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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, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-25972
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FIRST COMMUNITY CORPORATION
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(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
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(Issuer's Telephone Number, Including Area Code)
None
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(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
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661,807
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(Outstanding shares of the issuer's common stock as of March 31, 1996)
Transitional Small Business Disclosure Format (check one):
Yes No X
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FIRST COMMUNITY CORPORATION
INDEX
PART I. FINANCIAL INFORMATION:
Number Page
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Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1996 (Unaudited) and December 31, 1995 3
Consolidated Statements of Income
Three months ended March 31, 1996 and 1995 (Unaudited) 4
Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
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
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PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
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MARCH 31, December 31,
Assets 1996 1995
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Cash and due from banks $ 3,212 2,976
Federal funds sold 9,043 1,558
Securities available-for-sale, at fair value 11,308 11,145
Loans 43,517 41,932
Allowance for loan losses (542) (528)
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LOANS, NET 42,975 41,404
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Premises and equipment 2,202 2,088
Accrued income receivable 660 646
Deferred income taxes, net 124 152
Other assets 335 152
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$69,859 60,121
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LIABILITIES AND SHAREHOLDERS' EQUITY
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LIABILITIES:
DEPOSITS:
Noninterest-bearing $ 9,350 8,713
Interest-bearing 48,812 40,904
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TOTAL DEPOSITS 58,162 49,617
Securities sold under agreements to
repurchase 2,933 1,837
Other liabilities 556 694
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TOTAL LIABILITIES 61,651 52,148
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SHAREHOLDERS' EQUITY:
Common stock, no par value. Authorized 3,000,000
shares; issued and outstanding 661,807 in 1996
and 661,407 in 1995 7,389 7,384
Unrealized gain (loss) on securities available-for-sale 27 (17)
Retained earnings 792 606
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TOTAL SHAREHOLDERS' EQUITY 8,208 7,973
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$69,859 60,121
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FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS)
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THREE MONTHS ENDED
MARCH 31,
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1996 1995
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INTEREST INCOME:
Loans, including fees $ 1,116 790
Securities 158 152
Federal funds sold 72 63
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TOTAL INTEREST INCOME 1,346 1,005
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INTEREST EXPENSE:
Deposits 534 354
Other borrowings 22 11
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TOTAL INTEREST EXPENSE 556 365
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NET INTEREST INCOME 790 640
PROVISION FOR LOAN LOSSES 30 41
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 760 599
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OTHER INCOME:
Service charges on deposit accounts 90 64
Other service charges, commissions and fees 41 30
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TOTAL OTHER INCOME 131 94
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OTHER EXPENSES:
Salaries and employee benefits 292 251
Occupancy expense 66 54
Other operating expenses 234 255
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TOTAL OTHER EXPENSES 592 560
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INCOME BEFORE INCOME TAXES 299 133
INCOME TAXES 113 50
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NET INCOME $ 186 83
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EARNINGS PER SHARE $ 0.28 0.12
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WEIGHTED AVERAGE SHARES OUTSTANDING 668,250 668,195
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FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
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THREE MONTHS ENDED
MARCH 31,
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INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 186 83
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 33 24
Provision for loan losses 30 41
Increase in accrued income receivable (14) (46)
Other, net (250) (117)
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (15) (15)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in federal funds sold (7,485) 2,092
Purchases of securities held-to-maturity - (1,471)
Purchases of securities available-for-sale (163) -
Net increase in loans (1,601) (3,271)
Purchases of premises and equipment (146) (152)
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NET CASH USED BY INVESTING ACTIVITIES (9,395) (2,802)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 5 -
Increase in securities sold under agreements
to repurchase 1,096 902
Increase in deposits 8,545 1,823
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NET CASH PROVIDED BY FINANCING ACTIVITIES 9,646 2,725
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NET INCREASE (DECREASE) IN CASH 236 (92)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 2,976 2,874
CASH AND DUE FROM BANKS AT END OF PERIOD $ 3,212 2,782
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CASH PAYMENTS FOR INTEREST $ 797 292
CASH PAYMENTS FOR INCOME TAXES $ 116 168
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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, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996.
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ITEM NO. 2 MANAGEMENT'S 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 continued to experience growth during 1996. Total
assets have grown $9.7 million or 16% since December 31, 1995. The growth in
total assets has been funded by increases in deposits of $8.5 million and
federal funds purchased and securities sold under agreements to repurchase of
$1.1 million since December 31, 1995.
Loans have increased $1.6 million or 4% during the first three months of 1996.
Investment securities have increased $163,000 or 1.5% since December 31, 1995.
Due to a regulatory change eliminating unrealized gain or loss on
available-for-sale securities from regulatory capital, the Financial Accounting
Standards Board (FASB) issued a Special Report allowing a one-time opportunity
for security transfers between held-to-maturity and available-for-sale without
affecting the carrying value of other securities in the investment portfolio.
In December, 1995, management reassessed its classification of investment
securities and transferred, at fair value, $8,942,000 of investment securities
from held-to-maturity to available-for-sale. The reclassification provides
management greater flexibility in managing liquidity and in changing the Bank's
earning asset mix.
NONPERFORMING ASSETS AND RISK ELEMENTS. Nonperforming assets at March 31, 1996
amounted to $115,000, up from $4,000 at December 31, 1995. Diversification
within the loan portfolio is an important means of reducing inherent lending
risks. At March 31, 1996, the Bank had no concentrations of ten percent or
more of total loans in any single industry nor 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 had no restructured loans or other
real estate at March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $3.2 million and federal
funds sold of $9.0 million as of March 31, 1996. In addition, loans and
investment securities repricing or maturing in one year or less exceed $19
million at March 31, 1996. The Bank has approximately $109,000 in
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loan commitments that are expected to be funded within the next six months and
other commitments, primarily standby letters of credit, of approximately
$83,000 at March 31, 1996. The Bank is planning to become a member of the
Federal Home Loan Bank during 1996, which will improve liquidity. 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 at March 31, 1996, is $8.2 million or approximately 11.7%
of total assets. Because of the larger than anticipated growth in deposits the
Company completed a secondary stock offering in April, 1994 which increased
capital by approximately $3.0 million. The Company's capital position is
adequate to meet the minimum capital requirements for new banks as of March 31,
1996 for all regulatory agencies. The Tennessee Department of Financial
Institutions requires the subsidiary bank to maintain a minimum total capital
ratio (which includes the allowance for loan losses) of 10% during its initial
three years of operations. The company's capital ratios as of March 31, 1996,
are as follows:
Tier 1 leverage 11.75%
Tier 1 risk-based 20.17%
Total risk-based 21.32%
Funds for cash distributions to Company shareholders are derived from dividends
from the subsidiary bank. Tennessee banking law prohibits new banks from
paying dividends during the first three years of operations without prior
approval from the Commissioner. Accordingly, the Company's subsidiary bank is
prohibited from paying dividends without prior approval until April, 1996. The
Company received regulatory approval and declared a dividend of $.30 per share
in the fourth quarter of 1995.
RESULTS OF OPERATIONS
The Company had net income of $186,000 in the first quarter of 1996 compared to
$83,000 in the first quarter of 1995. Net interest income was up $150,000 or
23% through the first quarter of 1996 compared to 1995.
Interest income and interest expense both increased dramatically from 1995 to
1996 because of the increase in earning assets and deposits from March 31, 1995
to March 31, 1996. The growth in non-interest income for the first quarter of
1996 reflects the increase in deposits during 1995 and 1996. Data processing
expense increased by $10,000 or 25% for the first three months of 1996 over the
same period a year earlier primarily because of additional expenses related to
a change in January, 1996 of the data processing servicer. However, this
increase was more than offset by a decrease of $22,000 in FDIC insurance
resulting from the Bank's decreased assessment rate.
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The provision for loan losses was $30,000 in the first quarter of 1996 compared
to $41,000 in the first quarter of 1995. The allowance for loan losses of
$542,000 at March 31, 1996 (approximately 1.25% 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.
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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) Exhibit 27 Financial Data Schedule (for SEC use only)
b) The Company did not file any reports on Form 8-K
during the quarter ended March 31, 1996
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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)
May 9, 1996 /s/ John L. Campbell
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(Date) John L. Campbell, President
May 9, 1996 /s/ George E. Burnett
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(Date) George E. Burnett, Senior
Vice President and Cashier
(Principal Accounting Officer)