<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, 1998
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-25972
-------------
FIRST COMMUNITY CORPORATION
-----------------------------------
(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
- ---------------------------------------- -------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(423) 272-5800
------------------------------------------------
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NONE
--------------------------------------------------------------------
(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
--- ---
627,763
-------------------------
(OUTSTANDING SHARES OF THE ISSUER'S COMMON STOCK AS OF JUNE 30, 1998)
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES NO X
--- ---
<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, 1998 (UNAUDITED) AND DECEMBER 31, 1997
CONSOLIDATED STATEMENTS OF INCOME 4-5
THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 1998 AND 1997 (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
SIX MONTHS ENDED JUNE 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 I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
($ amounts in thousands)
June 30, December 31,
ASSETS 1998 1997
====================================================================================
<S> <C> <C>
Cash and due from banks $ 4,767 3,905
Federal funds sold 3,347 4,878
Securities available-for-sale, at fair value 6,816 10,704
Loans 71,363 64,843
Allowance for loan losses (803) (751)
- ------------------------------------------------------------------------------------
LOANS, NET 70,560 64,092
- ------------------------------------------------------------------------------------
Premises and equipment 3,677 3,386
Accrued income receivable 889 922
Deferred income taxes, net 157 122
Other assets 772 690
- -----------------------------------------------------------------------------------
$90,985 88,699
===================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
===================================================================================
Liabilities:
Deposits:
Noninterest-bearing $11,714 10,913
Interest-bearing 60,370 61,582
- -----------------------------------------------------------------------------------
TOTAL DEPOSITS 72,084 72,495
Securities sold under agreements to repurchase 4,406 4,118
Advances from FHLB 5,000 2,000
Note payable 0 250
Other liabilities 825 1,723
- -----------------------------------------------------------------------------------
TOTAL LIABILITIES 82,315 80,587
- -----------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, no par value. Authorized 3,000,000
shares; issued and outstanding 627,763 in 1998
and 624,896 in 1997 6,979 7,032
Unrealized gain (loss) on securities available-for-sale 42 39
Retained earnings 1,649 1,041
- -----------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 8,670 8,112
- -----------------------------------------------------------------------------------
$90,985 88,699
===================================================================================
</TABLE>
3
<PAGE> 4
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
($ amounts in thousands except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------
INTEREST INCOME: 1998 1997
----------- -----------
<S> <C> <C>
Loans, including fees $ 1,684 1,472
Securities:
Taxable 92 226
Tax exempt 19 20
Federal funds sold 64 8
- ---------------------------------------------------------------------------------
TOTAL INTEREST INCOME 1,859 1,726
- ---------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 710 636
Other borrowings 118 104
- ---------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 828 740
- ---------------------------------------------------------------------------------
NET INTEREST INCOME 1,031 986
PROVISION FOR LOAN LOSSES 15 65
- ---------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,016 921
- ---------------------------------------------------------------------------------
OTHER INCOME:
Service charges on deposit accounts 210 132
Security gains 0 0
Other service charges, commissions and fees 96 86
- ---------------------------------------------------------------------------------
TOTAL OTHER INCOME 306 218
- ---------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries and employee benefits 433 355
Occupancy expense 126 85
Other operating expenses 324 296
- ---------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 883 736
- ---------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 439 403
INCOME TAXES 163 147
- ---------------------------------------------------------------------------------
NET INCOME $ 276 256
=================================================================================
EARNINGS PER SHARE $ 0.42 0.39
=================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 660,390 655,231
=================================================================================
</TABLE>
4
<PAGE> 5
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
($ amounts in thousands except earnings per share)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------
INTEREST INCOME: 1998 1997
---------- -----------
<S> <C> <C>
Loans, including fees $ 3,287 2,801
Securities:
Taxable 219 471
Tax exempt 39 37
Federal funds sold 105 28
- ---------------------------------------------------------------------------------
TOTAL INTEREST INCOME 3,641 3,337
- ---------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 1,422 1,245
Other borrowings 203 200
- ---------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 1,625 1,445
- ---------------------------------------------------------------------------------
NET INTEREST INCOME 2,016 1,892
PROVISION FOR LOAN LOSSES 135 126
- ---------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,881 1,766
- ---------------------------------------------------------------------------------
OTHER INCOME:
Service charges on deposit accounts 337 262
Asset gains 169 0
Other service charges, commissions and fees 190 167
- ---------------------------------------------------------------------------------
TOTAL OTHER INCOME 696 429
- ---------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries and employee benefits 870 701
Occupancy expense 237 157
Other operating expenses 614 571
- ---------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 1,721 1,429
- ---------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 855 766
INCOME TAXES 317 281
- ---------------------------------------------------------------------------------
NET INCOME $ 539 485
=================================================================================
EARNINGS PER SHARE $ 0.82 0.74
=================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 660,085 654,915
=================================================================================
</TABLE>
5
<PAGE> 6
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In Thousands)
-----------------------
Six Months Ended
June 30,
-----------------------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 1998 1997
==================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 539 484
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 113 76
Provision for loan losses 135 126
Increase in accrued income receivable 33 (104)
Other, net (696) (121)
- ---------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 124 461
- ---------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in federal funds sold 1,531 (721)
Maturities and redemptions of securities
available for sale 3,887 1,406
Purchases of securities available-for-sale 0 (2,050)
Proceeds of sales of securities available-for-sale 0 0
Net increase in loans (6,520) (7,987)
Purchases of premises and equipment (404) (643)
- ---------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (1,506) (9,995)
- ---------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (414) (375)
Repayment of note payable (250) 0
Purchase and retirement of common stock 0 (87)
Proceeds from sale of common stock 17 59
Repayments of FHLB advances 0 0
Increase in borrowings from FHLB 3,000 0
Increase (decrease) in securities sold under agree-
ments to repurchase & federal funds purchased 288 383
Increase (decrease) in deposits (397) 9,820
- ---------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,244 9,800
- ---------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 862 266
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 3,905 3,956
- ---------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 4,767 4,222
========================================-========================================
CASH PAYMENTS FOR INTEREST $ 1,795 1,434
CASH PAYMENTS FOR INCOME TAXES $ 570 239
=================================================================================
</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, 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 $91 million at June 30,
1998. Total assets have increased $2.3 million or 2.6% since December 31, 1997.
The growth in total assets has been funded by a $3 million increase in FHLB
advances and a $288,000 increase in federal funds purchased and securities sold
under agreements to repurchase.
Loans have increased $6.5 million or 10.1% during the first six months of 1998.
The increased loans were funded in part through a $1.5 million reduction in
federal funds sold and a $3.9 million reduction in investments since December
31, 1997.
NONPERFORMING ASSETS AND RISK ELEMENTS. Nonperforming assets at June 30, 1998
amounted to $37,000, down from $43,000 at December 31, 1997. Diversification
within the loan portfolio is an important means of reducing inherent lending
risks. At June 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 June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $4.8 million and federal
funds sold of $3.3 million as of June 30, 1998. In addition, loans and
investment securities repricing or maturing within one year or less exceed $18
million at June 30, 1998. The Bank has approximately $1.4 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 $81,000 at
June 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 June 30, 1998, is $8.7 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, 1998, are as follows:
<TABLE>
<S> <C>
Tier 1 leverage 9.63%
Tier 1 risk-based 12.93%
Total risk-based 14.14%
</TABLE>
8
<PAGE> 9
RESULTS OF OPERATIONS
The Company had net income of $276,000 for the three months ending June 30,
1998, compared with $256,000 for the same period last year, resulting in an
increase of 7.7%. For six months ending June 30, 1998, net income was $539,000
compared with $485,000 for 1997, or an increase of 11.1%.
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 $2 million from $1.9 million for
the first six months ending June 30, 1997, or an increase of 6.64%. Earning
assets through June 30, 1998 increased $5.9 million and interest-bearing
liabilities also increased $5.9 million compared to June 30, 1997, reflecting
increases of 7.8% and 9.3%, respectively.
Noninterest income for the six months ending June 30, 1998 was $696,000 compared
to $429,000 for the same period in 1997 reflecting an increase of $267,000, or
62.1%. 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 six months ending June 30, 1998 was $337,000 compared
with $262,000 for the same period in 1997 reflecting an increase of 28.6%.
The provision for loan losses was $135,000 in the first half of 1998 compared
with $126,000 for the same period in 1997. The allowance for loan losses of
$803,000 at June 30, 1998 (approximately 1.13% 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 22, 1998, 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, 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)
July 31, 1998 /s/ John L. Campbell
- ----------------------------- -----------------------------------
(Date) John L. Campbell, President
July 31, 1998 /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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,682
<INT-BEARING-DEPOSITS> 85
<FED-FUNDS-SOLD> 3,347
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,816
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 71,363
<ALLOWANCE> 803
<TOTAL-ASSETS> 90,985
<DEPOSITS> 72,083
<SHORT-TERM> 9,406
<LIABILITIES-OTHER> 825
<LONG-TERM> 0
0
0
<COMMON> 6,979
<OTHER-SE> 1,691
<TOTAL-LIABILITIES-AND-EQUITY> 90,985
<INTEREST-LOAN> 3,278
<INTEREST-INVEST> 258
<INTEREST-OTHER> 105
<INTEREST-TOTAL> 3,641
<INTEREST-DEPOSIT> 1,422
<INTEREST-EXPENSE> 1,625
<INTEREST-INCOME-NET> 2,016
<LOAN-LOSSES> 135
<SECURITIES-GAINS> 6
<EXPENSE-OTHER> 1,722
<INCOME-PRETAX> 855
<INCOME-PRE-EXTRAORDINARY> 855
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 539
<EPS-PRIMARY> 0.86
<EPS-DILUTED> 0.82
<YIELD-ACTUAL> 5.30
<LOANS-NON> 23
<LOANS-PAST> 204
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 751
<CHARGE-OFFS> 87
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 803
<ALLOWANCE-DOMESTIC> 803
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
