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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, 1997
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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 (Zip Code)
Offices)
(615) 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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625,879
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(Outstanding shares of the issuer's common stock as of March 31, 1997)
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, 1997 (Unaudited) and December 31, 1996 3
Consolidated Statements of Income
Three months ended March 31, 1997 and 1996 (Unaudited) 4
Consolidated Statements of Cash Flows
Three months ended March 31, 1997 and 1996 (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
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PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
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MARCH 31, December 31,
ASSETS 1997 1996
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Cash and due from banks $ 4,090 3,956
Federal funds sold 452 13
Securities available-for-sale, at fair value 16,418 14,696
Loans 55,339 51,553
Allowance for loan losses (692) (644)
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LOANS, NET 54,647 50,909
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Premises and equipment 2,761 2,499
Accrued income receivable 886 778
Deferred income taxes, net 157 136
Other assets 294 259
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$ 79,705 73,246
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LIABILITIES AND SHAREHOLDERS' EQUITY
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LIABILITIES:
DEPOSITS:
Noninterest-bearing $ 10,709 9,085
Interest-bearing 56,080 48,532
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TOTAL DEPOSITS 66,789 57,617
Securities sold under agreements to
repurchase 4,356 4,745
Advances from FHLB 2,000
Note payable 200 200
Other liabilities 701 1,191
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TOTAL LIABILITIES 72,046 65,753
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SHAREHOLDERS' EQUITY:
Common stock, no par value. Authorized 3,000,000
shares; issued and outstanding 625,879 in 1997
and 624,379 in 1996 6,988 6,989
Unrealized gain (loss) on securities available-for-sale (28) 34
Retained earnings 699 470
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TOTAL SHAREHOLDERS' EQUITY 7,659 7,493
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$ 79,705 73,246
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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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INTEREST INCOME: 1997 1996
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Loans, including fees $ 1,329 1,116
Securities:
Taxable 232 158
Tax exempt 17
Federal funds sold 33 72
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TOTAL INTEREST INCOME 1,611 1,346
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INTEREST EXPENSE:
Deposits 609 534
Other borrowings 96 22
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TOTAL INTEREST EXPENSE 705 556
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NET INTEREST INCOME 906 790
PROVISION FOR LOAN LOSSES 61 30
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 845 760
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OTHER INCOME:
Service charges on deposit accounts 129 90
Other service charges, commissions and fees 81 41
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TOTAL OTHER INCOME 210 131
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OTHER EXPENSES:
Salaries and employee benefits 346 292
Occupancy expense 72 66
Other operating expenses 275 234
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TOTAL OTHER EXPENSES 693 592
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INCOME BEFORE INCOME TAXES 362 299
INCOME TAXES 134 113
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NET INCOME $ 228 186
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EARNINGS PER SHARE $ 0.35 0.28
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WEIGHTED AVERAGE SHARES OUTSTANDING 649,098 668,250
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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 1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 228 186
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 50 33
Provision for loan losses 61 30
Increase in accrued income receivable (108) (14)
Other, net (232) (52)
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (1) 183
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CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in federal funds sold (439) (7,485)
Maturities and redemptions of securities
available for sale 328
Purchases of securities available-for-sale (2,050) (163)
Net increase in loans (3,799) (1,601)
Purchases of premises and equipment (312) (146)
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NET CASH USED BY INVESTING ACTIVITIES (6,272) (9,395)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (375) (198)
Purchase and retirement of common stock (60)
Proceeds from sale of common stock 59 5
Repayments of FHLB advances (2,000)
Increase (decrease) in securities sold under
agreements to repurchase (389) 1,096
Increase in deposits 9,172 8,545
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NET CASH PROVIDED BY FINANCING ACTIVITIES 6,407 9,448
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NET INCREASE IN CASH 134 236
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 3,956 2,976
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CASH AND DUE FROM BANKS AT END OF PERIOD $ 4,090 3,212
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CASH PAYMENTS FOR INTEREST $ 735 525
CASH PAYMENTS FOR INCOME TAXES $ 145 116
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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, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-KSB 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 $6.5 million or 9% since December 31, 1996. The growth in
total assets has been funded by increases in deposits of $9.2 million, or 16%
since December 31, 1996.
Loans have increased $3.8 million or 7% during the first three months of 1997.
Investment securities have increased $1.7 million or 12% since December 31,
1996.
NONPERFORMING ASSETS AND RISK ELEMENTS. Nonperforming assets at March 31, 1997
amounted to $172,000, up from $171,000 at December 31, 1996. Diversification
within the loan portfolio is an important means of reducing inherent lending
risks. At March 31, 1997, 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, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $4.1 million and federal
funds sold of $452,000 as of March 31, 1997. In addition, loans and investment
securities repricing or maturing in one year or less exceed $2.2 million at
March 31, 1997. The Bank has approximately $1.5 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 $467,000 at March 31,
1997. In addition to the Federal Home Loan Bank membership, the Bank has
established federal funds lines of credit with three correspondent banks
totaling $7 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.
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Total equity capital at March 31, 1997, is $7.7 million or approximately 9.6% of
total assets. The Bank's capital position is adequate to meet the minimum
capital requirements as of March 31, 1997 for all regulatory agencies. The
Bank's capital ratios as of March 31, 1997, are as follows:
Tier 1 leverage 9.81%
Tier 1 risk-based 15.03%
Total risk-based 16.28%
During the second half of 1996 and the first quarter of 1997, the Company has
purchased and retired approximately 48,000 shares of its common stock for $25 to
$28 per share. The Company does not anticipate significant additional amounts of
common stock will be repurchased in 1997.
RESULTS OF OPERATIONS
The Company had net income of $228,000 in the first quarter of 1997 compared to
$186,000 in the first quarter of 1996. Net interest income was up $116,000 or
15% through the first quarter of 1997 compared to 1996.
Interest income and interest expense both increased from 1995 to 1996 because of
the increase in earning assets and deposits from March 31, 1996 to March 31,
1997. The growth in noninterest income for the first quarter of 1997 reflects
the increase in deposits during 1996 and 1997. Average earning assets through
March 31, 1997 increased by $12 million or 20% over the same period in 1996.
Average interest-bearing liabilities for the first quarter of 1997 increased by
$13.3 million or 23% over 1996.
The provision for loan losses was $61,000 in the first quarter of 1997 compared
to $30,000 in the first quarter of 1996. The allowance for loan losses of
$692,000 at March 31, 1997 (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) 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, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant 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 15, 1997 /s/ John L. Campbell
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(Date) John L. Campbell, President
May 15, 1997 /s/ George E. Burnett
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(Date) George E. Burnett, Senior
Vice President and Cashier
(Principal Accounting Officer)