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: SEPTEMBER 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
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(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
809 WEST MAIN STREET
ROGERSVILLE, TENNESSEE 37857
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(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 SEPTEMBER 30, 2001)
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES [ ] NO [X]
FIRST COMMUNITY CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
NUMBER PAGE
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ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
SEPTEMBER 30, 2001 (UNAUDITED) AND DECEMBER 31, 2000
CONSOLIDATED STATEMENTS OF INCOME 4
NINE MONTHS ENDED SEPTEMBER 30, 2001 (UNAUDITED)
CONSOLIDATED STATEMENTS OF INCOME 5
THREE MONTHS ENDED SEPTEMBER 30, 2001 (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
NINE MONTHS ENDED SEPTEMBER 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
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30, 2001
($ amounts in thousands)
SEPTEMBER 30, December 31, Amount %
ASSETS 2001 2000 Change Change
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Cash and due from banks $ 4,547 3,425 1,122 32.8%
Federal funds sold 6,164 2,460 3,704 150.6%
Securities available-for-sale, at fair value 8,862 8,310 552 6.6%
Loans 105,859 101,257 4,602 4.5%
Allowance for loan losses (1,066) (1,012) (54) 5.3%
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LOANS, NET 104,793 100,245 4,548 4.5%
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Premises and equipment 3,730 3,954 (224) -5.7%
Accrued income receivable 1,473 1,606 (133) -8.3%
Federal Home Loan Bank Stock 1,359 1,289 70 5.4%
Cash surrender value of life insurance 636 603 33 5.5%
Computer Software, net of amortization 503 585 (82) -14.0%
Other assets 671 499 172 34.5%
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$ 132,738 122,976 9,762 7.9%
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LIABILITIES AND SHAREHOLDERS' EQUITY
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LIABILITIES:
DEPOSITS:
Noninterest-bearing $ 12,446 12,029 417 3.5%
Interest-bearing 92,332 83,625 8,707 10.4%
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TOTAL DEPOSITS 104,778 95,654 9,124 9.5%
Securities sold under agreements to repurchase 2,858 2,257 601 26.6%
Advances from FHLB 12,000 12,500 (500) -4.0%
Note payable 1,708 1,823 (115) 0.0%
Accrued Interest Payable 699 1,019 (320) 0.0%
Dividend Payable 137 137 0 0.0%
Other liabilities 821 421 400 95.1%
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TOTAL LIABILITIES 123,001 113,811 9,190 8.1%
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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 7,381 7,386 (5) -0.1%
Accumulated other comprehensive income, net 99 17 82 482.4%
Retained earnings 2,257 1,761 496 28.2%
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TOTAL SHAREHOLDERS' EQUITY 9,737 9,165 572 6.2%
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$ 132,738 122,976 9,762 7.9%
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3
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
September 30, 2001
($ amounts in thousands except earnings per share)
NINE MONTHS ENDED SEPTEMBER 30, 2001
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Amount %
INTEREST INCOME: 2001 2000 Change Change
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Loans, including fees $ 7,272 6,760 512 7.6%
Securities:
Taxable 454 374 80 21.4%
Tax exempt 36 34 2 5.9%
Deposits in financial institutions 0 19 (19) 0.0%
Federal funds sold 197 57 140 245.6%
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TOTAL INTEREST INCOME 7,959 7,244 715 9.9%
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INTEREST EXPENSE:
Deposits 3,174 2,835 339 12.0%
Other borrowings 607 792 (185) -23.4%
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TOTAL INTEREST EXPENSE 3,781 3,627 154 4.2%
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NET INTEREST INCOME 4,178 3,617 561 15.5%
PROVISION FOR LOAN LOSSES 414 127 287 226.0%
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,765 3,491 274 7.8%
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OTHER INCOME:
Service charges on deposit accounts 472 470 2 0.4%
Asset Gains 0 75 (75) 0.0%
Other service charges, commissions and fees 210 305 (95) -31.1%
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TOTAL OTHER INCOME 682 849 (167) -19.7%
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OTHER EXPENSES:
Salaries, Directors' fees and employee benefits 1,565 1,469 96 6.5%
Occupancy expense 491 510 (19) -3.7%
Other operating expenses 985 980 5 0.5%
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TOTAL OTHER EXPENSES 3,041 2,960 81 2.7%
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INCOME BEFORE INCOME TAXES 1,406 1,380 26 1.9%
INCOME TAXES 509 500 9 1.8%
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NET INCOME $ 898 880 18 2.0%
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EARNINGS PER SHARE $ 0.46 0.44 0.02 4.0%
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WEIGHTED AVERAGE SHARES OUTSTANDING 1,962,221 2,021,253 (59,032) -2.9%
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4
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
September 30, 2001
($ amounts in thousands except earnings per share)
THREE MONTHS ENDED SEPTEMBER 30, 2001
----------------------------------------------------------------
Amount %
INTEREST INCOME: 2001 2000 Change Change
----------- ----------- ---------- ---------
Loans, including fees $ 2,383 2,296 87 3.8%
Securities:
Taxable 134 124 10 8.1%
Tax exempt 13 11 2 18.2%
Deposits in financial institutions 0 0 0 0.0%
Federal funds sold 88 14 74 528.6%
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Total interest income 2,618 2,446 172 7.0%
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Interest expense:
Deposits 1,053 974 79 8.1%
Other borrowings 135 290 (155) -53.4%
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Total interest expense 1,188 1,263 (75) -5.9%
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Net interest income 1,430 1,182 248 21.0%
Provision for loan losses 90 55 35 63.6%
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Net interest income after provision
for loan losses 1,340 1,128 212 18.8%
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Other income:
Service charges on deposit accounts 159 147 12 8.2%
Asset Gains 0 0 0 0.0%
Other service charges, commissions and fees 67 149 (82) -54.9%
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Total other income 226 295 (69) -23.3%
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Other expenses:
Salaries, Directors' fees and employee benefits 502 474 28 6.0%
Occupancy expense 171 192 (21) -12.1%
Other operating expenses 329 233 96 41.1%
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Total other expenses 1,002 901 101 11.2%
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Income before income taxes 564 522 42 8.0%
Income taxes 206 188 18 9.6%
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Net income $ 358 334 24 7.1%
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Earnings per share $ 0.18 0.17 0.02 10.3%
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Weighted average shares outstanding 1,963,035 2,021,180 (58,145) -2.9%
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5
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
------------------------
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 898 880
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 358 357
Provision for loan losses 414 127
Gain on sale of premises -- (75)
Decrease/(Increase) in accrued income receivable 133 (128)
Other, net (112) (293)
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,691 868
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CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase)/Decrease in federal funds sold (3,704) 1,100
Maturities and redemptions of securities
available for sale 6,640 4
Investment in subsidiary 0 0
Purchases of securities available-for-sale (7,192) (615)
Proceeds from sale of land -- 90
Net (Increase) in loans (4,962) (4,787)
Purchases of premises and equipment (53) (425)
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NET CASH PROVIDED (USED )BY INVESTING ACTIVITIES (9,271) (4,633)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (412) (424)
Issuance of common stock 9 0
Purchase and retirement of common stock (5) (5)
Proceeds of sale of common stock 0
Increase in borrowings of Note Payable 40 430
Repayments of Note Payable (155) (340)
Repayments of FHLB advances (9,500) 0
Increase in borrowings from FHLB 9,000 500
Increase/(Decrease) in securities sold under agreements
to repurchase 601 (577)
Increase in deposits 9,124 618
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NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 8,702 202
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NET INCREASE (DECREASE) IN CASH 1,122 (3,563)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 3,425 7,517
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CASH AND DUE FROM BANKS AT END OF PERIOD $ 4,547 3,954
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CASH PAYMENTS FOR INTEREST $ 4,022 3,627
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CASH PAYMENTS FOR INCOME TAXES $ 496 471
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6
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 nine-month period ended September 30, 2001, are not necessarily
indicative of the results that may be expected for the year ended December 31,
2001.
7
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 $ 132.4 million in total assets at September 30,
2001.
Loans have increased $4.6 million or 4.5% during the first nine 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 September 30, 2001
amounted to $392,000 or .37% 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 September 30, 2001,
the Bank had no concentrations of ten percent or more of total loans in any
single industry or 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 September 30, 2001.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $4.5 million. In addition,
loans and investment securities repricing or maturing within one year or less
exceed $ 24.0 million at September 30, 2001. The Bank has approximately $ 10.4
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 $364,000 at September 30, 2001. In addition to the Federal Home
Loan Bank membership from which the Bank has unused borrowing capacity of $ 9.2
million, the Bank has established federal funds lines of credit with five
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 September 30, 2001, is $11.250 million or
approximately 8.50 % 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 September 30, 2001, are as follows:
Tier 1 leverage 8.47%
Tier 1 risk-based 11.11%
Total risk-based 12.17%
8
RESULTS OF OPERATIONS
The Company had net income of $898,000 for the nine months ending September 30,
2001, compared with $880,000 for the same period last year, resulting in an
increase of 2.0 %.
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 $715,000 for the nine months ending September 30,
2001, or an increase of 9.9%. Earning assets through September 30, 2001
increased $ 8.9 million while interest-bearing liabilities increased $ 8.7
million compared to December 31, 2000, reflecting an increase of 7.9% and 8.7%,
respectively.
Noninterest income for the nine months ending September 30, 2001 was $682,000
compared to $849,000 for the same period in 2000 reflecting a decrease of
$167,000 or -19.7%. During the first nine months of 2000, the company had a
one-time gain on the sale of fixed assets of $ 75,000. 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 nine months ending September 30, 2001 was $472,000 compared
with $470,000 for the same period in 2000 reflecting a increase of $2,000 or
.4%. Non-interest income at September 30, 2001 is net of $ 127,000 in expenses,
which offsets the income from the Corporation's Greeneville branch. This branch
was formed in November 2000 in the anticipation of selling it to the Bank of
Greeneville, a de novo bank, upon issuance of its charter. Until the branch was
sold to Bank of Greeneville, monthly net income or loss respectively was paid to
or reimbursed by the organizers of Bank of Greeneville. As such, the net income
of the branch is excluded from First Community Corporation's net income.
The provision for loan losses was $414,000 during the six months ending
September 30, 2001 compared with $127,000 for the same period in 2000. The
allowance for loan losses of $1,066,000 at September 30, 2001 (approximately
1.01% 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.
SALE OF BRANCH
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
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 September 30, 2001.
10
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
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(Registrant)
11-13-01 \s\ Mark A. Gamble
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(Date) Mark A. Gamble, President
11-13-01 \s\ Elizabeth O. Lollar
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(Date) Elizabeth O. Lollar
Chief Financial Officer & EVP
11