<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: September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-25972
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FIRST COMMUNITY CORPORATION
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(Exact Name of Small Business Issuer as Specified in its Charter)
Tennessee 62-1562541
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(State of Incorporation) (I.R.S. Employer Identification No.)
809 West Main Street
Rogersville, Tennessee 37857
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(Address of Principal Executive Offices) (Zip Code)
(423) 272-5800
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(Issuer's Telephone Number, Including Area Code)
None
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(Former Name, Address and Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the Issuer: (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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627,763
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(Outstanding shares of the issuer's common stock as of September 30, 1998)
Transitional Small Business Disclosure Format (check one):
Yes No X
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FIRST COMMUNITY CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Number Page
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<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets 3
September 30, 1998 (Unaudited) and December 31, 1997
Consolidated Statements of Income 4-5
Three months and nine months ended
September 30, 1998 and 1997 (Unaudited)
Consolidated Statements of Cash Flows 6
Nine months ended September 30, 1998 and 1997 (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
<TABLE>
<CAPTION>
($ amounts in thousands)
SEPTEMBER 30, December 31,
ASSETS 1998 1997
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<S> <C> <C>
Cash and due from banks $ 3,462 3,905
Federal funds sold 4,432 4,878
Securities available-for-sale, at fair value 6,158 10,704
Loans 76,123 64,843
Allowance for loan losses (835) (751)
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LOANS, NET 75,288 64,092
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Premises and equipment 4,149 3,386
Accrued income receivable 995 922
Deferred income taxes, net 157 122
Other assets 749 690
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$ 95,390 88,699
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LIABILITIES AND SHAREHOLDERS' EQUITY
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LIABILITIES:
DEPOSITS:
Noninterest-bearing $ 10,188 10,913
Interest-bearing 67,130 61,582
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TOTAL DEPOSITS 77,318 72,495
Securities sold under agreements to repurchase 3,124 4,118
Advances from FHLB 5,000 2,000
Note payable 0 250
Other liabilities 1,009 1,723
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TOTAL LIABILITIES 86,452 80,587
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SHAREHOLDERS' EQUITY:
Common stock, no par value. Authorized 3,000,000
shares; issued and outstanding 627,763 in 1998
and 623,701 in 1997 6,979 7,032
Unrealized gain (loss) on securities available-for-sale 11 39
Retained earnings 1,948 1,041
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TOTAL SHAREHOLDERS' EQUITY 8,938 8,112
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$ 95,390 88,699
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</TABLE>
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FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
($ amounts in thousands except earnings per share)
THREE MONTHS ENDED SEPTEMBER 30,
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INTEREST INCOME: 1998 1997
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<S> <C> <C>
Loans, including fees $ 1,814 1,525
Securities:
Taxable 87 221
Tax exempt 10 19
Federal funds sold 52 33
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TOTAL INTEREST INCOME 1,963 1,798
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INTEREST EXPENSE:
Deposits 764 740
Other borrowings 125 79
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TOTAL INTEREST EXPENSE 889 819
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NET INTEREST INCOME 1,075 979
PROVISION FOR LOAN LOSSES 40 14
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,035 965
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OTHER INCOME:
Service charges on deposit accounts 182 137
Security gains 47 0
Other service charges, commissions and fees 96 71
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TOTAL OTHER INCOME 325 208
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OTHER EXPENSES:
Salaries and employee benefits 462 375
Occupancy expense 123 101
Other operating expenses 300 290
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TOTAL OTHER EXPENSES 884 766
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INCOME BEFORE INCOME TAXES 476 407
INCOME TAXES 176 145
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NET INCOME $ 299 262
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EARNINGS PER SHARE $ 0.45 0.40
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WEIGHTED AVERAGE SHARES OUTSTANDING 660,628 656,192
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</TABLE>
4
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FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
($ amounts in thousands except earnings per share)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------
INTEREST INCOME: 1998 1997
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<S> <C> <C>
Loans, including fees $ 5,092 4,326
Securities:
Taxable 306 692
Tax exempt 49 56
Federal funds sold 157 61
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TOTAL INTEREST INCOME 5,604 5,135
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INTEREST EXPENSE:
Deposits 2,186 1,984
Other borrowings 327 280
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TOTAL INTEREST EXPENSE 2,513 2,264
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NET INTEREST INCOME 3,091 2,871
PROVISION FOR LOAN LOSSES 175 141
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,916 2,730
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OTHER INCOME:
Service charges on deposit accounts 519 398
Asset gains 216 0
Other service charges, commissions and fees 286 238
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TOTAL OTHER INCOME 1,021 636
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OTHER EXPENSES:
Salaries and employee benefits 1,332 1,076
Occupancy expense 360 257
Other operating expenses 914 861
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TOTAL OTHER EXPENSES 2,606 2,194
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INCOME BEFORE INCOME TAXES 1,331 1,172
INCOME TAXES 493 426
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NET INCOME $ 838 746
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EARNINGS PER SHARE $ 1.27 1.14
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WEIGHTED AVERAGE SHARES OUTSTANDING 660,426 656,864
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</TABLE>
5
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FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(IN THOUSANDS)
-----------------------------------
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 838 746
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 170 125
Provision for loan losses 175 141
Increase in accrued income receivable (73) (261)
Other, net (529) 205
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 581 956
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CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in federal funds sold 446 (4,745)
Maturities and redemptions of securities
available for sale 3,998 3,763
Purchases of securities available-for-sale (2,532) (2,050)
Proceeds of sales of securities available-for-sale 3,079 0
Net increase in loans (11,280) (10,705)
Purchases of premises and equipment (933) (731)
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NET CASH USED BY INVESTING ACTIVITIES (7,222) (14,468)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (414) (375)
Repayment of note payable (250) 0
Purchase and retirement of common stock 0 (126)
Proceeds from sale of common stock 17 62
Repayments of FHLB advances 0 (2,000)
Increase in borrowings from FHLB 3,000 0
Increase (decrease) in securities sold under agree-
ments to repurchase & federal funds purchased (994) (318)
Increase (decrease) in deposits 4,838 16,387
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NET CASH PROVIDED BY FINANCING ACTIVITIES 6,197 13,630
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NET INCREASE (DECREASE) IN CASH (443) 118
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 3,905 3,956
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CASH AND DUE FROM BANKS AT END OF PERIOD $ 3,462 4,074
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CASH PAYMENTS FOR INTEREST $ 2,629 2,101
CASH PAYMENTS FOR INCOME TAXES $ 681 386
========================================================================================================
</TABLE>
6
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FIRST COMMUNITY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A --- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six month period ended September 30, 1998 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1998.
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 grown in total assets to $95 million at September
30, 1998. Total assets have increased $6.7 million or 7.5% since December 31,
1997. The growth in total assets has been funded by a $3 million increase in
FHLB advances and a $4.8 million increase in deposits.
Loans have increased $11.3 million or 17.4% during the first nine months of
1998. The increased loans were funded through the increases in deposits and FHLB
advances and a $4.5 million reduction in investments since December 31, 1997.
NONPERFORMING ASSETS AND RISK ELEMENTS. Nonperforming assets at September 30,
1998 amounted to $95,000, up from $43,000 at December 31, 1997. Diversification
within the loan portfolio is an important means of reducing inherent lending
risks. At September 30, 1998, 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 $7,000 in restructured loans and
$7,000 in other real estate at September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $3.5 million and federal
funds sold of $4.4 million as of September 30, 1998. In addition, loans and
investment securities repricing or maturing within one year or less exceed $18
million at September 30, 1998. The Bank has approximately $1.7 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 $65,000 at
September 30, 1998. In addition to the Federal Home Loan Bank membership, the
Bank has established federal funds lines of credit with three correspondent
banks totaling $7 million to meet unexpected liquidity demands. With the
exception of unfunded loan commitments, there are no known trends or any known
commitments of uncertainties that will result in the Bank's liquidity increasing
or decreasing in a material way. In addition, the Company is not aware of any
recommendations by any regulatory authorities which would have a material effect
on the Company's liquidity, capital resources or results of operations.
Total equity capital at September 30, 1998, is $8.9 million or approximately
9.4% of total assets. The Bank's capital position is adequate to meet the
minimum capital requirements for all regulatory agencies. The Bank's capital
ratios as of September 30, 1998, are as follows:
Tier 1 leverage 9.55%
Tier 1 risk-based 12.56%
Total risk-based 13.74%
8
<PAGE> 9
RESULTS OF OPERATIONS
The Company had net income of $299,000 for the three months ending September 30,
1998, compared with $262,000 for the same period last year, resulting in an
increase of 14.3%. For nine months ending September 30, 1998, net income was
$838,000 compared with $746,000 for 1997, or an increase of 12.4%.
Interest income and interest expense both increased from 1997 to 1998 resulting
from the increase in earning assets and interest bearing liabilities.
Consequently, net interest income increased to $3.1 million from $2.9 million
for the first nine months ending September 30, 1997, or an increase of 7.7%.
Earning assets through September 30, 1998 increased $6.1 million and
interest-bearing liabilities also increased $6.8 million compared to September
30, 1997, reflecting increases of 7.3% and 9.9%, respectively.
Noninterest income for the nine months ending September 30, 1998 was $1,021,000
compared to $636,000 for the same period in 1997 reflecting an increase of
$385,000, or 60.5%. The growth in noninterest income resulted primarily from the
sale of property adjoining the Church Hill Office. Noninterest income consists
mainly of service charges on deposit accounts, credit life insurance
commissions, secondary mortgage processing fees, and brokerage services. Service
charges on deposit accounts for the nine months ending September 30, 1998 was
$519,000 compared with $398,000 for the same period in 1997 reflecting an
increase of 30.3%.
The provision for loan losses was $175,000 in the first nine months of 1998
compared with $141,000 for the same period in 1997. The allowance for loan
losses of $835,000 at September 30, 1998 (approximately 1.1% 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
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) 27 Financial Data Schedule (for SEC use only)
b) The Company did not file any reports on Form 8-K during the
quarter ended September 30, 1998
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)
November 10, 1998 /s/ John L. Campbell
- --------------------------------- --------------------------------------
(Date) John L. Campbell, President
November 10, 1998 /s/ George E. Burnett
- --------------------------------- --------------------------------------
(Date) George E. Burnett,
Senior Vice President and Cashier
(Principal Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST COMMUNITY BANK FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,347
<INT-BEARING-DEPOSITS> 115
<FED-FUNDS-SOLD> 4,432
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,158
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 76,123
<ALLOWANCE> 835
<TOTAL-ASSETS> 95,390
<DEPOSITS> 77,318
<SHORT-TERM> 8,124
<LIABILITIES-OTHER> 1,009
<LONG-TERM> 0
0
0
<COMMON> 6,979
<OTHER-SE> 1,959
<TOTAL-LIABILITIES-AND-EQUITY> 95,390
<INTEREST-LOAN> 5,092
<INTEREST-INVEST> 355
<INTEREST-OTHER> 157
<INTEREST-TOTAL> 5,604
<INTEREST-DEPOSIT> 2,186
<INTEREST-EXPENSE> 2,513
<INTEREST-INCOME-NET> 3,091
<LOAN-LOSSES> 175
<SECURITIES-GAINS> (42)
<EXPENSE-OTHER> 2,606
<INCOME-PRETAX> 1,331
<INCOME-PRE-EXTRAORDINARY> 1,331
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 838
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.27
<YIELD-ACTUAL> 4.99
<LOANS-NON> 95
<LOANS-PAST> 172
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 751
<CHARGE-OFFS> 97
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 835
<ALLOWANCE-DOMESTIC> 835
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
