (including costs of investigation, collection and defense), claim, deficiency, guaranty or endorsement of or by any Person (other than endorsements of notes, bills, checks, and drafts presented for collection or deposit in the ordinary course of business) of any type, whether accrued, asserted, absolute or contingent, liquidated or unliquidated, matured or unmatured or otherwise.

“Lien” means, whether contractual or statutory, any conditional sale agreement, participation or repurchase agreement, assignment, default of title, easement, encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge, reservation, restriction, security interest, title retention or other security arrangement, or any adverse right or interest, charge or claim of any nature whatsoever of, on, or with respect to any property or property interest, other than (i) Liens for current property Taxes not yet due and payable, (ii) easements, restrictions of record and title exceptions that could not reasonably be expected to have a Material Adverse Effect, and (iii) pledges to secure deposits and other Liens incurred in the ordinary course of the banking business.

“Litigation” means any action, arbitration, cause of action, complaint, criminal prosecution, governmental investigation of which the Person being investigated has been notified, hearing, or administrative or other proceeding, but shall not include regular, periodic examinations of depository institutions and their Affiliates by Regulatory Authorities.

“Loan Collateral” means all of the assets, properties, businesses and rights of every kind, nature, character and description, whether real, Personal, or mixed, tangible or intangible, accrued or contingent, owned by whomever and wherever located, in which the Company or any of its subsidiaries has taken a security interest with respect to, on which the Company or any of it subsidiaries has placed a Lien with respect to, or which is otherwise used to secure, any loan made by the Company or any of its subsidiaries or any note, account, or other receivable payable to the Company or any of its subsidiaries.

“Market Value” of the Buyer’s Stock on any date shall be the closing price of such stock as quoted on the American Stock Exchange (as reported by The Wall Street Journal or, if not reported thereby, any other authoritative source), or if such date is not a trading day, on the last trading day preceding that date.

“Material” for purposes of this Agreement shall be determined in light of the facts and circumstances of the matter in question; provided, however, that any specific monetary amount stated in this Agreement shall determine materiality in that instance.

“Material Adverse Effect” on a Person shall mean an event, change, or occurrence that, individually or together with any other event, change, or occurrence, has a Material adverse impact on (i) the financial condition, results of operations, or business of such Person and its subsidiaries, taken as a whole, or (ii) the ability of such Person to perform its obligations under this Agreement or to consummate the Mergers or the other transactions contemplated by this Agreement, provided, however, that “Material Adverse Effect” shall not be deemed to include the impact of (a) changes in banking and similar Laws of general applicability or interpretations thereof by courts or governmental authorities, (b) changes in GAAP or regulatory accounting principles generally applicable to banks and their holding companies, (c) actions and omissions of a party to this Agreement (or any of its subsidiaries) taken with the prior informed consent of the other party hereto in contemplation of the transactions contemplated hereby, and (d) the Mergers (and the reasonable expenses incurred in connection therewith) and compliance with the provisions of this Agreement on the operating performance of the Buyer Parties or the Company Parties.

“Order” means any administrative decision or award, decree, injunction, judgment, order, quasi-judicial decision or award, ruling, or writ of any federal, state, local, foreign or other court, arbitrator, mediator, tribunal, or Governmental Authority.

“Participation Facility” shall mean any facility or property in which the Person in question or any of its subsidiaries participates in the management (including but not limited to participating in a fiduciary capacity) and, where required by the context, said term means the owner or operator of such facility or property, but only with respect to such facility or property.

“Pension Plan” means any ERISA Plan that also is a “defined benefit plan” (as defined in Section 414(j) of the Code or Section 3(35) of ERISA).

“Permit” means any approval, authorization, certificate, easement, filing, franchise, license, notice, permit, or right given by a Governmental Authority to which any Person is a party or that is or may be binding upon or inure to the benefit of any Person or its securities, Assets or business.

“Person” means a corporation, a limited liability company, an association, a joint venture, a partnership, an organization, a business, an individual, a trust, a Governmental Authority or any other legal entity.

“Real Property” means all of the land, buildings, premises, or other real property in which a Person has ownership or possessory rights, whether by title, lease or otherwise (including banking facilities and any foreclosed properties). Notwithstanding the foregoing, “Real Property,” as used with respect to any of the Company and its subsidiaries, does not include any Loan Collateral not yet foreclosed and conveyed to the Company or one of its subsidiaries as of the date with respect to which the term “Real Property” is being used.

“Regulatory Authorities” means, collectively, the Federal Trade Commission; the United States Department of Justice; the Federal Reserve Board; the South Carolina State Board of Financial Institutions; the FDIC, the National Association of Securities Dealers, Inc.; the SEC; and all other regulatory agencies having jurisdiction over the parties hereto and their respective subsidiaries.

“Rights” shall mean all arrangements, calls, commitments, Contracts, options, rights to subscribe to, scrip, understandings, warrants, or other binding obligations of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of the capital stock of a Person or by which a Person is or may be bound to issue additional shares of its capital stock or other Rights.

“Securities Documents” means all forms, proxy statements, registration statements, reports, schedules and other documents filed or required to be filed by a Person or any of its subsidiaries with any Regulatory Authority pursuant to the Securities Laws.

“Securities Laws” means the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, the Investment Advisors Act of 1940, the Trust Indenture Act of 1939, each as amended, and the rules and regulations of any Governmental Authority promulgated under each.

“Sherard Employment Agreement” means the Employment Agreement to be entered into at or prior to Closing between the Buyer Bank and Thomas D. Sherard, Jr., substantially in the form attached hereto as Exhibit D.

“Superior Proposal” means a bona fide written unsolicited Acquisition Proposal (including a new or solicited proposal received by the Company or any of its subsidiaries after execution of this Agreement from a party whose initial contact with the Company may have been solicited prior to the execution of this Agreement) that the Company’s board of directors concludes in good faith to be more favorable from a financial point of view to the Company’s shareholders than the Holding Company Merger and the other transactions contemplated hereby, (i) based on the advice of its financial advisors (which shall be reasonably acceptable to the Buyer, but which shall include HSB in any event), (ii) after taking into account the likelihood of consummation of such transaction on the terms set forth therein (as compared to, and with due regard for, the terms herein), and (iii) after taking into account all legal (with the advice of outside counsel reasonably acceptable to the Buyer, but which shall include HSB in any event), financial (including the financing terms of any such proposal), regulatory and other aspects of such proposal and any other relevant factors permitted under applicable Law.

“Tax” or “Taxes” means any and all taxes, charges, fees, levies or other assessments (whether federal, state, local or foreign), including without limitation income, gross receipts, excise, property, estate, sales, use, value added, transfer, license, payroll, franchise, ad valorem, withholding, Social Security and unemployment taxes, as well as any interest, penalties and other additions to such taxes, charges, fees, levies or other assessments.

“Tax Return” means any report, return or other information required to be supplied to a taxing authority in connection with Taxes.

“Taxable Period” shall mean any period prescribed by any Governmental Authority for which a Tax Return is required to be filed or Tax is required to be paid.

(a) The Merger. On the terms and subject to the conditions of this Agreement, the Plan of Merger in respect of the Holding Company Merger, which shall be substantially in the form attached hereto as Exhibit A (the “Holding Company Plan of Merger”), and applicable South Carolina Law, the Company shall merge into the Buyer, the separate existence of the Company shall cease, and the Buyer shall be the surviving corporation (the “Surviving Holding Company”).

(b) Governing Documents. The articles of incorporation of the Buyer in effect at the Effective Time shall be the articles of incorporation of the Surviving Holding Company until further amended in accordance with applicable Law. The bylaws of the Buyer in effect at such Effective Time shall be the bylaws of the Surviving Holding Company until further amended in accordance with applicable Law.

(c) Directors and Officers. Subject to Section 7.2(b), from and after the Effective Time, until successors or additional directors are duly elected or appointed in accordance with applicable Law, (i) the directors of the Buyer at the Effective Time shall be the directors of the Surviving Holding Company, and (ii) the officers of the Buyer at the Effective Time shall be the officers of the Surviving Holding Company.

(d) Headquarters. The headquarters of the Surviving Holding Company and the Surviving Bank after the Merger, unless and until relocated by the Buyer, shall be Greenwood, South Carolina.

(e) Approval. The parties hereto shall take and cause to be taken all action necessary to approve and authorize (i) this Agreement and the other documents contemplated hereby (including without limitation the Holding Company Plan of Merger) and (ii) the Holding Company Merger and the other transactions contemplated hereby.

(f) Effective Time. The Holding Company Merger shall become effective on the date and at the time of filing of the related Articles of Merger, containing the Holding Company Plan of Merger, in the form required by and executed in accordance with applicable South Carolina Law, or at such other time specified therein. The date and time when the Holding Company Merger shall become effective is herein referred to as the “Effective Time.”

(g) Filing of Articles of Merger. At the Closing, the Company shall cause the Articles of Merger in respect of the Holding Company Merger, containing the Holding Company Plan of Merger, to be executed and filed with the Secretary of State of South Carolina, as required by applicable South Carolina Law, and shall take any and all other actions and do any and all other things to cause the Holding Company Merger to become effective as contemplated hereby.

(a) Each share of the Company’s capital stock (the “Company Shares”), $5.00 par value per share, issued and outstanding shall, by virtue of the Holding Company Merger and without any action on the part of the holders thereof, be canceled and converted at the Effective Time into the right to receive the Merger Consideration (as defined below) in accordance with this Article II.

(b) Each Company Share, by virtue of the Holding Company Merger and without any action on the part of the holder thereof, shall at the Effective Time no longer be outstanding, shall be canceled and retired and shall cease to exist, and each holder of certificates representing any such Company Shares shall thereafter cease to have any rights with respect to such shares, except for the right to receive the Merger Consideration.

(c) From and after the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Holding Company of the Company Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, certificates representing Company Shares are presented to the Surviving Holding Company, they shall be canceled, and exchanged and converted into the Merger Consideration as provided for herein.

(a) At the Effective Time, subject to Sections 2.4, 2.5 and 2.6 and assuming that 237,615 Company Shares are outstanding at the Effective Time, each Company Share issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares), shall, by virtue of the Holding Company Merger, automatically and without any action on the part of the holder thereof, become and be converted into the right to receive, at the election of the holder, either (i) $63.13 in cash, without interest (the “Cash Consideration,” with such election referred to as a “Cash Election”), (ii) a number of shares of the Buyer’s Stock equal to the Exchange Ratio (the “Stock Consideration”, with such election referred to as a “Stock Election”) or (iii) a combination of 50% of such consideration in cash and 50% of such consideration in shares of Buyer’s Stock (the “Mixed Consideration”, with such election referred to as a “Mixed Election”). Company Shares as to which no election has been made are referred to herein as “No Election Shares” and shall receive the mix of Merger Consideration specified in Section 2.4 below. For purposes of this Agreement, Cash Consideration, Stock Consideration and any combination thereof shall be collectively referred to herein as “Merger Consideration.” Company Shares as to which a Cash Election has been made (including pursuant to a Mixed Election) are referred to herein as “Cash

Election Shares.” Company Shares as to which a Stock Election has been made (including pursuant to a Mixed Election) are referred to herein as “Stock Election Shares.” All Dissenting Shares will be deemed Cash Election Shares for purposes of determining the Cash Consideration available for distribution to other shareholders.

(b) For purposes of this Agreement, the “Exchange Ratio” shall be equal (rounded to the nearest ten-thousandth) to (x) 4.6419, if the Average Closing Price is less than or equal to $13.60, (y) 3.0946, if the Average Closing Price is greater than or equal to $20.40, or (z) if the Average Closing Price is between $13.60 and $20.40, the result obtained by dividing $63.13 by the Average Closing Price.

(c) (i) In the event that the sum of (x) the number of Cash Election Shares plus (y) 50.0% of the number of No Election Shares exceeds (z) 50.0% of the total number of issued and outstanding Company Shares, then the holders of Cash Election Shares will receive a combination of cash and shares of Buyer’s Stock to be determined as follows: (A) the number of Cash Election Shares which shall be converted into the right to receive the Cash Consideration shall equal the amount obtained by multiplying (I) the number of Company Shares covered by such Cash Election by (II) a fraction of which the numerator shall be the cash required to be made available by Buyer (pursuant to clause (iii) below) and the denominator of which shall be $63.13 multiplied by the number of Cash Election Shares; and (B) the balance of such Cash Election Shares shall be converted into the right to receive Stock Consideration.

(ii) In the event the foregoing clause (i) is not applicable, each holder of Company Shares (A) that makes a Stock Election will receive the Stock Consideration, (B) that makes a Cash Election will receive the Cash Consideration or (C) that makes a Mixed Election will receive the combination of Buyer’s Stock and cash set forth in such election.

(iii) For purposes of this Section, the amount of cash required to be made available by Buyer shall be equal to the difference between (A) the amount obtained by multiplying (I) $63.13 by (II) 50% of the number of outstanding Company Shares, minus (B) the amount of Cash Consideration attributable to the Dissenting Shares, minus (C) the amount of Cash Consideration required to be paid to No Election Shares. For purposes of this Section, the number of shares of Buyer’s Stock required to be made available by Buyer shall be equal to the difference between (A) the number of shares obtained by multiplying (I) the Exchange Ratio by (II) the number of outstanding Company Shares for which a Stock Election has been made, minus (B) the amount of Stock Consideration required to be paid to No Election Shares. Regardless of the applicability of clauses (i) or (ii) above, each No Election Share shall be converted in the Merger into the right to receive 50% Stock Consideration and 50% Cash Consideration. Notwithstanding anything contained herein, the aggregate amount of cash to be paid as Merger Consideration, plus any cash paid in lieu of fractional shares pursuant to Section 2.3(d) and any cash paid for Dissenting Shares shall not exceed $7,500,000, subject to the effect of any adjustment made as provided in this Article.

(d) No fractional shares of the Buyer’s Stock shall be issued or delivered in connection with the Holding Company Merger. In lieu of the issuance of any such fractional share, Buyer shall pay to each former stockholder of the Company who otherwise would be entitled to receive a fractional share of Buyer’s Stock an amount in cash equal to the product of (x) the Average Closing Price, times (y) the fraction of a share of Buyer’s Stock which such holder would otherwise be entitled to receive pursuant to this Article.

(e) In the event the Buyer changes the number of shares of the Buyer’s Stock issued and outstanding prior to the Effective Time as a result of a stock split, stock dividend or similar recapitalization with respect to such stock (each a “Stock Adjustment”) and the record date therefor (in the case of a stock dividend) or the effective date thereof (in the case of a stock split or similar recapitalization for which a record date is not established) shall be prior to the Effective Time, the amount of the Buyer’s Stock to be exchanged for Company Shares in connection with the Holding Company Merger shall be equitably adjusted to reflect such change.

(f) Notwithstanding any other provision contained in this Agreement, it is intended that the Holding Company Merger will qualify as a reorganization under the provisions of Section 368(a) of the Code and that this Agreement shall constitute a “plan of reorganization” for the purposes of Section 368 of the Code. In order that

the Holding Company Merger will not fail to satisfy the continuity of interest requirements under applicable federal income tax principles relating to reorganizations under Section 368(a) of the Code, as of the Effective Time, Buyer may, but shall not be obligated to, increase the Stock Consideration and decrease the Cash Consideration proportionally (i) so that the Stock Consideration measured at Market Value will represent at least 50% of the value of the aggregate Merger Consideration payable to the shareholders of the Company; (ii) the Cash Consideration is reduced by the aggregate amount of the Interim Distributions, cash paid in lieu of fractional shares pursuant to Section 2.3(d), and cash paid for Dissenting Shares; and/or (iii) any other reason the Buyer, in its sole discretion, determines is necessary to cause the Holding Company Merger to qualify as a tax-free reorganization under Section 368(a) of the Code. Upon any such adjustment, the components of the Mixed Consideration and the Stock Consideration set forth in Section 2.3(a) shall be equitably and proportionately adjusted to reflect the increase in the number of shares of the Buyer’s Stock being paid, and the decrease in the amount of cash being paid, as Merger Consideration to each shareholder of the Company.

(i) An election form (“Election Form”) together with the other transmittal materials described in Section 2.6 shall be mailed as soon as reasonably practicable after the Effective Time to each holder of Company Shares of record at the Effective Time. Such date of mailing shall be referred to hereinafter as the “Mailing Date.” Each Election Form shall permit a holder (or the beneficial owner through appropriate and customary documentation and instruction) of Company Shares to elect to receive the Mixed Consideration, the Stock Consideration or the Cash Consideration with respect to all or any of such holder’s (or beneficial owner’s) Company Shares.

(ii) Any Company Share with respect to which the holder (or the beneficial owner, as the case may be) shall not have submitted to the Exchange Agent an effective, properly completed Election Form on or before a date after the Effective Time to be agreed upon by the parties hereto (which date will be set forth on the Election Form), but in any event not earlier than the 20th Business Day after the Mailing Date (such deadline, the “Election Deadline”) shall be deemed to be No Election Shares.

(b) Allocation. As soon as reasonably practicable after the Effective Time, the Buyer shall cause the Exchange Agent to allocate the Merger Consideration among the holders of Company Shares in accordance with the terms of this Agreement.

2.5 Closing Payment. At the Effective Time, the Buyer shall deposit with an exchange and transfer agent selected by the Buyer (the “Exchange Agent”), for the benefit of the holders of Company Shares, (i) a certificate or certificates representing the aggregate number of shares of the Buyer’s Stock comprising the Merger Consideration, and (ii) an aggregate amount of cash comprising the Merger Consideration and in lieu of any fractional shares, to be issued and paid as the Merger Consideration in accordance with the provisions of this Agreement. The Exchange Agent shall deliver the Merger Consideration in accordance with the procedures set forth in Section 2.6 below. The Exchange Agent shall invest any cash so deposited as instructed by the Buyer and any interest resulting from such investment shall be paid to the Buyer. The Buyer shall not be obligated to pay any of the Merger Consideration to any holder of Company Shares until such holder surrenders the certificates representing such holder’s Company Shares.

(a) After the Effective Time, the Buyer shall cause the Exchange Agent to mail to the shareholders of the Company of record at the Effective Time, the Election Form, as required under Section 2.4 and other appropriate transmittal materials (which shall specify that delivery shall be effected, and risk of loss and title to the certificates representing Company Shares prior to the Effective Time shall pass, only upon proper delivery of such certificates to the Exchange Agent). After the Effective Time, each holder of Company Shares issued and outstanding at the

Effective Time shall surrender the certificate or certificates representing such shares to the Exchange Agent and shall promptly upon surrender thereof receive in exchange therefor the number of shares of the Buyer’s Stock and the cash to which such holder is entitled hereunder (including any cash payments to which such holder is entitled hereunder in respect of rights to receive fractional shares). The Exchange Agent shall not be obligated to deliver any of such payments in cash or stock until such holder surrenders the certificate(s) representing such holder’s Company Shares. The certificate(s) so surrendered shall be duly endorsed as the Exchange Agent may require.

(b) Any portion of the Merger Consideration that remains unclaimed by the shareholders of the Company for six months after the Effective Time shall be paid to Buyer. Any shareholders of the Company who have not theretofore complied with this Article shall thereafter look only to Buyer for payment of their portion of the Cash Consideration and their shares of Buyer’s Stock, cash in lieu of fractional shares and unpaid dividends and distributions on Buyer’s Stock deliverable in respect of each share of Company Shares such stockholder holds as determined pursuant to this Agreement, in each case, without any interest thereon. Notwithstanding the foregoing, none of Buyer, Company, the Exchange Agent or any other person shall be liable to any former holder of shares of Company Shares for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Law.

(c) To the extent permitted by applicable Law, former shareholders of record of the Company shall be entitled to vote after the Merger Consideration has been allocated pursuant to the provisions of this Article at any meeting of the Buyer’s stockholders the number of whole shares of the Buyer’s Stock into which their respective Company Shares are converted pursuant to the Holding Company Merger, regardless of whether such holders have exchanged their certificates representing such Company Shares for certificates representing the Buyer’s Stock in accordance with the provisions of this Agreement. Whenever a dividend or other distribution is declared by the Buyer on the Buyer’s Stock, the record date for which is at or after the Effective Time, the declaration shall include dividends or other distributions on all shares of the Buyer’s Stock issuable pursuant to this Agreement, but beginning at the Effective Time, no dividend or other distribution payable to the holders of record of the Buyer’s Stock as of any time subsequent to the Effective Time shall be delivered to the holder of any certificate representing any of the Company Shares issued and outstanding at the Effective Time until such holder surrenders such certificate for exchange as provided in this Section 2.6. However, upon surrender of such certificate(s), both the certificate(s) representing the shares of the Buyer’s Stock to which such holder is entitled and any such undelivered dividends (without any interest) shall be delivered and paid with respect to each share represented by such certificates.

2.7 Dissenting Shares. Notwithstanding any other provision of this Agreement to the contrary, Company Shares that are outstanding immediately prior to the Effective Time and that are held by shareholders who shall have not voted in favor of the Holding Company Merger or consented thereto in writing and who properly shall have demanded appraisal for such shares in accordance with South Carolina Law (collectively, the “Dissenting Shares”) shall not be converted into or represent the right to receive the Merger Consideration. Such shareholders instead shall be entitled to receive payment of the appraised value of such shares held by them in accordance with the provisions of South Carolina Law, except that all Dissenting Shares held by shareholders who shall have failed to perfect or who effectively shall have withdrawn or otherwise lost their rights to appraisal of such shares under South Carolina Law shall thereupon be deemed to have been converted into and to have become exchangeable, as of the Effective Time, for the right to receive, without any interest thereon, the Merger Consideration upon surrender in the manner provided in Section 2.6 of the certificate or certificates that, immediately prior to the Effective Time, evidenced such shares. The Company shall give the Buyer (i) prompt notice of any written demands for appraisal of any shares of Company Shares, attempted withdrawals of such demands for appraisal or any other instruments served pursuant to South Carolina Law and received by the Company relating to shareholders’ rights of appraisal, and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands under South Carolina Law consistent with the obligations of the Company thereunder. The Company shall not, except with the prior written consent of the Buyer, (x) make any payment with respect to such demand, (y) offer to settle or settle any demand for appraisal or (z) waive any failure to timely deliver a written demand for appraisal or timely take any other action to perfect appraisal rights in accordance with South Carolina Law.

(a) At the Effective Time, no options to acquire Company Shares shall be then outstanding and unexercised.

(b) The Company shall cause all of its stock option plans (if any) to be terminated no later than immediately prior to the Effective Time.

3.1 The Bank Merger. After the consummation of the Holding Company Merger, it is expected that the Company Bank shall merge and combine into the Buyer Bank, the separate existence of the Company Bank shall cease, and the Buyer Bank shall be the surviving corporation (the “Surviving Bank”). The date and time when the Bank Merger shall become effective shall be determined by the Buyer in its sole.

3.2 Company Bank Offices. After the consummation of the Bank Merger, the offices and branches of the Surviving Bank shall become offices and branches of the Buyer Bank.

4.1 Closing. The Closing of the Holding Company Merger shall take place at the offices of Nexsen Pruet Jacobs & Pollard, LLC in Columbia, South Carolina as soon as reasonably practical after all conditions to Closing have been met, or on such other date or at such other location as the Buyer and the Company may mutually agree (such date, the “Closing Date”). At the Closing, the parties hereto will execute, deliver and file all documents necessary to effect the transactions contemplated to occur at Closing herein, including the Articles of Merger in respect of the Holding Company Merger.

4.2 Deliveries by the Company. At or by the Closing, the Company shall have caused the following documents to be executed and delivered:

(a) the agreements, opinions, certificates, instruments and other documents contemplated in Section 9.3;

(b) the Sherard Employment Agreement, Howie Employment Agreement and the Knapp Employment Agreement; and

(c) all other documents, certificates and instruments required hereunder to be delivered to the Buyer, or as may reasonably be requested by the Buyer at or prior to the Closing.

4.3 Deliveries by the Buyer. At or by the Closing, the Buyer shall have caused the following documents to be executed and delivered:

(a) the agreements, opinions, certificates, instruments and other documents contemplated in Section 9.2;

(b) the Sherard Employment Agreement, Howie Employment Agreement and the Knapp Employment Agreement; and

(c) all other documents, certificates and instruments required hereunder to be delivered to the Company, or as may reasonably be requested by the Company at or prior to the Closing.

Except as set forth on the Company’s Disclosure Schedule, the Company represents and warrants to the Buyer that the statements contained in this Article V are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date.

(a) The Company is a South Carolina corporation and a bank holding company registered with the Federal Reserve Board under the Bank Holding Company Act, and the Company Bank is a bank chartered under South Carolina Law. The Company Bank is an “insured institution” as defined in the Federal Deposit Insurance Act and applicable regulations thereunder, and subject to dollar limits under such Act, all deposits in the Company Bank are fully insured by the FDIC to the extent permitted by Law.

(b) Each of the Company and its subsidiaries (i) is a corporation or a bank duly organized or chartered, validly existing and in good standing under the Laws of the State of South Carolina, (ii) has the corporate or other applicable power and authority to carry on, its businesses as now conducted and to own, lease and operate its Assets, and (iii) is duly qualified or licensed to transact business as a foreign corporation in good standing in the States of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except where the failure to do so will not cause a Material Adverse Effect on the Company.

(a) Subject to required regulatory and shareholder approvals, the Company has the corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of the Company’s obligations under this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action in respect thereof on the part of the Company. This Agreement represents a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of specific performance, injunctive relief and other equitable remedies is subject to the discretion of the court before which any proceeding may be brought).

(b) Neither the execution and delivery of this Agreement by the Company, nor the consummation by the Company Parties of the transactions contemplated hereby, nor compliance by the Company Parties with any of the provisions hereof, will (i) conflict with or result in a breach of any provision of the articles of incorporation, bylaws or any other similar governing document of either Company Party, or (ii) constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of the Company or any of its subsidiaries under, any Contract or Permit of the Company or any of its subsidiaries, or (iii) subject to obtaining the requisite Consents referred to in Section 9.1(b) of this Agreement, violate any Law or Order applicable to the Company or any of its subsidiaries or any of their Assets.

(c) Other than in connection or compliance with the provisions of the Securities Laws and banking Regulatory Authorities, no notice to, filing with, or Consent of, any Governmental Authority is necessary for the consummation by the Company and the Company Bank of the Mergers and the other transactions contemplated in this Agreement.

(a) The authorized capital stock of the Company consists of 1,000,000 shares of common stock, $5.00 par value per share, of which 237,615 shares are issued and outstanding as of the date of this Agreement, and except

for such 237,615 shares of common stock, there are no shares of capital stock or other equity securities of the Company outstanding. The authorized capital stock of the Company Bank consists of 1,000,000 shares of common stock, $5.00 par value per share, of which 248,761 shares are issued and outstanding as of the date of this Agreement and are owned and held by the Company, and except for such 248,761 shares of common stock, there are no shares of capital stock or other equity securities of the Company Bank outstanding. Section 5.3 of the Company’s Disclosure Schedule lists all of the Company’s direct and indirect subsidiaries other than the Company Bank as of the date of this Agreement. The Company or one of its subsidiaries owns all of the issued and outstanding shares of capital stock of each such subsidiary, if any.

(b) All of the issued and outstanding shares of capital stock of the Company and its subsidiaries are duly and validly issued and outstanding and are fully paid and nonassessable. None of the outstanding shares of capital stock of the Company or any of its subsidiaries has been issued in violation of any preemptive rights of the current or past shareholders of such Persons.

(c) There are no outstanding Rights to acquire directly or indirectly any shares of the capital stock of the Company or the Company Bank. No equity securities of the Company or any subsidiary of the Company are or may become required to be issued by reason of any Rights, and there are no Contracts by which the Company or any subsidiary of the Company is bound to issue additional shares of its capital stock or Rights or by which the Company or any of its subsidiaries is or may be bound to transfer any shares of the capital stock of the Company or any subsidiary of the Company. There are no equity securities reserved for any of the foregoing purposes, and there are no Contracts relating to the rights of the Company or any of its subsidiaries to vote or to dispose of any shares of the capital stock of any subsidiary of the Company.

(a) Neither the Company nor any of the Company’s subsidiaries is, or has ever been, required to file any forms, reports, or other documents with the SEC.

(b) Each of the Company Financial Statements (including, in each case, any related notes) was prepared or will be prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements, or, in the case of unaudited statements were or are subject to normal and recurring year-end adjustments), and fairly presented or will fairly present in all material respects the consolidated financial position of the Company and its subsidiaries as at the respective dates and the related consolidated income, comprehensive income and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments that were not or are not expected to be Material in amount or effect (except as may be indicated in such financial statements or notes thereto).

5.5 Absence of Undisclosed Liabilities. Neither the Company nor any of its subsidiaries has any Liabilities that are Material, either individually or in the aggregate, except Liabilities that are accrued or reserved against in the consolidated balance sheet of the Company as of December 31, 2002, included in the Company Financial Statements or reflected in the notes thereto and except for Liabilities incurred in the ordinary course of business consistent with past practice subsequent to December 31, 2002. Neither the Company nor any of its subsidiaries has incurred or paid any Liabilities that are Material, either individually or in the aggregate, since December 31, 2002, except for Liabilities incurred or paid in the ordinary course of business consistent with past business practice. To the Knowledge of the Company Parties, no facts or circumstances exist that could reasonably be expected to serve as the basis for any other Liabilities of the Company or any of its subsidiaries that are Material, either individually or in the aggregate.

5.6 Absence of Certain Changes or Events. Since December 31, 2002, (i) there have been no events, changes, or occurrences that have had, or could reasonably be expected to have, a Material Adverse Effect on the Company, and (ii) each of the Company and its subsidiaries has conducted in all Material respects its respective businesses as now conducted in the ordinary and usual course (excluding the incurrence of expenses in connection with this Agreement and the transactions contemplated hereby).

(a) All Tax Returns required to be filed by or on behalf of any of Company and its subsidiaries have been timely filed, or requests for extensions have been timely filed, granted, and have not expired for periods ended on or before December 31, 2002, and all Tax Returns filed are complete and accurate in all Material respects. All Tax Returns for periods ending on or before the date of the most recent fiscal year end immediately preceding the Effective Time will be timely filed or requests for extensions will be timely filed. All Taxes shown on filed Tax Returns have been paid. There is no audit examination, deficiency, or refund Litigation with respect to any Taxes, except to the extent reserved against in the Company Financial Statements dated prior to the date of this Agreement. All Taxes and other Liabilities due with respect to completed and settled examinations or concluded Litigation have been paid.

(b) None of the Company or its subsidiaries has executed an extension or waiver of any statute of limitations on the assessment or collection of any Tax due (excluding such statutes that relate to years currently under examination by the Internal Revenue Service or other applicable taxing authorities) that is currently in effect.

(c) Adequate provision for any Taxes due or to become due for any of the Company or its subsidiaries for the period or periods through and including the date of the respective Company Financial Statements has been made and is reflected on such Company Financial Statements.

(d) Each of the Company and its subsidiaries is in compliance with, and its records contain all information and documents (including properly completed IRS Forms W-9) necessary to comply with, all applicable information reporting and Tax withholding requirements under federal, state, and local Tax Laws, and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Code.

(e) None of the Company and its subsidiaries has made any payments, is obligated to make any payments, or is a party to any contract, agreement, or other arrangement that could obligate it to make any payments that would be disallowed as a deduction under Section 280G or 162(m) of the Code.

(f) There are no Liens with respect to Taxes upon any of the Assets of the Company and its subsidiaries.

(g) There has not been an ownership change, as defined in Code Section 382(g), of the Company and its subsidiaries that occurred during any Taxable Period in which any of the Company and its subsidiaries has incurred a net operating loss that carries over to another Taxable Period.

(h) Neither the Company nor any of its subsidiaries has filed any consent under Section 341(f) of the Code concerning collapsible corporations.

(i) Neither the Company nor any of its subsidiaries has or has had a permanent establishment in any foreign country, as defined in any applicable tax treaty or convention between the United States and such foreign country.

5.8 Assets. Each of the Company and its subsidiaries have good and marketable title, free and clear of all Liens, to all of their respective Assets, except for Liens to secure public deposits, repurchase agreements and borrowings from the Federal Home Loan Bank in the ordinary course of business consistent with past practice. All tangible properties used in the businesses of the Company and its subsidiaries are in good condition in all Material respects, reasonable wear and tear excepted, and are usable in the ordinary course of business consistent with each of their past practices. All Assets held under leases or subleases by any of the Company and its subsidiaries are held under valid Contracts enforceable in accordance with their respective terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the enforcement of creditors’ rights generally and except that the availability of specific performance, injunctive relief and other equitable remedies is subject to the discretion of the court before which any proceedings may be brought), and each

such Contract is in full force and effect. Each of the Company and its subsidiaries currently maintain insurance in amounts, scope, and coverage reasonably necessary for their operations. None of the Company or its subsidiaries has received notice from any insurance carrier that (i) such insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be increased in any Material respect. The Assets of the Company and its subsidiaries include all Assets required to operate in all Material respects their businesses taken as a whole as presently conducted.

5.9 Securities Portfolio and Investments. All securities owned by the Company or any of its subsidiaries (whether owned of record or beneficially) are held free and clear of all Liens that would impair the ability of the owner thereof to dispose freely of any such security and/or otherwise to realize the benefits of ownership thereof at any time, except for those Liens to secure public deposits, repurchase agreements and borrowings from the Federal Home Loan Bank, in the ordinary course of business consistent with past practice. There are no voting trusts or other agreements or undertakings to which the Company or any of its subsidiaries is a party with respect to the voting of any such securities. Except for fluctuations in the market values of United States Treasury and agency, mortgage-backed or municipal securities, since December 31, 2002, there has been no significant deterioration or Material adverse change in the quality, or any Material decrease in the value, of the securities portfolio of the Company and its subsidiaries, taken as a whole.

(a) Each of the Company and its subsidiaries, its Participation Facilities, and its Loan Collateral are, and have been, in compliance in all Material respects with all Environmental Laws.

(b) There is no Litigation pending or, to the Knowledge of the Company Parties, threatened before any court, Governmental Authority, or other forum in which any of the Company and its subsidiaries or any of its Participation Facilities has been or, with respect to threatened Litigation, may reasonably be expected to be named as a defendant (i) for alleged noncompliance (including by any predecessor) with any Environmental Law or (ii) relating to the release into the environment of any Hazardous Material, whether or not occurring at, on, under, or involving a site owned, leased, or operated by the Company or any of its subsidiaries or any of its Participation Facilities.

(c) There is no Litigation pending or, to the Knowledge of the Company Parties, threatened before any court, Governmental Authority, or other forum in which any Loan Collateral (or the Company or any of its subsidiaries in respect of such Loan Collateral) has been or, with respect to threatened Litigation, may reasonably be expected to be named as a defendant or potentially responsible party (i) for alleged noncompliance (including by any predecessor) with any Environmental Law or (ii) relating to the release into the environment of any Hazardous Material, whether or not occurring at, on, under, or involving Loan Collateral.

(d) To the Knowledge of the Company Parties, no facts exist that provide a reasonable basis for any Litigation of a type described in subsections (b) or (c).

(e) During and, to the Knowledge of the Company Parties, prior to, the period of (i) any of the Company’s or its subsidiaries’ ownership or operation of any of their respective current properties, (ii) any of the Company’s or its subsidiaries’ participation in the management of any Participation Facility, or (iii) any of the Company’s or subsidiaries’ holding of a security interest in Loan Collateral, there have been no releases of Hazardous Material in, on, under, or affecting (or potentially affecting) such properties.

5.11 Compliance with Laws. Each of the Company and its subsidiaries has in effect all Permits necessary for it to own, lease, or operate its Assets and to carry on its business in all Material respects, and there has occurred no Default under any such Permit that could have a Material Adverse Effect on the Company. None of the Company or its subsidiaries: (i) is in violation, in any Material respect, of any Laws, Orders, or Permits applicable to its business or employees conducting its business; and (ii) has received any notification or

communication from any Governmental Authority or any Regulatory Authority or the staff thereof (a) asserting that any of the Company and its subsidiaries is not in compliance with any of the Laws or Orders that such Governmental Authority or Regulatory Authority enforces, (b) threatening to revoke any Permits, or (iii) requiring the Company or any of its subsidiaries (x) to enter into or consent to the issuance of a cease and desist order, formal agreement, directive, commitment, or memorandum of understanding, or (y) to adopt any board or directors resolution or similar undertaking that restricts the conduct of its business, or in any manner relates to its capital adequacy, its credit or reserve policies, its management, or the payment of dividends.

5.12 Labor Relations. Neither the Company nor any of its subsidiaries is the subject of any Litigation asserting that it has committed an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state Law) or seeking to compel it to bargain with any labor organization as to wages or conditions of employment, nor is any of them a party to or bound by any collective bargaining Contract, with a labor union or labor organization, nor is there any strike or other labor dispute involving any of them pending or, to the Knowledge of the Company Parties, threatened, nor, to the Knowledge of the Company Parties, is there any activity involving any of the Company’s or its subsidiaries’ employees seeking to certify a collective bargaining unit or engaging in any other organization activity.

(a) The Company has made available to the Buyer prior to the execution of this Agreement correct and complete copies in each case of all Company Benefits Plans.

(b) All Company Benefit Plans are in compliance in all Material respects with the applicable terms of ERISA, the Code, and any other applicable Laws.

(c) Neither the Company nor any of its subsidiaries has an “obligation to contribute” (as defined in ERISA Section 4212) to a “multiemployer plan” (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)).

(d) Each “employee pension benefit plan,” as defined in Section 3(2) of ERISA, ever maintained by the Company or its subsidiaries that was intended to qualify under Section 401(a) of the Code and with respect to which the Company or any of its subsidiaries has any Liability, is disclosed as such in Section 5.13 of the Company’s Disclosure Schedule.

(e) The Company has made available to the Buyer prior to the execution of this Agreement correct and complete copies of the following documents: (i) all trust agreements or other funding arrangements for such Company Benefit Plans (including insurance contracts), and all amendments thereto, (ii) with respect to any such Company Benefit Plans or amendments, all determination letters, rulings, opinion letters, information letters, or advisory opinions issued by the Internal Revenue Service, the United States Department of Labor, or the Pension Benefit Guaranty Corporation after December 31, 1997, (iii) annual reports or returns, audited or unaudited financial statements, actuarial valuations and reports, and summary annual reports prepared for any Company Benefit Plan with respect to the most recent plan year, and (iv) the most recent summary plan descriptions and any modifications thereto.

(f) Each Company ERISA Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service, and, to the Knowledge of the Company Parties, there is no circumstance that will or could reasonably be expected to result in revocation of any such favorable determination letter. Each trust created under any Company ERISA Plan has been determined to be exempt from Tax under Section 501(a) of the Code and the Company is not aware of any circumstance that will or could reasonably be expected to result in revocation of such exemption. With respect to each such Company Benefit Plan, no event has occurred that will or could reasonably be expected to give rise to a loss of any intended Tax consequences under the Code or to any Tax under Section 511 of the Code. There is no Litigation pending or, to the Knowledge of the Company Parties, threatened relating to any Company ERISA Plan.

(g) Neither the Company nor any of its subsidiaries has engaged in a transaction with respect to any Company Benefit Plan that, assuming the Taxable Period of such transaction expired as of the date of this Agreement, would subject the Company or any of its subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA. Neither the Company or any of its subsidiaries nor, to the Knowledge of the Company Parties, any administrator or fiduciary of any Company Benefit Plan (or any agent of any of the foregoing) has engaged in any transaction, or acted or failed to act in any manner, that could subject the Company or any of its subsidiaries to any direct or indirect Liability (by indemnity or otherwise) for breach of any fiduciary, co-fiduciary, or other duty under ERISA. No oral or written representation or communication with respect to any aspect of the Company Benefit Plans has been made to employees of the Company or any of its subsidiaries that is not in accordance with the written or otherwise preexisting terms and provisions of such plans.

(h) Neither the Company nor any of its subsidiaries maintains or has ever maintained a Pension Plan.

(i) Neither the Company nor any of its subsidiaries has any obligation for retiree health and retiree life benefits under any of the Company Benefit Plans other than with respect to benefit coverage mandated by applicable Law.

(j) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will, by themselves, (i) result in any payment (including without limitation severance, unemployment compensation, golden parachute, or otherwise) becoming due to any director or any employee of the Company or it subsidiaries from the Company or any of its subsidiaries under any Company Benefit Plan or otherwise, (ii) increase any benefit otherwise payable under any Company Benefit Plan, or (iii) result in any acceleration of the time of any payment or vesting of any benefit.

5.14 Contracts. None of the Company or its subsidiaries, nor any of their respective Assets, businesses, or operations, is a party to, or is bound or affected by, or receives benefits under, (i) any employment, severance, termination, consulting, or retirement Contract, (ii) any Contract relating to the borrowing of money by the Company or its subsidiaries or the guarantee by the Company or its subsidiaries of any such obligation (other than Contracts evidencing deposit liabilities, purchases of federal funds, fully-secured repurchase agreements, and Federal Home Loan Bank advances to depository institution subsidiaries, trade payables, and Contracts relating to borrowings or guarantees made in the ordinary course of business), and (iii) any other Contract or amendment thereto that would be required to be filed as an exhibit to a Form 10-KSB filed by the Company with the SEC as of the date of this Agreement (together with all Contracts referred to in Sections 5.8 and 5.13(a) of this Agreement, the “Company Contracts”). With respect to each Company Contract: (i) the Contract is in full force and effect; (ii) none of the Company or its subsidiaries is in Default in any Material respect thereunder; (iii) neither the Company nor any of its subsidiaries has repudiated or waived any Material provision of any such Contract; and (iv) no other party to any such Contract is, to the Knowledge of the Company Parties, in Default in any respect, or has repudiated or waived any Material provision thereunder. Except for Federal Home Loan Bank advances, all of the indebtedness of the Company and its subsidiaries for money borrowed (not including deposit Liabilities) is prepayable at any time without penalty or premium.

5.15 Legal Proceedings. There is no Litigation pending, or, to the Knowledge of the Company Parties, threatened against the Company or any of its subsidiaries, or against any Asset, employee benefit plan, interest, or right of any of them, nor are there any Orders of any Regulatory Authorities, other Governmental Authorities, or arbitrators outstanding against any the Company or its subsidiaries. There is no Litigation to which the Company or any of its subsidiaries is a party that names the Company or any of its subsidiaries as a defendant or cross-defendant and where the maximum exposure is estimated to be $25,000 or more.

5.16 Reports. Each of the Company and its subsidiaries has timely filed all Material reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with any Regulatory Authorities. As of their respective dates, each of such reports and documents, including the financial statements, exhibits, and schedules thereto, complied in all Material respects with all applicable Laws.

5.17 Registration Statement; Proxy Statement. Subject to the accuracy of the representations contained in Section 6.13, the information supplied by the Company or its subsidiaries for inclusion in the registration statement on Form S-4 (or on such other form as may be appropriate) (the “Registration Statement”) covering the offering of shares of the Buyer’s Stock to be issued pursuant to this Agreement shall not, at the time the Registration Statement (including any amendments or supplements thereto) is declared effective by the SEC, contain any untrue statement of a Material fact or omit to state any Material fact required to be stated therein or necessary to make the statements therein not misleading. The information supplied by or on behalf of the Company and its subsidiaries for inclusion in the proxy statement/prospectus to be sent to the shareholders of the Company to consider at a special meeting (the “Shareholder Meeting”) to vote on the Holding Company Merger (such proxy statement/prospectus as amended or supplemented is referred to herein as the “Proxy Statement”) will not, on the date the Proxy Statement is first mailed to shareholders, at the time of the Shareholder Meeting and at the Effective Time, contain any untrue statement of a Material fact or omit to state any Material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If at any time prior to the Effective Time any event relating to the Company or its subsidiaries or any of their Affiliates should be discovered by the Company or its subsidiaries that should be set forth in an amendment to the Registration Statement or a supplement to the Proxy Statement, the Company will promptly inform the Buyer. The Proxy Statement shall comply in all Material respects with the requirements of the Securities Laws and the rules and regulations thereunder. Notwithstanding the foregoing, neither the Company nor any of its subsidiaries makes any representation or warranty with respect to any information supplied by the Buyer or any of its subsidiaries that is contained or incorporated by reference in, or furnished in connection with the preparation of, the Registration Statement or the Proxy Statement.

5.18 Accounting, Tax, and Regulatory Matters. None of the Company or its subsidiaries or any Affiliate thereof has taken or agreed to take any action, that could not reasonably be expected to (i) prevent the Holding Company Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code, or (ii) impede or delay receipt of any Consents of Regulatory Authorities referred to in Section 9.1(b) of this Agreement.

5.20 Charter Provisions. Each of the Company and the Company Bank has taken all action so that the entering into of this Agreement and the consummation of the Mergers and the other transactions contemplated by this Agreement do not and will not result in the grant of any rights to any Person under the articles of incorporation, bylaws, or other governing instruments of either of the Company Parties or restrict or impair the ability of the Buyer or any of its subsidiaries to vote, or otherwise to exercise the rights of a shareholder with respect to, the capital stock of the Company or any of its subsidiaries that may be directly or indirectly acquired or controlled by it.

5.21 Records. Complete and accurate copies of the articles of incorporation, bylaws, or other governing instruments of either of the Company Parties have been made available to the Buyer. The stock book of each such Person contains, in all Material respects, complete and accurate records of the record share ownership of the issued and outstanding shares of stock thereof.

5.22 Certain Regulated Businesses. Neither the Company nor any of its subsidiaries is an “investment company” as defined in the Investment Company Act of 1940, as amended, nor is it a “public utility holding company” as defined in the Public Utility Holding Company Act of 1935, as amended.

5.23 Commissions. Except for The Orr Group, no broker, finder or other Person is entitled to any brokerage fees, commissions or finder’s fees from the Company or any of its subsidiaries in connection with the transactions contemplated hereby by reason of any action taken by the Company or any of its subsidiaries or, to the Knowledge of the Company Parties, any of the Company’s shareholders.

Except as set forth on the Buyer’s Disclosure Schedule, the Buyer represents and warrants to the Company that the statements contained in this Article VI are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date.

(a) The Buyer is South Carolina corporation and a bank holding company registered with the Federal Reserve Board under the Bank Holding Company Act. The Buyer Bank is a bank chartered under South Carolina Law. The Buyer Bank is an “insured institution” as defined in the Federal Deposit Insurance Act and applicable regulations thereunder, and subject to dollar limits under such Act, all deposits in the Buyer Bank are fully insured by the FDIC to the extent permitted by Law.

(b) Each of the Buyer and its subsidiaries (i) is a corporation or a bank duly organized or chartered, validly existing and in good standing under the Laws of the State of South Carolina, (ii) has the corporate or other applicable power and authority to carry on its businesses as now conducted and to own, lease and operate its Assets, and (iii) is duly qualified or licensed to transact business as a foreign corporation in good standing in the States of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except where the failure to do so will not cause a Material Adverse Effect on the Buyer.

(a) Subject to required regulatory approvals, the Buyer has the corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of and performance of its obligations under this Agreement and the other documents contemplated hereby, and the consummation of the transactions contemplated herein have been duly and validly authorized by all necessary corporate action in respect thereof on the part of the Buyer. This Agreement represents a legal, valid, and binding obligation of the Buyer, enforceable against it in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of specific performance, injunctive relief and other equitable remedies is subject to the discretion of the court before which any proceeding may be brought).

(b) Neither the execution and delivery of this Agreement by the Buyer, nor the consummation by the Buyer Parties of the transactions contemplated hereby, nor compliance by the Buyer Parties with any of the provisions hereof will (i) conflict with or result in a breach of any provision of any Buyer Party’s articles of incorporation or bylaws, or (ii) constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of the Buyer or any of its subsidiaries under, any Contract or Permit of the Buyer or any of its subsidiaries, or (iii) subject to obtaining the requisite Consents referred to in Section 9.1(b) of this Agreement, violate any Law or Order applicable to the Buyer Parties or any of their respective Assets.

(c) Other than in connection or compliance with the provisions of the Securities Laws and banking Regulatory Authorities, no notice to, filing with, or Consent of, any Governmental Authority is necessary for the consummation by the Buyer and the Buyer Bank of the Mergers and the other transactions contemplated in this Agreement.

(a) The authorized capital stock of the Buyer consists of 10,000,000 shares of common stock, $1.00 par value per share, of which 3,442,405 shares are issued and outstanding as of the date of this Agreement, and

2,000,000 shares of “blank check” preferred stock of which no shares are outstanding. The authorized capital stock of the Buyer Bank consists of 10,000,000 shares of common stock, $5.00 par value per share, of which 400,000 shares are issued and outstanding as of the date of this Agreement. The Buyer owns all of the issued and outstanding shares of capital stock of the Buyer Bank, and no shares of capital stock of the Buyer Bank are owned by any other Person. Section 6.3 of the Buyer’s Disclosure Schedule lists all of the Buyer’s direct and indirect subsidiaries other than the Buyer Bank as of the date of this Agreement. The Buyer or one of its subsidiaries owns all of the issued and outstanding shares of capital stock of each such subsidiary.

(b) All of the issued and outstanding shares of capital stock of the Buyer and its subsidiaries are duly and validly issued and outstanding and are fully paid and nonassessable. Shares of the Buyer’s Stock to be issued hereunder are duly authorized and, upon issuance, will be validly issued and outstanding and fully paid and nonassessable, free and clear of any Liens, pledges or encumbrances. None of the outstanding shares of capital stock of the Buyer or any of its subsidiaries has been issued in violation of any preemptive rights of the current or past stockholders of such Persons, and none of the shares of the Buyer’s Stock to be issued pursuant to this Agreement will be issued in violation of any preemptive rights of the current or past stockholders of the Buyer.

(a) The Buyer has filed all forms, reports, and documents required to be filed by the Buyer with the SEC since December 31, 1999 (collectively, the “Buyer SEC Reports”). The Buyer SEC Reports (i) at the time filed, complied in all Material respects with the applicable requirements of the Securities Laws, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a Material fact or omit to state a Material fact required to be stated in such Buyer SEC Reports or necessary in order to make the statements in such Buyer SEC Reports, in light of the circumstances under which they were made, not misleading. None of the Buyer’s subsidiaries is required to file any forms, reports, or other documents with the SEC.

(b) Each of the Buyer Financial Statements (including, in each case, any related notes) contained in the Buyer SEC Reports, including any Buyer SEC Reports filed after the date of this Agreement until the Effective Time, complied or will comply as to form in all Material respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared or will be prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements, or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC), and fairly presented or will fairly present in all material respects the consolidated financial position of the Buyer and its subsidiaries as at the respective dates and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments that were not or are not expected to be Material in amount or effect (except as may be indicated in such financial statements or notes thereto).

6.5 Absence of Undisclosed Liabilities. Neither the Buyer nor any of its subsidiaries has any Liabilities that are Material, either individually or in the aggregate, except Liabilities that are accrued or reserved against in the consolidated balance sheets of the Buyer as of December 31, 2002, included in the Buyer Financial Statements or reflected in the notes thereto and except for Liabilities incurred in the ordinary course of business consistent with past practice subsequent to December 31, 2002. Neither the Buyer nor any of its subsidiaries has incurred or paid any Liabilities that are Material, either individually or in the aggregate, since December 31, 2002, except for such Liabilities incurred or paid in the ordinary course of business consistent with past business practice. No facts or circumstances exist that could reasonably be expected to serve as the basis for any other Liabilities of the Buyer or any of its subsidiaries that are Material, either individually or in the aggregate.

(a) All Tax Returns required to be filed by or on behalf of any of Buyer and its subsidiaries have been timely filed, or requests for extensions have been timely filed, granted, and have not expired for periods ended on or before December 31, 2002, and all Tax Returns filed are complete and accurate in all Material respects. All Tax

Returns for periods ending on or before the date of the most recent fiscal year end immediately preceding the Effective Time will be timely filed or requests for extensions will be timely filed. All Taxes shown on filed Tax Returns have been paid. There is no audit examination, deficiency, or refund Litigation with respect to any Taxes, except to the extent reserved against in the Buyer Financial Statements dated prior to the date of this Agreement. All Taxes and other Liabilities due with respect to completed and settled examinations or concluded Litigation have been paid.

(b) None of the Buyer or its subsidiaries has executed an extension or waiver of any statute of limitations on the assessment or collection of any Tax due (excluding such statutes that relate to years currently under examination by the Internal Revenue Service or other applicable taxing authorities) that is currently in effect.

(c) Adequate provision for any Taxes due or to become due for any of the Buyer or its subsidiaries for the period or periods through and including the date of the respective Buyer Financial Statements has been made and is reflected on such Buyer Financial Statements.

(d) There are no Liens with respect to Taxes upon any of the Assets of the Buyer and its subsidiaries.

6.7 Absence of Certain Changes or Events. Since December 31, 2002, (i) there have been no events, changes, or occurrences that have had, or could reasonably be expected to have, a Material Adverse Effect on the Buyer, and (ii) each of the Buyer and its subsidiaries has conducted in all Material respects its respective businesses as now conducted in the ordinary and usual course (excluding the incurrence of expenses in connection with this Agreement and the transactions contemplated hereby).

6.8 Compliance with Laws. Each of the Buyer and its subsidiaries has in effect all Permits necessary for it to own, lease, or operate its Assets and to carry on its business in all Material respects, and there has occurred no Default under any such Permit that could have a Material Adverse Effect on the Buyer. None of the Buyer or its subsidiaries: (i) is in violation in any Material respect of any Laws, Orders, or Permits applicable to its business or employees conducting its business; and (ii) has received any notification or communication from any agency or department of federal, state, or local government or any Regulatory Authority or the staff thereof (a) asserting that any of the Buyer and its subsidiaries is not in compliance with any of the Laws or Orders that such governmental authority or Regulatory Authority enforces, (b) threatening to revoke any Permits, or (c) requiring the Buyer or any of its subsidiaries (x) to enter into or consent to the issuance of a cease and desist order, formal agreement, directive, commitment, or memorandum of understanding, or (y) to adopt any board or directors resolution or similar undertaking that restricts the conduct of its business, or in any manner relates to its capital adequacy, its credit or reserve policies, its management, or the payment of dividends.

6.9 Securities Portfolio. Except for fluctuations in the market values of United States Treasury and agency, mortgage-backed or municipal securities, since December 31, 2002, there has been no significant deterioration or Material adverse change in the quality, or any Material decrease in the value, of the securities portfolio of the Buyer and its subsidiaries, taken as a whole.

(a) All Buyer Benefit Plans are in compliance in all Material respects with the applicable terms of ERISA, the Code, and any other applicable Laws.

(b) Each Buyer ERISA Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service, and, to the Knowledge of the Buyer Parties, there is no circumstance that will or could reasonably be expected to result in revocation of any such favorable determination letter. Each trust created under any Buyer ERISA Plan has been determined to be exempt from Tax under Section 501(a) of the Code and the Buyer is not aware of any circumstance that will or could reasonably be expected to result in revocation of such exemption. With respect to each such Buyer Benefit Plan, no event has

occurred that will or could reasonably be expected to give rise to a loss of any intended Tax consequences under the Code or to any Tax under Section 511 of the Code. There is no Litigation pending or, to the Knowledge of the Buyer Parties, threatened relating to any Buyer ERISA Plan.

(c) Neither the Buyer nor any of its subsidiaries has engaged in a transaction with respect to any Buyer Benefit Plan that, assuming the Taxable Period of such transaction expired as of the date of this Agreement, would subject the Buyer or any of its subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA. Neither the Buyer or any of its subsidiaries nor, to the Knowledge of the Buyer Parties, any administrator or fiduciary of any Buyer Benefit Plan (or any agent of any of the foregoing) has engaged in any transaction, or acted or failed to act in any manner, that could subject the Buyer or any of its subsidiaries to any direct or indirect Liability (by indemnity or otherwise) for breach of any fiduciary, co-fiduciary, or other duty under ERISA. No oral or written representation or communication with respect to any aspect of the Buyer Benefit Plans has been made to employees of the Buyer or any of its subsidiaries that is not in accordance with the written or otherwise preexisting terms and provisions of such plans.

6.11 Legal Proceedings. There is no Litigation instituted or pending, or, to the Knowledge of the Buyer Parties, threatened against the Buyer or any of its subsidiaries, or against any Asset, employee benefit plan, interest, or right of any of them, nor are there any Orders of any Regulatory Authorities, other governmental authorities, or arbitrators outstanding against any the Buyer or its subsidiaries. There is no Litigation as of the date of this Agreement to which the Buyer or any of its subsidiaries is a party and that names the Buyer or any of its subsidiaries as a defendant or cross-defendant and where the maximum exposure is estimated to be $25,000 or more.

6.12 Reports. Since December 31, 1997, or the date of organization if later, each of the Buyer and its subsidiaries has timely filed all Material reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with any Regulatory Authorities. As of their respective dates, each of such reports and documents, including the financial statements, exhibits, and schedules thereto, complied in all Material respects with all applicable Laws.

6.13 Registration Statement; Proxy Statement. Subject to the accuracy of the representations contained in Section 5.17, the information supplied by the Buyer or its subsidiaries for inclusion in the Registration Statement shall not, at the time the Registration Statement (including any amendments or supplements thereto) is declared effective by the SEC, contain any untrue statement of a Material fact or omit to state any Material fact required to be stated therein or necessary to make the statements therein not misleading. The information supplied by the Buyer or its subsidiaries for inclusion in the Proxy Statement will not, on the date the Proxy Statement is first mailed to shareholders, at the time of the Shareholder Meeting and at the Effective Time, contain any untrue statement of a Material fact or omit to state any Material fact necessary to make the statements therein, in light of circumstances under which they were made, not misleading. If at any time prior to the Effective Time any event relating to the Buyer or its subsidiaries or any of their Affiliates should be discovered by the Buyer or its subsidiaries that should be set forth in an amendment to the Registration Statement or a supplement to the Proxy Statement, the Buyer will promptly inform the Company. The Proxy Statement shall comply in all Material respects with the requirements of the Securities Laws and the rules and regulations thereunder. Notwithstanding the foregoing, the Buyer makes no representations or warranties with respect to any information supplied by the Company and its subsidiaries that is contained or incorporated by reference in, or furnished in connection with the preparation of, the Registration Statement or the Proxy Statement.

6.14 Accounting, Tax, and Regulatory Matters. None of the Buyer or it subsidiaries or any Affiliate thereof has taken or agreed to take any action, that could reasonably be expected to (i) prevent the Holding Company Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, or (ii) impede or delay receipt of any Consents of Regulatory Authorities referred to in Section 9.1(b) of this Agreement.

6.15 Commissions. No broker, finder or other Person is entitled to any brokerage fees, commissions or finder’s fees from the Buyer or any of its subsidiaries in connection with the transactions contemplated hereby by reason of any action taken by the Buyer or any of its subsidiaries or, to the Knowledge of the Buyer Parties, any of the Buyer’s shareholders.

(a) Ordinary Conduct of Business. Except as otherwise expressly permitted by this Agreement, the Company will, and will cause its subsidiaries (including the Company Bank) to, from the date of this Agreement to the Closing, conduct its business in the ordinary course in substantially the same manner as presently conducted and make reasonable commercial efforts consistent with past practices to preserve its relationships with other Persons. Additionally, except as otherwise contemplated by this Agreement or as set forth on Section 7.1(a) of the Company’s Disclosure Schedule, the Company will not, and it will not permit its subsidiaries (including the Company Bank) to do any of the following without the prior written consent of the Buyer:

(ii) authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver any stock or stock options or other equity equivalents of any class or any other of its securities (other than the issuance of any Company Shares pursuant to the exercise of options set forth on Section 5.3 of the Company’s Disclosure Schedule), or amend any of the terms of any securities outstanding as of the date hereof;

(iii) (A) split, combine or reclassify any shares of its capital stock, (B) declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, or (C) redeem or otherwise acquire any of its securities (other than the acceptance of any Company Shares as payment of the exercise price in connection with the exercise of options set forth on Section 5.3 of the Company’s Disclosure Schedule);

(iv) (A) incur or assume any long-term debt or issue any debt securities other than in the ordinary course of business consistent with past practice or, except under existing lines of credit and in amounts not Material to it, incur or assume any short-term debt other than in the ordinary course of business, (B) other than in the ordinary course of business consistent with past practice assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person, (C) make any loans, advances or capital contributions to, or investments in, any other Person, other than in the ordinary course and consistent with past practice up to an amount per loan relationship of $1.0 million, pledge or otherwise encumber shares of its capital stock, or (D) mortgage or pledge any of its assets, tangible or intangible, or create or suffer to exist any Lien thereupon, other than Liens permitted by the proviso clause in the definition of Liens and Liens created or existing in the ordinary course of business consistent with past practice.

(v) except as required by Law or as contemplated herein, adopt or amend any Benefit Plan other than usual and customary renewals;

(vi) grant to any director or executive officer or employee any stock options or increase in his or her compensation (except in the ordinary course of business consistent with past practice) or pay or agree to pay to any such Person, other than in the ordinary course of business consistent with past practice, any bonus, severance or termination payment, specifically including any such payment that becomes payable upon the termination of such Person by it after the Closing;

(vii) enter into or amend any employment Contract (including any termination agreement);

(viii) sell, dispose of, acquire or lease any Assets outside the ordinary course of business, or that in the aggregate are Material to it, or acquire any Person (or division thereof), any equity interest therein or the assets thereof outside the ordinary course of business consistent with past practice;

(ix) except as required by GAAP or regulatory authorities, change or modify any of the accounting principles or practices used by it or revalue in any Material respect any of its Assets, including without limitation writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business;

(x) enter into, cancel or modify any Contract (other than loans, advances, capital contributions, certificates of deposit or investments permitted by Section 7.1(a)(iv)) other than in the ordinary course of business consistent with past practice, but not in any event involving an amount in excess of $25,000 of payments in any twelve-month period per Contract, or enter into or amend any Contract with respect to any of the foregoing;

(xi) make or authorize to make any capital expenditure or expenditures other than in the ordinary course of business consistent with past practice, but not in any event involving an aggregate amount in excess of $25,000;

(xii) make or authorize to make any charitable contributions or pledges to make contributions other than in the ordinary course of business consistent with past practice, but not in any event involving an amount per contribution or pledge in excess of $5,000 or $15,000 in the aggregate.

(xiii) pay, discharge or satisfy, cancel, waive or modify any Liabilities, other than the payment, discharge or satisfaction in the ordinary course of business of liabilities reflected or reserved against in or contemplated by the Company Financial Statements, or incurred in the ordinary course of business consistent with past practices;

(xiv) settle or compromise any Material pending or threatened Litigation relating to the transactions contemplated hereby;

(xv) take, or agree in writing or otherwise to take, any action that would make any of the representations or warranties of the Company contained in this Agreement untrue or incorrect or result in any of the conditions set forth in this Agreement not being satisfied;

(xvi) make any election with respect to Taxes without the prior consent of the Buyer;

(xviii) during the period commencing on August 18, 2003 and ending at the Effective Time, the Company shall not (A) declare, set aside or pay any dividends or make any distributions with respect to its capital stock which in the aggregate exceed $178,000 (collectively the “Interim Distributions”), or (B) redeem, purchase or otherwise acquire any Company Shares.

(b) Consents. The Company will exercise its best efforts to obtain such Consents as may be necessary or desirable for the consummation of the transactions contemplated hereby from the appropriate parties to those Contracts listed on Section 5.2 of the Company’s Disclosure Schedule such that such Contracts shall survive the Mergers and not be breached thereby.

(i) The Company shall not, and shall not permit any of its subsidiaries or any of the respective Affiliates, representatives, advisers or agents of the Company and its subsidiaries to, directly or indirectly, (x) take any action to solicit, initiate or encourage any Acquisition Proposal, or (y) participate in any discussions or negotiations with or encourage any effort or attempt by any other Person or take any other action to facilitate an Acquisition Proposal. From and after the date hereof, the Company shall, and shall cause its subsidiaries and the Affiliates, representatives, advisers and agents of the Company and its subsidiaries to, cease doing any of the foregoing.

(ii) Notwithstanding the foregoing, in the event of the receipt by the Company or any of its subsidiaries of an Acquisition Proposal and (x) the Company’s board of directors concludes in good faith that there is a reasonably likelihood that such Acquisition Proposal constitutes or is reasonably likely to result in a Superior Proposal, and (y) neither the Company nor any of its subsidiaries or any of the respective Affiliates, representatives, advisers or agents of the Company and its subsidiaries solicited, initiated or encouraged such Acquisition Proposal, the Company may furnish to any party information and access in response to a request for information or access made incident to such Acquisition Proposal and may participate in discussions and negotiate with such party concerning its Acquisition Proposal to the extent that the Company’s board of directors shall have determined, based upon the written advice of outside counsel reasonably acceptable to the Buyer (which shall include HSB in any event), that failing to take such action would violate the directors’ fiduciary duties under applicable Law; provided, however, that prior to providing any nonpublic information permitted to be provided by this subsection (ii), the Company and its subsidiaries shall have entered into a confidentiality agreement with such third.

(iii) Unless this Agreement has been terminated in accordance with the provisions hereof, the board of directors of the Company shall notify the Buyer immediately of any and all communications regarding or in anticipation of an Acquisition Proposal and of any Acquisition Proposals that are made, and shall in such notice indicate in reasonable detail, to the extent reasonably possible, the identity of the offeror and the terms and conditions of such Acquisition Proposal and shall keep the Buyer promptly advised of all developments relating thereto or that could culminate in the board of directors withdrawing, modifying or amending its recommendation of the Holding Company Merger and the other transactions contemplated by this Agreement. Unless this Agreement has been terminated, neither the Company nor any of its subsidiaries shall waive or modify any provisions contained in any confidentiality agreement entered into relating to a possible acquisition (whether by merger, stock purchase, asset purchase or otherwise) or recapitalization of the Company or any of its subsidiaries.

(d) Shareholder Approval. The Company shall, at the earliest practicable date, hold the Shareholder Meeting. In connection with the Shareholder Meeting, the Company’s board of directors shall recommend to the Company’s shareholders approval of the Holding Company Merger; provided, however, that in the event of the receipt by the Company or any of its subsidiaries of an Acquisition Proposal and (x) the Company’s board of directors has concluded in good faith that such Acquisition Proposal constitutes a Superior Proposal, (y) neither the Company nor any of its subsidiaries or any of the respective Affiliates, representatives, advisers or agents of the Company and its subsidiaries solicited, initiated or encouraged such Acquisition Proposal, and (z) the Company’s board of directors shall have determined in good faith, based upon the written advice of outside counsel reasonably acceptable to the Buyer, that continuing to recommend the Holding Company Merger to the Company’s shareholders would violate the directors’ fiduciary duties under applicable Law, then in submitting the Holding Company Merger to the Company’s shareholders for a vote, the Company’s board of directors may submit the Holding Company Merger without recommendation, in which event the Company’s board of directors may communicate the basis for its lack of a recommendation to the Company’s shareholders in the Proxy Statement (or an appropriate amendment or supplement thereto, to the extent required by Law); provided, further, however, that the Company may not take any actions under this sentence until after giving the Buyer at least five Business Days notice to respond to such Acquisition Proposal (and after giving the Buyer at least five Business Days notice of the latest Material terms and conditions comprising such Acquisition Proposal) and then taking into account any amendment or modification to this Agreement proposed by the Buyer.

(a) Reservation of Shares of the Buyer’s Stock. The Buyer shall reserve for issuance a sufficient number of shares of the Buyer’s Stock to cover the issuances of such stock required hereby.

(b) Director. As soon as reasonably practicable after the Effective Time, the Buyer shall use its reasonable best efforts to cause Joseph L. Savitz, Jr., (or if Mr. Savitz is unable to serve as of the Effective Time, one other member of the Company’s board of directors, designated to the Buyer by the Company in writing on or before

the Effective Time), to be elected or appointed as a member of the board of directors of the Buyer, to serve until the scheduled annual meeting of the stockholders of the Buyer to be held not less than 2 years after the Effective Time, subject to and conditioned upon any necessary regulatory requirements. Thereafter, such individual shall be subject to the same nomination and election procedures as the other directors of the Buyer.

(i) Except as covered by the Sherard Employment Agreement, Howie Employment Agreement and Knapp Employment Agreement, any and all of the Company Parties’ employees will be employed by the Buyer or the Buyer Bank on an “at-will” basis, and nothing in this Agreement shall be deemed to constitute an employment agreement with any such individual or to obligate the Buyer or any Affiliate thereof to employ any such individual for any specific period of time or in any specific position or to restrict the Buyer’s or any of its Affiliates’ right to terminate the employment of any such individual at any time and for any reason satisfactory to it.

(ii) Such Company Parties’ employees who continue employment with the Buyer or any of its subsidiaries will be eligible for benefits consistent with those of existing employees of the Buyer Bank, with credit for past service with the Company or the Company Bank for purposes of participation, eligibility and vesting (including with respect to any amounts to be contributed by the Buyer or any of its subsidiaries or amounts that will vest under any Buyer Benefit Plan, but not including the calculation of any other benefit accrual); provided, however, that any such continuing employee will not be subject to any exclusion or penalty for pre-existing conditions that were covered under the Company’s or any of its subsidiaries’ medical plans as of the Closing Date or any waiting period relating to coverage under the Buyer’s or any of its subsidiaries’ medical plans. There shall be no waiting periods applicable to any such Company employees to participate in such benefits (including applicable insurance benefits).

(d) Directors and Officers Insurance. The Buyer shall maintain, or shall cause the Company Bank or Buyer Bank to maintain, in effect for three years from the Closing Date, if available, the current directors’ and officers’ liability insurance policies maintained by the Company; provided, however, that Buyer may substitute therefor policies of at least the same coverage containing terms and conditions that are no less favorable to the insured with respect to matters occurring prior to the Effective Time.

(a) Reorganization for Tax Purposes. Each of the parties hereto undertakes and agrees to use its reasonable efforts to cause the Holding Company Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code and that it will not intentionally take any action that would cause the Holding Company Merger to fail to so qualify; provided however, that this Section shall not be deemed to limit Buyer’s discretion as provided in Section 2.3 to determine whether to adjust the amount of Buyer’s Stock and cash delivered as Merger Consideration so that the Holding Company Merger will qualify as a tax free reorganization under Section 368(a) of the Code.

(b) Notification. Each party hereto agrees to notify promptly the other party hereto of any event, fact, or other circumstance arising after the date hereof that would have caused any representation or warranty herein, including, in the case of the Company, any information on any schedule hereto, to be untrue or misleading had such event, fact, or circumstance arisen prior to the execution of this Agreement. The parties hereto will exercise their reasonable best efforts to ensure that no such events, facts, or other circumstances occur, come to pass, or become true.

(c) Consummation of Agreement. Subject to Section 7.1(c), the parties hereto each agree to use their reasonable efforts to perform or fulfill all conditions and obligations to be performed or fulfilled by them under this Agreement so that the transactions contemplated hereby shall be consummated; provided however, that this Section shall not be deemed to limit Buyer’s discretion as provided in Section 2.3 to determine whether to adjust the amount of Buyer’s Stock and cash delivered as Merger Consideration so that the Holding Company Merger

will qualify as a tax free reorganization under Section 368(a) of the Code. Except for events that are the subject of specific provisions of this Agreement, if any event should occur, either within or outside the control of the Company Parties or the Buyer Parties, that would Materially delay or prevent fulfillment of the conditions upon the obligations of either party hereto to consummate the transactions contemplated by this Agreement, each party will notify the other of any such event and, subject to Section 7.1(c), the parties will use their reasonable, diligent and good faith efforts to cure or minimize the same as expeditiously as possible. Subject to Section 7.1(c), each party hereto shall use its reasonable efforts to obtain all Consents necessary or desirable for the consummation of the transactions contemplated by this Agreement and to assist in the procuring or providing of all documents that must be procured or provided pursuant to the provisions hereof. Notwithstanding anything to the contrary contained in this Agreement, but subject to Section 7.1(c), neither of the parties hereto will take any action that would (i) Materially affect or delay receipt of the approvals contemplated in Section 9.1(b) from the Regulatory Authorities, or (ii) Materially adversely affect or delay its ability to perform its covenants and agreements made pursuant to this Agreement.

(d) Corporate Action. Subject to the terms and conditions hereof (including Section 7.1(c)), each of the parties hereto shall, and each of them shall cause their subsidiaries to, take all corporate action, including the Company’s recommendation of the Holding Company Merger by its board of directors to its shareholders, and use each of their best efforts to cause all requisite shareholder action to be taken, necessary to consummate and give effect to the Mergers.

(e) Maintenance of Corporate Existence. Each of the parties hereto shall, and each of them shall cause their Affiliates to, maintain in full force and effect each their respective corporate or legal existences.

(f) Applications and Reports. The Buyer shall prepare and file as soon as reasonably practical after the date of this Agreement, and the Company shall cooperate in the preparation and, where appropriate, filing of, all applications, reports and statements with all Regulatory Authorities having jurisdiction over the transactions contemplated by this Agreement seeking the requisite Consents necessary to consummate the transactions contemplated by this Agreement.

(g) Registration Statement and Proxy Statement. As soon as reasonably practicable after the execution of the Agreement and after the furnishing by the Company and the Company Bank of all information required to be contained therein, the Buyer shall file with the SEC the Registration Statement, which shall contain the Proxy Statement. As soon as reasonably practicable after all consents contemplated by Section 9.1(b) have been obtained, the Buyer and the Company shall prepare, and the Company shall deliver by mail to the holders of record of the Company Shares, the Proxy Statement. The Buyer and the Company shall each use their reasonable best efforts to cause the Proxy Statement to comply in all Material respects with the requirements of the Securities Laws and the rules and regulations thereunder. Subject to Section 7.1(c), the Proxy Statement shall include the recommendation of the board of directors of the Company in favor of the Holding Company Merger. The Buyer and the Company shall each use all reasonable efforts to cause the Registration Statement to become effective as soon thereafter as practicable.

(h) Affiliate Agreements. Not less than 45 days prior to the Effective Time, the Company shall deliver to the Buyer a letter identifying all Persons who, in the judgment of the Company, may be deemed an “affiliate” of the Company for purposes of Rule 145 under the Securities Act and applicable SEC rules and regulations, and such list shall be updated as necessary to reflect changes from the date of delivery thereof. The Company shall use reasonable best efforts to cause each Person identified on such list to deliver to the Buyer not less than 10 days prior to the Effective Time, a written agreement substantially in the form attached hereto as Exhibit E.

(i) Closing. Subject to the terms and conditions hereof (including Section 7.1(c), the parties hereto shall use their reasonable best efforts to consummate the Closing within 30 days after all conditions to the Closing have been satisfied.

8.1 Access to Information. Prior to the Closing Date, the parties hereto shall, and shall cause each of their subsidiaries to:

(a) give the other and its authorized representatives reasonable access, during normal business hours and upon reasonable notice, to its books, records, offices and other facilities and properties; and

(b) furnish the other with such financial and operating data and other information with respect to its business, condition (financial or otherwise) and properties, as it may reasonably request.

8.2 Access to Premises. Prior to Closing, the Company shall, and shall cause its subsidiaries to, give the Buyer and its authorized representatives reasonable access to all of the Company’s and its subsidiaries’ Real Property for the purpose of inspecting such property.

8.3 Environmental Survey. At its option, the Buyer may cause to be conducted Phase I environmental assessments of the Real Property of the Company and its subsidiaries, whether owned or leased, or any portion thereof, together with such other studies, testing and intrusive sampling and analyses as the Buyer shall deem necessary or desirable (collectively, the “Environmental Survey”). Subject to any rights Buyer may have under Section 10.2, the costs of the Environmental Survey shall be paid by the Buyer.

8.4 Confidentiality. The parties hereto acknowledge that each of the Buyer and the Company have previously executed an agreement (the “Confidentiality Agreement”) dated June 26, 2003 in contemplation of negotiations regarding the Mergers and agree that such agreements shall continue in full force and effect in accordance with their terms.

8.5 Publicity. Without the prior consent of the other party hereto, neither party hereto shall issue any news release or other public announcement or disclosure, or any general public announcement to its employees, suppliers or customers, regarding this Agreement or the transactions contemplated hereby, except as may be required by Law, but in which case the disclosing party shall provide the other party hereto with reasonable advance notice of the timing and substance of any such disclosure.

9.1 Mutual Conditions. The respective obligations of each party hereto to perform this Agreement and consummate the Holding Company Merger and the other transactions contemplated at Closing hereby are subject to the satisfaction of the following conditions, unless waived by both parties hereto pursuant to Section 11.4 of this Agreement:

(a) Adverse Proceedings. Neither the Company, the Company Bank, the Buyer, the Buyer Bank, nor any shareholder or stockholder of any of the foregoing shall be subject to any Order that enjoins or prohibits the consummation of this Agreement or the Mergers, and no Governmental Authority shall have instituted a suit or proceeding that is then pending and seeks to enjoin or prohibit the transactions contemplated hereby. Any party who is subject to any such Order or the subject of any such Litigation shall take any reasonable steps within that party’s control to cause any such Order to be modified so as to permit the Closing and to cause any such Litigation to be dismissed.

(b) Regulatory Approvals. All Consents of, filings and registrations with, and notifications to, all Regulatory Authorities required for consummation of the Mergers shall have been obtained or made and shall be in full force and effect and all waiting periods required by Law shall have expired. No such Consent

obtained from any Regulatory Authority shall be conditioned or restricted in a manner (including requirements relating to the raising of additional capital or the disposition of Assets) not reasonably anticipated as of the date of this Agreement that in the reasonable judgment of the board of directors of the Buyer or the Company would so Materially adversely impact the economic or business assumptions of the transactions contemplated by this Agreement that had such condition or requirement been known, such party would not, in its reasonable judgment, have entered into this Agreement.

(c) Consents and Approvals. Each party hereto shall have obtained any and all Consents required for consummation of the Mergers or for the preventing of any Default under any Contract or Permit of such Person, including those Consents listed on Section 5.2 of the Company’s Disclosure Schedule.

(d) Effectiveness of Registration Statement. The Registration Statement shall have been declared effective by the SEC, and no stop order suspending such effectiveness shall have been initiated or, to the Knowledge of the Buyer Parties, threatened by the SEC.

(e) Approval. The Company’s shareholders shall have approved this Agreement and the Holding Company Merger in accordance with applicable Law.

(f) Tax Opinion. On the basis of facts, representations and assumptions that shall be consistent with the state of facts existing at the Closing Date, the Buyer and the Company shall have received an opinion of an acceptable tax advisor reasonably acceptable in form and substance to each of them dated as of the Closing Date, substantially to the effect that, for federal income tax purposes: (i) the Holding Company Merger, when consummated in accordance with the terms hereof, will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code; and (ii) the Buyer and the Company each will be a party to that reorganization within the meaning of Section 368(b) of the Code. Each of the Buyer and the Company shall provide a letter or certificate to the tax advisor setting forth the facts, assumptions, and representations on which such tax advisor may rely in rendering its opinion.

(g) Blue Sky Approvals. The Buyer shall have received all state securities or “Blue Sky” Permits or other authorizations or confirmations as to the availability of exemptions from “Blue Sky” registration requirements as may be necessary, and no stop orders or proceedings shall be pending, or to the Knowledge of the Buyer Parties or the Company Parties, threatened by a state “Blue Sky” administrator to suspend the effectiveness of any registration statement filed therewith with respect to the offering of the Buyer’s Stock in the Holding Company Merger.

(h) American Stock Exchange Listing. As of the Effective Time, the Buyer shall have satisfied all requirements in order for the shares of the Buyer’s Stock to be issued to shareholders of the Company in connection with the Holding Company Merger to be qualified for listing on the American Stock Exchange as of the Effective Time.

9.2 Conditions to the Obligations of the Company. The obligation of the Company to effect the transactions contemplated hereby shall be further subject to the fulfillment of the following conditions, unless waived by the Company pursuant to Section 11.4 of this Agreement:

(a) All representations and warranties of the Buyer contained in this Agreement shall be true and correct as of the Closing Date as though made as of such date (except for representations and warranties that are made as of a specific date). The Buyer shall have performed and complied with all covenants and agreements contained in this Agreement required to be performed and complied with by it at or prior to the Closing.

(b) All documents and agreements required to have been executed and delivered by the Buyer to the Company at or prior to the Closing shall have been so executed and delivered, whether or not such documents have been or will be executed and delivered by the other parties contemplated thereby.

(c) The Company shall have received from The Orr Group, a letter, dated not more than three Business Days prior to the Proxy Statement, stating that the Merger Consideration is fair, from a financial point of view, to the holders of the Company’s Shares.

(d) The Company shall have received an opinion of Nexsen Pruet Jacobs & Pollard, LLC, counsel to the Buyer, dated as of the Closing Date, in form and substance reasonably acceptable to the Company.

(e) As of the Closing Date, the Company shall have received the following documents with respect to the Buyer:

(i) a true and complete copy of its articles of incorporation and all amendments thereto, certified by the jurisdiction of its incorporation as of a recent date;

(ii) a true and complete copy of its bylaws, certified by its Secretary or an Assistant Secretary;

(iii) a certificate from its Secretary or an Assistant Secretary certifying that its articles of incorporation have not been amended since the date of the certificate described in subsection (i) above and that nothing has occurred since such date that would adversely affect its existence;

(iv) a true and complete copy of the resolutions of its board of directors authorizing the execution, delivery and performance of this Agreement, and all instruments and documents to be delivered in connection herewith, and the transactions contemplated hereby, certified by its Secretary or an Assistant Secretary; and

(v) a certificate from its Secretary or an Assistant Secretary certifying the incumbency and signatures of its officers who will execute documents at the Closing or who have executed this Agreement.

(f) The Exchange Agent shall have delivered to the Company a certificate, dated as of the Closing Date, to the effect that the Exchange Agent has received from the Buyer appropriate instructions and authorization for the Exchange Agent to issue a sufficient number of shares of Buyer’s Stock in exchange for all of the Company Shares and to the effect that the Exchange Agent has received a sufficient amount of cash to pay in exchange for all of the Company Shares and has appropriate instructions and authorization to deliver the cash Merger Consideration as required by this Agreement.

9.3 Conditions to the Obligations of the Buyer. The obligations of the Buyer to effect the transactions contemplated hereby shall be further subject to the fulfillment of the following conditions, unless waived by the Buyer pursuant to Section 11.4 of this Agreement:

(a) All representations and warranties of the Company contained in this Agreement shall be true and correct as of the Closing Date as though made as of such date (except for representations and warranties that are made as of a specific date). The Company shall have performed and complied with all covenants and agreements contained in this Agreement required to be performed and complied with by them at or prior to the Closing.

(b) Holders of Company Shares representing no more than ten percent (10%) of the issued and outstanding Company Shares immediately prior to the Effective Time shall have exercised dissenters’ or similar rights with respect to the Holding Company Merger.

(c) All documents and agreements required to have been executed and delivered by the Company or any third party to the Buyer at or prior to the Closing shall have been so executed and delivered, whether or not such documents have been or will be executed and delivered by the other parties contemplated thereby.

(d) The Buyer shall have received a legal opinion from HSB, counsel to the Company, dated as of the Closing Date, in form and substance reasonably satisfactory to the Buyer.

(e) As of the Closing Date, the Buyer shall have received the following documents with respect to each of the Company and its subsidiaries (including the Company Bank):

(i) a certificate of its corporate existence issued by the jurisdiction of its incorporation as of a recent date and a certificate of existence or authority as a foreign corporation issued as of a recent date by each of the jurisdictions in which it is qualified to do business as a foreign corporation;

(ii) a true and complete copy of its articles of incorporation and all amendments thereto, certified by the jurisdiction of its incorporation as of a recent date;

(iii) a true and complete copy of its bylaws, certified by its Secretary or an Assistant Secretary;

(iv) a certificate from its Secretary or an Assistant Secretary certifying that its articles of incorporation have not been amended since the date of the certificate described in subsection (ii) above, and that nothing has occurred since the date of issuance of the certificate of existence specified in subsection (i) above that would adversely affect its existence;

(v) with respect to the Company only, a true and complete copy of the resolutions of its board of directors and shareholders authorizing the execution, delivery and performance of this Agreement, and all instruments and documents to be delivered in connection herewith, and the transactions contemplated hereby, certified by its Secretary or an Assistant Secretary; and

(vi) with respect to the Company only, a certificate from its Secretary or an Assistant Secretary certifying the incumbency and signatures of its officers who will execute documents at the Closing or who have executed this Agreement.

10.1 Termination. The obligations of the parties hereunder may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing Date:

(b) by either the Buyer or the Company, if there shall be any Law that makes consummation of this Agreement illegal or otherwise prohibited or if any Order enjoining the Company or its shareholders, the Company Bank, the Buyer or its stockholders, or the Buyer Bank from consummating this Agreement is entered and such Order shall become final and nonappealable; provided, however, that the right to terminate this Agreement under this Section 10.1(b) shall not be available to the party whose failure to fulfill its obligations hereunder shall have been the cause of or resulted in such Order;

(c) by either the Buyer or the Company, if the Effective Time shall not have occurred on or before August 31, 2004, provided, however, that the right to terminate this Agreement under this Section 10.1(c) shall not be available to the party whose failure to fulfill its obligations hereunder shall have been the cause of or resulted in the failure of the Effective Time to occur on or before August 31, 2004;

(i) by the Buyer in writing, if the Company (i) has breached any covenant or agreement contained herein in any Material respect or (ii) any representation or warranty contained herein becomes untrue, in either case such that the condition contained in Section 9.3(a) would not be satisfied and in either case if such breach has not been cured by the earlier of 10 Business Days after the date on which the Buyer gives written notice of such breach to the Company or the Closing Date; or

(ii) by the Company in writing, if the Buyer (i) has breached any covenant or agreement contained herein in any Material respect or (ii) any representation or warranty contained herein becomes untrue, in either case such that the condition contained in Section 9.2(a) would not be satisfied and in either case if such breach has not been cured by the earlier of 10 Business Days after the date on which the Company gives written notice of such breach to the Buyer or the Closing Date;

(e) by either the Company or the Buyer if: the approval of the Company’s shareholders required for the consummation of the Holding Company Merger shall not have been obtained by reason of the failure to obtain the required vote upon the taking of such vote at a duly held meeting of the Company’s shareholders or at any adjournment thereof;

(i) (a) the Company’s board of directors shall have failed to recommend the Holding Company Merger to its shareholders at the time of giving of notice of the Shareholder Meeting, (b) withdrawn its recommendation of the Holding Company Merger to its shareholders, (c) modified or qualified its recommendation of the Holding Company Merger in any manner adverse to the consummation of the Holding Company Merger, or (d) failed to confirm its recommendation of the Holding Company Merger within five Business Days of the Buyer’s request to do so (or resolved or proposed to take any of the foregoing actions); or

(ii) the Company shall have breached its obligation under this Agreement by reason of a failure to timely call and hold the Shareholder Meeting in accordance with Section 7.1(b); or

(iii) a tender or exchange offer relating to securities of the Company or any of its subsidiaries shall have been commenced by a Person who is not an Affiliate of the Company or its subsidiaries, and the Company shall not have sent to its shareholders within 10 Business Days after such tender or exchange offer is first published, sent or given, a statement that the Company’s board of directors recommends rejection of such tender or exchange offer;

(g) by the Company, if (i) the board of directors of the Company shall have determined, based upon the written advice of outside counsel reasonably acceptable to the Buyer (which shall include HSB in any event), that an Acquisition Proposal constitutes a Superior Proposal; provided, however, that the Company may not terminate this Agreement pursuant to this Section 10.1(g) unless, after giving the Buyer at least five Business Days notice to respond to such Acquisition Proposal (and after giving the Buyer notice of the latest Material terms and conditions comprising such Acquisition Proposal), and then taking into account any amendment or modification to this Agreement proposed by the Buyer, the Company’s board of directors believes, based upon the written advice of outside counsel reasonably acceptable to the Buyer (which shall include HSB in any event), that such Acquisition Proposal constitutes a Superior Proposal, and (ii) the Company thereafter executes a definitive, binding transaction agreement to consummate an Acquisition Transaction in furtherance of such Acquisition Proposal; or

(h) by the Buyer, in the event (i) the board of directors of the Company shall have determined that an Acquisition Proposal constitutes a Superior Proposal, or (ii) holders of Company Shares representing more than ten percent (10%) of the issued and outstanding Company Shares immediately prior to the Effective Time exercised dissenters’ or similar rights with respect to the Holding Company Merger.

10.2 Procedure and Effect of Termination. (a) In the event of a termination contemplated hereby by either party pursuant to Section 10.1, the party seeking to terminate this Agreement shall give prompt written notice thereof to the other party, and the transactions contemplated hereby shall be abandoned, without further action by either party hereto. In such event:

(i) the parties hereto shall continue to be bound by (a) their obligations of confidentiality set forth in the Confidentiality Agreement, and all copies of the information provided by the a party hereto to the other party will be returned or destroyed immediately upon its request therefor, (b) the provisions set forth in Section 8.5 relating to publicity, and (c) the provisions set forth in Section 11.1 relating to expenses;

(ii) all filings, applications and other submissions relating to the transactions contemplated hereby shall, to the extent practicable, be withdrawn from the Person to which made; and

(iii) if the termination is pursuant to Section 10.1(d) or Section 10.1(f), the terminating party shall be entitled to seek any remedy to which such party may be entitled at law or in equity for the violation or breach of any agreement, covenant, representation or warranty contained in this Agreement.

(a) If this Agreement is terminated (i) pursuant to Section 10.1(g), or (ii) pursuant to Section 10.1(h)(i) and the Company, within one year after receipt by the Buyer of notice of termination in accordance with Section 10.2(a) above, executes a definitive, binding transaction agreement to consummate an Acquisition Transaction in furtherance of such Acquisition Proposal, the Company shall pay to the Buyer, within one Business Day following the later of such termination or the execution of such definitive agreement, the sum of Four Hundred Fifty Thousand and No/100 ($450,000.00) Dollars, plus an amount equal to the Buyer’s Costs

(b) (i) If the Company or any of its subsidiaries receives an Acquisition Proposal and the Company’s board of directors fails to recommend or continue recommending approval of the Holding Company Merger to the Company’s shareholders or amends or withdraws its recommendation of the Holding Company Merger to the Company’s shareholders, (ii) the Company’s shareholders do not approve the Holding Company Merger at the Shareholder Meeting, and (iii) the Company within one year after the date of the Shareholder Meeting executes a definitive, binding transaction agreement to consummate an Acquisition Transaction, the Company shall pay to the Buyer, within one Business Day following execution o such definitive agreement, the sum of Four Hundred Fifty Thousand and No/100 ($450,000.00) Dollars, plus an amount equal to the Buyer’s Costs (less the amount, if any, paid by the Company pursuant to Section 10.3(a)).

(c) If this Agreement is terminated by the Company pursuant to Section 10.1(d)(ii), the Buyer shall reimburse the Company’s Costs within one Business Day of the date of termination.

(d) If this Agreement is terminated by the Buyer pursuant to Section 10.1(d)(i), the Company shall reimburse the Buyer’s Costs within one Business Day of the date of termination.

(e) All amounts payable pursuant to this Section 10.3 shall be payable by wire transfer of immediately available funds to an account designated by the recipient.

11.1 Expenses. Except as provided in Section 10.3, whether or not the transactions contemplated hereby are consummated, (i) the Buyer shall pay all costs and expenses incurred by it and the Buyer Bank in connection with this Agreement and the Mergers and (ii) the Company shall pay all costs and expenses incurred by it and the Company Bank in connection with this Agreement and the Mergers.

11.2 Survival of Representations. The representations and warranties made by the parties hereto will not survive the Closing, and no party shall make or be entitled to make any claim based upon such representations and warranties after the Closing Date. No warranty or representation shall be deemed to be waived or otherwise diminished as a result of any due diligence investigation by the party to whom the warranty or representation was made or as a result of any actual or constructive knowledge by such party with respect to any facts, circumstances or claims or by the actual or constructive knowledge of such party that any warranty or representation is false at the time of signing or Closing.

11.3 Amendment and Modification. This Agreement may be amended, modified or supplemented only by written agreement of both parties hereto.

11.4 Waiver of Compliance; Consents. Except as otherwise provided in this Agreement, any failure of the Buyer Parties, on one hand, and the Company Parties, on the other, to comply with any obligation, representation, warranty, covenant, agreement or condition herein may be waived by the Buyer or the Company, as applicable, only by a written instrument signed by the party granting such waiver, but such waiver or failure to

insist upon strict compliance with such obligation, representation, warranty, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of either party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 11.4.

11.5 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given when delivered by hand or by facsimile transmission, one Business Day after sending by a reputable national over-night courier service or three Business Days after mailing when mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties in the manner provided below:

Either party may change the address to which notice is to be given by notice given in the manner set forth above.

11.6 Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and permitted assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either party hereto without the prior written consent of the other party.

11.7 Separable Provisions. If any provision of this Agreement shall be held invalid or unenforceable, the remainder nevertheless shall remain in full force and effect.

11.8 Governing Law. The execution, interpretation and performance of this Agreement shall be governed by the internal laws and judicial decisions of the State of South Carolina.

11.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11.10 Interpretation. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement.

11.11 Entire Agreement. This Agreement, including the agreements and documents that are Schedules and Exhibits hereto, embodies the entire agreement and understanding of the parties with respect of the subject matter of this Agreement. This Agreement supersedes all prior agreements and understandings between the parties with respect to the transactions contemplated hereby and subject matter hereof, including but not limited to that certain Letter of Intent dated August 18, 2003, by and among Buyer, Buyer Bank, Company and Company Bank.

IN WITNESS WHEREOF, the parties have executed this Merger Agreement as of the date first above written.

*BUYER:* COMMUNITY CAPITAL CORPORATION

By:		/s/ WILLIAM G. STEVENS

		William G. Stevens
Title:		President and Chief Executive Officer

*COMPANY:* ABBEVILLE CAPITAL CORPORATION

By:		/s/ THOMAS D. SHERARD, JR.

		Thomas D. Sherard, Jr.
Title:		President

This document constitutes the plan of merger (the “Plan”) for a merger (the “Merger”) between COMMUNITY CAPITAL CORPORATION, a South Carolina corporation (“CCC”), and ABBEVILLE CAPITAL CORPORATION, a South Carolina corporation (“ACC”). CCC and ACC are hereinafter collectively called the “Constituent Companies.”

A. ACC is a corporation duly organized and existing under the laws of the State of South Carolina with authorized capital of 1,000,000 shares $5.00 par value common stock (“ACC Common Stock”), of which 248,761 shares are issued and outstanding (the “ACC Shares”).

B. CCC is a corporation duly organized and existing under the laws of the State of South Carolina with authorized capital of 10,000,000 shares of $1.00 par value common stock (“CCC Common Stock”), of which shares are issued and outstanding, and 2,000,000 shares of “blank check” preferred stock of which no shares are issued and outstanding.

C. This Plan shall be part of that certain definitive Merger Agreement, dated October 15, 2004, by and between CCC and ACC (the “Agreement”), setting forth the respective rights and obligations of such parties in connection with the adoption and implementation of this Plan. This Plan is made, executed and delivered pursuant to the Agreement, and is subject to all the terms, provisions and conditions thereof. To the extent of any conflict between the terms hereof and thereof, the terms of the Agreement shall be controlling. All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Agreement unless the context clearly requires otherwise.

D. The Merger shall be implemented as provided herein upon the approval of the Board of Directors of each Constituent Company, and the owners of record of at least two-thirds of the outstanding shares of ACC.

E. The parties intend that the transactions contemplated hereby will qualify as a tax-free merger of ACC with and into CCC in a reorganization pursuant to Section 368(a) of the Internal Revenue Code of 1986, as amended.

1. The Merger. On and subject to the terms and conditions of the Agreement and this Plan, at the Effective Time ACC shall be merged with and into CCC, the separate corporate existence of ACC shall thereupon cease, and CCC shall be the surviving corporation in the Merger (the “Surviving Corporation”). The Surviving Corporation shall, from and after the Effective Date, possess all the rights, privileges, powers and franchises of whatsoever nature and description, as well as a public or private nature, and be subject to all the restrictions, disabilities and duties of each of the Constituent Corporations; and all rights, privileges, powers and franchises of each of the Constituent Corporations, and all property, tangible and intangible, real, personal and mixed, and debts due to either of the Constituent Corporations on whatever account as well for stock subscriptions as all

other things in action or belonging to each of the Constituent Corporations shall be vested in the Surviving Corporation; and all property, rights, privileges, powers and franchises, and all and every other interests shall be thereafter as effectually the property of the Surviving Corporation as they were of the several and respective Constituent Corporations, and the title to any real estate vested by deed or otherwise in any of the Constituent Corporations shall not revert or be in any way impaired by reason of the Merger. All rights of creditors and all liens upon the property of the Constituent Corporations shall be preserved unimpaired, and all debts, liabilities and duties of the Constituent Corporations shall thenceforth attach to the Surviving Corporation, and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred or contracted by it. Any claim existing or action or proceeding, whether civil, criminal or administrative, pending by or against either Constituent Corporation may be prosecuted to judgment or decree as if the Merger had not taken place, or the Surviving Corporation may be substituted in such action or proceeding. The foregoing shall not limit the effects of the Merger as set forth in Section 33-11-106 of the South Carolina Business Corporation Act of 1988, as amended (the “Act”).

2. Effective Time. At the Closing, CCC shall cause Articles of Merger (the “Articles of Merger”), to be duly executed and filed with the Secretary of State of the State of South Carolina as provided under the Act. The Merger shall become effective on the time and date specified in the Articles of Merger.

(a) At the Effective Time, subject to Sections 4, 5 and 6 below, and assuming that 237,615 shares of ACC Common Stock are outstanding at the Effective Time, each share of ACC Common Stock issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares), shall, by virtue of the Merger, automatically and without any action on the part of the holder thereof, become and be converted into the right to receive, at the election of the holder, either (i) $63.13 in cash, without interest (the “Cash Consideration,” with such election referred to as a “Cash Election”), (ii) a number of shares of the CCC Common Stock equal to the Exchange Ratio (the “Stock Consideration”, with such election referred to as a “Stock Election”) or (iii) a combination of 50% of such consideration in cash and 50% of such consideration in shares of CCC Common Stock (the “Mixed Consideration”, with such election referred to as a “Mixed Election”). Shares of ACC Common Stock as to which no election has been made are referred to herein as “No Election Shares” and shall receive the mix of Merger Consideration specified in Section 4 below. For purposes of this Plan, Cash Consideration, Stock Consideration and any combination thereof shall be collectively referred to herein as “Merger Consideration.” Company Shares as to which a Cash Election has been made (including pursuant to a Mixed Election) are referred to herein as “Cash Election Shares.” Company Shares as to which a Stock Election has been made (including pursuant to a Mixed Election) are referred to herein as “Stock Election Shares.” All Dissenting Shares will be deemed Cash Election Shares for purposes of determining the Cash Consideration available for distribution to other shareholders.

(c) (i) In the event that the sum of (x) the number of Cash Election Shares plus (y) 50.0% of the number of No Election Shares exceeds (z) 50.0% of the total number of issued and outstanding shares of ACC Common Stock, then the holders of Cash Election Shares will receive a combination of cash and shares of CCC Common Stock to be determined as follows: (A) the number of Cash Election Shares which shall be converted into the right to receive the Cash Consideration shall equal the amount obtained by multiplying (I) the number of shares of ACC Common Stock covered by such Cash Election by (II) a fraction of which the numerator shall be the cash required to be made available by CCC (pursuant to clause (iii) below) and the denominator of which shall be $63.13 multiplied by the number of Cash Election Shares; and (B) the balance of such Cash Election Shares shall be converted into the right to receive Stock Consideration.

(ii) In the event the foregoing clause (i) is not applicable, each holder of shares of ACC Common Stock (A) that makes a Stock Election will receive the Stock Consideration, (B) that makes a Cash Election will receive the Cash Consideration or (C) that makes a Mixed Election will receive the combination of CCC Common Stock and cash set forth in such election.

(iii) The amount of cash required to be made available by CCC shall be equal to the difference between (A) the amount obtained by multiplying (I) $63.13 by (II) 50% of the number of outstanding shares of ACC Common Stock, minus (B) the amount of Cash Consideration attributable to the Dissenting Shares, minus (C) the amount of Cash Consideration required to be paid to No Election Shares. The number of shares of CCC Common Stock required to be made available by CCC shall be equal to the difference between (A) the number of shares obtained by multiplying (I) the Exchange Ratio by (II) the number of outstanding shares of ACC Common Stock for which a Stock Election has been made, minus (B) the amount of Stock Consideration required to be paid to No Election Shares. Regardless of the applicability of clauses (i) or (ii) above, each No Election Share shall be converted in the Merger into the right to receive 50% Stock Consideration and 50% Cash Consideration. Notwithstanding anything contained herein, the aggregate amount of cash to be paid as Merger Consideration, plus any cash paid in lieu of fractional shares and any cash paid for Dissenting Shares shall not exceed $7,500,000, subject to the effect of any adjustment made as provided in this Plan.

(d) No fractional shares of the CCC Common Stock shall be issued or delivered in connection with the Merger. In lieu of the issuance of any such fractional share, CCC shall pay to each former stockholder of ACC who otherwise would be entitled to receive a fractional share of CCC Common Stock an amount in cash equal to the product of (x) the Average Closing Price, times (y) the fraction of a share of CCC Common Stock which such holder would otherwise be entitled to receive pursuant to this Plan.

(e) In the event CCC changes the number of shares of CCC Common Stock issued and outstanding prior to the Effective Time as a result of a stock split, stock dividend or similar recapitalization with respect to such stock (each a “Stock Adjustment”) and the record date therefor (in the case of a stock dividend) or the effective date thereof (in the case of a stock split or similar recapitalization for which a record date is not established) shall be prior to the Effective Time, the amount of CCC Common Stock to be exchanged for ACC Common Stock in connection with the Merger shall be equitably adjusted to reflect such change.

(f) Notwithstanding any other provision contained in this Plan, it is intended that the Merger will qualify as a reorganization under the provisions of Section 368(a) of the Code and that this Plan shall constitute a “plan of reorganization” for the purposes of Section 368 of the Code. In order that the Merger will not fail to satisfy the continuity of interest requirements under applicable federal income tax principles relating to reorganizations under Section 368(a) of the Code, as of the Effective Time, CCC may, but shall not be obligated to, increase the Stock Consideration and decrease the Cash Consideration proportionally (i) so that the Stock Consideration measured at Market Value will represent at least 50% of the value of the aggregate Merger Consideration payable to the shareholders of ACC; (ii) the Cash Consideration is reduced by the aggregate amount of the Interim Distributions, cash paid in lieu of fractional shares, and cash paid for Dissenting Shares; and/or (iii) any other reason the CCC, in its sole discretion, determines is necessary to cause the Merger to qualify as a tax-free reorganization under Section 368(a) of the Code. Upon any such adjustment, the components of the Mixed Consideration and the Stock Consideration set forth in Section 3 shall be equitably and proportionately adjusted to reflect the increase in the number of shares of CCC Common Stock being paid, and the decrease in the amount of cash being paid, as Merger Consideration to each shareholder of ACC.

(i) An election form (“Election Form”) together with the other transmittal materials described in Section 6 shall be mailed as soon as reasonably practicable after the Effective Time to each holder of ACC Common Stock of record at the Effective Time. Such date of mailing shall be referred to

hereinafter as the “Mailing Date.” Each Election Form shall permit a holder (or the beneficial owner through appropriate and customary documentation and instruction) of ACC Common Stock to elect to receive the Mixed Consideration, the Stock Consideration or the Cash Consideration with respect to all or any of such holder’s (or beneficial owner’s) ACC Common Stock.

(ii) Any share of ACC Common Stock with respect to which the holder (or the beneficial owner, as the case may be) shall not have submitted to the Exchange Agent an effective, properly completed Election Form on or before a date after the Effective Time to be agreed upon by the parties hereto (which date will be set forth on the Election Form), but in any event not earlier than the 20th Business Day after the Mailing Date (such deadline, the “Election Deadline”) shall be deemed to be No Election Shares.

(b) Allocation. As soon as reasonably practicable after the Effective Time, CCC shall cause the Exchange Agent to allocate the Merger Consideration among the holders of ACC Common Stock in accordance with the terms of this Plan.

5. Closing Payment. At the Effective Time, CCC shall deposit with an exchange and transfer agent selected by CCC (the “Exchange Agent”), for the benefit of the holders of ACC Common Stock, (i) a certificate or certificates representing the aggregate number of shares of CCC Common Stock comprising the Merger Consideration, and (ii) an aggregate amount of cash comprising the Merger Consideration and in lieu of any fractional shares, to be issued and paid as the Merger Consideration in accordance with the provisions of this Plan and the Agreement. The Exchange Agent shall deliver the Merger Consideration in accordance with the procedures set forth in Section 6 below. The Exchange Agent shall invest any cash so deposited as instructed by CCC and any interest resulting from such investment shall be paid to CCC. CCC shall not be obligated to pay any of the Merger Consideration to any holder of ACC Common Stock until such holder surrenders the certificates representing such holder’s shares of ACC Common Stock.

(a) After the Effective Time, CCC shall cause the Exchange Agent to mail to the shareholders of ACC of record at the Effective Time, the Election Form, as required under Section 4 and other appropriate transmittal materials (which shall specify that delivery shall be effected, and risk of loss and title to the certificates representing shares of ACC Common Stock prior to the Effective Time shall pass, only upon proper delivery of such certificates to the Exchange Agent). After the Effective Time, each holder of ACC Common Stock issued and outstanding at the Effective Time shall surrender the certificate or certificates representing such shares to the Exchange Agent and shall promptly upon surrender thereof receive in exchange therefor the number of shares of CCC Common Stock and the cash to which such holder is entitled hereunder (including any cash payments to which such holder is entitled hereunder in respect of rights to receive fractional shares). The Exchange Agent shall not be obligated to deliver any of such payments in cash or stock until such holder surrenders the certificate(s) representing such holder’s shares of ACC Common Stock. The certificate(s) so surrendered shall be duly endorsed as the Exchange Agent may require.

(b) Any portion of the Merger Consideration that remains unclaimed by the shareholders of ACC for six months after the Effective Time shall be paid to CCC. Any shareholders of ACC who have not theretofore complied with this Plan shall thereafter look only to CCC for payment of their portion of the Cash Consideration and their shares of CCC Common Stock, cash in lieu of fractional shares and unpaid dividends and distributions on CCC Common Stock deliverable in respect of each share of ACC Common Stock such stockholder holds as determined pursuant to this Plan and the Agreement, in each case, without any interest thereon. Notwithstanding the foregoing, none of CCC, ACC, the Exchange Agent or any other person shall be liable to any former holder of shares of ACC Common Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Law.

(c) To the extent permitted by applicable Law, former shareholders of record of ACC shall be entitled to vote after the Merger Consideration has been allocated pursuant to the provisions of this Plan at any

meeting of CCC’s stockholders the number of whole shares of CCC Common Stock into which their respective shares of ACC Common Stock are converted pursuant to the Merger, regardless of whether such holders have exchanged their certificates representing such CCC Common Stock for certificates representing ACC Common Stock in accordance with the provisions of this Plan and the Agreement. Whenever a dividend or other distribution is declared by CCC on CCC Common Stock, the record date for which is at or after the Effective Time, the declaration shall include dividends or other distributions on all shares of CCC Common Stock issuable pursuant to this Plan and the Agreement, but beginning at the Effective Time, no dividend or other distribution payable to the holders of record of ACC Common Stock as of any time subsequent to the Effective Time shall be delivered to the holder of any certificate representing any shares of CCC Common Stock issued and outstanding at the Effective Time until such holder surrenders such certificate for exchange as provided in this Plan and the Agreement. However, upon surrender of such certificate(s), both the certificate(s) representing the shares of CCC Common Stock to which such holder is entitled and any such undelivered dividends (without any interest) shall be delivered and paid with respect to each share represented by such certificates.

7. Dissenting Shares. Notwithstanding any other provision of this Plan to the contrary, shares of ACC Common Stock that are outstanding immediately prior to the Effective Time and that are held by shareholders who shall have not voted in favor of the Merger or consented thereto in writing and who properly shall have demanded appraisal for such shares in accordance with South Carolina Law (collectively, the “Dissenting Shares”) shall not be converted into or represent the right to receive the Merger Consideration. Such shareholders instead shall be entitled to receive payment of the appraised value of such shares held by them in accordance with the provisions of South Carolina Law, except that all Dissenting Shares held by shareholders who shall have failed to perfect or who effectively shall have withdrawn or otherwise lost their rights to appraisal of such shares under South Carolina Law shall thereupon be deemed to have been converted into and to have become exchangeable, as of the Effective Time, for the right to receive, without any interest thereon, the Merger Consideration upon surrender in the manner provided in Section 6 of the certificate or certificates that, immediately prior to the Effective Time, evidenced such shares.

8. Articles of Incorporation and Bylaws. The Articles of Incorporation and Bylaws of CCC shall continue to be the Articles of Incorporation and Bylaws of CCC from and after the Effective Time.

9. Directors and Officers. The directors and officers of CCC immediately prior to the Effective Time shall continue to be the directors and officers, respectively, of CCC from and after the Effective Time.

10. Subsequent Actions. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, affidavits of corporate name change, bills of sale, assignments, assurances or any other actions or things may be necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Constituent Corporations acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out the Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of each of the Constituent Corporations or otherwise, all such deeds, affidavits of corporate name change, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of the Constituent Corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out the Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Plan of Merger to be effective as of the day of , 2004.

COMMUNITY CAPITAL CORPORATION

By:

Its:

		(SEAL)

ABBEVILLE CAPITAL CORPORATION

By:

Its:

		(SEAL)

I have been advised that, as of the date of this letter, I may be deemed to be an “affiliate” of Abbeville Capital Corporation, a South Carolina corporation (the “ACC”), as the term “affiliate” is defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations (the “Rules and Regulations”) of the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Act”), although nothing contained herein should be construed as an admission of such fact or as a waiver of any rights I may have to object to any claim that I am an affiliate. I have been further advised that, pursuant to the terms of the Merger Agreement dated as of October , 2003 (the “Merger Agreement”) by and among Community Capital Corporation, a South Carolina corporation (“CCC”), and ACC, ACC will be merged with and into CCC (the “Merger”) and that, as a result of the Merger, I may receive shares of CCC common stock in exchange for shares of ACC common stock owned by me, all as more specifically described in the Merger Agreement.

I hereby represent, warrant, and covenant to CCC that in the event I receive any CCC common stock as a result of the Merger:

1. General Acknowledgments. I have carefully read this letter and discussed its requirements and other applicable limitations upon my ability to sell, transfer, or otherwise dispose of CCC common stock to the extent I believed necessary with my counsel or counsel for ACC. I acknowledge and understand that my execution and delivery of this letter agreement to CCC is a material inducement to CCC to enter into the Merger Agreement, and I agree that I will materially benefit from the Merger Agreement. I acknowledge and understand that the representations, warranties, and covenants by me set forth herein shall be relied upon by CCC and its affiliates and counsel and that substantial losses and damages may be incurred by these persons if my representations, warranties, or covenants are breached.

2. Beneficial Ownership of ACC Common Stock. I am the beneficial owner of shares of ACC (the “Shares”) as set forth below my signature hereto. The Shares are free and clear of any liens, claims, options, pledges, rights of first refusal, co-sale rights, charges or other encumbrances. There are no options, warrants, calls, commitments, or agreements of any character, written or oral, to which I am a party or by which I am bound obligating me to issue, deliver, sell, repurchase, or redeem, or cause to be issued, delivered, sold, repurchased, or redeemed, any Shares or obligating me to grant or enter into any such option, warrant, call, right, or commitment. I have the sole right to transfer the Shares. I understand and agree that the Shares and any and all shares of ACC or CCC acquired by me subsequent to this letter agreement shall be subject to the terms and conditions of this letter agreement as if held by me as of the date hereof.

3. Compliance with the Act and the Rules and Regulations. I have been advised that the issuance of CCC common stock to me pursuant to the Merger will be registered with the Commission under the Act on a Registration Statement on Form S-4. However, I have also been advised that, since at the time the Merger will be submitted for a vote of the stockholders of ACC I may be deemed to have been an affiliate of ACC, I may not sell, transfer, or otherwise dispose of CCC common stock issued to me in the Merger unless (i) such sale, transfer, or other disposition is made pursuant to an effective registration statement under the Act, (ii) such sale, transfer, or other disposition is made in conformity with the volume and other limitations of Rule 145 promulgated by the Commission under the Act, (iii) in the opinion of counsel reasonably acceptable to CCC, such sale, transfer or other disposition is otherwise exempt from registration under the Act; or (iv) an authorized representative of the Commission shall have rendered written advice to me to the effect that the Commission would take no action, or that the staff of the Commission would not recommend that the Commission take any action, with respect to the proposed disposition if consummated.

4. No Resale Registration Rights. I understand and agree that CCC is under no obligation to register the resale, transfer, or other disposition of CCC common stock held by me or on my behalf under the Act.

5. Stop Transfer Instructions and Legend on My CCC Shares. I also understand that stop transfer instructions will be given to CCC’s transfer agent with respect to shares of CCC common stock issued to me and that there will be placed on the certificates for such shares of CCC common stock issued to me, or any substitutions therefore, a legend stating in substance:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED , 2004 BETWEEN THE REGISTERED HOLDER HEREOF AND COMMUNITY CAPITAL CORPORATION, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF COMMUNITY CAPITAL CORPORATION.”

6. Legend on My Transferee’s CCC Shares. I also understand that unless the transfer by me of my CCC common stock has been registered under the Act or is a sale made in conformity with the provisions of Rule 145, CCC reserves the right to put the following legend on the certificates issued to my transferee:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE ACT APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE ACT AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT.”

7. Removal of Legends. I understand that the legends set forth in paragraphs 5 and 6 above shall be removed by delivery of substitute certificates without such legend if I deliver to CCC a copy of a letter from the staff of the Commission, or, if reasonably requested by CCC, an opinion of counsel in form and substance reasonably satisfactory to CCC, to the effect that such legend is not required for purposes of the Act.

8. Miscellaneous. I agree that if I breach the representations, warranties, or covenants contained in this letter, CCC shall be entitled to the remedy of specific performance of this Agreement and to temporary and permanent injunctive relief to enforce the provisions of this Agreement, without the posting of any bond. This provision with respect to injunctive relief shall not, however, diminish the right of CCC to any other remedy to which it may be entitled, at law or in equity, in addition to injunctive relief. This letter agreement is to be governed by the laws of South Carolina, and I consent to exclusive jurisdiction and venue, subject to proper service of process, in South Carolina. In the event of the invalidity of any term of this Agreement, all terms shall be considered severable, and the balance of this Agreement shall remain in effect.

9. Current Public Information. At all times during the two year period after the consummation of the Merger, CCC shall cause the current public information requirement of Rule 144(c) promulgated by the Commission under the Act to be met.

Very truly yours,



Print Name:

Notice Address:

ACC Shares Beneficially Owned:

Abbeville Capital Corporation (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Community Capital Corporation (“Community”) as of October 15, 2003, whereby the Company will merge with and into Community (the “Merger”).

You have requested our opinion, as investment bankers, with respect to the fairness, from a financial point of view, to the holders of the common stock (the “Stockholders”) of the Company of the consideration to be paid in the Merger as defined in the Merger Agreement (the “Merger Consideration”). Our opinion is as of the date hereof.

In conducting our analysis and arriving at our opinion as expressed herein, we have considered, reviewed and analyzed financial and other information and materials that we have deemed appropriate under the circumstances, and among other things:

(ii) Reviewed the historical and current financial position and results of operations of the Company and Community;

(iii) Reviewed certain publicly available information concerning the Company including Annual Reports for each of the years in the three year period ended December 31, 2002;

(iv) Reviewed certain publicly available information concerning Community including Annual Reports on Form 10-K for each of the years in the three year period ended December 31, 2002;

(v) Reviewed certain available financial forecasts concerning the business and operations of the Company that were prepared by management of the Company;

(vi) Participated in discussions with certain officers and employees of the Company and Community to discuss the past and current business operations, financial condition and prospects of the Company and Community, as well as matters we believe relevant to our inquiry;

(vii) Reviewed certain publicly available operating and financial information with respect to other companies that we believe to be comparable in certain respects to the Company and Abbeville;

(viii) Reviewed the current and historical relationships between the trading levels of the Company’s common stock and Community’s common stock and the historical and current market for the common stock of the Company, Community and other companies that we believe to be comparable in certain respects to the Company or Community;

(ix) Reviewed the nature and terms of certain other acquisition transactions that we believe to be relevant; and

In our review and analysis, we have assumed and relied upon the accuracy and completeness of all of the financial and other information provided us, or that is publicly available, and have not attempted independently to verify nor assumed responsibility for verifying any such information. With respect to the financial projections, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the Company or Community, as the case may be, and we express no opinion with respect to such forecasts or the assumptions on which they are based. We have not made or obtained or assumed any responsibility for making or obtaining any independent evaluations or appraisals of any of the assets, including properties and facilities, or liabilities of the Company or Community.

Our opinion is based upon conditions as they exist and can be evaluated on the date hereof. Our opinion expressed below does not imply any conclusion as to the likely trading range for any common stock following the consummation of the Merger, which may vary depending upon, among other factors, changes in interest rates, dividend rates, market conditions, general economic conditions and factors that generally influence the price of securities. Our opinion does not address the Company’s underlying business decision to effect the Merger. Our opinion is directed only to the fairness, from a financial point of view, of the Merger Consideration and does not constitute a recommendation concerning how holders of the Company’s common stock should vote with respect to the Agreement. The Orr Group will receive a fee from the Company for delivery of this fairness opinion.

In rendering our opinion we have assumed that in the course of obtaining the necessary regulatory approvals for the Merger no restrictions will be imposed that would have a material adverse affect on the contemplated benefits of the Merger to the Company following the Merger.

Subject to the foregoing, it is our opinion that, as of the date hereof, the Merger Consideration is fair to the Stockholders from a financial point of view.

At your request, we have acted as accountants to Community Capital Corporation, a corporation organized under the laws of South Carolina and a holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended (“CCC”), in connection with the proposed merger (the “Merger”) of Abbeville Capital Corporation, a corporation organized under the laws of South Carolina and a holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended (“ACC”), with and into CCC. The Merger will be effected pursuant to the Merger Agreement by and between Community Capital Corporation and Abbeville Capital Corporation dated October 15, 2003, together with the exhibits attached thereto will be referred to as “the Agreement.” CCC has requested our opinion with respect to certain federal income tax consequences of the Merger.

In rendering this opinion, we have examined (1) the Internal Revenue Code of 1986 as amended (the “Code”) and the Treasury Regulations promulgated thereunder (the “Regulations”), (2) judicial decisions interpreting the Code and Regulations, and (3) rulings and other documents issued by the Internal Revenue Service interpreting the Code and Regulations. In addition, we have relied upon certain information made known to us as more fully described below. All capitalized terms used herein without definition will have the respective meanings specified for such terms in the Agreement.

In rendering the opinions expressed herein, we have examined such documents as we have deemed appropriate, including (1) the Agreement; (2) the Registration Statement; and (3) such additional documents as we have deemed relevant. In our examination of such documents, we have assumed that all documents delivered to us as photocopies faithfully reproduce the originals thereof, that such originals are authentic, that all such documents have been or will be duly executed to the extent required and that all statements set forth in such documents are accurate. We have also obtained such additional information and representations as we have deemed relevant and necessary through certificates provided by the management of CCC and the management of ACC. Where such certificates are based on legal advice received from other counsel, we have assumed such legal advice to be correct in all respects; where such certificates have been limited to the “knowledge” (or other similar qualifying language) of the officer making such certification, we have assumed such knowledge to be correct in all respects.

In connection with the Merger, the following will occur pursuant to the Agreement:

1. Subject to the terms and conditions of the Agreement, at the Effective Time, ACC will be merged with and into CCC in accordance with the provisions of Section 33-11-101 of the Code of Laws of South Carolina,

1976, as amended (the “South Carolina Code”), and with the effect provided in Section 33-11-106 of the South Carolina Code. CCC will be the surviving corporation of the Merger and will continue to be governed by the laws of the State of South Carolina. The Merger will be consummated pursuant to the terms of the Agreement, which has been approved and adopted by the boards of directors of CCC and ACC.

2. Subject to the terms and conditions of the Agreement, at the Effective Time, each share of ACC Common Stock issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares), shall, by virtue of the Merger, automatically and without any action on the part of the holder thereof, become and be converted into the right to receive, at the election of the holder, either (i) $63.13 in cash, without interest (the “Cash Consideration,” with such election referred to as a “Cash Election”), (ii) a number of shares of the CCC Common Stock equal to the Exchange Ratio (the “Stock Consideration”, with such election referred to as a “Stock Election”) or (iii) a combination of 50% of such consideration in cash and 50% of such consideration in shares of CCC Common Stock (the “Mixed Consideration”, with such election referred to as a “Mixed Election”). Shares of ACC Common Stock as to which no election has been made are referred to herein as “No Election Shares” and shall receive the mix of Merger Consideration specified in Paragraph 6 below. For purposes of this Plan, Cash Consideration, Stock Consideration and any combination thereof shall be collectively referred to herein as “Merger Consideration.” Company Shares as to which a Cash Election has been made (including pursuant to a Mixed Election) are referred to herein as “Cash Election Shares.” Company Shares as to which a Stock Election has been made (including pursuant to a Mixed Election) are referred to herein as “Stock Election Shares.” All Dissenting Shares will be deemed Cash Election Shares for purposes of determining the Cash Consideration available for distribution to other shareholders.

3. For purposes of the Agreement, the “Exchange Ratio” shall be equal (rounded to the nearest ten-thousandth) to (x) 4.6419, if the Average Closing Price is less than or equal to $13.60, (y) 3.0946, if the Average Closing Price is greater than or equal to $20.40, or (z) if the Average Closing Price is between $13.60 and $20.40, the result obtained by dividing $63.13 by the Average Closing Price.

4. In the event that the sum of (x) the number of Cash Election Shares plus (y) 50.0% of the number of No Election Shares exceeds (z) 50.0% of the total number of issued and outstanding shares of ACC Common Stock, then the holders of Cash Election Shares will receive a combination of cash and shares of CCC Common Stock to be determined as follows: (A) the number of Cash Election Shares which shall be converted into the right to receive the Cash Consideration shall equal the amount obtained by multiplying (I) the number of shares of ACC Common Stock covered by such Cash Election by (II) a fraction of which the numerator shall be the cash required to be made available by CCC (pursuant to Paragraph 6. below) and the denominator of which shall be $63.13 multiplied by the number of Cash Election Shares; and (B) the balance of such Cash Election Shares shall be converted into the right to receive Stock Consideration.

5. In the event the foregoing Paragraph 4 is not applicable, each holder of shares of ACC Common Stock (A) that makes a Stock Election will receive the Stock Consideration, (B) that makes a Cash Election will receive the Cash Consideration or (C) that makes a Mixed Election will receive the combination of CCC Common Stock and cash set forth in such election.

6. The amount of cash required to be made available by CCC shall be equal to the difference between (A) the amount obtained by multiplying (I) $63.13 by (II) 50% of the number of outstanding shares of ACC Common Stock, minus (B) the amount of Cash Consideration attributable to the Dissenting Shares, minus (C) the amount of Cash Consideration required to be paid to No Election Shares. The number of shares of CCC Common Stock required to be made available by CCC shall be equal to the difference between (A) the number of shares obtained by multiplying (I) the Exchange Ratio by (II) the number of outstanding shares of ACC Common Stock for which a Stock Election has been made, minus (B) the amount of Stock Consideration required to be paid to No Election Shares. Regardless of the applicability of Paragraphs 4 & 5 above, each No Election Share shall be converted in the Merger into the right to receive 50% Stock Consideration and 50% Cash Consideration. Notwithstanding anything contained in the Agreement, the aggregate amount of cash to be paid as Merger

Consideration, plus any cash paid in lieu of fractional shares and any cash paid for Dissenting Shares shall not exceed $7,500,000, subject to the effect of any adjustment made as provided in the Agreement.

7. No fractional shares of the CCC Common Stock shall be issued or delivered in connection with the Merger. In lieu of the issuance of any such fractional share, CCC shall pay to each former stockholder of ACC who otherwise would be entitled to receive a fractional share of CCC Common Stock an amount in cash equal to the product of (x) the Average Closing Price, times (y) the fraction of a share of CCC Common Stock which such holder would otherwise be entitled to receive pursuant to the Agreement.

8. In the event CCC changes the number of shares of CCC Common Stock issued and outstanding prior to the Effective Time as a result of a stock split, stock dividend or similar recapitalization with respect to such stock (each a “Stock Adjustment”) and the record date therefor (in the case of a stock dividend) or the effective date thereof (in the case of a stock split or similar recapitalization for which a record date is not established) shall be prior to the Effective Time, the amount of CCC Common Stock to be exchanged for ACC Common Stock in connection with the Merger shall be equitably adjusted to reflect such change.

9. Notwithstanding any other provision contained in the Agreement, it is intended that the Merger will qualify as a reorganization under the provisions of Section 368(a) of the Code and that the Agreement shall constitute a “plan of reorganization” for the purposes of Section 368 of the Code. In order that the Merger will not fail to satisfy the continuity of interest requirements under applicable federal income tax principles relating to reorganizations under Section 368(a) of the Code, as of the Effective Time, CCC may, but shall not be obligated to, increase the Stock Consideration and decrease the Cash Consideration proportionally (i) so that the Stock Consideration measured at Market Value will represent at least 50% of the value of the aggregate Merger Consideration payable to the shareholders of ACC; (ii) the Cash Consideration is reduced by the aggregate amount of the Interim Distributions, cash paid in lieu of fractional shares, and cash paid for Dissenting Shares; and/or (iii) any other reason the CCC, in its sole discretion, determines is necessary to cause the Merger to qualify as a tax-free reorganization under Section 368(a) of the Code. Upon any such adjustment, the components of the Mixed Consideration and the Stock Consideration set forth in Paragraph 2 above shall be equitably and proportionately adjusted to reflect the increase in the number of shares of CCC Common Stock being paid, and the decrease in the amount of cash being paid, as Merger Consideration to each shareholder of ACC.

We have assumed that the following statements are true on the date hereof and will be true as of the Effective Time:

1. The Merger will be consummated in exact accordance with the Agreement and the Agreement represents the entire understanding of CCC and ACC with respect to the Merger.

2. CCC has no plan or intention to sell or otherwise dispose of any of the assets of ACC acquired in the transaction, except for dispositions made in the ordinary course of business.

3. During the five-year period ending at the Effective Time, except for (i) the Cash Consideration described in paragraph 2 under Structure of Transaction, (ii) cash paid to dissenting holders of ACC Common Stock as described in paragraph 6 under Structure of Transaction, (iii) cash paid as part of the Interim Distribution as described in paragraph 9 under Structure of Transaction and (iv) cash paid in lieu of fractional shares as described in paragraph 7 under Structure of Transaction, either directly or through any transaction, agreement, or arrangement with any other person, (a) ACC has not redeemed (and will not redeem) any ACC common stock and has not made (and will not make) any extraordinary distributions (other than regular, normal dividend distributions made pursuant to ACC’s historic paying practice) with respect thereto and (b) the persons that are related to ACC within the meaning of Treasury Regulation section 1.368-1(e)(3) (determined without regard to Treasury Regulation section 1.368-1(e)(3)(i)(A)), have not acquired (and will not acquire) ACC common stock

from any holder thereof with consideration other than either ACC common stock from any holder thereof with consideration other than either ACC stock or CCC stock as of the Effective Time.

4. Except for (i) the Cash Consideration described in paragraph 2 under Structure of Transaction, (ii) cash paid to dissenting holders of ACC Common Stock as described in paragraph 6 under Structure of Transaction and (iii) cash paid in lieu of fractional shares as described in paragraph 7 under Structure of Transaction, there is no plan or intention on the part of CCC, any CCC Company, or any other person related to CCC (as defined in Treasury Regulation section 1.368-1(e)(3)), to acquire, during the five-year period beginning at the Effective Time, with consideration other than CCC stock, CCC Common Stock furnished in exchange for ACC Common Stock in the Merger, either directly or through any transaction, agreement, or arrangement with any other person.

5. Following the Merger, CCC will continue the historic business of ACC or use a significant portion of ACC’s historic assets in a business.

6. The liabilities of ACC assumed by CCC and the liabilities to which the transferred assets of ACC are subject were incurred by ACC in the ordinary course of its business. No liabilities of any person other than ACC will be assumed by CCC in the Merger, and none of the shares of ACC to be surrendered in exchange for Merger Consideration in the Merger will be subject to any liabilities.

7. CCC, ACC and the shareholders of ACC will each pay their respective expenses incurred in connection with the Merger.

8. There is no intercorporate indebtedness existing between CCC (or any CCC Company) and ACC (or any ACC Company) that was issued, acquired or will be settled at a discount.

9. Neither ACC (or any ACC Company) nor CCC (or any CCC Company) is an investment company as defined in Code Section 368(a)(2)(F).

10. Neither CCC, any CCC Company, nor any other person related (as defined in Treasury Regulation section 1.368-1(e)(3)) to CCC, has any plan or intention to reacquire any of its common stock issued under the Agreement.

11. Neither ACC nor any ACC Company is under the jurisdiction of a court in a case under Title 11 of the United States Code or a receivership, foreclosure, or similar proceeding in a federal or state court.

12. The payment of cash in lieu of fractional shares of CCC Common Stock made by CCC to ACC shareholders is solely for the purpose of avoiding the expense and inconvenience to CCC of issuing fractional shares and does not represent separately bargained-for consideration.

13. None of the compensation received by any shareholder-employee of ACC or any Affiliate of ACC pursuant to any employment, consulting or similar arrangement is or will be separate consideration for, or allocable to, any of his shares of CCC stock. None of the shares of common stock of CCC received by any shareholder-employee of ACC or any Affiliate of ACC pursuant to the Merger are or will be separate consideration for, or allocable to, any such employment, consulting or similar arrangement. The compensation paid to any shareholder-employee of ACC pursuant to any such employment, consulting or similar arrangement is or will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm’s length for similar services.

14. Each holder of ACC Common Stock is a resident individual of the United States or a United States corporation, partnership or other entity.

Based solely on the information submitted and the assumptions set forth above and assuming that the Merger will take place as described in the Agreement and that the representations made by CCC and ACC are true and correct at the time of the consummation of the Merger, we are of the opinion that the Merger will be a reorganization for federal income tax purposes within the meaning of Code Section 368(a)(1)(A), and CCC and ACC will each be “a party to a reorganization” within the meaning of Code Section 368(b).

The opinions expressed herein are based upon existing statutory, regulatory and judicial authority, any of which may be changed at any time with retroactive effect. In addition, our opinions are based solely on the documents that we have examined and the statements set out herein, which we have assumed and you have confirmed to be true on the date hereof and will be true on the day on which the Merger is consummated. Our opinions cannot be relied upon if any of the facts contained in such documents is, or later becomes, inaccurate or if any of the statements set out herein is, or later becomes, inaccurate. Our opinions do not address the various state, local or foreign tax consequences that may result from the Merger, and no opinion is expressed as to any federal income tax consequence of the Merger except as specifically set forth in this opinion.

The opinion is being provided solely for the benefit of ACC, CCC and their respective shareholders. No other person or party is entitled to rely on this opinion.

We consent to be named in the Registration Statement as accountants in connection with the offering described in the Registration Statement, and in the filing of this opinion as an exhibit to the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933.

(1) “Corporation” means the issuer of the shares held by a dissenter before the corporate action, or the surviving or acquiring corporation by merger or share exchange of that issuer.

(2) “Dissenter” means a shareholder who is entitled to dissent from corporate action under Section 33-13-102 and who exercises that right when and in the manner required by Sections 33-13-200 through 33-13-280.

(3) “Fair value”, with respect to a dissenter’s shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable. The value of the shares is to be determined by techniques that are accepted generally in the financial community.

(4) “Interest” means interest from the effective date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all the circumstances.

(5) “Record shareholder” means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.

(6) “Beneficial shareholder” means the person who is a beneficial owner of shares held by a nominee as the record shareholder.

(7) “Shareholder” means the record shareholder or the beneficial shareholder.

(A) A shareholder is entitled to dissent from, and obtain payment of the fair value of, his shares in the event of any of the following corporate actions:

(1) consummation of a plan of merger to which the corporation is a party (i) if shareholder approval is required for the merger by Section 33-11-103 or the articles of incorporation and the shareholder is entitled to vote on the merger or (ii) if the corporation is a subsidiary that is merged with its parent under Section 33-11-104 or 33-11-108 or if the corporation is a parent that is merged with its subsidiary under Section 33-11-108;

(2) consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares are to be acquired, if the shareholder is entitled to vote on the plan;

(3) consummation of a sale or exchange of all, or substantially all, of the property of the corporation other than in the usual and regular course of business, if the shareholder is entitled to vote on the sale or exchange, including a sale in dissolution, but not including a sale pursuant to court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale must be distributed to the shareholders within one year after the date of sale;

(4) an amendment of the articles of incorporation that materially and adversely affects rights in respect of a dissenter’s shares because it:

(ii) creates, alters, or abolishes a right in respect of redemption, including a provision respecting a sinking fund for the redemption or repurchase, of the shares;

(iii) alters or abolishes a preemptive right of the holder of the shares to acquire shares or other securities;

(iv) excludes or limits the right of the shares to vote on any matter, or to cumulate votes, other than a limitation by dilution through issuance of shares or other securities with similar voting rights; or

(v) reduces the number of shares owned by the shareholder to a fraction of a share if the fractional share so created is to be acquired for cash under Section 33-6-104; or

(5) in the case of corporations which are not public corporations, the approval of a control share acquisition under Article 1 of Chapter 2 of Title 35;

(6) any corporate action to the extent the articles of incorporation, bylaws, or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares.

(B) Notwithstanding subsection (A), no dissenters’ rights under this section are available for shares of any class or series of shares which, at the record date fixed to determine shareholders entitled to receive notice of a vote at the meeting of shareholders to act upon the agreement of merger or exchange, were either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc.

(a) A record shareholder may assert dissenters’ rights as to fewer than all the shares registered in his name only if he dissents with respect to all shares beneficially owned by any one person and notifies the corporation in writing of the name and address of each person on whose behalf he asserts dissenters’ rights. The rights of a partial dissenter under this subsection are determined as if the shares to which he dissents and his other shares were registered in the names of different shareholders.

(b) A beneficial shareholder may assert dissenters’ rights as to shares held on his behalf only if he dissents with respect to all shares of which he is the beneficial shareholder or over which he has power to direct the vote. A beneficial shareholder asserting dissenters’ rights to shares held on his behalf shall notify the corporation in writing of the name and address of the record shareholder of the shares, if known to him.

(a) If proposed corporate action creating dissenters’ rights under Section 33-13-102 is submitted to a vote at a shareholders’ meeting, the meeting notice must state that shareholders are or may be entitled to assert dissenters’ rights under this chapter and be accompanied by a copy of this chapter.

(b) If corporate action creating dissenters’ rights under Section 33-13-102 is taken without a vote of shareholders, the corporation shall notify in writing all shareholders entitled to assert dissenters’ rights that the action was taken and send them the dissenters’ notice described in Section 33-13-220.

(a) If proposed corporate action creating dissenters’ rights under Section 33-13-102 is submitted to a vote at a shareholders’ meeting, a shareholder who wishes to assert dissenters’ rights (1) must give to the corporation before the vote is taken written notice of his intent to demand payment for his shares if the proposed action is effectuated and (2) must not vote his shares in favor of the proposed action. A vote in favor of the proposed action cast by the holder of a proxy solicited by the corporation shall not disqualify a shareholder from demanding payment for his shares under this chapter.

(b) A shareholder who does not satisfy the requirements of subsection (a) is not entitled to payment for his shares under this chapter.

(a) If proposed corporate action creating dissenters’ rights under Section 33-13-102 is authorized at a shareholders’ meeting, the corporation shall deliver a written dissenters’ notice to all shareholders who satisfied the requirements of Section 33-13-210(a).

(b) The dissenters’ notice must be delivered no later than ten days after the corporate action was taken and must:

(1) state where the payment demand must be sent and where certificates for certificated shares must be deposited;

(2) inform holders of uncertificated shares to what extent transfer of the shares is to be restricted after the payment demand is received;

(3) supply a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action and requires that the person asserting dissenters’ rights certify whether or not he or, if he is a nominee asserting dissenters’ rights on behalf of a beneficial shareholder, the beneficial shareholder acquired beneficial ownership of the shares before that date;

(4) set a date by which the corporation must receive the payment demand, which may not be fewer than thirty nor more than sixty days after the date the subsection (a) notice is delivered and set a date by which certificates for certificated shares must be deposited, which may not be earlier than twenty days after the demand date; and

(a) A shareholder sent a dissenters’ notice described in Section 33-13-220 must demand payment, certify whether he (or the beneficial shareholder on whose behalf he is asserting dissenters’ rights) acquired beneficial ownership of the shares before the date set forth in the dissenters’ notice pursuant to Section 33-13-220(b)(3), and deposit his certificates in accordance with the terms of the notice.

(b) The shareholder who demands payment and deposits his share certificates under subsection (a) retains all other rights of a shareholder until these rights are canceled or modified by the taking of the proposed corporate action.

(c) A shareholder who does not comply substantially with the requirements that he demand payment and deposit his share certificates where required, each by the date set in the dissenters’ notice, is not entitled to payment for his shares under this chapter.

(a) The corporation may restrict the transfer of uncertificated shares from the date the demand for payment for them is received until the proposed corporate action is taken or the restrictions are released under Section 33-13-260.

(b) The person for whom dissenters’ rights are asserted as to uncertificated shares retains all other rights of a shareholder until these rights are canceled or modified by the taking of the proposed corporate action.

(a) Except as provided in Section 33-13-270, as soon as the proposed corporate action is taken, or upon receipt of a payment demand, the corporation shall pay each dissenter who substantially complied with Section 33-13-230 the amount the corporation estimates to be the fair value of his shares, plus accrued interest.

(1) the corporation’s balance sheet as of the end of a fiscal year ending not more than sixteen months before the date of payment, an income statement for that year, a statement of changes in shareholders’ equity for that year, and the latest available interim financial statements, if any;

(2) a statement of the corporation’s estimate of the fair value of the shares and an explanation of how the fair value was calculated;

(4) a statement of the dissenter’s right to demand additional payment under Section 33-13-280; and

(a) If the corporation does not take the proposed action within sixty days after the date set for demanding payment and depositing share certificates, the corporation, within the same sixty-day period, shall return the deposited certificates and release the transfer restrictions imposed on uncertificated shares.

(b) If, after returning deposited certificates and releasing transfer restrictions, the corporation takes the proposed action, it must send a new dissenters’ notice under Section 33-13-220 and repeat the payment demand procedure.

(a) A corporation may elect to withhold payment required by section 33-13-250 from a dissenter as to any shares of which he (or the beneficial owner on whose behalf he is asserting dissenters’ rights) was not the beneficial owner on the date set forth in the dissenters’ notice as the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action, unless the beneficial ownership of the shares devolved upon him by operation of law from a person who was the beneficial owner on the date of the first announcement.

(b) To the extent the corporation elects to withhold payment under subsection (a), after taking the proposed corporate action, it shall estimate the fair value of the shares, plus accrued interest, and shall pay this amount to each dissenter who agrees to accept it in full satisfaction of his demand. The corporation shall send with its offer a statement of its estimate of the fair value of the shares, an explanation of how the fair value and interest were calculated, and a statement of the dissenter’s right to demand additional payment under Section 33-13-280.

(a) A dissenter may notify the corporation in writing of his own estimate of the fair value of his shares and amount of interest due and demand payment of his estimate (less any payment under Section 33-13-250) or reject the corporation’s offer under Section 33-13-270 and demand payment of the fair value of his shares and interest due, if the:

(1) dissenter believes that the amount paid under Section 33-13-250 or offered under Section 33-13-270 is less than the fair value of his shares or that the interest due is calculated incorrectly;

(2) corporation fails to make payment under Section 33-13-250 or to offer payment under Section 33-13-270 within sixty days after the date set for demanding payment; or

(3) corporation, having failed to take the proposed action, does not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within sixty days after the date set for demanding payment.

(b) A dissenter waives his right to demand additional payment under this section unless he notifies the corporation of his demand in writing under subsection (a) within thirty days after the corporation made or offered payment for his shares.

(a) If a demand for additional payment under Section 33-13-280 remains unsettled, the corporation shall commence a proceeding within sixty days after receiving the demand for additional payment and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within the sixty-day period, it shall pay each dissenter whose demand remains unsettled the amount demanded.

(b) The corporation shall commence the proceeding in the circuit court of the county where the corporation’s principal office (or, if none in this State, its registered office) is located. If the corporation is a foreign corporation without a registered office in this State, it shall commence the proceeding in the county in this State where the principal office (or, if none in this State, the registered office) of the domestic corporation merged with or whose shares were acquired by the foreign corporation was located.

(c) The corporation shall make all dissenters (whether or not residents of this State) whose demands remain unsettled parties to the proceeding as in an action against their shares and all parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication, as provided by law.

(d) The jurisdiction of the court in which the proceeding is commenced under subsection (b) is plenary and exclusive. The court may appoint persons as appraisers to receive evidence and recommend decisions on the question of fair value. The appraisers have the powers described in the order appointing them or in any amendment to it. The dissenters are entitled to the same discovery rights as parties in other civil proceedings.

(e) Each dissenter made a party to the proceeding is entitled to judgment for the amount, if any, by which the court finds the fair value of his shares, plus interest, exceeds the amount paid by the corporation.

(a) The court in an appraisal proceeding commenced under Section 33-13-300 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The

court shall assess the costs against the corporation, except that the court may assess costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under Section 33-13-280.

(b) The court also may assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable:

(1) against the corporation and in favor of any or all dissenters if the court finds the corporation did not comply substantially with the requirements of Sections 33-13-200 through 33-13-280; or

(2) against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this chapter.

(c) If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the corporation, the court may award to these counsel reasonable fees to be paid out of the amounts awarded the dissenters who were benefited.

(d) In a proceeding commenced by dissenters to enforce the liability under Section 33-13-300(a) of a corporation that has failed to commence an appraisal proceeding within the sixty-day period, the court shall assess the costs of the proceeding and the fees and expenses of dissenters’ counsel against the corporation and in favor of the dissenters.

Appendix A —	Merger Agreement, dated as of October 15, 2003, between Community Capital Corporation and Abbeville Capital Corporation	A-1

Appendix B —	Fairness Opinion of The Orr Group.	B-1

Appendix C —	Tax Opinion of Elliott Davis, LLC.	C-1

Appendix D —	Article 13 of the South Carolina Business Corporation Act of 1988.	D-1

Aggregate Merger Consideration: (See pages 22 to 24)		564,559 shares of Community Capital common stock and $7,500,000 of cash. The aggregate amount of stock merger consideration may be increased and the aggregate amount of cash merger consideration decreased to the extent necessary for the merger to qualify as a tax-free reorganization.

Form of Merger Consideration: (See pages 22 to 24)		Abbeville Capital shareholders will receive one of the following forms of payment of the merger consideration for each share of Abbeville Capital common stock:

		• $63.13 in cash;

		• a number of shares of Community Capital common stock as determined by the exchange ratio described below; or

		• a combination of cash and shares of Community Capital common stock.

		Cash will be paid in lieu of any fractional share interest of Community Capital common stock.

		The exchange ratio will fluctuate, depending on the market price of Community Capital common stock. The exchange ratio will be 4.6419 shares of Community Capital common stock for each share of Abbeville Capital common stock if the average daily closing trading price per share of Community Capital common stock for the twenty consecutive trading days ending on the third trading day immediately preceding the merger is less than or equal to $13.60. The exchange ratio will be 3.0946 shares of Community Capital common stock for each share of Abbeville Capital common stock if the average daily closing trading price per share of Community Capital common stock for this period is greater than or equal to $20.40. If the average daily closing trading price per share of Community Capital common stock for this time period is between $13.60 and $20.40, the number of shares of Community Capital common stock exchangeable for each share of Abbeville Capital common stock will be determined by dividing $63.13 by the average daily trading price.

		You may elect the form of payment to receive for each of your shares of Abbeville Capital common stock, subject to a maximum of 564,559 shares of Community Capital common stock and $7.5 million of cash to be issued and paid as merger consideration. Abbeville Capital shareholders are unlikely to elect this exact mix of merger consideration. As a result, the merger agreement provides rules, which are described in the proxy statement/prospectus, to allocate the stock and cash forms of consideration based on the elections made by Abbeville Capital shareholders. Accordingly, you probably will not receive a portion of the merger consideration in the form you elect.

Surviving Corporation:		Abbeville Capital will merge into Community Capital, with Community Capital being the surviving corporation. (See page 22)

Headquarters after Merger:		Greenwood, South Carolina (See page 96)

Abbeville Capital Representation on Board of Directors of Community Capital Corporation:		One director (See page 37)

Pro Forma Ownership of Community Capital Common Stock by Abbeville Capital Shareholders:		Approximately 10.844%, as of November 11, 2003 (See page 11)

Expected Closing:		First quarter of 2004 (See page 32)

Required Approvals: (See pages 32 to 34)		Community Capital – Regulatory Abbeville Capital – Shareholder and Regulatory

	Nine months ended September 30,
*(Dollars in thousands)*	2003			2002
Income Statement Data:
Interest income	$	15,964		$	16,728
Interest expense		5,027			5,884

Net interest income		10,937			10,844
Provision for loan losses		243			663

Net interest income after provision for loan losses		10,694			10,181
Net securities gains (losses)		1,374			106
Noninterest income		4,094			3,098
Noninterest expense		10,711			8,806

Income before income taxes		5,451			4,579
Income tax expense		1,475			1,250

Net income	$	3,976		$	3,329

Balance Sheet Data:
Assets	$	394,847		$	378,777
Earning assets		358,623			356,358
Securities⁽¹⁾		46,756			56,157
Loans⁽²⁾		308,884			290,027
Allowance for loan losses		4,372			4,282
Deposits		301,700			274,063
Federal Home Loan Bank advances		32,450			31,165
Shareholders’ equity		44,616			44,137
Per Share Data:
Basic Earnings per share		1.14			0.97
Diluted earnings per share		1.08			0.91
Book value (period end)		12.75			12.53
Tangible book value (period end)		11.68			11.38
Performance Ratios:
Return on average assets		1.35	%		1.26	%
Return on average equity		11.99			13.14
Net interest margin⁽³⁾		4.22			4.56
Efficiency⁽⁴⁾		63.64			61.00
Allowance for loan losses to loan		1.42			1.48
Net charge-offs to average loans		0.05			0.29
Nonperforming assets to period end loans⁽²⁾⁽⁵⁾		0.54			0.65
Capital and Liquidity Ratios:
Average equity to average assets		11.29			11.65
Leverage (4.00% required minimum)		10.14			10.69
Tier 1 risk-based capital ratio		13.83			13.97
Total risk-based capital ratio		15.09			15.23
Average loans to average deposits		105.96			104.12

Year Ended December 31, *(Dollars in thousands, except per share)*	2002			2001			2000			1999			1998
Income Statement Data:
Interest income	$	22,204		$	26,961		$	29,722		$	23,199		$	21,043
Interest expense		7,793			13,675			16,636			11,850			11,198

Net interest income		14,411			13,286			13,086			11,349			9,845
Provision for loan losses		773			1,920			471			1,037			1,836

Net interest income after provision for loan losses		13,638			11,366			12,615			10,312			8,009
Net securities gains		106			290			—			175			220
Noninterest income		4,433			9,824			3,303			3,005			2,797
Noninterest expense		11,892			15,102			13,976			12,014			10,228

Income before income taxes		6,285			6,378			1,942			1,478			798
Income tax expense		1,683			1,900			290			150			34

Net income	$	4,602		$	4,478		$	1,652		$	1,328		$	764

Balance Sheet Data:
Assets	$	380,765		$	340,682		$	422,250		$	359,668		$	321,031
Earning assets		347,377			314,769			387,146			328,478			295,213
Securities ⁽¹⁾		55,812			62,806			106,041			108,926			120,695
Loans ⁽²⁾		288,842			248,390			280,506			219,054			172,545
Allowance for loan losses		4,282			4,103			3,060			2,557			2,399
Deposits		276,561			258,330			332,976			257,247			260,120
Federal Home Loan Bank advances		31,140			31,270			32,399			20,729			9,434
Shareholders’ equity		44,408			39,273			35,144			31,218			33,430
Per Share Data ⁽³⁾:
Basic earnings per share	$	1.34		$	1.31		$	0.48		$	0.40		$	0.24
Diluted earnings per share		1.26			1.26			0.48			0.40			0.23
Book value (period end) ⁽⁴⁾		12.71			11.66			10.79			10.10			10.81
Tangible book value (period end) ⁽⁴⁾		11.57			10.37			8.72			8.48			9.01
Cash dividends		0.17			0.06			—			—			—
Performance Ratios:
Return on average assets		1.28	%		1.19	%		0.41	%		0.40	%		0.27	%
Return on average equity		11.11			11.68			4.57			3.90			2.33
Net interest margin ⁽⁵⁾		4.50			4.08			3.83			3.96			3.77
Efficiency ⁽⁶⁾		61.45			72.71			81.75			79.55			78.50
Allowance for loan losses to loan		1.48			1.65			1.09			1.17			1.39
Net charge-offs to average loans		0.22			0.34			0.12			0.47			0.62
Nonperforming assets to period end loans ⁽²⁾⁽⁷⁾		0.71			0.68			0.25			0.56			0.78
Capital and Liquidity Ratios:
Average equity to average assets		11.71			10.22			9.07			10.22			11.47
Leverage (4.00% required minimum)		10.59			10.21			7.02			8.37			8.89
Tier 1 risk-based capital ratio		14.16			14.26			10.05			11.85			13.78
Total risk-based capital ratio		15.41			15.53			11.12			12.90			15.00
Average loans to average deposits		103.86			90.03			86.46			72.97			69.65

		Page
SUMMARY TERM SHEET		vi

QUESTIONS AND ANSWERS ABOUT THE MERGER		viii

SUMMARY		1
The Parties		1
The Merger		2
What Abbeville Capital Shareholders Will Receive in the Merger		2
Dissenters’ Rights		3
Abbeville Capital Recommendation to Shareholders		3
Opinion of The Orr Group that the Merger is Fair, from a Financial Point of View, to Abbeville Capital’s Shareholders		3
Expected Federal Tax Consequences of the Merger		4
Expected Community Capital Corporation Dividend Policy after the Merger		4
Management of Community Capital Corporation after the Merger		4
Interests of Abbeville Capital’s Executive Officers and Directors in the Merger		4
Ownership of Abbeville Capital Common Stock		4
Regulatory Approval and Other Conditions to the Merger		5
Termination of the Merger Agreement; Termination Fee		5
Differences in Shareholders’ Rights		6
Share Information and Price of Common Stock		6
Community Capital’s Recent Operating Results		7
Community Capital Selected Financial Data		8
Community Capital Corporation Selected Historical Financial Data		8
Abbeville Capital’s Recent Operating Results		9
Abbeville Capital Selected Financial Data		10
Abbeville Capital Selected Historical Financial Data		10
Unaudited Pro Forma Combined Financial Data		11
Community Capital Corporation Unaudited Pro Forma Condensed Balance Sheet		12
Community Capital Corporation Unaudited Pro Forma Condensed Income Statement 9/30/03		13
Community Capital Corporation Unaudited Pro Forma Condensed Income Statement 12/31/02		14

RISK FACTORS		15
You may not receive the form of merger consideration you elect		15
The value of your stock merger consideration will vary with changes in Community Capital Corporation’s stock price		15
The value of shares of Community Capital common stock may decline after the merger is completed before you receive your shares of Community Capital common stock		15
A lack of acquisition history could cause Community Capital to have difficulty in integrating Abbeville Capital into its operations		15
A loss of services of Thomas D. Sherard, Jr. and Patricia P. Howie, or other key personnel could have a material negative impact upon the future success of the acquired operations of Abbeville Capital		16
Directors and executive officers of Abbeville Capital may have interests that are different from or in addition to your interests as a shareholder of Abbeville Capital		16
You will have less influence as a shareholder of Community Capital than as a shareholder of Abbeville Capital		16
Changes in Interest Rates Could Adversely Affect Community Capital’s Results of Operations and Financial Condition		16
Community Capital could sustain losses if its asset quality declines		17
The Banking Industry is Highly Competitive		17

Changes in Economic Conditions Could Adversely Affect Community Capital’s Results of Operation and Financial Condition		17
Community Capital Relies Heavily on the Services of Key Personnel		18
Community Capital Could be Adversely Affected by Government Regulation		18

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION		19

SHAREHOLDER MEETING		20
Date, Place, Time and Purpose		20
Record Date, Voting Rights, Required Vote and Revocability of Proxies		20
Solicitation of Proxies		21
Dissenters’ Rights		21
Recommendation by Abbeville Capital’s Board of Directors		21

DESCRIPTION OF THE MERGER		22
The Merger		22
What Abbeville Capital Shareholders Will Receive in the Merger		22
Possible Adjustment of the Merger Consideration		22
Allocation of the Merger Consideration		23
Election of the Form of Payment of the Merger Consideration		23
Background of the Merger		24
Community Capital Reasons for the Merger		26
Abbeville Capital’s Reasons for the Merger; Recommendation of the Board of Directors		27
Opinion of Abbeville Capital’s Financial Advisor		28
Selected Companies Analysis		29
Comparable Transaction Analysis		30
Discount Dividend Analysis		31
Contribution Analysis		31
Pro Forma Merger Analysis		31
Effective Time of the Merger		32
Condition to Consummation of the Merger		32
Regulatory Approvals of the Merger		33
Waiver, Amendment and Termination of the Merger Agreement; Termination Fee		34
Conduct of Business of Abbeville Capital Pending the Merger		35
Management and Operations of Community Capital after the Merger		36
Expected Dividend Policy of Community Capital Corporation after the Merger		36
Interests of Abbeville Capital’s Executive Officers and Directors in the Merger		36
Interests of Community Capital		37
Expected Federal Tax Consequences of the Merger		37
Accounting Treatment		41
Expenses and Fees		41

DISSENTERS’ RIGHTS		41

EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS		44
Antitakeover Provisions Generally		44
Authorized Capital Stock		44
Amendment of Articles of Incorporation and Bylaws		45
Election of Directors		46
Removal of Directors		47
Record Date		48
Indemnification		48
Shareholder Nominations		49
Shareholder Proposals		49
Mergers, Consolidations and Sales of Assets		49
Business Combinations with Interested Shareholders		50

Control Share Acquisition Provisions		51
Consideration of Other Constituencies		52
Dissenters’ Rights		52

PRICE RANGE OF COMMON STOCK AND DIVIDENDS		52

ABBEVILLE CAPITAL MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		54
General		54
Results of Operation		54
Net Interest Income		57
Provision and Allowance for Loan Losses		60
Noninterest Income and Expenses		62
Assets and Liabilities		63
Loans		63
Risk Elements in the Loan Portfolio		63
Deposits and Other Interest Bearing Liabilities		66
Capital		68
Analysis of Capital and Capital Ratios		68
Liquidity and Capital Resources		68
Critical Accounting Policies		69
Impact of Inflation		70
Regulatory Matters		70

COMMUNITY CAPITAL MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		71
General		71
Results of Operation		71
Net Interest Income		75
Provision and Allowance for Loan Losses		79
Noninterest Income and Expenses		81
Assets and Liabilities		82
Loans		83
Risk Elements in the Loan Portfolio		83
Premises and Equipment		86
Deposits and Other Interest Bearing Liabilities		87
Advances from Federal Home Loan Bank		88
Capital		88
Analysis of Capital		89
Liquidity Management and Capital Resources		89
Off Balance Sheet Risks		90
Impact of Inflation		91
Critical Accounting Policies		91
Recently Issued Accounting Standards		91
Industry Developments		92
Regulatory Matters		92
INFORMATION ABOUT ABBEVILLE CAPITAL		93
General		93

Employees		94
Certain Relationships and Related Transactions		94
Legal Proceedings		94
Principal Shareholders and Management		94
Change in Accountants		95
Equity Compensation Plans		95

INFORMATION ABOUT COMMUNITY CAPITAL		96
General		96
Business		96
Market Areas		97
Lending Activities		97
Deposits		98
Competition		98
Employees		99
Properties		99
Legal Proceedings		99
Equity Compensation Plan Information		100
Quantitative and Qualitative Disclosures About Market Risk		100
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		100
Directors of Community Capital		101
Executive Officers		102
Compensation of Officers		103
Option Grants		103
Option Grants In Last Fiscal Year		103
Employment Contract, Termination, and Change in Control Arrangements		104
Compensation of Directors		105
Certain Relationships and Related Transactions		106
Security Ownership of Certain Beneficial Owners		106
Security Ownership of Management		106
Section 16(a) Beneficial Ownership Reporting Compliance		108

RESALES OF COMMUNITY CAPITAL CORPORATION COMMON STOCK		108

CERTAIN REGULATORY CONSIDERATIONS		109
Bank Holding Company Regulation Generally		109
Interstate and Intrastate Banking and Branching		110
Gramm-Leach Bliley Act		110
Sarbanes-Oxley Act of 2002		111
FIRREA		112
Reserve Requirements		112
Loan Restrictions		112
Restrictions on the Payment of Dividends		113
Capital Adequacy		113
Other Regulations		113
Enforcement Authority		114

DESCRIPTION OF COMMUNITY CAPITAL COMMON STOCK		115

OTHER MATTERS		116

WHERE YOU CAN FIND MORE INFORMATION		116

LEGAL MATTERS		116

EXPERTS		116

INDEX TO FINANCIAL STATEMENTS		F-1

	Nine months ended September 30,
*(Dollars in thousands, except per share)*	2003			2002
Income Statement Data:
Interest income	$	2,840		$	3,091
Interest expense		961			1,134

Net interest income		1,879			1,957
Provision for loan losses		—			55

Net interest income after provision for loan losses		1,879			1,902
Net securities gains (losses)		21			1
Noninterest income		524			442
Noninterest expense		1,491			1,371

Income before income taxes		933			974
Income tax expense		244			263

Net income	$	689		$	711

Balance Sheet Data:
Assets	$	69,923		$	68,622
Earning assets		66,587			64,406
Securities⁽¹⁾		17,858			21,526
Loans⁽²⁾		38,565			38,325
Allowance for loan losses		375			372
Deposits		53,238			52,773
Federal Home Loan Bank advances		3,000			3,000
Shareholders’ equity		7,705			7,281
Per Share Data:
Basic Earnings per share		2.90			2.99
Diluted earnings per share		2.90			2.99
Book value (period end)		32.43			30.64
Tangible book value (period end)		32.43			30.64
Performance Ratios:
Return on average assets		1.31	%		1.39	%
Return on average equity		12.60			14.17
Net interest margin⁽³⁾		3.80			4.06
Efficiency⁽⁴⁾		61.50			57.13
Allowance for loan losses to loan		0.97			0.97
Net charge-offs to average loans		0.04			0.26
Nonperforming assets to period end loans⁽²⁾⁽⁵⁾		0.06			0.09
Capital and Liquidity Ratios:
Average equity to average assets		10.40			9.81
Leverage (4.00% required minimum)		10.56			10.14
Tier 1 risk-based capital ratio		17.07			15.89
Total risk-based capital ratio		17.91			16.75
Average loans to average deposits		71.35			71.28

	Years ended December 31,
*(Dollars in Thousands except per share)*	2002			2001			2000			1999			1998
Income Statement Data:
Interest income	$	4,091		$	4,663		$	4,568		$	4,146		$	3,976
Interest expense		1,488			2,327			2,346			2,061			2,059

Net interest income		2,603			2,336			2,222			2,085			1,917
Provision for loan losses		86			31			80			90			41

Net interest income after provision for loan losses		2,517			2,305			2,142			1,995			1,876
Net securities gains (losses)		1			—			(10	)		(3	)		—
Noninterest income		643			407			393			382			352
Noninterest expense		1,904			1,632			1,528			1,443			1,348

Income before income taxes		1,257			1,080			997			931			880
Income tax expense		340			345			276			298			259

Net income	$	917		$	735		$	721		$	633		$	621

Balance Sheet Data:
Assets	$	68,030		$	67,713		$	63,438		$	59,538		$	58,541
Earning assets		64,414			63,769			58,530			54,855			55,047
Securities⁽¹⁾		21,060			21,180			21,866			21,889			19,303
Loans ⁽²⁾		38,230			36,347			33,868			31,995			28,444
Allowance for loan losses		387			373			350			310			315
Deposits		53,043			50,620			48,091			44,597			44,463
Federal Home Loan Bank advances		3,000			3,000			3,000			3,000			3,000
Shareholders’ equity		7,478			6,737			6,002			5,324			5,073
Per Share Data:
Basic earnings per share		3.86			3.09			3.04			2.67			2.61
Diluted earnings per share		3.86			3.09			3.04			2.67			2.61
Book value (period end)		31.48			28.35			25.26			22.41			21.37
Tangible book value (period end)		31.48			28.35			25.26			22.41			21.37
Performance Ratios:
Return on average assets		1.35	%		1.11	%		1.15	%		1.06	%		1.08	%
Return on average equity		13.46			12.04			12.82			11.89			12.23
Net interest margin ⁽³⁾		3.71			3.21			3.18			3.58			3.40
Efficiency ⁽⁴⁾		58.65			59.51			58.44			58.50			59.42
Allowance for loan losses to loan		1.01			1.03			1.03			0.97			1.11
Net charge-offs to average loans		0.19			0.02			0.12			0.32			0.17
Nonperforming assets to period end loans ⁽²⁾⁽⁵⁾		0.08			0.14			0.23			0.25			0.88
Capital and Liquidity Ratios:
Average equity to average assets		10.00			9.20			8.94			8.93			8.79
Leverage (4.00% required minimum)		10.74			10.41			9.49			9.05			8.85
Tier 1 risk-based capital ratio		16.73			16.64			16.37			16.58			16.05
Total risk-based capital ratio		17.62			17.57			17.33			17.53			17.05
Average loans to average deposits		71.46			70.77			70.03			65.72			70.94

	Actual							Pro Forma
	Community Capital		Abbeville Capital		Adjustments			September 30, 2003
Assets
Cash and cash equivalents	$	12,476	$	10,527		(8,379	)⁽¹⁾		14,624
Investment securities		46,756		17,858		494	⁽²⁾		65,108
Loans held for sale		2,980		—					2,980
Loans, net of allowance		304,512		38,190		78	⁽²⁾		342,780
Premises and equipment, net		9,609		1,246		118	⁽²⁾		10,973
Goodwill		—		—		6,672	⁽⁴⁾		6,672
Core Deposit Premium		—		—		1,334	⁽³⁾		1,334
Other assets		18,511		2,102					20,613

Total assets	$	394,844	$	69,923	$	317		$	465,084

Liabilities
Deposits		301,700		53,238		453	⁽²⁾		355,391
Federal funds purchased and securities held under agreement to repurchase		13,494		5,587					19,081
Advances from Federal Home Loan Bank		32,450		3,000		69	⁽²⁾		35,519
Other liabilities		2,584		393					2,977

Total liabilities		350,228		62,218		522			412,968

Shareholders’ equity
Shareholders’ equity		44,616		7,705		(205	)⁽⁵⁾		52,116

Total liabilities and shareholders’ equity	$	394,844	$	69,923	$	317		$	465,084

Purchase price: Cash	$	7,500
Stock		7,500
Estimated transaction costs		879

Total purchase price			$	15,879
Fair value of assets – identifiable		71,947
Fair value of liabilities		62,740

Fair value of identifiable net assets				9,207

Goodwill			$	6,672

Community Capital equity issued	$	7,500
Abbeville Capital equity		(7,705	)

Adjustment	$	(205	)

	Actual (Unaudited)							Pro Forma
	Community Capital		Abbeville Capital		Adjustments			September 30, 2003
Interest income	$	15,964	$	2,840		(59	)⁽¹⁾	$	18,745
Interest expense		5,027		961					5,988

Net interest income		10,937		1,879					12,757
Provision for loan losses		43		—					243

Net interest income after provision for loan losses		10,694		1,879					12,514
Noninterest income		5,468		546					6,014
Noninterest expense		10,711		1,491		(197	)⁽²⁾		12,005

Income before income taxes		5,451		934					6,523
Income tax expense		1,475		245		39	⁽³⁾		1,759

Net income	$	3,976	$	689	$	99		$	4,764

Basic net income per share	$	1.14	$	2.90				$	1.23	⁽⁴⁾
Diluted net income per share	$	1.08		2.90				$	1.17	⁽⁴⁾
Weighted average number of common shares outstanding
Basic		3,499,320		237,615					3,866,983
Diluted		3,687,374		237,615					4,055,037

Cecil Bancorp	MD	Madison Bancshares	FL

Muncy Bank Financial	PA	Parke Bank	NJ

Potomac Bancshares	WV	First Trust Bank	NC

Greer Bancshares	SC	MidCarolina Financial	NC

Cardinal Bankshares	VA	FNB Bancshares, Inc.	SC

Heritage Bankshares	VA	Guaranty Financial Corp	VA

Harford Bank	MD	Atlantic BancGroup	FL

Surrey Bancorp	NC	Patapsco Bancorp	MD

Bank of SC Corp	SC	Pioneer Bankshares	VA

Fulton Bancshares	PA	Allaire Community Bank	NJ

Bank of the James	VA	Boardwalk Bank	NJ

Citizens Financial Corp	WV	United Financial	NC

Waccamaw Bankshares	NC	Bank of Wilmington	NC

People's Community Capital	SC	United Financial Banking Cos	VA

Shore Financial Corp	VA	Easton Bancorp, Inc.	MD

Thomasville Bancshares	GA	Weststar Financial Services	NC

FNB Financial Corp	PA	Beach First National Bancshares	SC

Select Financial Data	Abbeveille Data		Peer Median
Assets (000s)	$	69,975	$	152,981
Tangible Equity (000s)	$	7,705	$	13,986
Loans to Deposits		71.7		86.8
Tangible Common Equity Ratio (TCE)		11.0		9.8
Tier 1 Ratio		15.9		12.2
Reserves to Loans		1.1		1.4
Net Charge Offs to Loans		0.1		0.1
Return on Average Assets (ROAA)		1.4		1.0
Return on Average Equity (ROAE)		13.5		9.8
Net Interest Margin (NIM)		4.1		4.1
Efficiency Ratio		56.6		62.8
Dividend Yield		0.00		0.90

Median Statistics	Price to Book	Price to TBVPS	Price to LTM EPS	Price to Assets	Price to Deposits	Fran Prem to Core Dep	Target Assets
Abbeville - Community Capital	195.0	195.0	16.7	21.4	28.1	16.6	$	69,975
All Comparables	180.9	195.2	17.5	17.4	20.7	11.4	$	106,922
ROAA Comparables	193.1	200.8	16.3	17.9	21.0	13.1	$	110,620
Size Comparables	176.9	177.2	19.3	17.6	21.1	12.3	$	75,125
TCE Comparables	180.2	181.4	15.6	17.9	21.3	10.2	$	109,304
Regional Comparables	186.8	190.6	18.7	20.4	24.1	15.2	$	83,355
Select Comparables	164.1	164.1	16.1	18.2	21.0	10.2	$	95,036

		Stock Prices				Cash Dividends Per Share
Year	Quarter	High		Low		Cash Dividends Per Share
2004	First Quarter (through January 5, 2004)	$	20.40	$	19.80	$	0.00

2003	First Quarter	$	15.84	$	13.91	$	0.06
	Second Quarter		16.25		14.05		0.06
	Third Quarter		20.30		16.05		0.09
	Fourth Quarter		21.75		18.96		0.12

2002	First Quarter	$	12.70	$	11.25	$	0.03
	Second Quarter		14.75		12.25		0.04
	Third Quarter		15.60		11.95		0.05
	Fourth Quarter		14.50		12.00		0.05

	Year ended December 31,
	2002							2001
*(Actual amounts)*	Average Balance			Interest		Yield/ Rate		Average Balance			Interest		Yield/ Rate
Assets
Securities, taxable	$	13,674,979		$	688,940	5.04	%	$	13,234,554		$	794,447	6.00	%
Securities, nontaxable		8,023,819			372,047	4.64			7,812,087			367,783	4.71
Loans		37,022,181			2,933,494	7.92			35,850,446			3,277,267	9.14
Federal funds sold		5,371,341			83,993	1.56			5,714,857			206,245	3.61
Nonmarketable equity securities		276,956			12,811	4.63			270,964			16,680	6.16

Total earning assets		64,369,276			4,091,285	6.36			62,882,908			4,662,422	7.41
Cash and due from banks		1,954,861							1,889,930
Allowance for loan losses		(368,006	)						(354,499	)
Premises and equipment		1,223,109							1,080,605
Other assets		996,813							848,356

Total assets	$	68,176,953						$	66,347,300

Liabilities and Stockholders’ Equity
Interest bearing transaction accounts	$	8,897,949			29,150	0.33	%		8,923,411			55,072	0.62	%
Money market		4,369,799			69,178	1.58			4,556,537			133,583	2.93
Savings accounts		3,134,019			19,319	0.62			2,779,463			44,063	1.59
Time deposits		30,989,524			1,130,562	3.65			30,214,985			1,704,608	5.64

Total interest bearing deposits		47,391,291			1,248,209	2.63			46,474,396			1,937,326	4.17

FHLB advances		3,000,000			182,604	6.09			3,000,000			182,604	6.09
Other short-term borrowings		5,691,279			57,591	1.01			5,886,229			206,681	3.51

Total other interest-bearing liabilities		8,691,279			240,195	2.76			8,886,229			389,285	4.38

Total interest-bearing liabilities		56,082,570			1,488,404	2.65			55,360,625			2,326,611	4.20
Non-interest deposits		4,415,622							4,184,642
Other liabilities		862,412							697,139
Stockholders’ equity		6,815,449							6,104,894

Total liabilities and equity	$	68,176,053						$	66,347,300

Net interest income/interest rate spread				$	2,602,881	3.71	%				$	2,335,811	3.21	%

Net interest margin						4.04	%						3.71	%

	2002 Compared With 2001
*(Actual amounts)*	Volume ⁽¹⁾			Variance Due to Rate ⁽¹⁾			Total
Earning Assets
Securities, taxable	$	25,586		$	(131,093	)	$	(105,507	)
Securities, nontaxable		9,817			(5,553	)		4,264
Loans		104,443			(448,216	)		(343,773	)
Federal funds sold		(11,702	)		(110,550	)		(122,252	)
Nonmarketable equity securities		361			(4,230	)		(3,869	)

Total earning assets		128,505			(699,642	)		(571,137	)

Interest-Bearing Liabilities
Interest bearing transaction accounts		(1,040	)		(24,882	)		(25,922	)
Money market		(5,260	)		(59,145	)		(64,405	)
Savings accounts		5,395			(30,139	)		(24,744	)
Time deposits		42,570			(616,616	)		(574,046	)

Total deposits		41,665			(730,782	)		(689,117	)
FHLB advances		—			—			—
Other short-term borrowings		(6,624	)		(142,465	)		(149,090	)

Total interest bearing liabilities		35,040			(873,247	)		(838,207	)

Net interest income	$	93,465		$	173,605		$	267,070

	2001 Compared With 2000
*(Actual amounts)*	Volume ⁽¹⁾			Variance Due to Rate ⁽¹⁾			Total
Earning Assets
Securities, taxable	$	(25,263	)	$	(59,791	)	$	(85,054	)
Securities, nontaxable		(4,644	)		21,065			16,421
Loans		204,669			(64,530	)		140,139
Federal funds sold		55,018			(30,672	)		24,346
Nonmarketable equity securities		—			(1,920	)		(1,920	)

Total earning assets		229,780			(135,848	)		93,932

Interest-Bearing Liabilities
Interest bearing transaction accounts		2,210			(29,111	)		(26,901	)
Money market		25,863			(42,364	)		(16,501	)
Savings accounts		2,879			(28,882	)		(26,003	)
Time deposits		92,870			67,828			160,698

Total deposits		123,822			(32,529	)		91,293
FHLB advances		—			—			—
Other short-term borrowings		8,101			(118,862	)		(110,761	)

Total interest bearing liabilities		131,923			(151,391	)		(19,468	)

Net interest income	$	97,857		$	15,543		$	113,400

*(Dollars in thousands)*	Within One Month			After One Through Three Months			After Three Through Twelve Months			Within One Year			Greater Than One Year or Non- Sensitive			Total
Assets
Earning Assets:
Loans ⁽¹⁾	$	1,407		$	2,050		$	5,127		$	8,584		$	29,728		$	38,312
Securities		279			500			—			779			20,281			21,060
Federal funds sold		5,034			—			—			5,034			—			5,034

Total earning assets		6,720			2,550			5,127			14,397			50,009			64,406

Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
Demand deposits		12,800			—			—			12,800			—			12,800
Savings deposits		3,042			—			—			3,042			—			3,042
Time deposits		3,802			3,973			15,589			23,364			9,541			32,905

Total interest-bearing deposits		19,644			3,973			15,589			39,206			9,541			48,747

FHLB advances		—			—			—			—			3,000			3,000
Securities sold under agreements to repurchase		3,993			—			—			3,993			—			3,993

Total interest-bearing liabilities		23,637			3,973			15,589			43,199			12,541			55,740

Period gap	$	(16,917	)	$	(1,423	)	$	(10,462	)	$	(28,802	)	$	37,468

Cumulative gap	$	(16,917	)	$	(18,340	)	$	(28,802	)	$	(28,802	)	$	8,666

Ratio of cumulative gap to total earning assets		(26.27	)%		(28.48	)%		(44.72	)%		(44.72	)%		13.46	%

	December 31,
*(Dollars in thousands)*	2002			2001			2000
Nonaccrual loans	$	8		$	12		$	34
Restructured or impaired loans		—			—			—

Total nonperforming loans		8			12			34
Other real estate owned		22			38			44

Total nonperforming assets	$	30		$	50		$	78

Loans 90 days or more past due and still accruing interest	$	57		$	92		$	5
Nonperforming assets to period end loans and foreclosed property		0.08	%		0.14	%		0.23	%

*(Dollars in thousands)*	September 30, 2003		December 31, 2002
Commercial and industrial	$	3,357	$	3,507
Real estate		20,116		20,782
Installment and consumer credit lines		14,553		13,626
All other loans		558		418

	$	38,584	$	38,333

	September 30, 2003			December 31, 2002
Loans: Nonaccrual loans	$	—			8,330
Accruing loans more than 90 days past due	$	2,793		$	58,311

Activity in the Allowance for Loan Losses is as follows:

	September 30, 2003			December 31, 2002
Balance, January 1	$	386,914		$	373,410
Provision for loan losses for the period		—			86,000
Net loans (charged-off) for the period		(11,969	)		(72,496	)

Balance, end of period	$	374,945		$	386,914

Gross loans outstanding, end of period	$	38,583,741		$	38,333,368
Allowance for loan losses to loans outstanding		0.97	%		1.01	%

*(Dollars in thousands)*	One Year or Less		Over One Year Through Five Years		Over Five Years		Total
Commercial and industrial	$	772	$	2,139	$	596	$	3,507
Real estate		4,572		12,677		3,533		20,782
Consumer and other		3,248		8,589		2,194		14,031

		8,592		23,405		6,323		38,320

Loans maturing after one year with:
Fixed interest rates							$	25,394
Floating interest rates								4,334

							$	29,728

	Within One Year				After One But Within Five Years				After Five But Within Ten Years				Over Ten Years				Total
*(Dollars in thousands)*	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
U.S. Government agencies	$	—	—		$	3,568	4.80	%	$	1,516	4.54	%	$	1,527	5.97	%	$	6,611	4.98	%
Mortgage-backed securities		—	—			—	—			1,846	4.21			4,144	5.98			5,990	5.80
Obligations of state and political subdivisions		500	4.75	%		1,362	4.60			3,861	4.44			2,457	5.25			8,180	5.06

Total debt securities	$	500	4.75	%	$	4,930	4.75	%	$	7,223	4.41	%	$	8,128	5.89	%	$	20,781	5.37	%

		Within Three Months			After Three Through Six Months			After Six Through Twelve Months			After Twelve Months			Total
Certificates of deposit of $100,00 or more		$	3,296		$	3,083		$	2,925		$	1,980		$	11,284

	The Bank of Abbeville
	2002			2001
Tier 1 capital	$	7,084		$	6,432
Tier 2 capital		387			373

Total qualifying capital	$	7,471		$	6,805

Risk-adjusted total assets (including off-balance sheet exposures)	$	43,583		$	39,904

Tier 1 risk-based capital ratio		16.25	%		16.12	%
Total risk-based capital ratio		17.14			17.06
Tier 1 leverage ratio		10.42			9.46

*(Dollars in thousands)*
Shareholders’ equity	$	7,470
Less: unrealized gains on available-for-sale securities		(53	)

Tier a capital		7,417
Plus: allowance for loan losses⁽¹⁾		375

Total capital	$	7,792

Risk-weighted assets	$	44,833

Risk-based capital ratios
Total capital (to risk-weighted assets)		17.38	%
Tier 1 capital (to risk-weighted assets)		16.54	%
Tier 1 capital (to average assets)		10.56	%

December 31, 2002 *(Dollars in thousands)*	Within One Month			After One Through Three Months			After Three Through Twelve Months			Within One Year			Greater Than One Year or Non- Sensitive			Total
Assets
Earning assets:
Loans⁽¹⁾	$	90,189		$	13,707		$	40,332		$	144,228		$	145,405		$	289,633
Securities		502			617			7,627			8,746			47,066			55,812
Federal funds sold and other		39			—			—			39			—			39

Total earning assets		90,730			14,324			47,959			153,013			192,471			345,484

Liabilities
Interest-bearing liabilities
Interest-bearing deposits:
Demand deposits		102,416			—			—			102,416			—			102,416
Savings deposits		27,948			—			—			27,948			—			27,948
Time deposits		13,911			21,126			50,716			85,753			31,022			116,775

Total interest-bearing deposits		144,275			21,126			50,716			216,117			31,022			247,139
Other short-term borrowings		25,850			—			—			25,850			—			25,850
Federal Home Loan Bank advances		—			10,015			—			10,015			21,125			31,140
Obligations under capital leases		18			37			173			228			505			733

Total interest-bearing liabilities		170,043			31,178			50,889			252,210			52,652			304,862

Period gap	$	(79,413	)	$	(16,854	)	$	(2,930	)	$	(99,197	)	$	139,819

Cumulative gap	$	(79,413	)	$	(96,267	)	$	(99,197	)	$	(99,197	)	$	40,622

Ratio of cumulative gap to total earning assets		(22.99	)%		(27.86	)%		(28.71	)%		(28.71	)%		11.76	%

*(Dollars in thousands)*	September 30, 2003		September 30, 2002
Loans:
Nonaccrual loans	$	1,343	$	1,682
Accruing loans more than 90 days past due		339		626

		1,682		2,308

*(Dollars in thousands)*	September 30,
	2003			2002
Balance, January 1,	$	4,282		$	4,103
Provision for loan losses for the period		243			663
Chargeoffs		(409	)		(589	)
Recoveries		256			105

Balance, end of period	$	4,372		$	4,282

Gross loans outstanding, end of period	$	308,884		$	290,027
Allowance for loan losses to loans outstanding		1.42	%		1.48	%

December 31, 2002 *(Dollars in thousands)*	One Year or Less		Over One Year Through Five Years		Over Five Years		Total
Commercial and industrial	$	17,374	$	13,445	$	1,250	$	32,069
Real estate		89,574		127,383		23,960		240,917
Consumer and other		5,215		10,253		388		15,856

	$	112,163	$	151,081	$	25,598	$	288,842

Loans maturing after one year with:
Fixed interest rates							$	176,213
Floating interest rates								466

							$	176,679