1
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2001
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-25972
FIRST COMMUNITY CORPORATION
-----------------------------------
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
TENNESSEE 62-1562541
- ------------------------------------------ -----------------------------
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
809 WEST MAIN STREET
ROGERSVILLE, TENNESSEE 37857
- ------------------------------------------ -----------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(423) 272-5800
--------------------------------------------------------
(ISSUER"S TELEPHONE NUMBER, INCLUDING AREA CODE)
NONE
--------------------------------------------
(FORMER NAME, ADDRESS AND FISCAL YEAR, IF CHANGED SINCE LAST REPORT)
INDICATE BY CHECK MARK WHETHER THE ISSUER: (1) HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
1,963,035
-------------------------------------
(OUTSTANDING SHARES OF THE ISSUER'S COMMON STOCK AS OF JUNE 30, 2001)
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES [ ] NO [X]
2
FIRST COMMUNITY CORPORATION
INDEX
NUMBER PAGE
- ------ ----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
JUNE 30, 2001 (UNAUDITED) AND DECEMBER 31, 2000
CONSOLIDATED STATEMENTS OF INCOME 4
SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED)
CONSOLIDATED STATEMENTS OF INCOME 5
THREE MONTHS ENDED JUNE 30, 2001 (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 10
ITEM 2. CHANGES IN SECURITIES 10
ITEM 3. DEFAULT UPON SENIOR SECURITIES 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10
ITEM 5. OTHER INFORMATION 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
2
3
PART I - FINANCIAL INFORMATION
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, 2001
($ amounts in thousands )
JUNE 30, December 31, Amount %
ASSETS 2001 2000 Change Change
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and due from banks $ 8,133 3,425 4,708 137.5%
Federal funds sold 7,600 2,460 5,140 208.9%
Securities available-for-sale, at fair value 6,773 8,310 (1,537) -18.5%
Loans 111,225 101,257 9,968 9.8%
Allowance for loan losses (1,236) (1,012) (224) 22.1%
- ----------------------------------------------------------------------------------------------------------------------------------
LOANS, NET 109,989 100,245 9,744 9.7%
- ----------------------------------------------------------------------------------------------------------------------------------
Premises and equipment 3,771 3,954 (183) -4.6%
Accrued income receivable 1,317 1,606 (289) -18.0%
Federal Home Loan Bank Stock 1,336 1,289 47 3.6%
Cash surrender value of life insurance 597 603 (6) -1.0%
Computer Software, net of amortization 530 585 (55) -9.4%
Other assets 605 499 106 21.2%
- ----------------------------------------------------------------------------------------------------------------------------------
$ 140,651 122,976 17,675 14.4%
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
DEPOSITS:
Noninterest-bearing $ 11,848 12,029 (181) -1.5%
Interest-bearing 101,672 83,625 18,047 21.6%
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 113,520 95,654 17,866 18.7%
Securities sold under agreements to repurchase 1,609 2,257 (648) -28.7%
Advances from FHLB 12,700 12,500 200 1.6%
Note payable 1,683 1,823 (140.00) 0.0%
Accrued Interest Payable 938 1,019 (81) 0.0%
Dividend Payable 137 137 -- 0.0%
Other liabilities 598 421 177 42.0%
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 131,186 113,811 17,375 15.3%
- ----------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, no par value. Authorized 10,000,000
shares; issued and outstanding 1,963,035 in 2001
and 2,021,180 in 2000 7,390 7,386 4 0.1%
Accumulated other comprehensive income, net 49 17 32 188.2%
Retained earnings 2,026 1,761 265 15.0%
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 9,465 9,165 300 3.3%
- ----------------------------------------------------------------------------------------------------------------------------------
$ 140,651 122,976 17,675 14.4%
- ----------------------------------------------------------------------------------------------------------------------------------
3
4
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
June 30, 2001
($ amounts in thousands except earnings per share)
SIX MONTHS ENDED JUNE 30, 2001
---------------------------------------------------------------
Amount %
2001 2000 Change Change
---------- --------- ------ ------
INTEREST INCOME:
Loans, including fees $ 4,889 4,464 425 9.5%
Securities:
Taxable 320 250 70 28.0%
Tax exempt 23 23 0 0.0%
Deposits in financial institutions 0 19 (19) 0.0%
Federal funds sold 109 43 66 153.5%
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 5,341 4,798 543 11.3%
- -----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 2,121 1,861 260 14.0%
Other borrowings 472 502 (30) -6.0%
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 2,593 2,364 229 9.7%
- -----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 2,748 2,435 313 12.9%
PROVISION FOR LOAN LOSSES 324 72 252 350.0%
- -----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,425 2,363 62 2.6%
- -----------------------------------------------------------------------------------------------------------------------------
OTHER INCOME:
Service charges on deposit accounts 313 323 (10) -3.1%
Asset Gains 0 75 (75) 0.0%
Other service charges, commissions and fees 143 156 (13) -8.4%
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 456 554 (98) -17.7%
- -----------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries, Directors' fees and employee benefits 1,063 995 68 6.8%
Occupancy expense 320 318 2 0.6%
Other operating expenses 656 747 (91) -12.2%
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 2,039 2,059 (20) -1.0%
- -----------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 842 858 (16) -1.8%
INCOME TAXES 303 312 (9) -2.9%
- -----------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 540 546 (6) -1.0%
- -----------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE $ 0.28 0.27 0.01 2.0%
- -----------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING 1,961,807 2,021,290 (59,483) -2.9%
- -----------------------------------------------------------------------------------------------------------------------------
4
5
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
June 30, 2001
($ amounts in thousands except earnings per share)
THREE MONTHS ENDED JUNE 30, 2001
---------------------------------------------------------------
Amount %
2001 2000 Change Change
---------- --------- ------ ------
INTEREST INCOME:
Loans, including fees $ 2,491 2,258 233 10.3%
Securities:
Taxable 196 126 70 55.6%
Tax exempt 12 12 0 0.0%
Deposits in financial institutions 0 19 (19) -100.0%
Federal funds sold 79 3 76 2533.3%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 2,778 2,416 362 15.0%
- ------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 1,055 915 140 15.3%
Other borrowings 236 269 (33) -12.3%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 1,291 1,185 106 8.9%
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 1,487 1,232 255 20.7%
PROVISION FOR LOAN LOSSES 166 46 120 260.9%
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,321 1,186 135 11.4%
- ------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME:
Service charges on deposit accounts 164 155 9 5.8%
Asset Gains 0 75 (75) -100.0%
Other service charges, commissions and fees 26 86 (60) -70.0%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 190 317 (127) -40.1%
- ------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries, Directors' fees and employee benefits 527 479 48 10.0%
Occupancy expense 156 167 (11) -7.0%
Other operating expenses 324 434 (110) -25.3%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 1,007 1,074 (67) -6.3%
- ------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 504 429 75 17.5%
INCOME TAXES 183 155 28 18.1%
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 321 274 47 17.2%
- ------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE $ 0.16 0.14 0.02 16.9%
- ------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING 1,962,194 2,028,802 (66,608) -3.3%
- ------------------------------------------------------------------------------------------------------------------------------
5
6
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
-------------------------
SIX MONTHS ENDED
JUNE 30,
-------------------------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 2001 2000
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 540 546
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 242 231
Provision for loan losses 324 72
Gain on sale of premises -- (75)
Decrease in accrued income receivable 289 150
Other, net (19) (512)
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,376 412
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in federal funds sold (5,140) (500)
Maturities and redemptions of securities
available for sale 6,605 (562)
Investment in subsidiary 0 (55)
Purchases of securities available-for-sale FCB (5,068) 0
Proceeds from sale of land -- 90
Net (Increase)/decrease in loans (10,068) (2,128)
Purchases of premises and equipment (4) (404)
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (13,675) (3,559)
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (275) (283)
Issuance of common stock 9 0
Purchase and retirement of common stock (5) (5)
Proceeds of sale of common stock 0
Repayments of Note Payable (140) 0
Repayments of FHLB advances (8,800) 200
Increase in borrowings from FHLB 9,000 500
Increase/(Decrease) in securities sold under agreements
to repurchase (648) (2,166)
Increase(Decrease) in deposits 17,866 949
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 17,007 (805)
- ----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 4,708 (3,952)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 3,425 7,517
- ----------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 8,133 3,565
- ----------------------------------------------------------------------------------------------------
CASH PAYMENTS FOR INTEREST $ 2,674 2,364
CASH PAYMENTS FOR INCOME TAXES $ 240 312
- ----------------------------------------------------------------------------------------------------
6
7
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six month period ended June 30, 2001, are not necessarily
indicative of the results that may be expected for the year ended December 31,
2001.
7
8
ITEM NO. 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
First Community Bank of East Tennessee (the "Bank") represents virtually all of
the assets of First Community Corporation (the "Company"). The Bank, which was
opened in April of 1993, has grown in total assets to $140.6 million at June 30,
2001.
Loans have increased $10.0 million or 9.8% during the first six months of 2001.
NONPERFORMING ASSETS AND RISK ELEMENTS. Nonperforming assets consist of (1)
nonaccrual loans where the recognition of interest was discontinued, (2) loans
which have been restructured to provide for a reduction or deferral of interest
or principal because the borrower's financial condition deteriorated, and (3)
foreclosed and repossessed assets. Nonperforming assets at June 30, 2001
amounted to $578,000 or .51% of total loans, an increase from $ 96,000 or .09 %
of total loans at December 31, 2000. Diversification within the loan portfolio
is an important means of reducing inherent lending risks. At June 30, 2001, the
Bank had no concentrations of ten percent or more of total loans in any single
industry nor in any geographical area outside the immediate market area of the
Bank.
The Bank discontinues the accrual of interest on loans which become ninety days
past due (principal and/or interest), unless the loans are adequately secured
and in the process of collection. Other real estate owned is carried at fair
value, determined by an appraisal. A loan is classified as a restructured loan
when the interest rate is materially reduced or the term is extended beyond the
original maturity date because of the inability of the borrower to service the
debt under the original terms. The Bank has $ 110,000 of other real estate owned
as of June 30, 2001.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $8.1 million. In addition,
loans and investment securities repricing or maturing within one year or less
exceed $ 27.5 million at June 30, 2001. The Bank has approximately $ 10.6
million in loan commitments that are expected to be funded within the next six
months and other commitments, primarily standby letters of credit, of
approximately $139,000 at June 30, 2001. In addition to the Federal Home Loan
Bank membership from which the Bank has unused borrowing capacity of $ 8.5
million, the Bank has established federal funds lines of credit with three
correspondent banks totaling $13.5 million to meet unexpected liquidity demands.
With the exception of unfunded loan commitments, there are no known trends or
any known commitments or uncertainties that will result in the Bank's liquidity
increasing or decreasing in a material way. In addition, the Company is not
aware of any recommendations by any regulatory authorities, which would have a
material effect on the Company's liquidity, capital resources or results of
operations.
Total equity capital of the bank at June 30, 2001, is $10.959 million or
approximately 7.8 % of total assets. The Bank's capital position is adequate to
meet the minimum capital requirements for all regulatory agencies. The Bank's
capital ratios as of June 30, 2001, are as follows:
Tier 1 leverage 8.38 %
Tier 1 risk-based 10.38 %
Total risk-based 11.55 %
8
9
RESULTS OF OPERATIONS
The Company had net income of $540,000 for the six months ending June 30, 2001,
compared with $546,000 for the same period last year, resulting in a decrease of
1.0 %.
Interest income and interest expense both increased from 2000 to 2001 resulting
from the increase in loans and interest bearing deposit balances. Consequently,
net interest income increased $313,000 for the six months ending June 30, 2001,
or an increase of 12.9%. Earning assets through June 30, 2001 increased $ 13.6
million while interest-bearing liabilities increased $ 17.5 million compared to
December 31, 2000, reflecting an increase of 10.7% and 14.8%, respectively.
Noninterest income for the six months ending June 30, 2001 was $456,000 compared
to $554,000 for the same period in 2000 reflecting a decrease of $98,000 or
17.7%. Noninterest income consists mainly of service charges on deposit
accounts, credit life insurance commissions, and secondary mortgage processing
fees. Service charges on deposit accounts for the six months ending June 30,
2001 was $313,000 compared with $323,000 for the same period in 2000 reflecting
a decrease of $10,000 or 3.1%.
The provision for loan losses was $324,000 during the six months ending June 30,
2001 compared with $72,000 for the same period in 2000. The allowance for loan
losses of $1,236,000 at June 30, 2001 (approximately 1.11% of loans) is
considered by management to be adequate to cover losses inherent in the loan
portfolio. Management evaluates the adequacy of the allowance for loan losses
monthly and makes provisions for loan losses based on this evaluation.
SUBSEQUENT EVENTS
On July 6, 2001, First Community Bank sold its Greeneville branch to Bank of
Greeneville, a de novo bank. The sale price was based on the net book value of
assets purchased and liabilities assumed by Bank of Greeneville. Total assets of
the branch at July 6, 2001 were $ 9,880,756 and total liabilities were $
8,669,096. First Community Bank did not incur a gain or loss on the sale of the
branch.
9
10
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) The company did not file any reports on Form 8-K during the
quarter ended June 30, 2001.
10
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registration has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST COMMUNITY CORPORATION
-------------------------------
(Registrant)
August 8, 2001 /s/ Mark A. Gamble
- --------------- -------------------------------
(Date) Mark A. Gamble, President & CEO
August 8, 2001 /s/ Elizabeth O. Lollar
- --------------- -------------------------------
(Date) Elizabeth O. Lollar
Chief Financial Officer & EVP
11