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, 1996
------------------
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 (Zip Code)
Offices)
(615) 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
---- ----
661,407
-------
(Outstanding shares of the issuer's common stock as of June 30, 1996)
Transitional Small Business Disclosure Format (check one):
Yes No X
---- ----
2
FIRST COMMUNITY CORPORATION
INDEX
PART I. FINANCIAL INFORMATION:
Number Page
- ------- ----
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1996 (Unaudited) and December 31, 1995 3
Consolidated Statements of Income
Three months and six months ended June 30, 1996
and 1995 (Unaudited) 4
Consolidated Statements of Cash Flows
Three months and six months ended June 30, 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 7-8
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
2
3
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
================================================================================
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
(IN THOUSANDS)
-----------------------
JUNE 30, December 3
ASSETS 1996 1995
=================================================================================================
Cash and due from banks $ 3,024 2,976
Federal funds sold 3,224 1,558
Investment securities available-for-sale, at fair value 15,130 11,145
Loans 45,380 41,932
Allowance for loan losses (566) (528)
- -------------------------------------------------------------------------------------------------
Loans, net 44,814 41,404
- -------------------------------------------------------------------------------------------------
Premises and equipment 2,191 2,088
Accrued income receivable 683 646
Deferred income taxes 142 152
Other assets 312 152
- -------------------------------------------------------------------------------------------------
$ 69,520 60,121
=================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
=================================================================================================
LIABILITIES:
DEPOSITS:
Noninterest-bearing $ 9,367 8,713
Interest-bearing 47,350 40,904
- -------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 56,717 49,617
Federal funds purchased and securities sold
under agreements to repurchase 3,929 1,837
Other liabilities 544 694
- -------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 61,190 52,148
- -------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, no par value. Authorized 3,000,000
shares; 661,407 shares outstanding 7,385 7,384
Unrealized loss on AFS securities, net of tax (32) (17)
Retained earnings 977 606
- -------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 8,330 7,973
- -------------------------------------------------------------------------------------------------
$ 69,520 60,121
=================================================================================================
3
4
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
(IN THOUSANDS EXCEPT FOR PER SHARE INFORMATION)
-------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
INTEREST INCOME: 1996 1995 1996 1995
-------- ------- ------- -------
Loans, including fees $ 1,132 938 2,248 1,728
Investment securities, taxable 196 176 354 328
Investment securities, tax exempt 1 - 1 -
Federal funds sold 70 17 142 80
- -------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 1,399 1,131 2,745 2,136
- -------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 546 383 1,080 737
Other borrowings 31 20 53 31
- -------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 577 403 1,133 768
- -------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 822 728 1,612 1,368
PROVISION FOR LOAN LOSSES 45 73 75 114
- -------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 777 655 1,537 1,254
- -------------------------------------------------------------------------------------------------------------------
OTHER INCOME:
Service charges on deposit accounts 111 74 201 138
Other service charges, commissions and fees 45 29 86 59
- -------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 156 103 287 197
- -------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries and employee benefits 282 252 574 503
Occupancy and equipment 77 65 143 119
Other operating 263 244 497 499
- -------------------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 622 561 1,214 1,121
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 311 197 610 330
INCOME TAXES 118 80 231 130
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 193 117 379 200
===================================================================================================================
EARNINGS PER SHARE $ 0.28 0.19 0.55 0.30
===================================================================================================================
AVERAGE SHARES OUTSTANDING 683,400 668,195 683,400 668,195
===================================================================================================================
4
5
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
------------------
SIX MONTHS ENDED
JUNE 30,
------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1996 1995
===========================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 379 200
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 65 54
Provision for loan losses 75 114
Increase in accrued income receivable (37) (123)
Other, net (313) (201)
- -------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 169 44
- -------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in federal funds sold (1,666) 4,127
Maturities of securities available-for-sale 1,500 499
Purchases of securities available-for-sale (5,485) -
Purchases of securities held-to-maturity - (1,434)
Net increase in loans (3,485) (8,218)
Purchases of premises and equipment (168) (175)
- -------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (9,304) (5,201)
- -------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock 8 -
Purchase and retirement of treasury shares (17) -
Increase in federal funds purchased and securities
sold under agreements to repurchase 2,092 1,465
Increase in deposits 7,100 3,152
- -------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,183 4,617
- -------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 48 (540)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,976 2,874
- -------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,024 2,334
===========================================================================================
CASH PAYMENTS FOR INTEREST $ 1,047 600
CASH PAYMENTS FOR INCOME TAXES $ 293 244
===========================================================================================
5
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 six month period ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996.
6
7
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 $9.4 million or 16% since December 31, 1995. The growth in
total assets has been funded by increases in deposits of $7.1 million and
federal funds purchased and securities sold under agreements to repurchase of
$2.1 million since December 31, 1995.
Loans have increased $3.4 million or 8% during the first six months of 1996.
Investment securities have increased $4.0 million or 36% 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 June 30, 1996
amounted to $151,000, up from $4,000 at December 31, 1995. Diversification
within the loan portfolio is an important means of reducing inherent lending
risks. At June 30, 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 June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $3.0 million and federal
funds sold of $3.2 million as of June 30, 1996. In addition, loans and
investment securities repricing or maturing in one year or less exceed $21
million at June 30, 1996. The Bank has approximately $172,000 in loan
7
8
commitments that are expected to be funded within the next six months and other
commitments, primarily standby letters of credit, of approximately $87,000 at
June 30, 1996. 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 June 30, 1996, is $8.3 million or approximately 12.0%
of total assets. The Company's capital position is adequate to meet the
minimum capital requirements as of June 30, 1996 for all regulatory agencies.
The company's capital ratios as of June 30, 1996, are as follows:
Tier 1 leverage 12.0%
Tier 1 risk-based 15.9%
Total risk-based 17.0%
During July of 1996 the Company purchased and retired 33,107 shares of its
common stock for $25.00 per share. The subsidiary bank paid a dividend of
$802,500 to the parent company to fund this purchase. In addition, in order to
facilitate additional purchases of Company stock, the Company plans to obtain a
line of credit of $1,500,000.
RESULTS OF OPERATIONS
The Company had net income of $193,000 in the second quarter of 1996 compared
to $117,000 in the second quarter of 1995. The Company's net income was
$379,000 in the first half of 1996 compared to $200,000 in the first half of
1995. Net interest income was up $94,000, or 13%, for the second quarter of
1996 compared to 1995 and up $244,000, or 18%, through the first six months 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 June 30, 1995
to June 30, 1996. The growth in non-interest income for the first six months
of 1996 reflects the increase in deposits during 1995 and 1996. Data
processing expense increased by $21,000 or 26% for the first six 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 $44,000 in FDIC insurance
resulting from the Bank's decreased assessment rate.
The provision for loan losses was $45,000 in the second quarter of 1996
compared to $75,000 in 1995 and $75,000 in the first six months of 1996
compared to $114,000 in the first six months of 1995. The higher provisions
for loan losses in 1995 reflect a higher growth in loans both on a percentage
and absolute dollar basis in 1995. The allowance for loan losses of $566,000
at June 30, 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.
8
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
---------------------------------------------------
On April 24, 1996, the Company held its annual meeting of
shareholders and the only item of business was the election of
directors. All nine of the Company's incumbent directors were
re-elected at the meeting.
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) 27 Financial Data Schedule (for SEC Use Only)
b) The Company did not file any reports on Form 8-K during the
quarter ended June 30, 1996
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
---------------------------
(Registrant)
8-7-96 /s/ John L. Campbell
- ------------------------- ----------------------------------
(Date) John L. Campbell, President
8-7-96 /s/ George E. Burnett
- ------------------------- ----------------------------------
(Date) George E. Burnett, Senior
Vice President and Cashier
(Principal Accounting Officer)