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: MARCH 31, 2002
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 [ ]
1,917,323
--------------------------------------
(OUTSTANDING SHARES OF THE ISSUER'S COMMON STOCK AS OF MARCH 31, 2002)
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES [ ] NO [X]
FIRST COMMUNITY CORPORATION
INDEX
NUMBER PAGE
- ------ ----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
MARCH 31, 2002 (UNAUDITED) AND DECEMBER 31, 2001
CONSOLIDATED STATEMENTS OF INCOME 4
THREE MONTHS ENDED MARCH 31, 2002 (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
THREE MONTHS ENDED MARCH 31, 2002 AND 2001 (UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 7
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 9
ITEM 2. CHANGES IN SECURITIES 9
ITEM 3. DEFAULT UPON SENIOR SECURITIES 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
ITEM 5. OTHER INFORMATION 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, 2002
($ amounts in thousands)
MARCH 31, December 31, Amount %
ASSETS 2002 2001 Change Change
- -------------------------------------------------------------------------------------------------------------------------------
Cash and due from banks $ 6,391 4,866 1,525 31.3%
Federal funds sold 8,236 3,713 4,523 121.8%
Securities available-for-sale, at fair value 11,238 10,518 720 6.8%
Loans 109,600 110,269 (669) -0.6%
Allowance for loan losses (1,269) (1,243) (26) 2.1%
- -------------------------------------------------------------------------------------------------------------------------------
LOANS, NET 108,331 109,026 (695) -0.6%
- -------------------------------------------------------------------------------------------------------------------------------
Premises and equipment 3,773 3,744 29 0.8%
Accrued income receivable 1,184 1,363 (179) -13.1%
Federal Home Loan Bank Stock 1,393 1,378 15 1.1%
Cash surrender value of life insurance 651 644 8 1.2%
Computer Software, net of amortization 495 500 (4) -0.8%
Other assets 743 703 40 5.7%
- -------------------------------------------------------------------------------------------------------------------------------
$ 142,436 136,455 5,981 4.4%
===============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
DEPOSITS:
Noninterest-bearing $ 15,225 12,426 2,799 22.5%
Interest-bearing 97,929 93,576 4,353 4.7%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 113,154 106,002 7,152 6.7%
Securities sold under agreements to repurchase 2,399 3,518 (1,119) -31.8%
Advances from FHLB 12,000 12,000 0 0.0%
Note payable 0 124 (124) 0.0%
Accrued Interest Payable 662 642 20 0.0%
Dividend Payable 134 134 0 0.0%
Other liabilities 756 855 (99) -11.6%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 129,105 123,276 5,829 4.7%
- -------------------------------------------------------------------------------------------------------------------------------
Trust Preferred Securities 4,000 4,000 0 0.0%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL TRUST PREFERRED SECURITIES 4,000 4,000 0 0.0%
- -------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, no par value. Authorized 10,000,000
shares; issued and outstanding 1,917,323 in 2002
and 1,917,167 in 2001 6,579 6,578 1 0.0%
Accumulated other comprehensive income, net (32) 33 (65) -197.0%
Retained earnings 2,784 2,568 216 8.4%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 9,331 9,179 152 1.7%
- -------------------------------------------------------------------------------------------------------------------------------
$ 142,436 136,455 5,981 4.4%
===============================================================================================================================
3
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
March 31, 2002
($ amounts in thousands except earnings per share)
Three Months Ended March 31, 2002
----------------------------------------------------------------------
Amount %
2002 2001 Change Change
------------ --------- --------- --------
INTEREST INCOME:
Loans, including fees $ 2,176 2,398 (222) -9.3%
Securities:
Taxable 126 124 2 1.3%
Tax exempt 14 11 3 26.5%
Federal funds sold 31 30 1 3.9%
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 2,347 2,563 (216) -8.4%
- ----------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 649 1,066 (417) -39.1%
Other borrowings 209 236 (27) -11.4%
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 858 1,302 (444) -34.1%
- ----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 1,490 1,261 229 18.2%
PROVISION FOR LOAN LOSSES 29 158 (129) -81.5%
- ----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,461 1,104 357 32.3%
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME:
Service charges on deposit accounts 172 149 23 15.3%
Other service charges, commissions and fees 86 117 (32) -26.9%
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 257 266 (9) -3.3%
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries, Directors' fees and employee benefits 631 536 95 17.6%
Occupancy expense 177 164 13 8.1%
Other operating expenses 360 332 28 8.5%
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 1,169 1,032 137 13.3%
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 549 338 211 62.4%
INCOME TAXES 199 120 79 65.6%
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 350 219 131 59.9%
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME:
UNREALIZED GAINS/LOSSES ON SECURITIES, NET (65) 61 (125) -207.1%
- ----------------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME $ 285 280 6 2.1%
- ----------------------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE $ 0.18 0.11 0.07 63.5%
- ----------------------------------------------------------------------------------------------------------------------------------
BASIC AVERAGE SHARES OUTSTANDING 1,917,170 1,961,416 (44,246) -2.3%
- ----------------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE $ 0.18 0.11 0.07 63.9%
- ----------------------------------------------------------------------------------------------------------------------------------
DILUTED AVERAGE SHARES OUTSTANDING 1,945,269 1,994,019 (48,750) -2.4%
- ----------------------------------------------------------------------------------------------------------------------------------
4
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
-----------------------------
Three Months Ended
March 31,
-----------------------------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 2002 2001
- -------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 350 219
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 120 121
Provision for loan losses 29 158
Decrease/(Increase) in accrued income receivable 179 123
Other, net (211) (24)
- -------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 467 597
- -------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase)/Decrease in federal funds sold (4,523) (660)
Maturities and redemptions of securities -- 0
available for sale 2,308 4,105
Purchases of securities available-for-sale (3,028) (4,087)
Net decrease/(increase) in loans 669 1,105
Purchases of premises and equipment (144) (4)
- -------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (4,718) 459
- -------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (134) (137)
Issuance of common stock 1 0
Purchase and retirement of common stock -- (5)
Repayments of Note Payable (124) 0
Repayments of FHLB advances -- (7,800)
Increase in borrowings from FHLB -- 9,000
Increase/(Decrease) in securities sold under agreements
to repurchase (1,119) (144)
Increase in deposits 7,152 (1,900)
- -------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 5,776 (986)
- -------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 1,525 70
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 4,866 3,425
- -------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 6,391 3,495
- -------------------------------------------------------------------------------------------------
CASH PAYMENTS FOR INTEREST $ 838 1,169
CASH PAYMENTS FOR INCOME TAXES $ 209 33
- -------------------------------------------------------------------------------------------------
5
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 three-month period ended March 31, 2002, are not necessarily
indicative of the results that may be expected for the year ended December 31,
2002.
6
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 $142 million at March 31,
2002.
Loans have decreased $.7 million or .6% during the first three months of 2002.
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 March 31, 2002
amounted to $315,000 or .01% of total loans, a decrease from $ 318,000 or .01%
of total loans at December 31, 2001. Diversification within the loan portfolio
is an important means of reducing inherent lending risks. At March 31, 2002, 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 March 31, 2002.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $6.391 million. In
addition, loans and investment securities repricing or maturing within one year
or less exceed $ 45.7 million at March 31, 2002. The Bank has approximately
$7.2 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 $323,000 at March 31, 2002. In addition to the Federal Home Loan
Bank membership from which the Bank has unused borrowing capacity of $13.6
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 March 31, 2002, is $12.945 million or
approximately 9.1% 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 March 31, 2002, are as follows:
Tier 1 leverage 9.36%
Tier 1 risk-based 12.46%
Total risk-based 13.68%
7
RESULTS OF OPERATIONS
The Company had net income of $350,000 for the three months ending March 31,
2002, compared with $219,000 for the same period last year, resulting in an
increase of 59.9%.
Interest income and interest expense both decreased from 2001 to 2002 resulting
from the change in interest rates. Consequently, net interest income increased
$229,000 for the three months ending March 31, 2002, or an increase of 18.2%.
Earning assets through March 31, 2002 increased $4.6 million while
interest-bearing liabilities increased $3.1 million compared to December 31,
2001, reflecting an increase of 3.6% and 2.8%, respectively.
Noninterest income for the three months ending March 31, 2002 was $257,000
compared to $266,000 for the same period in 2001 reflecting a decrease of
$9,000 or 3.4%. 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 three months ending March 31,
2002 was $172,000 compared with $149,000 for the same period in 2001 reflecting
a increase of $23,000 or 15.3%.
The provision for loan losses was $ 29,000 during the three months ending March
31, 2002 compared with $158,000 for the same period in 2001. The allowance for
loan losses of $1,269,000 at March 31, 2002 (approximately 1.16% 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.
8
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 March 31, 2002.
9
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)
May 14, 2002 /s/ Mark A. Gamble
- -------------------------- -------------------------------
(Date) Mark A. Gamble, President & CEO
May 14, 2002 /s/ Elizabeth O. Lollar
- -------------------------- --------------------------------
(Date) Elizabeth O. Lollar
Chief Financial Officer & EVP
10