<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, 1999
-------------------
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 [ ]
2,052,270
-------------------------------
(OUTSTANDING SHARES OF THE ISSUER'S COMMON STOCK AS OF SEPTEMBER 30, 1999)
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
SEPTEMBER 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998
CONSOLIDATED STATEMENTS OF INCOME 4-5
THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (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
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
September 30, 1999
<TABLE>
<CAPTION>
($ amounts in thousands)
SEPTEMBER 30, December 31, Amount %
ASSETS 1999 1998 Change Change
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 3,853 3,570 283 7.9%
Federal funds sold 2,300 11,123 (8,823) -79.3%
Securities available-for-sale, at fair value 5,784 3,321 2,463 74.2%
Loans 92,221 80,898 11,323 14.0%
Allowance for loan losses (918) (869) (49) 5.6%
- ----------------------------------------------------------------------------------------------------------------------------------
LOANS, NET 91,303 80,029 11,274 14.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Premises and equipment 3,993 4,153 (160) -3.9%
Accrued income receivable 1,431 1,039 392 37.7%
Deferred income taxes, net 183 122 61 50.0%
Other assets 922 801 121 15.1%
- ----------------------------------------------------------------------------------------------------------------------------------
$ 109,769 104,158 5,611 5.4%
==================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
==================================================================================================================================
LIABILITIES:
DEPOSITS:
Noninterest-bearing $ 10,155 10,956 (801) -7.3%
Interest-bearing 71,197 72,505 (1,308) -1.8%
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 81,352 83,461 (2,109) -2.5%
Securities sold under agreements to repurchase 2,122 1,528 594 38.9%
Advances from FHLB 15,100 8,000 7,100 88.8%
Note payable -- -- -- --
Other liabilities 1,096 1,720 (624) -36.3%
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 99,670 94,709 4,961 5.2%
- ----------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, no par value. Authorized 10,000,000
shares; issued and outstanding 2,052,270 in 1999
and 1,883,289 in 1998 7,758 7,746 12 0.2%
Unrealized gain (loss) on securities-AFS (63) 14 (77) -550.0%
Retained earnings 2,447 1,689 758 44.9%
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 10,142 9,449 693 7.3%
- ----------------------------------------------------------------------------------------------------------------------------------
$ 109,769 104,158 5,611 5.4%
==================================================================================================================================
</TABLE>
3
<PAGE> 4
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
September 30, 1999
<TABLE>
<CAPTION>
($ amounts in thousands except earnings per share)
THREE MONTHS ENDED SEPTEMBER 30, 1999,
-----------------------------------------------------------------
Amount %
1999 1998 Change Change
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 2,086 1,814 272 15.0%
Securities:
Taxable 55 87 (32) -36.7%
Tax exempt 12 10 --
Federal funds sold 37 52 (15) -28.7%
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 2,190 1,963 227 11.6%
- --------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 754 764 (10) -1.3%
Other borrowings 200 125 75 60.2%
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 954 889 65 7.3%
- --------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 1,237 1,075 162 15.1%
PROVISION FOR LOAN LOSSES 71 40 31 76.3%
- --------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,166 1,035 131 12.7%
- --------------------------------------------------------------------------------------------------------------------------
OTHER INCOME:
Service charges on deposit accounts 237 182 55 30.0%
Asset Gains -- 47 (47) -100.0%
Income from Subsidiary 0 --
Other service charges, commissions and fees 4 96 (92) -95.4%
- --------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 241 325 (84) (25.9)%
- --------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries, Directors' fees and employee benefits 469 462 7 1.5%
Occupancy expense 157 123 34 27.6%
Other operating expenses 321 300 21 7.0%
- --------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 970 884 86 9.7%
- --------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 936 476 (40) (8.3)%
INCOME TAXES 161 176 (15) (8.4)%
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 275 299 (24) (7.9)%
==========================================================================================================================
EARNINGS PER SHARE $ 0.13 0.15 (.02) (10.6)%
==========================================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 2,052,270 1,981,884 70,386 3.6%
==========================================================================================================================
</TABLE>
4
<PAGE> 5
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
September 30, 1999
<TABLE>
<CAPTION>
($ amounts in thousands except earnings per share)
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------------------------
Amount %
1999 1998 Change Change
---------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 6,029 5,092 937 18.4%
Securities:
Taxable 135 306 (171) -55.9%
Tax exempt 26 49 (23) -47.0%
Federal funds sold 169 157 12 7.7%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 6,359 5,604 755 13.5%
- -------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 2,272 2,186 86 3.9%
Other borrowings 450 327 123 37.7%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 2,722 2,513 209 8.3%
- -------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 3,637 3,091 546 17.7%
PROVISION FOR LOAN LOSSES 197 175 22 12.3%
- -------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,440 2,916 524 18.0%
- -------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME:
Service charges on deposit accounts 527 519 8 1.5%
Asset Gains -- 216 (216) -100.0%
Income from Subsidiary -- -- 100.0%
Other service charges, commissions and fees 185 286 (101) -35.2%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 712 1,021 (309) -30.3%
- -------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries, Directors' fees and employee benefits 1,382 1,332 50 3.8%
Occupancy expense 435 360 75 20.8%
Other operating expenses 904 914 (10) -1.1%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 2,744 2,606 138 5.3%
- -------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 1,408 1,331 77 5.8%
INCOME TAXES 524 493 31 6.3%
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 884 838 46 5.5%
===============================================================================================================================
EARNINGS PER SHARE $ .43 0.42 0.01 2.1%
===============================================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 2,046,423 1,981,278 65,145 3.3%
===============================================================================================================================
</TABLE>
5
<PAGE> 6
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS)
----------------------------------
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 1,032 838
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 253 170
Provision for loan losses 197 175
Increase in accrued income receivable (392) (73)
Other, net (600) (529)
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 490 581
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in federal funds sold 8,823 446
Maturities and redemptions of securities
available for sale 1,537 3,998
Purchases of securities available-for-sale (4,000) (2,532)
Proceeds of sales of securities available-for-sale 3,079
Net increase in loans (11,323) (11,280)
Purchases of premises and equipment (93) (933)
- ----------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (5,056) (7,222)
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (754) (414)
Purchase and retirement of common stock -- (250)
Proceeds of sale of common stock 12 17
Repayments of FHLB advances -- --
Increase in borrowings from FHLB 7,100 3,000
Increase in securities sold under agreements
to repurchase 594 (994)
Increase (Decrease) in deposits (2,103) 4,838
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,849 6,197
- ----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 283 (443)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 3,570 3,905
- ----------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 3,853 3,462
====================================================================================================
CASH PAYMENTS FOR INTEREST $ 2,722 2,629
CASH PAYMENTS FOR INCOME TAXES $ 545 681
====================================================================================================
</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 nine month period ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1999.
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 $110 million at September
30, 1999 reflecting an increase from December 31, 1998 of 5.4%.
Loans have increased $11.2 million or 14.1% during the first nine months of
1999. The increased loans were funded through an $8.823 million decrease in fed
funds sold since December 31, 1998 and increased borrowings from Federal Home
Loan Bank of Cincinnati.
NONPERFORMING ASSETS AND RISK ELEMENTS. Nonperforming assets at September 30,
1999 amounted to $37,154, or .03% of total loans, a decline from $104,000 or
.12% of total loans at December 31, 1998. Diversification within the loan
portfolio is an important means of reducing inherent lending risks. At September
30, 1999, the Bank had no concentrations of ten percent or more of total loans
in any single industry nor in 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 or other real
estate as of September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $3.8 million as of
September 30, 1999. In addition, loans and investment securities repricing or
maturing within one year or less exceed $30.3 million at September 30, 1999. The
Bank has approximately $5.3 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 $173,435 at September 30, 1999. In addition
to the Federal Home Loan Bank membership, the Bank has established federal funds
lines of credit with three correspondent banks totaling $ 10.0 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, 1999, is $10.1 million or approximately
9.2% 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, 1999, are as follows:
Tier 1 leverage 9.25%
Tier 1 risk-based 11.49%
Total risk-based 12.55%
8
<PAGE> 9
RESULTS OF OPERATIONS
The Company had net income of $275,000 for the three months ending September 30,
1999, compared with $299,000 for the same period last year, resulting in an
decrease of 7.9%. For nine months ending September 30, 1999, net income was
$884,000 compared with $838,000 for 1998, or an increase of 5.5%.
Interest income and interest expense both increased from 1998 to 1999 resulting
from the increase in earning assets and interest bearing liabilities.
Consequently, net interest income increased $546,000 for the first nine months
ending September 30, 1999, or an increase of 17.7%. Earning assets through
September 30, 1999 increased $13.6 million and interest-bearing liabilities also
increased $13.1 million compared to September 30, 1998, reflecting increases of
13.55% and 13.29%, respectively.
Noninterest income for the nine months ending September 30, 1999 was $712,000
compared to $1,021,000 for the same period in 1998 reflecting an decrease of
$309,000 or 30.3%. Non-interest income in 1998 was unusually high due to the one
time sale of property adjoining the Church Hill Office. Noninterest income
consists mainly of service charges on deposit accounts, credit life insurance
commissions, and secondary mortgage processing fees. Service charges on deposit
accounts for the nine months ending September 30, 1999 was $527,000 compared
with $519,000 for the same period in 1998 reflecting an decrease of 1.5%.
The provision for loan losses was $197,000 in the first nine months of 1999
compared with $175,000 for the same period in 1998. The allowance for loan
losses of $918,000 at September 30, 1999 (approximately 1.01% 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.
YEAR 2000 DISCLOSURE
First Community Bank has been actively addressing Year 2000 issues since June
1997. The Bank's Year 2000 Committee developed and implemented a comprehensive
Y2K readiness plan to identify, assess, and renovate internal hardware, software
and processes utilized in day-to-day financial activities. The plan included
ongoing assessments of suppliers and vendors, associated customer risk and
contigency planning. All mission-critical systems have been successfully tested
and certified as compliant. Additionally, First Community Bank has taken a
proactive stance in providing customers, and the general public, with relevant
information about our preparations for the century date rollover. Our Y2K
efforts have been evaluated by independent organizations and our primary
regulator, the Federal Deposit Insurance Corporation (FDIC), reviews our
progress on an ongoing basis.
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, 1999.
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 12, 1999 /s/ John L. Campbell
- ------------------------------ ------------------------------------
(Date) John L. Campbell, President
November 12, 1999 /s/ Matthew V. Branham
- ------------------------------ ------------------------------------
(Date) Matthew V. Branham,
Vice President
(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, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,853
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,784
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 92,221
<ALLOWANCE> 918
<TOTAL-ASSETS> 109,769
<DEPOSITS> 81,352
<SHORT-TERM> 17,222
<LIABILITIES-OTHER> 1,053
<LONG-TERM> 0
0
0
<COMMON> 7,758
<OTHER-SE> 2,384
<TOTAL-LIABILITIES-AND-EQUITY> 109,769
<INTEREST-LOAN> 6,029
<INTEREST-INVEST> 161
<INTEREST-OTHER> 169
<INTEREST-TOTAL> 6,359
<INTEREST-DEPOSIT> 2,272
<INTEREST-EXPENSE> 2,722
<INTEREST-INCOME-NET> 3,637
<LOAN-LOSSES> 197
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,744
<INCOME-PRETAX> 1,408
<INCOME-PRE-EXTRAORDINARY> 1,408
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 884
<EPS-BASIC> .43
<EPS-DILUTED> .43
<YIELD-ACTUAL> 5.17
<LOANS-NON> 17
<LOANS-PAST> 88
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 869
<CHARGE-OFFS> 153
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 918
<ALLOWANCE-DOMESTIC> 918
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
