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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: SEPTEMBER 30, 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 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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623,701
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(OUTSTANDING SHARES OF THE ISSUER'S COMMON STOCK AS OF SEPTEMBER 30, 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 3
SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
CONSOLIDATED STATEMENTS OF INCOME 4-5
THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (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
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
September 30, 1997
($ amounts in thousands )
SEPTEMBER 30, December 31,
ASSETS 1997 1996
===================================================================================================
Cash and due from banks $ 4,074 3,956
Federal funds sold 4,758 13
Securities available-for-sale, at fair value 12,989 14,696
Loans 62,258 51,553
Allowance for loan losses (755) (644)
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LOANS, NET 61,503 50,909
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Premises and equipment 3,105 2,499
Accrued income receivable 1,039 778
Deferred income taxes, net 157 136
Other assets 373 259
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$ 87,999 73,246
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LIABILITIES AND SHAREHOLDERS' EQUITY
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LIABILITIES:
DEPOSITS:
Noninterest-bearing $ 10,310 9,085
Interest-bearing 63,788 48,532
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TOTAL DEPOSITS 74,099 57,617
Securities sold under agreements to repurchase 4,427 4,745
Advances from FHLB 0 2,000
Note payable 250 200
Other liabilities 1,058 1,191
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TOTAL LIABILITIES 79,833 65,753
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SHAREHOLDERS' EQUITY:
Common stock, no par value. Authorized 3,000,000
shares; issued and outstanding 623,701 in 1997
and 624,379 in 1996 6,924 6,989
Unrealized gain (loss) on securities available-for-sale 27 34
Retained earnings 1,215 470
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TOTAL SHAREHOLDERS' EQUITY 8,166 7,493
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$ 87,999 73,246
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FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
September 30, 1997
($ amounts in thousands except earnings per share)
THREE MONTHS ENDED SEPTEMBER 30,
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1997 1996
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INTEREST INCOME:
Loans, including fees $ 1,525 1,223
Securities:
Taxable 221 223
Tax exempt 19 5
Federal funds sold 33 11
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TOTAL INTEREST INCOME 1,798 1,462
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INTEREST EXPENSE:
Deposits 740 552
Other borrowings 79 44
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TOTAL INTEREST EXPENSE 819 596
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NET INTEREST INCOME 980 866
PROVISION FOR LOAN LOSSES 14 46
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 965 820
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OTHER INCOME:
Service charges on deposit accounts 137 117
Security gains 0 3
Other service charges, commissions and fees 71 53
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TOTAL OTHER INCOME 208 173
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OTHER EXPENSES:
Salaries and employee benefits 375 299
Occupancy expense 101 77
Other operating expenses 290 235
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TOTAL OTHER EXPENSES 766 611
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INCOME BEFORE INCOME TAXES 407 382
INCOME TAXES 145 143
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NET INCOME $ 262 239
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EARNINGS PER SHARE $ 0.40 0.37
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WEIGHTED AVERAGE SHARES OUTSTANDING 656,192 652,400
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FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
September 30 , 1997
($ amounts in thousands except earnings per share)
NINE MONTHS ENDED SEPTEMBER 30,
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1997 1996
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INTEREST INCOME:
Loans, including fees $ 4,326 3,471
Securities:
Taxable 692 577
Tax exempt 56 6
Federal funds sold 61 153
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TOTAL INTEREST INCOME 5,135 4,207
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INTEREST EXPENSE:
Deposits 1,984 1,632
Other borrowings 280 97
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TOTAL INTEREST EXPENSE 2,264 1,729
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NET INTEREST INCOME 2,872 2,478
PROVISION FOR LOAN LOSSES 141 121
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,731 2,357
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OTHER INCOME:
Service charges on deposit accounts 398 318
Security gains 0 3
Other service charges, commissions and fees 238 139
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TOTAL OTHER INCOME 636 460
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OTHER EXPENSES:
Salaries and employee benefits 1,076 873
Occupancy expense 257 220
Other operating expenses 861 732
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TOTAL OTHER EXPENSES 2,195 1,825
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INCOME BEFORE INCOME TAXES 1,172 992
INCOME TAXES 426 374
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NET INCOME $ 746 618
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EARNINGS PER SHARE $ 1.14 0.92
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WEIGHTED AVERAGE SHARES OUTSTANDING 656,864 672,000
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FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
September 30 , 1997
(IN THOUSANDS)
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NINE MONTHS ENDED
SEPTEMBER 30,
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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 $ 746 618
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 125 126
Provision for loan losses 141 121
Increase in accrued income receivable (261) (190)
Other, net 205 251
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 956 926
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CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in federal funds sold (4,745) 421
Maturities and redemptions of securities
available for sale 3,763 3,900
Purchases of securities available-for-sale (2,050) (8,637)
Proceeds of sales of securities available-for-sale 0 1,004
Net increase in loans (10,705) (7,361)
Purchases of premises and equipment (731) (385)
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NET CASH USED BY INVESTING ACTIVITIES (14,468) (11,058)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (375) (198)
Purchase and retirement of common stock (126) (1,072)
Proceeds from sale of common stock 62 65
Repayments of FHLB advances (2,000) 0
Increase in borrowings from FHLB 0 2,000
Increase in securities sold under agreements
to repurchase & federal funds purchased (318) 1,055
Increase in deposits 16,388 8,372
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NET CASH PROVIDED BY FINANCING ACTIVITIES 13,631 10,222
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NET INCREASE (DECREASE) IN CASH 118 90
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 $ 4,074 3,066
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CASH PAYMENTS FOR INTEREST $ 2,101 1,578
CASH PAYMENTS FOR INCOME TAXES $ 386 390
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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 nine month period ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997.
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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 continued to experience growth during 1997. Total
assets have grown $14.8 million or 20.1% since December 31, 1996. The growth in
total assets has been funded by increases in deposits of $16.5 million in
combination with a $2 million decline in borrowings through the Federal Home
Loan Bank.
Loans have increased $10.7 million or 20.8% during the first nine months of
1997. Federal funds sold increased $4.7 million while investments declined $1.7
million since December 31, 1996. Funds were allowed to remain in shorter term
federal funds sold at September 30, 1997, to meet expected loan demands and
deposit maturities in the last quarter of 1997.
NONPERFORMING ASSETS AND RISK ELEMENTS. Nonperforming assets at September 30,
1997 amounted to $64,000 or .1% of total loans, down from $171,000 or .3% at
December 31, 1996. Diversification within the loan portfolio is an important
means of reducing inherent lending risks. At September 30, 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 $8,000 in restructured loans and
$7,000 in other real estate as of September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $4.1 million and federal
funds sold of $4.8 million as of September 30, 1997. In addition, loans and
investment securities repricing or maturing within one year or less exceed $14.9
million at September 30, 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 $90,000 at
September 30, 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 of 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 September 30, 1997, is $8.2 million or approximately
9.3% 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, 1997, are as follows:
Tier 1 leverage 9.75%
Tier 1 risk-based 14.29%
Total risk-based 15.54%
During the first nine months of 1997, the Company has purchased and retired
approximately 5,000 shares of
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its common stock for $26 to $30 per share. The Company does not anticipate that
significant additional amounts of common stock will be repurchased in 1997.
RESULTS OF OPERATIONS
The Company had net income of $262,000 for the three months ending September 30,
1997, compared with $239,000 for the same period last year, resulting in an
increase of 9.5%. For nine months ending September 30, 1997, net income was
$746,000 compared with $618,000 for 1996, or an increase of 20.6%.
Interest income and interest expense both increased from 1996 to 1997 resulting
from the increase in earning assets and interest bearing liabilities.
Consequently, net interest income increased to $2.9 million from $2.5 million
for the first nine months ending September 30, 1996, or an increase of 15.9%.
Earning assets through September 30, 1997 increased $14.7 million and
interest-bearing liabilities increased $16.6 million compared to September 30,
1996, reflecting increases of 22.6% and 31.9%, respectively.
Noninterest income for the nine months ending September 30, 1997 was $636,000
compared to $460,000 for the same period in 1996 reflecting an increase of
38.3%. The growth in noninterest income resulted primarily from the combination
of service charges associated with deposit growth, increased credit life
insurance commissions, and secondary mortgage processing fees.
The provision for loan losses was $141,000 in the first nine months of 1997
compared with $121,000 for the same period in 1996. The allowance for loan
losses of $755,000 at September 30, 1997 (approximately 1.21% 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 September 30, 1997
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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)
November 7, 1997 /s/ John L. Campbell
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(Date) John L. Campbell, President
November 7, 1997 /s/ George E. Burnett
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(Date) George E. Burnett, Senior
Vice President and Cashier
(Principal Accounting Officer)
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