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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-18527
FIRST COMMUNITY BANCORP, INC.
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(Name of small business issuer in its charter)
Georgia 58-1869700
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
827 Joe Frank Harris Parkway, S.E.,
Cartersville, Georgia 30120
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (770) 382-1495
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act: None
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act during the past 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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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. X
-----
State issuer's revenues for its most recent fiscal year. $7,466,726
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock as of March 1, 1997.
$5,998,880
As of March 1, 1997, issuer has outstanding 415,103 shares of common
stock, $1 par value per share, which is issuer's only class of common stock.
Documents incorporated by reference: None
----
Transitional Small Business Disclosure Format (Check one): Yes No X
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FIRST COMMUNITY BANCORP, INC. AND SUBSIDIARY
FORM 10-KSB
INDEX
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PAGE
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Part I
Item 1. Business ............................................ 3
Item 2. Properties........................................... 15
Item 3. Legal Proceedings.................................... 15
Item 4. Submission of Matters to a Vote
of Security Holders................................ 15
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.................... 15
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of
Operations......................................... 17
Item 7. Financial Statements and Supplementary Data.......... 35
Item 8. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure............. 66
Part III
Item 9. Directors and Executive Officers
of the Registrant.................................. 66
Item 10. Executive Compensation............................... 71
Item 11. Security Ownership of Certain
Beneficial Owners and Management................... 72
Item 12. Certain Relationships and Related
Transactions....................................... 74
Part IV
Item 13. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K................. 75
Signatures .......................................................... 76
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FIRST COMMUNITY BANCORP, INC. AND SUBSIDIARY
PART I
ITEM 1. BUSINESS.
Business of the Company
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First Community Bancorp, Inc. (the "Company"), a Georgia corporation,
was organized on May 31, 1989, for the purpose of acquiring all of the issued
and outstanding common stock of First Community Bank & Trust (the "Bank").
Pursuant to a Plan of Reorganization, effective December 1, 1989, the Company
acquired all of the issued and outstanding shares of common stock, $5.00 par
value of the Bank. As a result of this transaction, the former stockholders of
the Bank became the stockholders of the Company, and the Bank became a
wholly-owned subsidiary of the Company.
The Bank is a financial institution which was organized under the laws
of the State of Georgia on July 11, 1988 and, on October 23, 1989, began
operation of a full-service commercial banking business based in Bartow County,
Georgia, providing such customary banking services as checking and savings
accounts, various types of time deposits, safe deposit facilities and individual
retirement accounts. It also makes secured and unsecured loans and provides
other financial services to its customers. While the Bank has trust powers, such
powers are currently exercised only to permit the Bank to serve as custodian of
its individual retirement accounts. The Bank engages in a general commercial
banking business in its community, emphasizing the banking needs of individuals
and small- to medium-sized business and professional concerns.
On October 21, 1993, the Bank opened a full-serve branch in
Adairsville, Georgia.
Competition
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The banking industry is highly competitive. The Bank's primary market
consists of Bartow County, Georgia, which has a population of approximately
65,000. The Bank competes for all types of loans, deposits and other financial
services with seven other commercial banks located in Bartow County. The Bank
also competes with other financial institutions in Bartow County and with
commercial banks, savings and loan associations and other financial institutions
located outside of Bartow County. To a lesser extent, the Bank competes for
loans with insurance companies, regulated small loan companies, credit unions
and certain governmental agencies.
The Company and any non-banking subsidiaries that it may organize will
compete with numerous other companies and financial
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institutions engaged in similar lines of business, such as other bank holding
companies, leasing companies and insurance companies. Many of these other
financial institutions and companies will have far greater resources than either
the Bank or the Company.
Employees
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As of December 31, 1996 the Bank had 41 full-time equivalent employees.
The Company has no employees separate from the Bank. Neither the Company nor the
Bank is a party to any collective bargaining agreement, and, in the opinion of
management, the Bank enjoys satisfactory relations with its employees.
SUPERVISION, REGULATION, AND OTHER FACTORS
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Bank Holding Company Regulation
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Offers and sales of the common stock of the Company are subject to the
registration requirements of the Securities Act of 1933 and the regulations
promulgated thereunder which are administered by the Securities and Exchange
Commission. The Company is also subject to the reporting requirements of the
Securities Exchange Act of 1934. Such offers and sales are also subject to the
registration requirements of various state securities acts.
The Company is a registered holding company under the Bank Holding
Company Act of 1956, as amended (the "Federal Bank Holding Company Act"), and
the Georgia Bank Holding Company Act, and is regulated under such acts by the
Board of Governors of the Federal Reserve System (the "Federal Reserve") and by
the Georgia Department of Banking and Finance, respectively. As a bank holding
company, the Company is required to file with the Federal Reserve an annual
report and such additional information as the Federal Reserve may require
pursuant to the Federal Bank Holding Company Act. The Federal Reserve may also
conduct examinations of the Company and the subsidiary of the Company.
The Federal Bank Holding Company Act also requires every bank holding
company to obtain prior approval from the Federal Reserve before acquiring
direct or indirect ownership or control of more than 5% of the voting shares of
any bank which is not already majority owned or controlled by that bank holding
company. The Federal Reserve is prohibited, however, from approving the
acquisition by the Company of the voting shares of, or substantially all the
assets of, any bank located outside Georgia, unless such acquisition is
specifically authorized by the laws of the state in which the bank is located.
On March 16, 1994, the Georgia legislature adopted the "Georgia
Interstate Banking Act," effective July 1, 1995. Interstate acquisitions by
institutions located in Georgia will be
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permitted in states which also allow national interstate acquisitions, and (2)
interest acquisitions of institutions located in Georgia will be permitted by
institutions located in states which also allow national interstate
acquisitions; provided, however, that if the board of directors of a Georgia
bank or bank holding company adopts a resolution to except such bank or bank
holding company from being acquired pursuant to the provisions of the Georgia
Interstate Banking Act and properly files a certified copy of such resolution
with the Georgia Department, such bank or bank holding company may not be
acquired by an institution located outside of the State of Georgia.
In addition, the President of the United States signed into law the
"Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994" on
September 29, 1994 (the "Interstate Branching Act"). The Interstate Branching
Act, will permit bank holding companies to merge their multi-state bank
subsidiaries into a single bank by June 1, 1997, unless state legislators act to
"opt- out" of this provision, to acquire banks in any state one year after the
effective date of the Interstate Branching Act, and to establish de novo
branches across state lines so long as the individual state into which a
potential de novo entrant proposes to branch specifically passes legislation to
"opt-in".
Under the Interstate Branching Act, a bank may merge beginning on June
1, 1997, with a bank in another state so long as the transaction does not
involve a bank in a home state which has enacted a law after the date of
enactment of the Interstate Branching Act and before June 1, 1997 that applies
equally to all out of state banks and expressly prohibits such interstate merger
transactions. Such a law would have no effect on merger transactions approved
before the effective date of such a state law. States may also elect to permit
merger transactions before June 1, 1997.
The Interstate Branching Act authorizes interstate mergers involving
the acquisition of a branch of a bank without the acquisition of the bank only
if state law permits an out of state acquiror to acquire a branch without
acquiring the bank. State minimum age laws for banks to be acquired will be
preserved unless state law provides for a minimum age period of more than five
years. After consummation of any interstate merger transaction, a resulting bank
may establish or operate additional branches at any location where any bank
involved in the transaction could have established or operated a branch under
applicable federal or state law.
The Riegle Community Development and Regulatory Improvement Act of 1994
(the "RCDRIA") was enacted September 23, 1994, to promote economic
revitalization and community development to "investment areas." The RCDRIA
establishes a Community Development Financial Institutions Fund to achieve these
objectives. The Fund
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is authorized to provide financial assistance through a variety of mechanisms
including equity investments, grants, loans, credit union shares and deposits.
The amount of assistance any community development financial institution and its
subsidiaries and affiliates may receive is generally limited to $5 million. A
qualifying institution may receive $3.75 million for the purpose of serving an
investment area in another state.
The RCDRIA also provides certain regulatory relief requiring each
agency to streamline and modify its regulations and policies, remove
inconsistencies and eliminate outputted and duplicative requirements. The RCDRIA
also directs the federal agencies to coordinate examinations among affiliate
banks, coordinate examinations with other federal banking agencies, and work to
coordinate with state banking agencies. The federal banking agencies are also
directed to work jointly in developing a system for banks and savings
associations to file reports and statements electronically and to adopt a single
form for filing core information in reports and statements.
The RCDRIA also provides procedures for expediting bank holding company
applications, eliminating prior approval of the Federal Reserve for the
acquisition of control of a bank in a reorganization in which persons exchange
their shares for shares of a newly-formed bank holding company provided the bank
holding company immediately after the acquisition meets capital and other
financial standards and the bank is "adequately capitalized," the holding
company does not engage in any activities other than those of managing and
controlling banks, the holding company provides 30 days prior notice to the
board of the transaction, and the holding company will not acquire control of
any additional bank. The RCDRIA also provides for reduction of post-approval
waiting periods, decreasing the waiting period from 30 days to 15 days in most
instances. The RCDRIA also exempts from federal securities registration
securities issued in connection with the formation of a one-bank holding
company.
The Georgia General Assembly recently enacted legislation altering the
public policy of the State regarding intrastate branch banking. Essentially, the
legislation allows a bank to establish de novo branch banks on a limited basis
beginning July 1, 1996. Between July 1, 1996 and June 30, 1998, the number of de
novo branch banks is limited to three per bank or group of affiliated banks
under the same bank holding company. Beginning July 1, 1998, the number of de
novo branch banks which may be established is no longer limited by statute.
The Federal and Georgia Bank Holding Company Acts further provide that
the Federal Reserve and the Department of Banking and Finance will not approve
any acquisition, merger or consolidation (a) which would result in a monopoly,
(b) which would be in furtherance of any combination or conspiracy to monopolize
or
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attempt to monopolize the business of banking in any part of the United States,
(c) the effect of which may be substantially to lessen competition or to tend to
create a monopoly in any section of the country or (d) which in any other manner
would be in restraint of trade, unless the anticompetitive effects of the
proposed transaction are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and needs of the
community to be served.
In addition to having the right to acquire ownership or control of
other banks, the Company is authorized to acquire ownership or control of
nonbanking companies, provided the activities of such companies are so closely
related to banking or managing or controlling banks that the Federal Reserve
considers such activities to be proper to the operation and control of banks.
Regulation Y, promulgated by the Federal Reserve, sets forth those activities
which are regarded as closely related to banking or managing or controlling
banks and, thus, are permissible activities for bank holding companies, subject
to approval by the Federal Reserve in individual cases.
Pursuant to (S) 4(j) of the Bank Holding Company Act (12 U.S.C. (S)
1843(j)), a bank holding company must submit a written notice to the Federal
Reserve Board at least sixty days before engaging, directly or indirectly, in a
non-banking activity authorized under (S) 4(c)(8), which authorizes holding
companies to engage in activities that are closely related to banking or
managing or controlling banks. The processing period begins to run from the date
the Federal Reserve Board receives a complete notice, and may be extended under
certain circumstances. In acting on a notice to engage in (S) 4(c)(8)
activities, the Federal Reserve Board is required by certain sections of the
Bank Holding Company Act to consider whether the benefits of the proposed
activity (such as greater convenience, increased competition, or gains in
efficiency) outweigh the potential adverse effects (such as undue concentration
of resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices). Section 4(c)(8) also requires that proposals to engage in
permissible activities are subject to public notice and an opportunity for a
hearing only in the case of an acquisition of a savings association.
Section 4(j) of the Bank Holding Company Act was amended by the
Economic Growth and Regulatory Paperwork Reduction Act of 1996, enacted as a
part of the Omnibus Consolidated Appropriations Act for Fiscal Year 1997 to
permit a well-capitalized and well-managed bank holding company, that controls
predominantly well-capitalized and well-managed depository institutions, as
defined by amendments to The Bank Holding Company Act, to engage de novo in any
permissible 4(c)(8) activity or acquire any company engaged in permissible
4(c)(8) activities (except for an insured depository institution, i.e., a
savings association) under expedited procedures. To be eligible for the
expedited procedures, the book
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value of the assets acquired may not exceed 10% of the holding company's
consolidated risk weighted assets and the consideration paid may not exceed 15%
of Tier One capital. The Federal Reserve Board may adjust these percentages. In
addition, no administrative enforcement action may have been commenced or be
pending nor may any cease and desist order pursuant to (S) 8 of the FDI Act have
been issued or be pending against the holding company or any of its depository
institutions subsidiaries.
While all qualifying holding companies engaging in (S) 4(c)(8)
activities under the expedited procedures must provide notice to the Federal
Reserve Board, the notice provisions differ. First, to engage de novo directly
or through a subsidiary in activities that the Fed has already approved by
regulation, the bank holding company must provide notice within ten days after
commencing the activity. Second, to engage in activities that the Fed has
permitted by order or to acquire the shares or assets of an existing company,
the bank holding company must provide notice at least twelve business days prior
to commencing the activity, during which time the Fed may require the full
60-day notice procedure.
The Company is authorized to borrow money and pledge as security for
such indebtedness the shares of its subsidiary bank for general corporate
purposes, including acquisition of other permitted businesses, capital for its
subsidiary bank and purchase of its own shares. The only source the holding
company has to repay the debt is dividends from the subsidiary bank. Dividends
may only be paid to the extent of fifty percent (50%) of the prior year earnings
without the express consent of the Georgia Department of Banking and Finance,
and further, regulatory agencies have the authority to restrict payment of
dividends in the event the Bank's capital falls below minimum levels and under
certain other conditions.
Bank Regulation
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The Bank operates as a bank organized under the laws of the State of
Georgia subject to examination by the Georgia Department of Banking and Finance.
The Georgia Department of Banking and Finance regulates all areas of the Bank's
commercial banking operations, including reserves, loans, mergers, payment of
dividends, interest rates, establishment of branches and other aspects of
operation. The Bank is not a member of the Federal Reserve system, but uses the
Federal Reserve as a clearing agent.
The Bank is insured and also regulated by the Federal Deposit Insurance
Corporation (the "FDIC"). The major functions of the FDIC with respect to
insured banks include paying depositors to the extent provided by law in the
event an insured bank is closed without adequately providing for payment of the
claims of depositors, acting as a receiver of state banks placed in receivership
when so appointed by state authorities, and preventing
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the continuance or development of unsound and unsafe banking practices. In
addition, the FDIC is authorized to examine insured banks which are not members
of the Federal Reserve to determine the condition of such banks for insurance
purposes. The FDIC also approves conversions, mergers, consolidations and
assumption of deposit liability transactions where the resulting, continued or
assumed bank is an insured nonmember state bank.
Subsidiary banks or a bank holding company are subject to certain
restrictions imposed by the Federal Bank Holding Company Act on any extension of
credit to the bank holding company or any of its subsidiaries, on investment in
the stock or other securities thereof, and on the taking of such stock or
securities as collateral for loans to any borrower. In addition, a bank holding
company and its subsidiaries are prohibited from engaging in certain tying
arrangements in connection with any extension of credit or the provision of any
property or services. The Federal Reserve also possesses cease-and-desist powers
over bank holding companies and their nonbank subsidiaries if their actions
represent an unsafe or unsound practice or violation of laws.
FIRREA
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The Financial Institutions Reform, Recovery and Enforcement Act of 1989
(FIRREA) was introduced into Congress on February 22, 1989 and enacted on August
9, 1989. Under the 1989 Act, the Federal Savings and Loan Insurance Corporation
was abolished. Two separate funds have been established, one for commercial
banks (the Bank Insurance Fund) and the other for savings institutions (the
Savings Associations Insurance Fund). Both funds are under the management of the
FDIC which sets insurance premium rates for all insured institutions. Effective
January 1, 1994, the FDIC adopted a new system of risk-based insurance
assessment. Under the FDIC's rule, each depository institution is assigned to
one of the three groups, well-capitalized, adequately capitalized or under-
capitalized, based on its capital ratios and will be further assigned to one of
three subgroups within its capital ratios and will be further assigned to one of
three subgroups within its capital category based on an evaluation of the risk
posed by the institution to its insurance fund. The capital standard being used
to set insurance premium rates are the same as those adopted by the agencies
with the prompt corrective action framework. The rule provides that
well-capitalized institutions pay assessment rates ranging from 23 to 29 basis
points, depending upon the subgroup to which they are assigned. Adequately
capitalized institutions pay from 26 to 30 basis points, and undercapitalized
institutions pay from 29 to 31 basis point. In February 1995, the FDIC proposed
a new rule which would significantly reduce the assessment rate payable by
well-capitalized institutions. Such institutions would pay assessment rates from
4 to 21 basis points. Adequately capitalized institutions would pay from 7 to 28
basis
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points, and undercapitalized institutions would pay from 14 to 31
basis points.
FDICIA
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FDICIA was signed into law on December 19, 1991. Regulations
implementing the prompt corrective action provisions of FDICIA became effective
on December 19, 1992. In addition to the prompt corrective action requirements,
FDICIA includes significant changes to the legal and regulatory environment for
insured depository institutions, including reductions in insurance coverage for
certain kinds of deposits, increased supervision by the federal regulatory
agencies, increased reporting requirements for insured institutions, and new
regulations concerning internal controls, accounting, and operations.
The prompt corrective action regulations define specific capital
categories based on an institution's capital ratios. The capital categories, in
declining order, are "well-capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." Institutions categorized as "undercapitalized" or worse are
subject to certain restrictions, including the requirement to file a capital
plan with its primary federal regulator, prohibitions on the payment of
dividends and management fees, restrictions on executive compensation, and
increased supervisory monitoring, among other things. Other restrictions may be
imposed on the institutions either by its primary federal regulator or by the
Federal Deposit Insurance Corporation ("FDIC"), including requirements to raise
additional capital, sell assets, or sell the entire institution. Once an
institution becomes "critically undercapitalized" it must generally be placed in
receivership or conservatorship within 90 days. As of December 31, 1996 and
1995, notification from the FDIC categorized the Bank as "well capitalized"
under the regulatory framework for prompt corrective action.
Recent Regulatory Developments
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On September 3, 1996, President Clinton signed the Omnibus Consolidated
Appropriations Act for FY 1997. Subtitle G of Title Two of that Act is titled
the "Deposit Insurance Funds Act of 1996" (Deposit Insurance Funds Act), which
among other things provides for the recapitalization of the Savings Association
Insurance Fund ("SAIF") as of October 1, 1996. To accomplish this
recapitalization, the FDIC imposed a special assessment on each insured
depository institution with deposits assessable under the SAIF so that SAIF
would achieve its designated reserve ratio (DRR) on the first business day of
the first month after the date of the enactment of the Deposit Insurance Funds
Act. Because the legislation was enacted as of September 30, 1996, under the
Deposit Insurance Funds Act, SAIF achieved its DRR and became fully capitalized
on October 1, 1996. For purposes of the SAIF special
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assessment, the amount of SAIF-assessable deposits is determined as of March 31,
1995. However, the term "SAIF-assessable deposits" includes deposits assumed
after March 31, 1995 if the deposits were assumed from an institution that is no
longer insured when the special assessment to recapitalize SAIF is imposed under
this section. Therefore, some institutions will be required to pay the special
assessment on SAIF insured deposits that were assumed after March 31, 1995.
A major part of the plan to recapitalize SAIF involves imposing a
one-time special assessment on SAIF-assessable deposits that may be paid in two
installments under certain conditions. Subject to certain statutory adjustments,
the FDIC has discretion to determine the rates of the assessments after
considering certain factors, including the most recent SAIF balance, data on
insured deposits, and any other factors that the FDIC deems appropriate. This
one-time special assessment is subject to certain exceptions, and the FDIC has
discretion to issue orders exempting weak institutions from paying this special
assessment if the exemption will reduce the risk to SAIF. The FDIC prescribed
guidelines for issuing such an exemption within 30 days of enactment of the
Deposit Insurance Funds Act. The Act required FDIC to exempt from the special
assessment (1) institutions that existed on October 1, 1995 and held no SAIF
assessable deposits before January 1, 1993, (2) federal savings banks newly
established in April, 1994 to acquire the deposits of savings institutions in
default that received assistance from the RTC in connection with the
transactions, and (3) an SAIF insured savings association that, before January
1, 1987, was a federal savings bank insured by the FSLIC for the purpose of
acquiring the assets or assuming the liabilities of a national bank in a
transaction consummated after July 1, 1986 and had assets less than $150
million. Exempt institutions generally are required to pay semi-annual
assessments at former rates under the schedule applicable to SAIF fund members
on June 30, 1995, with certain exceptions.
There are three statutory adjustments that the FDIC must consider in
setting the SAIF recapitalization rates. The first of these relates to Oakar
transactions, which are generally defined to include bank purchases of
SAIF-assessable deposits. Generally, Bank Insurance Fund (BIF) members acquiring
SAIF-assessable deposits in Oakar transactions prior to March 31, 1995 (or after
March 31, 1995 if the institution from which the deposits were acquired is no
longer insured at the time the special assessment is imposed), are subject to
the SAIF special assessment but the amount of assessable deposits would, as a
general proposition, be reduced by 20% for purposes of the assessment if certain
conditions are satisfied. The 20% haircut for these BIF members applies for
purposes of the special assessment and for purposes of future semi-annual
assessments on SAIF-assessable deposits that were acquired prior to March 31,
1995. To be eligible for the 20% haircut, a BIF
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member must satisfy certain requirements that are based on a suggested
attributable deposit amount as of June 30, 1995.
The second statutory adjustment the FDIC must consider for purposes of
computing this special assessment relates to "converted associations," a term
defined by the Act. An institution meeting one of the Act's definitions of
"converted association" may also reduce by 20% the amount of deposits that are
SAIF insured as of March 31, 1995 (or after March 31, 1995 is subject to the
special assessment because the institution from which the deposits were acquired
is no longer insured at the time the special assessment is imposed). In addition
to "converted associations," Sasser banks a savings association that converted
to a bank charter prior to SAIF reaching its DRR and as a result the resulting
bank was required to remain an SAIF member - may qualify under this second
adjustment under very limited criteria.
Third, if payment of the special assessment would pose a significant
risk that an insured depository institution or its holding company may default
on payments under debt obligations or preferred stock, the institution may elect
to pay the special assessment under extended terms that would include a
supplemental special assessment.
The SAIF was initially capitalized through the issuance of bond
obligations by the Financing Corporation (FICO), commonly referred to as FICO
bonds. The Deposit Insurance Funds Act also addresses repayment of the interest
on those bonds. Beginning with the semi-annual periods after December 31, 1996,
assessments to pay approximately $8 million in interest on FICO bonds will be
shared among all insured depository institutions, including insured national
banks, instead of only SAIF members. For purposes of the assessments to pay the
interest on the FICO bonds, BIF-assessable deposits will be assessed at a rate
of 20% of the assessment rate applicable to SAIF-assessable deposits until
December 31, 1999. After the earlier of December 31, 1999 or the date the last
savings association ceases to exist, full pro rata sharing of FICO assessments
will begin.
For purposes of paying the interest on the FICO bonds, "BIF- assessable
deposits" means deposits that are subject to assessments under BIF. The term
"SAIF-assessable deposits" means deposits that are assessable under SAIF and
includes any deposits that were assumed after March 31, 1995 if the insured
institution from which the deposits were acquired is not insured when the SAIF
special assessment is imposed.
The Deposit Insurance Funds Act also provides that, as of the date of
enactment and ending on the earlier of December 31, 1999 or the date that the
last savings association ceases to exist, the federal banking agencies must take
appropriate action to prohibit deposit shifting from SAIF to BIF, including
enforcement actions,
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denial of applications, or imposing exit and interest fees as if the transaction
qualified as a conversion. The legislation requires the Office of the
Comptroller of the Currency, the FDIC, the Federal Reserve Board, and the Office
of Thrift Supervision to take necessary actions to prevent insured depository
institutions and depository institution holding companies from facilitating or
encouraging the shifting of deposits from SAIF assessable to BIF- assessable for
the purpose of evading the assessments imposed on SAIF-assessable deposits. The
FDIC may issue regulations to prevent deposit shifting. It is a rule of
construction, however, that this portion of the Deposit Insurance Funds Act does
not prohibit an institution from engaging in conduct or activity that is part of
the ordinary course of business and is not directed at depositors of an insured
affiliated institution.
The Deposit Insurance Funds Act also provides for the merger of BIF and
SAIF into the Deposit Insurance Fund (DIF) on January 1, 1999, if no insured
depository institution is a "savings association" on that date. If an insured
savings association still exists on January 1, 1999, the Deposit Insurance Funds
Act does not make provision for the merger of the funds to occur on a subsequent
date. For purposes of the BIF/SAIF merger, the term "savings association" is
defined as having the same meaning as it does in (S) 3(b) of the FDI Act (12
U.S.C. (S) 1813(b)), and thus includes both federal and state savings
associations.
If immediately before the merger, the SAIF reserve ratio exceeds the
DRR, the excess will be placed in DIF's special reserve. While the DIF special
reserve will not be included for purposes of calculating the DIF DRR and the
FDIC can not refund any amount in the special reserve, it can be drawn upon for
emergency purposes if the reserve ratio of the DIF should drop below 50% of its
DRR for a sustained period of time. This portion of the Deposit Insurance Funds
Act also makes conforming changes to the FDI Act and other provisions of law
effective on January 1, 1999 if the funds are so merged. If the funds are not
merged, the Deposit Insurance Fund Act establishes an SAIF special reserve as of
January 1, 1999 that will consist of the excess in the SAIF over the DRR as of
that date. While the amount in the SAIF special reserve can not be used to
calculate any future DRR and can not be used for refunds from the SAIF, it would
be available for emergency purposes if the reserve ratio of the SAIF is less
than 50% of its DRR for a sustained period of time.
The Deposit Insurance Funds Act also required the FDIC on such basis as
it deems appropriate to refund any amounts in excess of the DRR to BIF members
and, after it is established, to DIF members. There are no similar provisions
for refunds to SIF members. A member can not, however, receive any refund for
any semi-annual assessment period that exceeds the assessment paid during that
period. Institutions that are not "well-capitalized" or that have other
weaknesses are not eligible for refunds. The
-13-
<PAGE>
refund provision becomes effective as of the end of any semi-annual assessment
period beginning after the date of enactment of the Deposit Insurance Funds Act.
Capital Requirements
- --------------------
The Department of Banking and Finance of the State of Georgia requires
that de novo banks in Georgia maintain a minimum ratio of primary capital, as
defined, to total assets of not less than eight percent (8%) during the first
three years of operation, and thereafter at six percent (6%). Additionally,
banks and their holding companies are subject to certain risk-based capital
requirements based on their respective asset composition. Management believes as
of December 31, 1996, the Company and the Bank meet all capital adequacy
requirements to which they are subject.
Monetary Policy
- ---------------
The earnings of the Bank are affected by domestic and foreign economic
conditions, particularly by the monetary and fiscal policies of the United
States Government and its agencies.
The Federal Reserve has had, and will continue to have, an important
impact on the operating results of commercial banks through its power to
implement national monetary policy in order, among other things, to mitigate
recessionary and inflationary pressures by regulating the national money supply.
The techniques used by the Federal Reserve include setting the reserve
requirements of member banks and establishing the discount rate on member banks'
borrowings. The Federal Reserve also conducts open market transactions in United
States Government securities.
Periodically, bills are pending before the United States Congress which
contain wide-ranging proposals for altering the structures, regulations and
competitive relationships of the nation's financial institutions. Among such
bills are proposals to prohibit banks and bank holding companies from conducting
certain types of activities, to subject banks to increased disclosure and
reporting requirements, to eliminate on a regional or other basis the present
restriction on interstate expansion by banks or bank holding companies, to alter
the statutory separation of commercial and investment banking and to alter the
powers of thrift institutions and other competitors of banks. It cannot be
predicted whether or in what form any of these proposals will be adopted or the
extent to which the business of the Company may be affected thereby.
-14-
<PAGE>
ITEM 2. PROPERTIES.
The Company's corporate office and the Bank's main office are located
at 827 Joe Frank Harris Parkway, S.E., Cartersville, Georgia 30120.
The Bank's office is a modern two-story building constructed in 1989
containing approximately 10,005 square feet located on approximately one and
one-half (1.5) acres owned by the Bank. The Bank utilizes both floors of the
building. On the first floor, there are five inside teller and four drive-up
teller windows along with the new account and customer service representatives
and three loan offices. The second floor is devoted to administration. The Bank
owns its office properties without encumbrance.
The Bank's branch is located at 5827 Joe Frank Harris Parkway,
Adairsville, Georgia 30103. The land and building comprising the branch are
wholly owned assets of the Bank and are free of any encumbrances.
The branch office is a modern one-story building constructed in 1980
containing approximately 2,400 square feet located on approximately three-fourth
(.75) acre. There are four inside teller and two drive-up teller windows along
with the new account and customer service representatives and one loan officer.
ITEM 3. LEGAL PROCEEDINGS.
The Company and the Bank are not parties to, nor is any of their
property the subject of, any material pending legal proceedings, other than
ordinary routine litigation incidental to their business, and no such
proceedings are known to be contemplated by governmental authorities. There are
no material legal proceedings to which any director, officer, affiliate or more
than 5% shareholder is a party adverse to or that has a material interest
adverse to the Company or the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of shareholders of the Company during
the fourth quarter ended December 31, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The stock of the Company is not traded publicly and no specific market
sales prices can be quoted. The Company has maintained partial records of share
prices based upon actual transactions disclosed. However, these records are
incomplete since they do not reflect prices for all transactions in the common
-15-
<PAGE>
stock of the Company. To the extent such information has been disclosed to the
Company, the share prices of the common stock of the Company are as follows:
<TABLE>
<CAPTION>
==============================================================================
YEAR/QUARTER HIGH SELLING PRICE LOW SELLING PRICE
- ------------------------------------------------------------------------------
<S> <C> <C>
1995
- ------------------------------------------------------------------------------
First Quarter $12.50 $12.50
- ------------------------------------------------------------------------------
Second Quarter $13.00 $13.00
- ------------------------------------------------------------------------------
Third Quarter $16.25 $13.33
- ------------------------------------------------------------------------------
Fourth Quarter $17.16 $12.50
- ------------------------------------------------------------------------------
1996
- ------------------------------------------------------------------------------
First Quarter $15.30 $15.30
- ------------------------------------------------------------------------------
Second Quarter $15.51 $15.51
- ------------------------------------------------------------------------------
Third Quarter $16.17 $16.17
- ------------------------------------------------------------------------------
Fourth Quarter $20.00 $17.11
==============================================================================
</TABLE>
During the period covered by this report and to date, sales not reported to
management may have occurred at share prices not reflected in this table.
As of March 1, 1997, the Company had 828 shareholders of record. As of
January, 1995 the Company has appointed Mellon Trust Securities Corporation as
official transfer and paying agent for all stock transactions and dividend
payments.
Under the Georgia Business Corporation Code, the Company may from time
to time make distributions, including the payment of dividends, to its
shareholders in money, indebtedness, or other property (except its own shares)
unless, after giving effect to such distribution, the Company would not be able
to pay its debts as they become due in the usual course of business or the
Company's total assets would be less than the sum of its total liabilities, plus
the amount that would be needed, if the Company were to be dissolved at the time
of the distribution, to satisfy any preferential rights of shareholders upon
dissolution. The Company may also distribute its shares pro rata and without
consideration to its shareholders or to the shareholders of one or more classes
or series, which constitutes a share dividend.
In the absence of other activities conducted by the Company, its
ability to pay dividends will depend on the earnings of the Bank. At December
31, 1994, the Board of Directors of the Company had declared the first dividend
since organization to shareholders in the amount of $.25 per share for a total
of $103,776.00 payable
-16-
<PAGE>
in January, 1995. In 1996, the Board declared a cash dividend of $.30 per share
for a total of $124,531.00 payable. The Company declared no dividend in 1995.
General legal requirements applicable to the payments of dividends, actual
financial results and capital needs, in the opinion of management, will
determine the payment of dividends in the future. At December 31, 1996, total
stockholders' equity of the Bank aggregated $6,888,738.00.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
[Management's Discussion and Analysis begins on next page]
-17-
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following is a discussion of the financial condition of First Community
Bancorp, Inc. (the Company) and subsidiary at December 31, 1996 and 1995 and
the results of operations for the years ended December 31, 1996 and 1995. The
purpose of this discussion is to focus on information about the Company's
financial condition and results of operations which are not otherwise apparent
from the audited consolidated financial statements. Reference should be made
to those statements and the selected financial data presented elsewhere in this
report for an understanding of the following discussion and analysis.
Overview
The subsidiary bank, First Community Bank & Trust (the Bank), was
incorporated on July 11, 1988 and commenced business on October 23, 1989.
During 1989, First Community Bancorp, Inc. (the Company) was formed and all
415,103 shares of common stock of the Bank were acquired by the Company. The
Company has had continued steady growth in earning assets, deposits and net
income since 1989, the year operations began. The table below summarizes the
growth in earning assets, deposits and net income for the previous five years:
<TABLE>
<CAPTION>
(Dollars in Thousands)
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Earning assets $72,704 $59,337 $53,412 $44,860 $34,223
Deposits 65,374 55,854 50,735 42,006 33,581
Net income 1,238 993 587 787 262
</TABLE>
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
Financial Condition at December 31, 1996 and 1995
Following is a summary of the Company's balance sheets for the periods
indicated:
<TABLE>
<CAPTION> December 31,
1996 1995 Increase (Decrease)
(Dollars in Thousands) Amount Percent
<S> <C> <C> <C> <C>
Cash and due from banks $ 3,685 $ 2,514 $ 1,171 46.58%
Interest-bearing deposits in banks 3,739 4,707 (968) (20.57)
Securities 14,529 12,506 2,023 16.18
Loans, net 53,522 41,418 12,104 29.22
Premises and equipment 1,778 1,745 33 1.89
Other assets 1,968 1,788 180 10.07
------ ------ ------
$ 79,221 $ 64,678 $ 14,543 22.49%
====== ====== ======
Deposits $ 65,374 $ 55,854 $ 9,520 17.04
Other borrowings 5,348 1,405 3,943 280.64
Other liabilities 1,610 1,644 (34) (2.07)
Stockholders' equity 6,889 5,775 1,114 19.29
------ ------ ------
$ 79,221 $ 64,678 $ 14,543 22.49%
====== ====== ======
</TABLE>
Financial Condition at December 31, 1996 and 1995
As indicated in the above table, the Company's assets increased 22.49%
during 1996. The growth was due primarily to the growth of Bartow County, the
Company's primary market area, as the county is increasingly becoming a part of
the expanding metropolitan Atlanta area. The most significant increase was in
loans, which is a direct result of the growth of the market area. Securities
increased as a result of increases in deposits. The increase was comprised of
$7,228,000 in purchases of investment securities net of $5,208,000 of
maturities. The loan to deposit ratio of the Company increased from 75.42% in
1995 to 83.27% in 1996. Other borrowings increased due to additional advances
from the Federal Home Loan Bank of $3,900,000 during 1996 to fund the
additional loan demand.
There were $125,000 in dividends declared during 1996, therefore net
earnings of $1,113,000 were retained by the Company. Also, the unrealized loss
on available-for- sale securities, net of taxes, decreased by $1,200 during
1996.
<PAGE>
The Company has a significant concentration of its loan portfolio secured by
real estate located in the Company's primary market area of Bartow County. The
Company's real estate mortgage and construction portfolio consists of loans
collateralized by one to four family residential properties, multi-family
residential properties and nonresidential properties, which consists primarily
of small business commercial properties. The Company generally requires that
the loan values not exceed 75% to 85% of the collateral values for these types
of real estate lending.
The primary risk associated with the Company's real estate portfolio is that
a downturn in the economy could negatively impact the values of the real estate
which is held as collateral for these loans. Also, an economic downturn could
also increase unemployment rates in the Company's market area. These risks
could affect the borrower's ability to repay the loans as well as the Company's
ability to recover its investment if repayment is dependent upon the
liquidation of the collateral. The Company reduces these risks not only by
adherence to loan to value guidelines, but also by investigating the
creditworthiness of the borrower and monitoring the borrower's financial
position. Currently, real estate values and employment trends in the Company's
market area are stable with no indications of a significant downturn in the
general economy.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114 and, as amended, No. 118, "Accounting by Creditors
for Impairment of a Loan". The statement prescribes that impaired loans be
measured on the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. The statement had no material effect on the financial
statements of the Company as of December 31, 1996 and 1995.
Liquidity and Capital Resources
The purpose of liquidity management is to ensure that there are sufficient
cash flows to satisfy demands for credit, deposit withdrawals and other needs
of the Company. Traditional sources of liquidity include asset maturities and
growth in core deposits. A company may achieve its desired liquidity
objectives from the management of assets and liabilities, and through funds
provided by operations. Funds invested in short-term marketable instruments
and the continuous maturing of other earning assets are sources of liquidity
from the asset perspective. The liability base provides sources of liquidity
through deposit growth, the maturity structure of liabilities and accessibility
to market sources of funds.
Scheduled loan payments are a relatively stable source of funds, but loan
payoffs and deposit flows fluctuate significantly, being influenced by interest
rates and general economic conditions and competition. The Company attempts to
price its deposits to meet its asset/liability objectives consistent with local
market conditions.
The liquidity and capital resources of the Company are monitored on a
periodic basis by State and Federal regulatory authorities. As determined
under guidelines established by those regulatory authorities and internal
policy, the Company's liquidity is considered adequate.
<PAGE>
At December 31, 1996, the Company had loan commitments and letters of credit
outstanding of $8,919,403 and $393,100, respectively. Because these
commitments generally have fixed expiration dates and many will expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. If needed, the Bank has the ability on a short-term
basis, to borrow and purchase Federal funds from other financial institutions.
At December 31, 1996, the Bank has arrangements with commercial banks for
additional short-term advances of approximately $3,750,000.
At December 31, 1996, the subsidiary Bank's capital ratios were considered
adequate based on regulatory minimum capital requirements. The Company's
common stockholders' equity increased due to the retention of net earnings of
$1,113,000. The Company's stockholders' equity also increased due to the
effect of unrealized gains in the available for sale investment portfolio of
$1,200. For regulatory purposes, the net unrealized losses on securities
available for sale, net of taxes, are not considered in the computation of the
capital ratios.
The primary source of funds available to the Company is the payment of
dividends by its subsidiary Bank. Banking regulations limit the amount of the
dividends that may be paid without prior approval of the Bank's regulatory
agency. Approximately $623,000 are available to be paid as dividends by the
Bank at December 31, 1996.
The minimum capital requirements to be considered well-capitalized under
prompt corrective action regulatory guidelines and the actual capital ratios
for the subsidiary bank as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Regulatory
Actual Requirement
------ -----------
<S> <C> <C>
Leverage capital ratio 8.77% 5.00%
Risk-based capital ratios:
Core capital 12.89 6.00
Total capital 14.15 10.00
</TABLE>
At December 31, 1996, the Company had commitments of $184,000 to complete
its new operations center which also includes outfitting the center with
various equipment.
The Company is not aware of any known trends, events or uncertainties that
will have or that are reasonably likely to have a material effect on its
liquidity, capital resources or operations. The Company is also not aware of
any current recommendations by the regulatory authorities which, if they were
implemented, would have such an effect.
<PAGE>
Effects of Inflation
- --------------------
The impact of inflation on banks differs from its impact on non-financial
institutions. Banks, as financial intermediaries, have assets which are
primarily monetary in nature and which tend to fluctuate in concert with
inflation. A bank can reduce the impact of inflation if it can manage its rate
sensitivity gap. This gap represents the difference between rate sensitive
assets and rate sensitive liabilities. The Company, through its
asset-liability committee, attempts to structure the assets and liabilities and
manage the rate sensitivity gap, thereby seeking to minimize the potential
effects of inflation. For information on the management of the Company's
interest rate sensitive assets and liabilities, see the "Asset/Liability
Management" section.
Results of Operations For The Years Ended December 31, 1996 and 1995
Following is a summary of the Company's operations for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 Increase (Decrease)
(Dollars in Thousands) Amount Percent
<S> <C> <C> <C> <C>
Interest income $ 6,828 $ 5,674 $ 1,154 20.34%
Interest expense 2,683 2,252 431 19.14
Net interest income 4,145 3,422 723 21.13
Provision for loan losses 216 192 24 12.50
Other income 639 615 24 3.90
Other expense 2,666 2,312 354 15.31
Pretax income 1,902 1,533 369 24.07
Income taxes 664 540 124 22.96
------ ----- -----
Net income $ 1,238 $ 993 $ 245 24.67%
====== ===== =====
</TABLE>
Net Interest Income
- -------------------
The Company's results of operations are determined by its ability to
effectively manage interest income and expense, to minimize loan and investment
losses, to generate non-interest income and to control operating expenses.
Since interest rates are determined by market forces and economic conditions
beyond the control of management, The Company's ability to generate net
interest income is dependent upon its ability to obtain an adequate net
interest spread between the rate paid on interest-bearing liabilities and the
rate earned on interest-earning assets.
<PAGE>
The net yield on average interest-earning assets decreased in 1996 to 6.16%
from 6.17% in 1995. This insignificant decrease was due primarily to an
increase in net average interest-earning assets being offset by slight
decreases in rates. The yield on interest earning assets was 10.15% in 1996
compared to 10.23% in 1995. Yields on loans decreased to 11.89% in 1996
compared to 12.12% in 1995. This decrease was consistent with decreases in the
yields of securities, federal funds sold and deposits in banks. Average
interest-earning assets increased overall by $11,782,000 or 21.24%. Average
interest-bearing liabilities increased by $8,776,000 or 19.37%, while the
overall cost of funds decreased from 4.97% in 1995 to 4.96% in 1996.
Provision for Loan Losses
- -------------------------
The provision for loan losses increased by $24,000 during 1996 or 12.50%.
The allowance for loan loss amounted to $914,266 or 1.68% of total loans
outstanding at December 31, 1996 as compared to $705,473 or 1.67% of total
loans outstanding at December 31, 1995. The increase in the amount of the
reserve was due to the increase in the loan loss provision and a reduction in
net charge-offs of $67,000 in 1996 as compared to 1995. There were no
nonaccrual loans at December 31, 1996 and there were no other nonperforming
assets. Based upon management's evaluation of the loan portfolio, management
believes the reserve for loan losses is adequate to absorb possible losses on
existing loans that may become uncollectible. This evaluation considers past
loan loss experience, past due and classified loans, underlying collateral
values and current economic conditions which may affect the borrower's ability
to pay.
Other Income
- ------------
Other operating income consists principally of service charges on deposit
accounts which increased in 1996 ($473,000 in 1996 and $448,000 in 1995).
Non-interest bearing demand, interest-bearing demand and savings accounts
increased 15.38% during 1996 as compared to an increase of 5.58% in the above
service charges. Other income increased $63,000 during 1996 primarily due to
$34,000 in increased mortgage loan originations. The increases in service
charges and other income were offset by a decrease in gain on sale of loans of
$65,000.
Non-interest Expenses
- ---------------------
The increase in non-interest expenses were due primarily to the growth in
the Company which resulted in increased non-interest expenses of $354,000 in
1996 or 15.33%. Salaries and employee benefits and other operating expenses
are the primary components of non-interest expense. Salaries and employee
benefits increased to $1,452,000 in 1996 from $1,174,000 in 1995. This increase
is attributable to the increases in the average wages paid to employees, and
the related payroll tax costs. Other operating expenses increased to $803,000
in 1996 from $743,000 in 1995 and is due primarily to the growth of the Bank.
A significant offset to the other operating expense increases was a reduction
in the FDIC assessments for 1996 of $57,000 which is due to a reduction in the
assessment rates for "well capitalized" financial institutions.
<PAGE>
Income Tax
- ----------
Income taxes, as a percentage of pre-tax income, remained stable in 1996 and
1995 at 35%.
Asset/Liability Management
- --------------------------
It is the Company's objective to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the framework of
established cash, loan, investment, borrowing and capital policies. Certain
officers are charged with the responsibility for monitoring policies and
procedures that are designed to ensure an acceptable composition of the
asset/liability mix. It is the overall philosophy of management to support
asset growth primarily through growth of core deposits of all categories made
by local individuals, partnerships and corporations.
The Company's asset/liability mix is monitored on a regular basis with a
report reflecting the interest rate sensitive assets and interest rate
sensitive liabilities being prepared and presented to the Board of Directors of
the Bank on a monthly basis. The objective of this policy is to monitor
interest rate sensitive assets and liabilities so as to minimize the impact of
substantial movements in interest rates on earnings. An asset or liability is
considered to be interest rate-sensitive if it will reprice or mature within
the time period analyzed, usually one year or less. The interest
rate-sensitivity gap is the difference between the interest-earning assets and
interest-bearing liabilities scheduled to mature or reprice within such time
period. A gap is considered positive when the amount of interest
rate-sensitive assets exceeds the amount of interest rate-sensitive
liabilities. A gap is considered negative when the amount of interest
rate-sensitive liabilities exceeds the interest rate-sensitive assets. During
a period of rising interest rates, a negative gap would tend to adversely
affect net interest income, while a positive gap would tend to result in an
increase in net interest income. Conversely, during a period of falling
interest rates, a negative gap would tend to result in an increase in net
interest income, while a positive gap would tend to adversely affect net
interest income. If the Company's assets and liabilities were equally flexible
and move concurrently, the impact of any increase or decrease in interest rates
on net interest income would be minimal.
A simple interest rate "gap" analysis by itself may not be an accurate indicator
of how net interest income will be affected by changes in interest rates.
Accordingly, the Company also evaluates how the repayment of particular assets
and liabilities is impacted by changes in interest rates. Income associated with
interest-earning assets and costs associated with interest-bearing liabilities
may not be affected uniformly by changes in interest rates. In addition, the
magnitude and duration of changes in interest rates may have a significant
impact on net interest income. For example, although certain assets and
liabilities may have similar maturities or periods of repricing, they may react
in different degrees to changes in market interest rates. Interest rates on
certain types of assets and liabilities fluctuate in advance of changes in
general market rates, while interest rates on other types may lag behind changes
in general market rates. In addition, certain assets, such as adjustable rate
mortgage loans, have features (generally referred to as "interest rate caps and
floors") which limit changes in interest rates. Prepayment and early withdrawal
levels also could deviate significantly from those assumed in calculating the
interest rate gap. The ability of many borrowers to service their debts also may
decrease during periods of rising interest rates.
<PAGE>
Changes in interest rates also affect the Company's liquidity position. The
Company currently prices deposits in response to market rates and it is
management's intention to continue this policy. If deposits are not priced in
response to market rates, a loss of deposits could occur which would negatively
affect the Company's liquidity position.
At December 31, 1996, the Company's cumulative one year interest rate
sensitivity gap ratio was 95%. The Company's targeted ratio is 80% to 120% in
this time horizon. This indicates that the Company's interest-bearing
liabilities will reprice during this period at a rate slightly faster than the
Company's interest-earning assets. The Company is within its targeted
parameters and net interest income should not be significantly affected by
changes in interest rates. It is also noted that over 77% of the Company's
certificates of deposit greater than $100,000 mature within the one year time
horizon. The majority of these deposits are from established customers. It is
management's belief that as long as the Company pays the prevailing market rate
on these type deposits, the Company's liquidity, while not assured, will not be
negatively affected.
The following table sets forth the distribution of the repricing of the
Company's interest-earning assets and interest-bearing liabilities as of
December 31, 1996, the interest rate sensitivity gap, the cumulative interest
rate sensitivity gap, the interest rate sensitivity gap ratio and the
cumulative interest rate sensitivity gap ratio. The table also sets forth the
time periods in which earning assets and liabilities will mature or may reprice
in accordance with their contractual terms. However, the table does not
necessarily indicate the impact of general interest rate movements on the net
interest margin since the repricing of various categories of assets and
liabilities is subject to competitive pressures and the needs of the Company's
customers. In addition, various assets and liabilities indicated as repricing
within the same period may, in fact, reprice at different times within such
period and at different rates.
<PAGE>
Asset/Liability Management
<TABLE>
<CAPTION>
After After
Three One Year
Months But
Within But Within After
Three Within Five Five
Months One Year Years Years Total
------ -------- ----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits $ 3,739 $ -- $ -- $ -- $ 3,739
Securities 2,264 2,038 8,872 1,355 14,529
Loans 24,394 11,016 17,742 1,284 54,436
------- ------- ------- ------ -------
Total interest earning
assets $30,397 $13,054 $26,614 $ 2,639 $72,704
------- ------- ------- ------ -------
Interest-bearing liabilities:
Interest-bearing demand deposits $14,545 $ -- $ -- $ -- $14,545
Savings 4,356 -- -- -- 4,356
Time deposits, less than $100,000 4,446 11,623 8,842 -- 24,911
Time deposits, $100,000 and over 2,113 4,823 2,017 -- 8,953
Other borrowings (1) 4,020 20 1,009 159 5,208
------- ------- ------- ------ -------
Total interest-bearing
liabilities $29,480 $16,466 $11,868 $ 159 $57,973
------- ------- ------- ------ -------
Interest rate sensitivity gap $ 917 $(3,412) $14,746 $ 2,480 $14,731
------- ------- ------- ------ -------
Cumulative interest rate
sensitivity gap $ 917 $(2,495) $12,251 $14,731
------- ------- ------- ------
Interest rate sensitivity gap ratio 1.03 0.79 2.24 16.60
------- ------- ------- ------
Cumulative interest rate
sensitivity gap ratio 1.03 0.95 1.21 1.25
------- ------- ------- ------
</TABLE>
(1) The above amounts do not include approximately $140,000 of non-interest
bearing advances from the Federal Home Loan Bank as described in the
consolidated financial statements.
<PAGE>
SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA
The tables and schedules on the following pages set forth certain
significant financial information and statistical data with respect to: the
distribution of assets, liabilities and stockholders' equity of the Company,
the interest rates and interest differentials experienced by the Company; the
investment portfolio of the Company; the loan portfolio of the Company,
including types of loans, maturities and sensitivities of loans to changes in
interest rates and information on nonperforming loans; summary of the loan loss
experience and reserves for loan losses of the Company; types of deposits of
the Company and the return on equity and assets for the Company.
Interest Income and Interest Expense
The following tables set forth the amount of the Company's interest income
and interest expense for each category of interest-earning assets and
interest-bearing liabilities and the average interest rate for total
interest-earning assets and total interest-bearing liabilities, net interest
spread and net yield on average interest-earning assets. (1)
Distribution of Assets, Liabilities and Stockholders' Equity
Interest Rates and Interest Differentials
<TABLE>
<CAPTION>
1996 1995
---- ----
Average Income or Yields/ Average Income or Yields/
Balances Expense Rates Balances Expense Rates
-------- ------- ----- -------- ------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits in banks 3,026 162 5.35% 1,936 117 6.04%
Taxable securities 12,971 696 5.37 13,426 743 5.53
Nontaxable securities(4) 1,659 74 4.46 654 31 4.74
Unrealized losses on AFS (58) -- -- (67) -- --
Loans (2) (3) 49,598 5,896 11.89 39,456 4,783 12.12
Allowance for loan losses (826) (677)
Cash and due from banks 2,531 2,084
Other assets 3,546 3,349
------ ----- ------ -----
Total 72,447 6,828 60,161 5,674
====== ===== ====== =====
Total average interest-earning assets 67,254 10.15% 55,472 10.23%
====== ======
Noninterest-bearing demand 10,594 8,288
Interest-bearing demand & savings 19,333 588 3.04 17,770 614 3.46
Time 31,607 1,950 6.17 25,364 1,517 5.98
------ ----- ------ -----
Total deposits 61,534 2,538 51,422 2,131
Borrowings 3,144 145 4.61 2,174 121 5.57
Other liabilities 1,553 1,355
Stockholders' equity 6,216 5,210
------ ----- ------ -----
Total 72,447 2,683 60,161 2,252
====== ===== ====== =====
Total interest-bearing liabilities 54,084 4.96% 45,308 4.97%
====== ======
Net interest income 4,145 3,422
====== ======
Net interest spread 5.19% 5.26%
==== ====
Net yield on average interest-earning assets 6.16% 6.17%
==== ====
</TABLE>
(1) Average balances were determined using the daily average balances during
the year for each category.
(2) Average loans include nonaccrual loans and are stated net of unearned
income.
(3) Interest and fees on loans includes $669,192 and $537,491 of loan fee
income for the years ended December 31, 1996 and 1995, respectively. There
was no significant amount of interest income recognized during 1996 or 1995
on nonaccrual loans.
(4) Yields on nontaxable securities have not been computed on a tax
equivalent basis.
<PAGE>
Rate and Volume Analysis
The following table describes the extent to which changes in interest rates
and changes in volume of interest-earning assets and interest-bearing
liabilities have affected the Company's interest income and expense during the
year indicated. For each category of interest-earning asset and
interest-bearing liability, information is provided on changes attributable to
(1) change in volume (change in volume multiplied by old rate); (2) change in
rate (change in rate multiplied by old volume); and (3) a combination of change
in rate and change in volume. The changes in interest income and interest
expense attributable to both volume and rate have been allocated
proportionately on a consistent basis to the change due to volume and the
change due to rate.
<TABLE>
<CAPTION>
1995 to 1996
Increase (decrease)
due to change in
Rate Volume Total
---- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C>
Income from interest-earning assets:
Interest and fees on loans $ (90) $ 1,203 $ 1,113
Interest on taxable securities (22) (25) (47)
Interest on nontaxable securities (2) 45 43
Interest on interest bearing deposits (14) 59 45
----- ----- -----
Total interest income $ (128) $ 1,282 $ 1,154
----- ----- -----
Expense from interest-bearing liabilities:
Interest on interest-bearing
demand and savings deposits $ (77) $ 51 $ (26)
Interest on time deposits 49 384 433
Interest on other borrowings (23) 47 24
----- ----- -----
Total interest expense $ (51) $ 482 $ 431
----- ----- -----
Net interest income $ (77) $ 800 $ 723
===== ===== =====
</TABLE>
<PAGE>
INVESTMENT PORTFOLIO
Types of Investments
The carrying amounts of investment securities at the dates indicated are
summarized as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
(Dollars in Thousands)
<S> <C> <C>
U.S. Treasury and other U.S. Government agencies and corporations $ 9,248 $ 8,773
Municipal securities 2,581 1,438
Mortgage-backed securities 1,708 2,023
Equity securities (3) 992 272
-------- --------
$ 14,529 $ 12,506
======== ========
</TABLE>
Maturities
The amounts of investment securities in each category as of December 31,
1996 are shown in the following table according to contractual maturity
classifications (1) one year or less, (2) after one year through five years,
(3) after five years through ten years and (4) after ten years.
<TABLE>
<CAPTION>
After one year After five years
One year or less through five years through ten years After ten years Total
Amount Yield(1) Amount Yield(1) Amount Yield(1) Amount Yield(1) Amount Yield(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
other U.S. Government
agencies and corporations $ 1,102 5.90% $ 7,644 5.43% $ 502 7.05% $ -- -- $ 9,248 5.57%
Municipal securities(2) 487 6.69 1,604 4.47 287 5.36 203 5.60 2,581 5.08
Mortgage-backed securities -- -- 625 5.00 130 6.00 953 6.94 1,708 6.16
------------------------------------------------------------------------------------------------
$ 1,589 6.14% $ 9,873 5.25% $ 919 6.37% $ 1,156 6.70% $13,537 5.55%
</TABLE>
(1) Yields were computed using coupon interest, adding discount accretion or
subtracting premium amortization, as appropriate, on a ratable basis over the
life of each security. The weighted average yield for each maturity range was
computed using the carrying value of each security in that range.
(2) Yields on municipal securities have not been computed on a tax
equivalent basis.
(3) Equity securities have not been included in the above maturity analysis
because they have no contractual maturity.
<PAGE>
LOAN PORTFOLIO
Types of Loans
The amount of loans outstanding at the indicated dates are shown in the
following table according to the type of loan.
<TABLE>
<CAPTION>
December 31,
1996 1995
(Dollars in Thousands)
<S> <C> <C>
Commercial, financial and agricultural $ 9,404 $ 7,363
Real estate-construction 12,576 7,128
Real estate-mortgage 25,240 21,011
Consumer instalment and other 7,216 6,621
-------- --------
54,436 42,123
Allowance for loan losses (914) (705)
-------- --------
Net loans $ 53,522 $ 41,418
======== ========
</TABLE>
Maturities and Sensitivities of Loans to Changes in Interest Rates
Total loans as of December 31, 1996 are shown in the following table
according to contractual maturity classifications (1) one year or less, (2)
after one year through five years and (3) after five years. The disclosure of
loans by the required categories, commercial, financial, agricultural and real
estate - construction, is not available and would involve undue burden and
expense to the Company. In making this determination, the Company has
considered the estimated cost to compile the required information and its
current and future electronic data processing capability.
<TABLE>
<CAPTION>
(Dollars in Thousands)
<S> <C>
Maturity:
One year or less $ 13,117
After one year through five years 33,044
After five years 8,275
--------
$ 54,436
========
</TABLE>
The following table summarizes loans at December 31, 1996 with the due dates
after one year which have predetermined and floating or adjustable interest
rates.
<TABLE>
<CAPTION>
(Dollars in Thousands)
<S> <C>
Predetermined interest rates $ 17,439
Floating or adjustable interest rates 23,880
--------
$ 41,319
========
</TABLE>
<PAGE>
Risk Elements
Information with respect to nonaccrual, past due and restructured loans at
December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
(Dollars in Thousands)
<S> <C> <C>
Nonaccrual loans $ -- $ 3
Loans contractually past due ninety days or more
as to interest or principal payments and still accruing 80 172
Restructured loans -- --
Loans, now current about which there are serious
doubts as to the ability of the borrower to comply
with loan repayment terms -- --
Interest income that would have been recorded on
nonaccrual and restructured loans under original terms -- 1
Interest income that was recorded on nonaccrual and
restructured loans -- --
</TABLE>
It is the policy of the Bank to discontinue the accrual of interest income
when, in the opinion of management, collection of such interest becomes
doubtful. This status is accorded such interest when (1) the asset is
maintained on a cash basis because of deterioration in the financial condition
of the borrower, (2) the full repayment of principal and interest is not
expected and (3) the principal or interest is more than ninety days past due,
unless the loan is both well-secured and in the process of collection.
Loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention that have not been included in the table above do not represent
or result from trends or uncertainties which management reasonably expects will
materially impact future operating results, liquidity or capital resources.
These classified loans do not represent material credits about which management
is aware of any information which causes management to have serious doubts as
to the ability of such borrowers to comply with the loan repayment terms.
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes average loan balances for each year
determined using the daily average balances during the year; changes in the
reserve for possible loan losses arising from loans charged off and recoveries
on loans previously charged off; additions to the reserve which have been
charged to operating expense; and the ratio of net charge-offs during the
period to average loans.
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
(Dollars in Thousands)
<S> <C> <C>
Average amount of loans outstanding $ 49,598 $ 39,456
====== ======
Balance of allowance for loan losses
at beginning of period $ 705 $ 588
------ ------
Loans charged off
Commercial, financial and
agricultural $ (6) $ (5)
Instalment (81) (131)
------ ------
$ (87) $ (136)
------ ------
Loans recovered
Commercial, financial and
agricultural $ 23 $ 22
Real estate mortgage 6 5
Instalment 51 34
------ ------
$ 80 $ 61
------ ------
Net charge-offs $ (7) $ (75)
------ ------
Additions to allowance charged to
operating expense during period $ 216 $ 192
------ ------
Balance of allowance for loan losses
at end of period $ 914 $ 705
====== ======
Ratio of net loans charged off during the
period to average loans outstanding 0.01% 0.19%
====== ======
</TABLE>
Allowance for Loan Losses
The allowance for loan losses is maintained at a level that is deemed
appropriate by management to adequately cover all known and inherent risks in
the loan portfolio. Management's evaluation of the loan portfolio includes a
continuing review of loan loss experience, current economic conditions which
may affect the borrower's ability to pay and the underlying collateral value of
the loans.
<PAGE>
As of December 31, 1996 and 1995, management had made no allocations of its
allowance for loan losses to specific categories of loans. Based on
management's best estimate, the allocation of the allowance for loan losses to
types of loans as of the indicated dates is as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
Percent of loans in Percent of loans in
each category each category
Amount to total loans Amount to total loans
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 366 17.28% $ 283 17.48%
Real estate - construction 137 23.10 102 16.92
Real estate - mortgage 311 46.36 241 49.88
Consumer instalment and other 100 13.26 79 15.72
--- ------ --- ------
$ 914 100.00% $ 705 100.00%
=== ====== === ======
</TABLE>
<PAGE>
DEPOSITS
Average amount of deposits and average rates paid thereon, classified as to
noninterest-bearing demand deposits, interest-bearing demand and savings
deposits and time deposits, for the years indicated are presented below. (1)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
Amount Percent Amount Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 10,594 --% $ 8,288 --%
Interest-bearing demand deposits
& savings 19,333 3.04 17,770 3.46
Time deposits 31,607 6.17 25,364 5.98
------ ------
Total deposits $ 61,534 $ 51,422
====== ======
</TABLE>
(1) Average balances were determined using the daily average balances
during the year for each category.
The amounts of time deposits issued in amounts of $100,000 or more as of
December 31, 1996 are shown below by category, which is based on time remaining
until maturity of (1) three months or less, (2) over three through six months,
(3) over six through twelve months and (4) over twelve months.
<TABLE>
<CAPTION>
(Dollars in Thousands)
<S> <C>
Three months or less $ 2,113
Over three through six months 2,770
Over six months through twelve months 2,053
Over twelve months 2,017
------
Total $ 8,953
======
</TABLE>
RETURN ON ASSETS AND STOCKHOLDERS' EQUITY
The following rate of return information for the years indicated is
presented below.
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
<S> <C> <C>
Return on assets (1) 1.71% 1.65%
Return on equity (2) 19.91 19.07
Dividend payout ratio (3) 10.07 --
Equity to assets ratio (4) 8.58 8.66
</TABLE>
(1) Net income divided by average total assets.
(2) Net income divided by average equity.
(3) Dividends declared per share of common stock divided by net income per
share.
(4) Average equity divided by average total assets.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
[Financial Statements begin on next page]
-35-
<PAGE>
-------------------------------
FIRST COMMUNITY BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1996
-------------------------------
<PAGE>
FIRST COMMUNITY BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT................................................. 1
FINANCIAL STATEMENTS
Consolidated balance sheets............................................... 2
Consolidated statements of income......................................... 3
Consolidated statements of stockholders' equity........................... 4
Consolidated statements of cash flows............................... 5 and 6
Notes to consolidated financial statements............................. 7-28
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
To the Board of Directors
First Community Bancorp, Inc.
and Subsidiary
Cartersville, Georgia
We have audited the accompanying consolidated balance sheets of
the First Community Bancorp, Inc. and subsidiary as of December 31, 1996 and
1995, and the related consolidated statements of income, stockholders' equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
First Community Bancorp, Inc. and subsidiary as of December 31, 1996 and 1995,
and the results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
/s/ Mauldin & Jenkins, LLC
Atlanta, Georgia
February 13, 1997
<PAGE>
FIRST COMMUNITY BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
================================================================================
<TABLE>
<CAPTION>
Assets 1996 1995
----------------------- -----------------------
<S> <C> <C>
Cash and due from banks $ 3,685,230 $ 2,513,995
Interest-bearing deposits in banks 3,739,163 4,706,593
Securities available-for-sale 10,326,359 5,807,889
Securities held-to-maturity, at cost (fair value of $4,154,118
and $6,605,835) 4,202,450 6,698,457
Loans 54,436,430 42,123,639
Less allowance for loan losses 914,266 705,473
----------------------- -----------------------
Loans, net 53,522,164 41,418,166
Premises and equipment 1,778,201 1,745,032
Other assets 1,967,631 1,787,857
----------------------- -----------------------
Total assets $ 79,221,198 $ 64,677,989
======================= =======================
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing demand $ 12,609,298 $ 8,431,497
Interest-bearing demand 14,545,120 14,975,634
Savings 4,355,535 3,903,015
Time, $100,000 and over 8,952,875 6,140,390
Other time 24,910,718 22,403,600
----------------------- -----------------------
Total deposits 65,373,546 55,854,136
Other borrowings 5,348,450 1,405,250
Other liabilities 1,610,464 1,644,116
----------------------- -----------------------
Total liabilities 72,332,460 58,903,502
----------------------- -----------------------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $1; 10,000,000 shares authorized;
415,103 issued and outstanding 415,103 415,103
Capital surplus 3,627,104 3,627,104
Retained earnings 2,848,956 1,735,949
Unrealized losses on securities available-for-sale,
net of tax (2,425) (3,669)
----------------------- -----------------------
Total stockholders' equity 6,888,738 5,774,487
----------------------- -----------------------
Total liabilities and stockholders' equity $ 79,221,198 $ 64,677,989
======================= =======================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
FIRST COMMUNITY BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996 AND 1995
===============================================================================
<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
<S> <C> <C>
Interest income
Loans $ 5,895,861 $ 4,782,992
Taxable securities 696,228 741,076
Nontaxable securities 73,304 31,275
Deposits in banks 162,350 116,542
Federal funds sold - 2,166
------------------- -------------------
Total interest income 6,827,743 5,674,051
------------------- -------------------
Interest expense
Deposits 2,537,622 2,130,375
Federal funds purchased 889 5,457
Other borrowings 144,044 116,272
------------------- -------------------
Total interest expense 2,682,555 2,252,104
------------------- -------------------
Net interest income 4,145,188 3,421,947
Provision for loan losses 216,000 192,000
------------------- -------------------
Net interest income after provision for loan losses 3,929,188 3,229,947
------------------- -------------------
Other income
Service charges on deposit accounts 473,412 447,835
Other service charges and fees 165,571 102,627
Gains on sale of loans - 65,042
------------------- -------------------
Total other income 638,983 615,504
------------------- -------------------
Other expenses
Salaries and employee benefits 1,452,141 1,173,502
Equipment and occupancy expenses 411,730 395,155
Other operating expenses 802,660 743,496
------------------- -------------------
Total other expenses 2,666,531 2,312,153
------------------- -------------------
Income before income taxes 1,901,640 1,533,298
Income tax expense 664,102 539,933
------------------- -------------------
Net income $ 1,237,538 $ 993,365
=================== ===================
Net income per share of common stock $ 2.98 $ 2.39
=================== ===================
Weighted average shares outstanding 415,103 415,103
=================== ===================
</TABLE>
See Notes to Consolidated Financial Statements.
40
<PAGE>
FIRST COMMUNITY BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
================================================================================
<TABLE>
<CAPTION>
Unrealized
Losses on
Securities
Common Stock Available- Total
--------------------------- Capital Retained for -Sale, Stockholders'
Shares Par Value Surplus Earnings Net of Tax Equity
----------- -------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 415,103 $ 415,103 $ 3,627,104 $ 742,584 $ (112,255) $ 4,672,536
Net income - - - 993,365 - 993,365
Net change in unrealized
losses on securities
available-for-sale,
net of tax - - - - 108,586 108,586
----------- -------------- ---------------- ---------------- --------------- ----------------
Balance, December 31, 1995 415,103 415,103 3,627,104 1,735,949 (3,669) 5,774,487
Net income - - - 1,237,538 - 1,237,538
Cash dividends declared,
$.30 per share - - - (124,531) - (124,531)
Net change in unrealized
losses on securities
available-for-sale,
net of tax - - - - 1,244 1,244
----------- -------------- ---------------- ---------------- --------------- ----------------
Balance, December 31, 1996 415,103 $ 415,103 $ 3,627,104 $ 2,848,956 $ (2,425) $ 6,888,738
=========== ============== ================ ================ =============== ================
</TABLE>
See Notes to Consolidated Financial Statements.
41
<PAGE>
FIRST COMMUNITY BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
================================================================================
<TABLE>
<CAPTION>
1996 1995
--------------------- -------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,237,538 $ 993,365
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 216,494 227,060
Provision for loan losses 216,000 192,000
Deferred income taxes (86,472) (54,769)
Gain on sale of loans - (65,042)
Increase in interest receivable (38,741) (80,450)
Increase in interest payable 198,233 119,275
Increase (decrease) in income taxes payable (295,087) 337,581
Other operating activities 7,911 80,722
--------------------- -------------------
Net cash provided by operating activities 1,455,876 1,749,742
--------------------- -------------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (7,024,930) (2,818,627)
Proceeds from maturities of securities available-for-sale 2,508,434 4,156,626
Purchases of securities held-to-maturity (203,546) -
Proceeds from maturities of securities held-to-maturity 2,699,553 499,176
Proceeds from sale of loans - 1,844,032
Net (increase) decrease in interest-bearing deposits in banks 967,430 (459,483)
Net increase in loans (12,319,998) (8,983,719)
Purchase of premises and equipment (249,663) (142,992)
Purchase of life insurance policies - (935,000)
--------------------- -------------------
Net cash used in investing activities (13,622,720) (6,839,987)
--------------------- -------------------
FINANCING ACTIVITIES
Net increase in deposits 9,519,410 5,118,757
Proceeds from other borrowings 4,000,000 555,250
Repayment of other borrowings (56,800) -
Dividends paid (124,531) (103,776)
--------------------- -------------------
Net cash provided by financing activities 13,338,079 5,570,231
--------------------- -------------------
</TABLE>
42
<PAGE>
FIRST COMMUNITY BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
================================================================================
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
<S> <C> <C>
Net increase in cash and due from banks $ 1,171,235 $ 479,986
Cash and due from banks at beginning of year 2,513,995 2,034,009
------------------- -------------------
Cash and due from banks at end of year $ 3,685,230 $ 2,513,995
=================== ===================
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest $ 2,484,322 $ 2,132,829
Income taxes $ 1,045,661 $ 257,121
NONCASH TRANSACTION
Unrealized gains on securities available-for-sale $ (1,974) $ (172,359)
</TABLE>
See Notes to Consolidated Financial Statements.
43
<PAGE>
FIRST COMMUNITY BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
First Community Bancorp, Inc. (the Company) is a bank holding company
whose business is conducted by its wholly-owned subsidiary, First
Community Bank & Trust, (the Bank). The Bank is a commercial bank
located in Cartersville, Bartow County, Georgia with one branch
located in Adairsville, Georgia. The Bank provides a full range of
banking services in its primary market area of Bartow County and
surrounding counties.
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its subsidiary. Significant intercompany transactions and
accounts are eliminated in consolidation.
The accounting and reporting policies of the Company conform to
generally accepted accounting principles and general practices within
the financial services industry. In preparing the financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period.
Actual results could differ from those estimates.
Cash and Due from Banks
Cash on hand, cash items in process of collection, and amounts due
from banks are included in cash and due from banks.
The Company maintains amounts due from banks which, at times, may
exceed Federally insured limits. The Company has not experienced any
losses in such accounts.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Securities
Securities are classified based on management's intention on the date
of purchase. Securities which management has the intent and ability to
hold to maturity are classified as held-to-maturity and reported at
amortized cost. All other debt securities are classified as available-
for-sale and carried at fair value with net unrealized gains and
losses included in stockholders' equity net of tax. Equity securities
without a readily determinable fair value are carried at cost.
Interest and dividends on securities, including amortization of
premiums and accretion of discounts, are included in interest income.
Realized gains and losses from the sales of securities are determined
using the specific identification method.
Loans
Loans are carried at their principal amounts outstanding less unearned
income and the allowance for loan losses. Interest income on loans is
credited to income based on the principal amount outstanding.
Loan origination fees and certain direct costs of most loans are
recognized at the time the loan is recorded. Loan origination fees and
costs incurred for other loans are deferred and recognized as income
over the life of the loan. Because net origination loan fees and costs
are not material, the results of operations are not materially
different than the results which would be obtained by accounting for
all loan fees and costs in accordance with generally accepted
accounting principles.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans (Continued)
The allowance for loan losses is maintained at a level that management
believes to be adequate to absorb potential losses in the loan
portfolio. Management's determination of the adequacy of the allowance
is based on an evaluation of the portfolio, past loan loss experience,
current economic conditions, volume, growth, composition of the loan
portfolio, and other risks inherent in the portfolio. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses, and may
require the Company to record additions to the allowance based on
their judgment about information available to them at the time of
their examinations.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. Interest income is subsequently recognized only to
the extent cash payments are received.
A loan is impaired when it is probable the Company will be unable to
collect all principal and interest payments due in accordance with the
terms of the loan agreement. Individually identified impaired loans
are measured based on the present value of payments expected to be
received, using the contractual loan rate as the discount rate.
Alternatively, measurement may be based on observable market prices
or, for loans that are solely dependent on the collateral for
repayment, measurement may be based on the fair value of the
collateral. If the recorded investment in the impaired loan exceeds
the measure of fair value, a valuation allowance is established as a
component of the allowance for loan losses. Changes to the valuation
allowance are recorded as a component of the provision for loan
losses.
Sale of Loans
The Company originates and sells participations in certain loans. The
amount of gain on the sale of a specific loan is equal to the
percentage resulting from determining the fair value of the portion of
the loan sold relative to the fair value of the entire loan. Any
material gain is deferred and amortized into income over the term of
the loan. Losses are recognized at the time the loan is identified as
held for sale and the loan's carrying value exceeds its fair value.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Premises and Equipment
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally by the straight-
line method over the estimated useful lives of the assets.
Income Taxes
Income tax expense consists of current and deferred taxes. Current
income tax provisions approximate taxes to be paid or refunded for the
applicable year. Deferred tax assets and liabilities are recognized
for the temporary differences between the bases of assets and
liabilities as measured by tax laws and their bases as reported in the
financial statements. Deferred tax expense or benefit is then
recognized for the change in deferred tax assets or liabilities
between periods.
Recognition of deferred tax balance sheet amounts is based on
management's belief that it is more likely than not that the tax
benefit associated with certain temporary differences, tax operating
loss carryforwards and tax credits will be realized. A valuation
allowance is recorded for those deferred tax items for which it is
more likely than not that realization will not occur.
The Company and the Bank file a consolidated income tax return. Each
entity provides for income taxes based on its contribution to income
taxes (benefits) of the consolidated group.
Earnings Per Common Share
Earnings per common share are computed by dividing net income by the
weighted average number of shares of common stock and common stock
equivalents outstanding. Common stock equivalents consist of stock
options.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Securities Available-for-Sale
December 31, 1996:
U. S. Government and agency
securities $ 5,445,927 $ 18,416 $ (15,276) $ 5,449,067
State and municipal securities 2,167,026 10,319 (308) 2,177,037
Mortgage-backed securities 1,725,188 556 (17,557) 1,708,187
Equity securities 992,068 - - 992,068
----------- ----------- ---------- -----------
$10,330,209 $ 29,291 $ (33,141) $10,326,359
=========== =========== ========== ===========
December 31, 1995:
U. S. Government and agency
securities $ 2,248,324 $ 26,213 $ - $ 2,274,537
State and municipal securities 1,228,259 10,937 (1,495) 1,237,701
Mortgage-backed securities 2,064,730 - (41,479) 2,023,251
Equity securities 272,400 - - 272,400
----------- ----------- ---------- -----------
$ 5,813,713 $ 37,150 $ (42,974) $ 5,807,889
=========== =========== ========== ===========
Securities Held-to-Maturity
December 31, 1996:
U. S. Government and agency
securities $ 3,798,988 $ - $ (45,787) $ 3,753,201
State and municipal securities 403,462 - (2,545) 400,917
----------- ----------- ---------- -----------
$ 4,202,450 $ - $ (48,332) $ 4,154,118
=========== =========== ========== ===========
December 31, 1995:
U. S. Government and agency
securities $ 6,498,503 $ 3,995 $ (93,803) $ 6,408,695
State and municipal securities 199,954 - (2,814) 197,140
----------- ----------- ---------- -----------
$ 6,698,457 $ 3,995 $ (96,617) $ 6,605,835
=========== =========== ========== ===========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2. SECURITIES (Continued)
The amortized cost and fair value of securities as of December 31, 1996
by contractual maturity are shown below. Maturities may differ from
contractual maturities in mortgage-backed securities because the
mortgages underlying the securities may be called or prepaid with or
without penalty. Therefore, these securities and equity securities are
not included in the maturity categories in the following maturity
summary.
<TABLE>
<CAPTION>
Securities Available-for-Sale Securities Held-to-Maturity
------------------------------ ---------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 1,490,950 $ 1,489,150 $ 99,983 $ 99,803
Due from one year to five years 5,326,017 5,348,209 3,898,988 3,853,201
Due from five to ten years 795,986 788,745 - -
Due after ten years - - 203,479 201,114
Mortgage-backed securities 1,725,188 1,708,187 - -
Equity securities 992,068 992,068 - -
----------- ----------- ---------- ----------
$10,330,209 $10,326,359 $4,202,450 $4,154,118
=========== =========== ========== ==========
</TABLE>
Securities with a carrying value of $4,408,000 and $3,961,000 at
December 31, 1996 and 1995, respectively, were pledged to secure public
deposits and for other purposes.
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Commercial, financial, and agricultural $ 9,404,000 $ 7,363,000
Real estate - construction 12,576,000 7,128,000
Real estate - mortgage 25,374,000 21,154,000
Consumer instalment and other 7,215,989 6,620,919
----------- -----------
54,569,989 42,265,919
Unearned income (133,559) (142,280)
Allowance for loan losses (914,266) (705,473)
----------- -----------
Loans, net $53,522,164 $41,418,166
=========== ===========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
--------- ---------
<C> <S> <S>
Balance, beginning of year $ 705,473 $ 587,874
Provision for loan losses 216,000 192,000
Loans charged off (87,385) (135,992)
Recoveries of loans previously charged off 80,178 61,591
--------- --------
Balance, end of year $ 914,266 $ 705,473
========= =========
</TABLE>
There were no material amounts of loans considered to be impaired as defined by
Statement of Financial Accounting Standard No. 114, "Accounting by Creditors for
Impairment of a Loan" as of December 31, 1996 and 1995.
The Company has granted loans to certain directors, executive officers, and
related entities of the Company and the Bank. The interest rates on these loans
were substantially the same as rates prevailing at the time of the transaction
and repayment terms are customary for the type of loan involved. Changes in
related party loans for the year ended December 31, 1996 are as follows:
<TABLE>
<CAPTION>
<C> <S>
Balance, beginning of year $ 1,738,393
Advances 1,926,565
Repayments (2,258,440)
------------
Balance, end of year $ 1,406,518
===========
</TABLE>
50
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
----------- ----------
<S> <C> <C>
Land $ 393,035 $ 393,035
Buildings 1,124,885 1,123,084
Equipment 1,254,941 1,093,650
Construction and equipment installation in progress
(estimated cost to complete, $184,000) 86,571 --
--------- ---------
2,859,432 2,609,769
Accumulated depreciation 1,081,231 864,737
---------- ----------
$1,778,201 $1,745,032
========== ==========
</TABLE>
NOTE 5. OTHER BORROWINGS
Other borrowings consisted of the following Federal Home Loan Bank
advances:
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
--------------------------
<S> <C> <C>
5.53% interest only, payable monthly, principal due in 1998. $ 850,000 $ 850,000
Noninterest-bearing, payable quarterly in instalments of
$4,250. This advance bears no interest due to the Bank
qualifying under the FHLB Affordable Housing Program. 140,250 157,250
6.28% interest and principal payable semiannually. 358,200 398,000
Principal due in instalments of $19,900.
Variable rate interest only, payable monthly, principal 4,000,000 --
due September 1997. Interest is adjusted daily based
upon the overnight deposit rate of the FHLB plus .25%
---------- ----------
(6.95% at December 31, 1996). $5,348,450 $1,405,250
========== ==========
</TABLE>
51
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5. OTHER BORROWINGS (Continued)
The Company's advances from the Federal Home Loan Bank are
collateralized by a blanket floating lien on qualifying first mortgage
loans and pledging of the Company's stock in the Federal Home Loan Bank
of Atlanta with a combined balance of $7,961,000 at December 31, 1996.
Advances at December 31, 1996 have maturities in future years as
follows:
<TABLE>
<CAPTION>
Year Ending December 31, Amount
------------------------ ------
<S> <C>
1997 $4,056,800
1998 906,800
1999 56,800
2000 56,800
2001 56,800
Later years 214,450
----------
$5,348,450
==========
</TABLE>
NOTE 6. EMPLOYEE BENEFITS
The Company has adopted a 401(k) retirement plan and it is available to
all employees subject to certain age and minimum service requirements.
The Company's contribution to the plan for the years ended December 31,
1996 and 1995 was $35,575 and $18,373, respectively.
The Company has deferred compensation agreements with its directors
providing for future monthly periodic payments which commence at the
retirement of the directors. At December 31, 1996 and 1995, $12,114 and
$0, respectively, had been accrued under these agreements.
The Company is also the owner and beneficiary of life insurance
policies on the lives of its directors. The Company intends to use
these policies to fund the directors' deferred compensation described
above. The carrying value of the policies was $955,671 and $936,172 at
December 31, 1996 and 1995, respectively.
52
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6. EMPLOYEE BENEFITS (Continued)
Common stock options:
The Company has reserved 20,000 shares of common stock for issuance to
key employees under a qualified stock option plan. Options are granted
at prices equal to or greater than the fair market value of the shares
at the date of grant, and are exercisable at a rate of 20% per year
beginning with the initial grant date. The options expire seven years
from the date of grant. 4,250 options have been granted under this plan
at December 31, 1996.
The Company has also granted stock options to certain senior officers
of the Company under employment agreements. The agreements provide for
the officers to purchase up to 8,302 shares of common stock. The
exercise price is based on the book value of the shares at the date of
grant. The options may be exercised at any time until they expire in
1997 and 1998.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------
1996 1995
-----------------------------------------------------------
Weighted- Weighted-
average average
Exercise Exercise
Number Price Number Price
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Under option, beginning of year 12,852 $10.41 10,852 $ 9.36
Granted -- -- 2,000 16.13
Exercised -- -- -- --
Terminated (300) 14.32 -- --
------ ------
Under option, end of year 12,552 10.32 12,852 10.41
====== ======
Exercisable, end of year 10,482 9.51 9,722 9.14
====== ======
</TABLE>
53
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6. EMPLOYEE BENEFITS (Continued)
<TABLE>
<CAPTION>
Weighted-
average
Weighted- Remaining
average Contractual
Range of Exercise Life in
Number Prices Price Years
------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Under Option, End of Year 8,302 $ 8.04 - 8.75 $ 8.40 2
2,400 12.50 12.50 5
1,850 16.13 16.13 6
------
12,552
======
Options Exercisable, End of Year 8,302 $ 8.04 - 8.75 $ 8.40 2
1,440 12.50 12.50 5
740 16.13 16.13 6
------
10,482
======
</TABLE>
As permitted by SFAS No. 123 ("Accounting for Stock-Based
Compensation"), the Company recognizes compensation cost for stock-
based employee compensation awards in accordance with APB Opinion No.
25, ("Accounting for Stock Issued to Employees"). The Company
recognized no compensation cost for stock-based employee compensation
awards for the years ended December 31, 1996 and 1995. If the Company
had recognized compensation cost in accordance with SFAS No. 123, the
effect on net income and earnings per share would not be material.
54
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
------- ------
<S> <C> <C>
Current $750,574 $594,702
Deferred (86,472) (54,769)
-------- --------
Income tax expense $664,102 $539,933
======== ========
</TABLE>
The Company's income tax expense differs from the amounts computed by
applying the Federal income tax statutory rates to income before income
taxes. A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------
1996 1995
-------------------------------------------------------------
Amount Percent Amount Percent
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income taxes at statutory rate $ 646,557 34% $ 521,321 34%
Tax-exempt interest (24,923) (1) (10,634) (1)
State income taxes 40,218 2 24,255 2
Other items, net 2,250 _ 4,991 -
-------- --- -------- ---
Income tax expense $664,102 35% $539,933 35%
======== === ======== ===
</TABLE>
55
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7. INCOME TAXES (Continued)
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Loan loss reserves $311,892 $235,472
Deferred loan fees 45,923 44,049
Directors fees 8,666 -
Securities available-for-sale 1,424 2,155
-------- --------
367,905 281,676
-------- --------
Deferred tax liabilities:
Depreciation 38,895 38,408
Other 2,794 2,793
-------- --------
41,689 41,201
-------- --------
Net deferred tax assets $326,216 $240,475
======== ========
</TABLE>
56
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company has entered into off-
balance-sheet financial instruments which are not reflected in the
financial statements. These financial instruments include commitments
to extend credit and standby letters of credit. Such financial
instruments are included in the financial statements when funds are
disbursed or the instruments become payable. These instruments
involve, to varying degrees, elements of credit risk in excess of the
amount recognized in the balance sheet.
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to
extend credit and standby letters of credit is represented by the
contractual amount of those instruments. A summary of the Company's
commitments is as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Commitments to extend credit $ 8,919,403 $ 9,060,165
Standby letters of credit 393,100 490,682
$ 9,312,503 $ 9,550,847
============ ============
</TABLE>
Commitments to extend credit generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since many
of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The credit risk involved in issuing these financial
instruments is essentially the same as that involved in extending
loans to customers. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of credit,
is based on management's credit evaluation of the customer. Collateral
held varies but may include real estate and improvements, crops,
marketable securities, accounts receivable, inventory, equipment, and
personal property.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan
facilities to customers. Collateral held varies as specified above and
is required in instances which the Company deems necessary.
In the normal course of business, the Company is involved in various
legal proceedings. In the opinion of management of the Company, any
liability resulting from such proceedings would not have a material
effect on the Company's financial statements.
On September 9, 1996, the Company entered into a lease agreement for
the lease of a operations facility under a noncancelable agreement
which expires on August 30, 2001, with an option to renew for five
successive periods of twelve months each. The lease requires the
payment of normal maintenance utilities and insurance on the property.
The total minimum rental commitment at December 31, 1996 is due as
follows:
<TABLE>
<CAPTION>
During the year ending December 31:
<S> <C>
1997 $ 31,200
1998 31,200
1999 31,200
2000 31,200
2001 20,800
----------
$ 145,600
==========
</TABLE>
The total rental expense for the year ended December 31, 1996 was
$10,400.
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9. CONCENTRATIONS OF CREDIT
The Company originates primarily commercial, residential, and consumer
loans to customers in Bartow County and surrounding counties. The
ability of the majority of the Company's customers to honor their
contractual loan obligations is dependent on the economy in these
areas.
Seventy percent (70%) of the Company's loan portfolio is concentrated
in loans secured by real estate, of which a substantial portion is
secured by real estate in the Company's primary market area.
Accordingly, the ultimate collectibility of the loan portfolio is
susceptible to changes in market conditions in the Company's primary
market area. The other significant concentrations of credit by type of
loan are set forth in Note 3.
The Company, as a matter of policy, does not generally extend credit
to any single borrower or group of related borrowers in excess of 25%
of statutory capital, or approximately $1,400,000.
NOTE 10. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends
that may be declared without prior regulatory approval. At December
31, 1996, approximately $623,000 of retained earnings were available
for dividend declaration without regulatory approval.
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory - and
possibly additional discretionary - actions by regulators that, if
undertaken, could have a direct material effect on the financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and Bank must meet
specific capital guidelines that involve quantitative measures of the
assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Company and Bank capital
amounts and classification are also subject to qualitative judgments
by the regulators about components, risk weightings, and other
factors.
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10. REGULATORY MATTERS (Continued)
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts
and ratios of total and Tier I capital to risk-weighted assets and of
Tier I capital to average assets. Management believes, as of December
31, 1996, the Company and the Bank meet all capital adequacy
requirements to which they are subject.
As of December 31, 1996 and 1995, notification from the FDIC
categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the following
table. There are no conditions or events since that notification that
management believes have changed the Bank's category.
The Company and Bank's actual capital amounts and ratios as of
December 31, 1996 are presented in the following table:
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
------------------------- ---------------------- ---------------------------
Amount Ratio Amount Ratio Amount Ratio
------------- -------- ----------- -------- ----------- ---------
(Dollars in Thousands)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(to Risk Weighted Assets):
Consolidated $ 7,561 14.17% $ 4,269 8% $ 5,336 10%
Bank $ 7,546 14.15% $ 4,266 8% $ 5,333 10%
Tier I Capital
(to Risk Weighted Assets):
Consolidated $ 6,891 12.92% $ 2,133 4% $ 3,200 6%
Bank $ 6,876 12.89% $ 2,134 4% $ 3,201 6%
Tier I Capital
(to Average Assets):
Consolidated $ 6,891 8.79% $ 3,136 4% $ 3,920 5%
Bank $ 6,876 8.77% $ 3,136 4% $ 3,920 5%
</TABLE>
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 10. REGULATORY MATTERS (Continued)
The Company has a "Stock Repurchase Program" whereby the Company may
purchase shares from the stockholders at a price of 1.1 times the
book value per share of the Company as of the previous quarter end,
up to an aggregate dollar limit of $100,000 during any one calendar
year. Shares are purchased on a "first-come" basis until the $100,000
limit is reached or the end of the calendar year. No stock has been
purchased under this program.
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments. In
cases where quoted market prices are not available, fair values are
based on estimates using discounted cash flow methods. Those methods
are significantly affected by the assumptions used, including the
discount rates and estimates of future cash flows. In that regard,
the derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be
realized in immediate settlement of the instrument. The use of
different methodologies may have a material effect on the estimated
fair value amounts. Also, the fair value estimates presented herein
are based on pertinent information available to management as of
December 31, 1996 and 1995. Such amounts have not been revalued for
purposes of these financial statements since those dates and,
therefore, current estimates of fair value may differ significantly
from the amounts presented herein.
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments as disclosed herein:
Cash, Due From Banks, and Interest-bearing Deposits in Banks:
The carrying amounts of cash, due from banks, and interest-bearing
deposits in banks approximate their fair value.
Available-For-Sale and Held-To-Maturity Securities:
Fair values for securities are based on quoted market prices. The
carrying values of equity securities with no readily determinable
fair value approximate fair values.
61
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Loans:
For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on
carrying values. For other loans, the fair values are estimated
using discounted cash flow methods, using interest rates currently
being offered for loans with similar terms to borrowers of similar
credit quality. Fair values for impaired loans are estimated using
discounted cash flow methods or underlying collateral values.
Deposits:
The carrying amounts of demand deposits, savings deposits, and
variable-rate certificates of deposit approximate their fair
values. Fair values for fixed-rate certificates of deposit are
estimated using discounted cash flow methods, using interest rates
currently being offered on certificates.
Other Borrowings:
The fair values of the Company's other borrowings are estimated
using discounted cash flow methods based on the Company's current
incremental borrowing rates for similar types of borrowing
arrangements.
Accrued Interest:
The carrying amounts of accrued interest approximate their fair
values.
Off-Balance-Sheet Instruments:
Fair values of the Company's off-balance-sheet financial
instruments are based on fees charged to enter into similar
agreements. However, commitments to extend credit and standby
letters of credit do not represent a significant value to the
Company until such commitments are funded. The Company has
determined that these instruments do not have a distinguishable
fair value and no fair value has been assigned.
62
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Off-Balance-Sheet Instruments: (Continued)
The estimated fair values of the Company's financial
instruments were as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
-------------------------------- ---------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Financial assets:
Cash, due from banks
and interest-bearing deposits
in banks $ 7,424,393 $ 7,424,393 $ 7,220,588 $ 7,220,588
Securities available-for-sale 10,326,359 10,326,359 5,807,889 5,807,889
Securities held-to-maturity 4,202,450 4,154,118 6,698,457 6,605,835
Loans 53,522,164 55,190,506 41,418,166 41,653,776
Accrued interest receivable 563,320 563,320 524,579 524,579
Financial liabilities:
Deposits 65,373,546 65,676,561 55,854,136 55,885,764
Other borrowings 5,348,450 5,348,450 1,405,250 1,385,019
Accrued interest payable 1,366,219 1,366,219 1,167,986 1,167,986
</TABLE>
NOTE 12. SUPPLEMENTAL FINANCIAL DATA
Components of other operating expenses in excess of 1% of income are
as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1996 1995
---------------- ------------------
<S> <C> <C>
Stationery and supplies $ 126,228 $ 122,424
Other service fees 75,227 43,652
</TABLE>
63
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 13. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets,
statements of income, and cash flows of First Community Bancorp, Inc.
as of and for the years ended December 31, 1996 and 1995:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Assets
Cash $ 9,983 $ 3,556
Investment in subsidiary 6,873,693 5,765,974
Other assets 5,062 4,957
----------- -----------
Total assets $ 6,888,738 $ 5,774,487
=========== ===========
Stockholders' equity $ 6,888,738 $ 5,774,487
=========== ===========
CONDENSED STATEMENTS OF INCOME
1996 1995
----------- -----------
Income, dividends from subsidiary $ 139,531 $ -
Expense, other 13,530 13,135
----------- -----------
Income (loss) before income tax
benefits and equity in undistributed
income of subsidiary 126,001 (13,135)
Income tax benefits (5,062) (4,957)
----------- -----------
Income (loss) before equity in
undistributed income of subsidiary 131,063 (8,178)
Equity in undistributed income of
subsidiary 1,106,475 1,001,543
----------- -----------
Net income $ 1,237,538 $ 993,365
=========== ===========
</TABLE>
64
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 13. PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,237,538 $ 993,365
Adjustments to reconcile net income
to net cash provided by operating
activities:
Undistributed income of subsidiary (1,106,475) (1,001,543)
Other operating activities (105) (4,266)
----------- -----------
Net cash provided by (used in)
operating activities 130,958 (12,444)
----------- -----------
FINANCING ACTIVITIES
Dividends paid (124,531) (103,776)
----------- -----------
Net cash used in financing activities (124,531) (103,776)
----------- -----------
Net increase (decrease) in cash 6,427 (116,220)
Cash at beginning of year 3,556 119,776
----------- -----------
Cash at end of year $ 9,983 $ 3,556
=========== ===========
</TABLE>
65
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
FIRST COMMUNITY BANCORP, INC. AND SUBSIDIARY
The Company did not have any changes in or disagreements with its
principal independent accountant during the Company's two most recent fiscal
years.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Pursuant to the Company's Articles of Incorporation, its Board of
Directors is divided into three classes: Class I, Class II, and Class III. The
number of directors is set in the Company's Bylaws, which may be amended from
time to time by the Board of Directors. Currently, the number of directors is
11. The current terms of the Class I directors expire in 1999; those of the
Class II directors expire in 1997; and those of the Class III directors expire
in 1998. If the number of directors is modified, any increase or decrease in
directorships is apportioned among the classes so as to make all classes as
nearly equal in number as possible.
The table set forth below shows for each director nominee and each
continuing director (a) his proposed or current class and term of office, (b)
his name, (c) his age at December 31, 1996, (d) the year he was first elected as
a director of the Company, (e) any positions held by him with the Company or the
Bank other than as a director, and (f) his business experience for the past five
years:
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<PAGE>
CLASS I - DIRECTOR NOMINEES
Current Term Expires in 1996
----------------------------
<TABLE>
<CAPTION>
Year
First Positions with Company
Name Age Elected and Business Experience
- ---- --- -------- -----------------------
<S> <C> <C> <C>
C. Gregory Culverhouse 41 1989 Company Loan Committee
Chairman; Attorney and
President Culverhouse &
Associates, P.C.
Jack Fournier 59 1989 President and CEO,
Speedknit Corporation
Fareed Z. Kadum, M.D. 45 1989 Physician and CEO
Cartersville OB/GYN
Associates, P.C.
Michael L. McPherson 47 1992 Executive Vice-President
of the Company since
September 1990; Director,
Executive Vice-President,
and Senior Lending
Officer of the Bank since
September 1990
</TABLE>
CLASS II - CONTINUING DIRECTORS
Current Term Expires in 1997
<TABLE>
<CAPTION>
Year
First Positions with Company
Name Age Elected and Business Experience
- ---- --- -------- -----------------------
<S> <C> <C> <C>
Sammy L. Neal 47 1989 General Manager and Chief
Operating Officer,
Lanell's Motor Coach, Inc.
(charter service)
H. Boyd Pettit, III 44 1989 Chairman of the Board for
the Company for 1996,
Attorney
D. Arnold Tillman 35 1989 Physician
</TABLE>
-67-
<PAGE>
CLASS III - CONTINUING DIRECTORS
Current Term Expires in 1998
----------------------------
<TABLE>
<CAPTION>
Year
First Positions with Company
Name Age Elected and Business Experience
- ---- --- -------- -----------------------
<S> <C> <C> <C>
Terry N. Tumlin, D.M.D. 43 1989 Dentist
J. Steven Walraven 48 1989 President and Chief
Executive Officer of the
Company since 1989;
President and Chief
Executive Officer of the
Bank since 1988
L. Ross Whatley, III 44 1989 Physician
Earl Williamson, Jr. 53 1989 Certified Public
Accountant with
Williamson & Company
CPA's, P.C.
</TABLE>
None of the directors hold directorships in other reporting companies.
There are no family relationships among directors, executive officers,
or persons nominated or chosen by the Company to become directors or executive
officers. The Company and the Bank do not separately compensate their directors.
The directors are compensated for attending the monthly board meetings of the
Bank and various other committee meetings.
-68-
<PAGE>
OFFICERS
The following table sets forth for each officer of the Company (a) the
person's name, (b) his/her age at December 31, 1995, (c) the year he/she was
first elected as an officer of the Company and (d) his/her position with the
Company and the Bank:
<TABLE>
<CAPTION>
Year Positions with the
First Company and the Bank;
Name Age Elected Business Experience
- ---- --- ------- -------------------
<S> <C> <C> <C>
J. Steven Walraven 48 1989 President and Chief
Executive Officer of the
Company since June 1989;
President and Chief
Executive Officer of the
Bank since January 1988
Michael L. McPherson 47 1990 Executive Vice President
of the Company since
September 1990; Director,
Executive Vice President,
and Senior Lending
Officer of the Bank since
September 1990
Danny Dukes 37 1997 Vice-President, Chief
Financial and Operations
Officer, and Corporate
Secretary of the Company
since March 17, 1997;
has previously served as
an internal auditor,
controller, and CFO for
financial institutions
</TABLE>
During the previous five years, no director or executive officer was
the subject of a legal proceeding (as defined below) that is material to an
evaluation of the ability or integrity of any director or executive officer. A
"legal proceeding" includes: (a) any bankruptcy petition filed by or against any
business of which such person was a general partner or executive prior to that
time; (b) any conviction in a criminal proceeding or subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses); (c)
any order, judgment, or decree of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; and
(d) any finding by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Futures Trading Commission
of a violation of a federal or state securities or commodities law (such finding
having not been reversed, suspended or vacated).
-69-
<PAGE>
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company under Rule 16a-3(d) during 1996 and Form 5 and
amendments thereto furnished to the Company during 1996, no person who, at any
time during 1996, was a director, officer or beneficial owner of more than 10%
of any class of equity securities of the Company failed to file on a timely
basis any reports required by Section 16(a) during the 1996 fiscal year or
previously.
-70-
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
The Company has not paid any remuneration to its officers and directors
since its formation. It is not currently anticipated that the Company will pay
any remuneration to its officers and directors. The Bank paid the following
remuneration to its Chief Executive Officer.
SUMMARY COMPENSATION TABLE
The following table sets forth compensation earned from the Bank
in 1996, 1995 and 1994 by J. Steven Walraven.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS PAYOUTS
---------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
NAME AND OTHER ANNUAL RESTRICTED OPTIONS LTIP OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS SARs PAYOUTS COMPENSATION
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
J. STEVEN WALRAVEN 1996 113,612 18,985 9,132
CEO/President
1995 89,016 8,902 19,738 --- 600/1/ --- 2
1994 80,548 4,317 12,635 --- 800 --- ---
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
/1/ On May 15, 1994, the shareholders of the Company approved the 1994
Incentive Stock Option Plan (the "Plan). Under the Plan, up to 20,000
shares of common stock of the Company may be issued to key employees. The
option price for the shares of common stock is equal to or greater than the
fair market value of such shares on the date on which the option covering
such shares is granted. The Plan became effective June 1, 1994 and
continues in effect until May 31, 2004 unless earlier terminated. A copy of
the Plan was incorporated into the Form 10-KSB for the 1994 fiscal year as
Exhibit 10.2. On November 15, 1994, Mr. J. Steven Walraven, CEO/President
of the Company, was granted an option for 800 shares of common stock of the
Company under the Plan. The exercise price of these shares is $12.50 per
share and the fair market value of these shares was $12.50 per share on the
date of the grant based on the analysis of the trades during the year. The
expiration date of these shares is November 15, 2001. On November 21, 1995,
Mr. Walraven was again granted an option for 600 shares of common stock of
the Company under the Plan. The exercise price of these shares is $16.13
per share and the fair market value of these shares was $13.44 per share on
the date of the grant based on the analysis of the trades during the year.
The expiration date of these shares is November 21, 2002.
/2/ During 1988, Mr. Walraven executed an Employment Agreement with the Bank
for a term of three years, subject to renewal annually. Pursuant to this
Agreement he was granted options for 4,151 shares of common stock in 1991
and 4,151 shares in 1990 at an exercise price of $8.75 and $8.04,
respectively. These options granted in 1991 and 1990 expire June 18, 1998
and June 2, 1997, respectively.
-71-
<PAGE>
There were no grants to any executive officers, during the last
completed fiscal year, of any stock options or stock appreciation rights.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Ownership of Stock by Principal Stockholders
On March 1, 1997 there were no persons who beneficially owned five
percent (5%) or more of the outstanding shares of stock to the best information
and knowledge of the Company.
The following table sets forth the number of shares of stock
beneficially owned by each director nominee and each continuing director of the
Company and Officers as of March 1, 1996 and by all director nominees,
continuing directors and officers of the Company as a group. Unless otherwise
indicated, each person is the record owner of and has sole voting and investment
powers over his shares.
<TABLE>
<CAPTION>
<S> <C> <C>
Name of Nominee or Number of Shares Percent
Director or Officer Beneficially Owned of Class
- ------------------- ------------------ --------
<S> <C> <C>
C. Gregory Culverhouse 11,710 2.8
Jack Fournier 17,012(1) 4.1
Fareed Z. Kadum, M.D. 10,982(2) 2.6
Michael L. McPherson 5,833(8) 1.4(a)
(1,100 Shares Subject to Option)
Sammy L. Neal 13,904(3) 3.3
H. Boyd Pettit, III 8,475 1.9
D. Arnold Tillman 5,000 1.2
Terry N. Tumlin, D.M.D. 10,510(4) 2.5
J. Steven Walraven 5,230(5) 3.5(a)
(9,702 Shares Subject to Option)
17,009(6) 4.1
L. Ross Whatley, III, M.D.
9,494(7) 2.3
Earl Williamson, Jr., C.P.A.
All Directors and
Principal Officers
as a Group (11 persons) 115,159 27.7
</TABLE>
-72-
<PAGE>
Footnotes
- ---------
(a) Mr. Walraven's and Mr. McPhersons's "Percent of Class" has been
calculated assuming the exercise of all options exercisable by
him within 60 days after March 31, 1996.
(1) Includes (a) 15,288 shares owned of record jointly by Mr. Fournier and
his wife, as to which they share voting and investment powers, (b) 862
shares owned of record by Mr. Fournier and (c) 862 shares owned of
record by Mr. Fournier's wife, as to which Mr. Fournier shares voting
and investment powers.
(2) Includes (a) 7,821 shares owned of record by Dr. Kadum, (b) 461 shares
owned of record by Kadum's wife, as to which Dr. Kadum shares voting
and investment powers, (c) 700 shares owned of record by Dr. Kadum as
trustee for his minor children and (d) 2,000 shares owned of record by
Cartersville OB/GYN.
(3) Includes (1) 8,904 shares owned of record by Mr. Neal, (b) 5,000 shares
owned of record by Mr. Neal's wife, as to which Mr. Neal shares voting
and investment powers.
(4) Includes (a) 4,100 shares owned of record by Mr. Tumlin, (b) 6,000
shares owned of record by Terry N. Tumlin, D.M.D., P.C. Pension Trust
Account, as to which Mr. Tumlin is the beneficial owner, and 3,410
shares owned of record by Terry N. Tumlin, D.M.D., P.C. Profit Sharing
Plan Trust Account, as to which Mr. Tumlin is the beneficial owner.
(5) Includes (a) 4,950 shares owned of record by Mr. Walraven, (b) 170
shares owned of record by Mr. Walraven's wife, as to which Mr. Walraven
shares voting and investment powers but as to which he disclaims
beneficial ownership, (c) 10 shares owned of record by Mr. Walraven's
minor children, as to which Mr. Walraven shares voting and investment
powers, and (d) 100 shares owned of record by Mr. Walraven as custodian
for his minor children, as in which Mr. Walraven has sole voting and
investment powers but as to which he disclaims beneficial ownership. In
addition, Mr. Walraven was granted options on June 7, 1990; June 18,
1991; November 15, 1994; and November 21, 1995, in the following
respective amounts: 4,151; 4,151; 800; 600. The exercise prices on
these options are, respectively, as follows: $8.75; $8.04; $12.50;
$16.13. These options will expire, respectively, on the following
dates: June 2, 1997; June 18, 1998; November 15, 2001; June 2, 2002.
Altogether, Mr. Walraven may purchase 9,702 shares pursuant to the
foregoing options.
(6) Includes (a) 8,143 shares owned of record by Dr. Whatley, (b) 8,700
shares owned of record by Cartersville Radiology Group P.C., Money
Purchase Pension Plan, F.B.O. Lewis Ross Whatley,
-73-
<PAGE>
III, as to which Mr. Whatley is the beneficial owner and (c) 166 shares
owned of record jointly by Mr. Whatley and his minor child, as to which
Mr. Whatley shares voting and investment powers but disclaims
beneficial ownership.
(7) Includes (a) 8,651 shares owned of record by Mr. Williamson, (b) 1,000
shares owned of record by Mr. Williamson jointly with Ronald G. Smith,
as to which Mr. Williamson shares voting and investment powers, (c) 137
shares owned of record by Mr. Williamson as custodian for his minor
child, as to which Mr. Williamson shares voting and investment powers,
(d) 706 shares owned of record by Mr. Williamson's wife, as to which he
shares voting and investment powers but disclaims beneficial ownership.
(8) Includes (a) 4,300 shares owned of record by Mr. McPherson, (b) 1333
shares owned of record jointly by Mr. McPherson, and his wife, as to
which they share voting and investment powers, (c) 200 shares owned of
record by Mr. McPherson's minor child, as to which Mr. McPherson shares
voting and investment powers, but disclaims beneficial ownership. On
November 15, 1994, Mr. McPherson was granted an option for 650 shares
of common stock for the Company under the plan. The exercise price of
these shares is $12.50 per share and the fair market value of the
unexercised options as of December 31, 1994 was $12.50 per share based
on the analysis of the trades during the year. The expiration date of
these shares is November 15, 2001. On November 21, 1995, Mr. McPherson
was again granted an option for 450 shares of common stock of the
Company under the plan. The exercise price of these shares is $16.13
per share and the fair market value of these shares was $13.44 per
share on the date of the grant based on the analysis of the trades
during the year. The expiration date of these shares is November 21,
2002.
Change in Control
- -----------------
Management is not aware of any arrangement which may result in a change
in control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company's directors and officers and certain business organizations
and individuals associated with them have been customers of and have had banking
transactions with the Bank and are expected to continue such relationships in
the future. Pursuant to such transactions, the Company's directors and officers
from time to time have borrowed funds from the Bank for various business and
personal reasons. The extensions of credit made by the Bank to the Company's
directors and officers (a) were made in the ordinary course of business, (b)
were made on substantially the same terms, including interest rates and
collateral, as those
-74-
<PAGE>
prevailing at the time for comparable transactions with other persons and (c)
did not involve more than a normal risk of collectibility or present other
unfavorable features.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) The Consolidated Financial Statements listed in Item 8 of
Part II are filed as part of this report.
(2) All financial statement schedules are omitted because the data
is either not applicable or the required information is
included within the consolidated financial statements or
related notes thereto.
(3) Index to Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Document
---------- --------
<S> <C>
3.1 Articles of Incorporation/1/
3.2 Bylaws, as amended as of March 3, 1990/1/
10.1 Employment Agreement, dated December 17,
1987, between First Community Bank &
Trust and J. Steven Walraven/2/
10.2 1994 Incentive Stock Option Plan (the
"Plan") effective June 1, 1994 as
approved by shareholders May 15, 1994/3/
22.0 Subsidiary of First Community Bancorp, Inc./1/
25.0 A Power of Attorney is set forth on the
signature pages to this Form 10-KSB
</TABLE>
(b) The Company did not file a Form 8-K during the fourth quarter
of the 1996 fiscal year.
- --------------------------------
1. Incorporated by reference to exhibit of same number in the Form 10-K for
the year ended December 31, 1989 as filed with the Commission.
2. Incorporated by reference to exhibit of same number in the Registrant's
Registration Statement No. 33-29979 as filed with the Commission.
3. Incorporated by reference to exhibit of same number in the Form 10-KSB for
the year ended December 31, 1994 as filed with the Commission.
-75-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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 BANCORP, INC.
Date: March 25, 1997 By: /s/ J. Steven Walraven
--------------------- ------------------------------
President and
Chief Executive Officer
-76-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints J. Steven Walraven and Michael L.
McPherson, and each of them, his attorney-in-fact, each with full power of
substitution, for him in his name, place and stead, in any and all capacities,
to sign any amendment to this Report on Form 10-KSB, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and hereby ratifies and confirms all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ J. Steven Walraven
- -------------------------- President & CEO, February 18, 1997
J. Steven Walraven Director (Principal
Executive Officer)
/s/ Michael L. McPherson
- -------------------------- Executive Vice February 18, 1997
Michael L. McPherson President, Chief
Lending Officer &
Director
/s/ C. Gregory Culverhouse
- -------------------------- Director February 18, 1997
C. Gregory Culverhouse
/s/ Jack Fournier
- -------------------------- Director February 18, 1997
Jack Fournier
/s/ Fareed Z. Kadum, M.D.
- -------------------------- Director February 18, 1997
Fareed Z. Kadum, M.D.
</TABLE>
-77-
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Sammy L. Neal
- -------------------------- Director February 18, 1997
Sammy L. Neal
/s/ H. Boyd Pettit, III
- -------------------------- Chairman of the Board February 18, 1997
H. Boyd Pettit, III
/s/ D. Arnold Tillman, Jr.
- -------------------------- Director February 18, 1997
D. Arnold Tillman, Jr.
/s/ Terry N. Tumlin, D.M.D.
- -------------------------- Director February 18, 1997
Terry N. Tumlin, D.M.D.
/s/ L. Ross Whately, III
- -------------------------- Director February 18, 1997
L. Ross Whatley, III
/s/ Earl Williamson, Jr.
- -------------------------- Director February 18, 1997
Earl Williamson, Jr.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,685,230
<INT-BEARING-DEPOSITS> 3,739,163
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,326,359
<INVESTMENTS-CARRYING> 4,202,450
<INVESTMENTS-MARKET> 4,154,118
<LOANS> 54,436,430
<ALLOWANCE> 914,266
<TOTAL-ASSETS> 79,221,198
<DEPOSITS> 65,373,546
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,610,464
<LONG-TERM> 5,348,450
<COMMON> 415,103
0
0
<OTHER-SE> 6,473,635
<TOTAL-LIABILITIES-AND-EQUITY> 79,221,198
<INTEREST-LOAN> 5,895,861
<INTEREST-INVEST> 769,532
<INTEREST-OTHER> 162,350
<INTEREST-TOTAL> 6,827,743
<INTEREST-DEPOSIT> 2,537,622
<INTEREST-EXPENSE> 2,682,555
<INTEREST-INCOME-NET> 4,145,188
<LOAN-LOSSES> 216,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,666,531
<INCOME-PRETAX> 1,901,640
<INCOME-PRE-EXTRAORDINARY> 1,237,538
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,237,538
<EPS-PRIMARY> 2.98
<EPS-DILUTED> 0
<YIELD-ACTUAL> 6.16
<LOANS-NON> 0
<LOANS-PAST> 80,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 705,000
<CHARGE-OFFS> 87,000
<RECOVERIES> 80,000
<ALLOWANCE-CLOSE> 914,000
<ALLOWANCE-DOMESTIC> 914,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
