<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 1997
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-25972
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FIRST COMMUNITY CORPORATION
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(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
TENNESSEE 62-1562541
---------------------- ----------------------------------
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
809 WEST MAIN STREET
ROGERSVILLE, TENNESSEE 37857
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(423) 272-5800
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(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NONE
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(FORMER NAME, ADDRESS AND FISCAL YEAR, IF CHANGED SINCE LAST REPORT)
INDICATE BY CHECK MARK WHETHER THE ISSUER: (1) HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
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624,896
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(OUTSTANDING SHARES OF THE ISSUER'S COMMON STOCK AS OF JUNE 30, 1997)
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES NO X
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<PAGE> 2
FIRST COMMUNITY CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NUMBER PAGE
- ------ ----
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
CONSOLIDATED STATEMENTS OF INCOME 4-5
THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 10
ITEM 2. CHANGES IN SECURITIES 10
ITEM 3. DEFAULT UPON SENIOR SECURITIES 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10
ITEM 5. OTHER INFORMATION 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
</TABLE>
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
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FIRST COMMUNITY CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 1997
<TABLE>
<CAPTION>
($ amounts in thousands)
June 30, December 31
Assets 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 4,223 3,956
Federal funds sold 734 13
Securities available-for-sale, at fair value 15,333 14,696
Loans 59,540 51,553
Allowance for loan losses (744) (644)
- --------------------------------------------------------------------------------
Loans, net 58,795 50,909
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Premises and equipment 3,066 2,499
Accrued income receivable 882 778
Deferred income taxes, net 157 136
Other assets 464 259
- --------------------------------------------------------------------------------
$ 83,654 73,246
================================================================================
Liabilities and Shareholders' Equity
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Liabilities:
Deposits:
Noninterest-bearing $ 10,973 9,085
Interest-bearing 56,539 48,532
- --------------------------------------------------------------------------------
Total deposits 67,512 57,617
Securities sold under agreements to repurchase 5,128 4,745
Advances from FHLB 2,000 2,000
Note payable 200 200
Other liabilities 874 1,191
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Total liabilities 75,714 65,753
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Shareholders' equity:
Common stock, no par value. Authorized 3,000,000
shares; issued and outstanding 624,896 in
1997 and 624,379 in 1996 6,959 6,989
Unrealized gain (loss) on securities available- 28 34
for-sale
Retained earnings 953 470
- --------------------------------------------------------------------------------
Total shareholders' equity 7,940 7,493
- --------------------------------------------------------------------------------
$ 83,654 73,246
================================================================================
</TABLE>
3
<PAGE> 4
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
June 30, 1997
($ amounts in thousands except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1997 1996
----------- -------
<S> <C> <C>
Interest income:
Loans, including fees $ 1,472 1,132
Securities:
Taxable 226 196
Tax exempt 20 1
Federal funds sold 8 70
- --------------------------------------------------------------------------------
Total interest income 1,726 1,399
- --------------------------------------------------------------------------------
Interest expense:
Deposits 636 546
Other borrowings 104 31
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Total interest expense 740 577
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Net interest income 986 822
Provision for loan losses 65 45
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Net interest income after provision
for loan losses 921 777
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Other income:
Service charges on deposit accounts 133 111
Other service charges, commissions and fees 86 45
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Total other income 218 156
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Other expenses:
Salaries and employee benefits 355 282
Occupancy expense 85 77
Other operating expenses 296 263
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Total other expenses 736 622
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Income before income taxes 403 311
Income taxes 147 118
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Net income $ 256 193
================================================================================
Earnings per share $ 0.39 0.28
================================================================================
Weighted average shares outstanding 655,231 683,400
================================================================================
</TABLE>
4
<PAGE> 5
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
June 30, 1997
($ amounts in thousands except earnings per share)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1997 1996
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<S> <C> <C>
Interest income:
Loans, including fees $ 2,801 2,248
Securities:
Taxable 471 354
Tax exempt 37 1
Federal funds sold 28 142
- --------------------------------------------------------------------------------
Total interest income 3,337 2,745
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Interest expense:
Deposits 1,245 1,080
Other borrowings 200 53
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Total interest expense 1,445 1,133
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Net interest income 1,892 1,612
Provision for loan losses 126 75
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Net interest income after provision
for loan losses 1,766 1,537
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Other income:
Service charges on deposit accounts 262 201
Other service charges, commissions and fees 167 86
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Total other income 428 287
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Other expenses:
Salaries and employee benefits 701 574
Occupancy expense 157 143
Other operating expenses 571 497
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Total other expenses 1,429 1,214
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Income before income taxes 765 610
Income taxes 281 231
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Net income $ 484 379
================================================================================
Earnings per share $ 0.74 0.55
================================================================================
Weighted average shares outstanding 654,915 683,400
================================================================================
</TABLE>
5
<PAGE> 6
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
June 30, 1997
<TABLE>
<CAPTION>
(In Thousands)
------------------------
Six Months Ended
June 30,
------------------------
Increase (decrease) in cash and due from banks 1997 1996
================================================================================
<S> <C> <C>
Cash flows from operating activities:
Net income $ 484 379
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 76 65
Provision for loan losses 126 75
Increase in accrued income receivable (104) (37)
Other, net (122) (115)
- --------------------------------------------------------------------------------
Net cash provided (used) by operating activities 461 367
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Decrease (increase) in federal funds sold (721) (1,666)
Maturities and redemptions of securities
available for sale 1,406 1,500
Purchases of securities available-for-sale (2,050) (5,485)
Net increase in loans (7,987) (3,485)
Purchases of premises and equipment (643) (168)
- --------------------------------------------------------------------------------
Net cash used by investing activities (9,994) (9,304)
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Cash dividends paid (375) (198)
Purchase and retirement of common stock (87) (17)
Proceeds from sale of common stock 59 8
Repayments of FHLB advances 0 0
Increase in securities sold under agreements
to repurchase & federal funds purchased 383 2,092
Increase in deposits 9,820 7,100
- --------------------------------------------------------------------------------
Net cash provided by financing activities 9,799 8,985
- --------------------------------------------------------------------------------
Net increase (decrease) in cash 266 48
Cash and due from banks at beginning of period 3,956 2,976
- --------------------------------------------------------------------------------
Cash and due from banks at end of period $ 4,223 3,024
================================================================================
Cash payments for interest $ 1,434 1,047
Cash payments for income taxes $ 239 293
================================================================================
</TABLE>
6
<PAGE> 7
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A --- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six month period ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997.
7
<PAGE> 8
ITEM NO. 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
First Community Bank of East Tennessee (the "Bank") represents virtually all of
the assets of First Community Corporation (the "Company"). The Bank, which was
opened in April of 1993, has continued to experience growth during 1997. Total
assets have grown $10.4 million or 14.2% since December 31, 1996. The growth in
total assets has been funded by increases in deposits of $9.9 million, and
increases in federal funds purchased and securities sold under agreements to
repurchase of $383,000.
Loans have increased $8 million or 15.5% during the first six months of 1997.
Federal funds sold increased $721,000 and investments increased $637,000 since
December 31, 1996.
NONPERFORMING ASSETS AND RISK ELEMENTS. Nonperforming assets at June 30, 1997
amounted to $227,000, up from $171,000 at December 31, 1996. Diversification
within the loan portfolio is an important means of reducing inherent lending
risks. At June 30, 1997, the Bank had no concentrations of ten percent or more
of total loans in any single industry nor any geographical area outside the
immediate market area of the Bank.
The Bank discontinues the accrual of interest on loans which become ninety days
past due (principal and/or interest), unless the loans are adequately secured
and in the process of collection. Other real estate owned is carried at fair
value, determined by an appraisal. A loan is classified as a restructured loan
when the interest rate is materially reduced or the term is extended beyond the
original maturity date because of the inability of the borrower to service the
debt under the original terms. The Bank had no restructured loans at June 30,
1997. Other real estate amounted to $114,000 as of June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $4.2 million and federal
funds sold of $734,000 as of June 30, 1997. In addition, loans and investment
securities repricing or maturing within one year or less exceed $15.6 million at
June 30, 1997. The Bank has approximately $2.1 million in loan commitments that
are expected to be funded within the next six months and other commitments,
primarily standby letters of credit, of approximately $134,000 at June 30, 1997.
In addition to the Federal Home Loan Bank membership, the Bank has established
federal funds lines of credit with three correspondent banks totaling $7 million
to meet unexpected liquidity demands. With the exception of unfunded loan
commitments, there are no known trends or any known commitments of uncertainties
that will result in the Bank's liquidity increasing or decreasing in a material
way. In addition, the Company is not aware of any recommendations by any
regulatory authorities which would have a material effect on the Company's
liquidity, capital resources or results of operations.
Total equity capital at June 30, 1997, is $7.9 million or approximately 9.5% of
total assets. The Bank's capital position is adequate to meet the minimum
capital requirements for all regulatory agencies. The Bank's capital ratios as
of June 30, 1997, are as follows:
Tier 1 leverage 10.05%
Tier 1 risk-based 14.46%
Total risk-based 15.72%
During the second half of 1996 and first half of 1997, the Company has purchased
and retired approximately 49,000 shares of its common stock for $25 to $30 per
share. The Company does not anticipate that significant additional amounts of
common stock will be repurchased in 1997.
8
<PAGE> 9
RESULTS OF OPERATIONS
The Company had net income of $256,000 for the three months ending June 30,
1997, compared with $193,000 for the same period last year, resulting in an
increase of 32.6%. For six months ending June 30, 1997, net income was $484,000
compared with $379,000 for 1996, or an increase of 27.7%.
Interest income and interest expense both increased from 1996 to 1997 resulting
from the increase in earning assets and interest bearing liabilities.
Consequently, net interest income increased to $1.9 million from $1.6 million
for the first six months ending June 30, 1996, or an increase of 17.4%. Earning
assets through June 30, 1997 increased $11.7 million and interest-bearing
liabilities increased $12.4 million compared to June 30, 1996, reflecting
increases of 18.5% and 24.2%, respectively.
Noninterest income for the six months ending June 30, 1997 was $428,000 compared
to $287,000 for the same period in 1996 reflecting an increase of 49.3%. The
growth in noninterest income resulted primarily from the combination of service
charges associated with deposit growth, increased credit life insurance
commissions, and the establishment of secondary mortgage processing services in
June, 1996.
The provision for loan losses was $126,000 in the first half of 1997 compared
with $75,000 for the same period in 1996. The allowance for loan losses of
$744,000 at June 30, 1997 (approximately 1.25% of loans) is considered by
management to be adequate to cover losses inherent in the loan portfolio.
Management evaluates the adequacy of the allowance for loan losses monthly and
makes provisions for loan losses based on this evaluation.
9
<PAGE> 10
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 23, 1997, the Company held its annual meeting of shareholders
and the only item of business was the re-election of eight incumbent
directors.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) 27 Financial Data Schedule (for SEC use only)
b) The Company did not file any reports on Form 8-K during the
quarter ended June 30, 1997
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registration has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST COMMUNITY CORPORATION
------------------------------
(Registrant)
August 5, 1997 /s/ John L. Campbell
- ------------------------- ------------------------------------
(Date) John L. Campbell, President
August 5, 1997 /s/ George E. Burnett
- ------------------------- ------------------------------------
(Date) George E. Burnett, Senior
Vice President and Cashier
(Principal Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,223
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 734
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,333
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 59,540
<ALLOWANCE> 744
<TOTAL-ASSETS> 83,654
<DEPOSITS> 67,512
<SHORT-TERM> 7,328
<LIABILITIES-OTHER> 874
<LONG-TERM> 0
0
0
<COMMON> 6,959
<OTHER-SE> 981
<TOTAL-LIABILITIES-AND-EQUITY> 83,654
<INTEREST-LOAN> 2,801
<INTEREST-INVEST> 506
<INTEREST-OTHER> 28
<INTEREST-TOTAL> 3,337
<INTEREST-DEPOSIT> 1,245
<INTEREST-EXPENSE> 1,445
<INTEREST-INCOME-NET> 1,892
<LOAN-LOSSES> 126
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,429
<INCOME-PRETAX> 765
<INCOME-PRE-EXTRAORDINARY> 765
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 484
<EPS-PRIMARY> .74
<EPS-DILUTED> .74
<YIELD-ACTUAL> 5.31
<LOANS-NON> 95
<LOANS-PAST> 132
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 644
<CHARGE-OFFS> 28
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 744
<ALLOWANCE-DOMESTIC> 744
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
