<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, 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 JUNE 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
JUNE 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998
CONSOLIDATED STATEMENTS OF INCOME 4-5
THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 1999 AND 1998 (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
SIX MONTHS ENDED JUNE 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
June 30, 1999
($ amounts in thousands)
<TABLE>
<CAPTION>
JUNE 30, December 31, Amount %
ASSETS 1999 1998 Change Change
=====================================================================================================================
<S> <C> <C> <C> <C>
Cash and due from banks $ 3,809 3,570 239 6.7%
Federal funds sold -- 11,123 (11,123) -100.0%
Securities available-for-sale, at fair value 5,398 3,321 2,077 62.5%
Loans 87,605 80,898 6,707 8.3%
Allowance for loan losses (885) (869) (16) 1.8%
- ---------------------------------------------------------------------------------------------------------------------
LOANS, NET 86,720 80,029 6,691 8.4%
- ---------------------------------------------------------------------------------------------------------------------
Premises and equipment 4,035 4,153 (118) -2.8%
Accrued income receivable 1,099 1,039 60 5.8%
Deferred income taxes, net 161 122 39 32.0%
Other assets 890 801 89 11.1%
- ---------------------------------------------------------------------------------------------------------------------
$ 102,112 104,158 (2,046) -2.0%
=====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
=====================================================================================================================
LIABILITIES:
DEPOSITS:
Noninterest-bearing $ 10,927 10,956 (29) -0.3%
Interest-bearing 67,571 72,505 (4,934) -6.8%
- ---------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 78,498 83,461 (4,963) -5.9%
Securities sold under agreements to repurchase 1,605 1,528 77 5.0%
Advances from FHLB 11,000 8,000 3,000 37.5%
Note payable -- -- -- --
Other liabilities 1,082 1,720 (638) -37.1%
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 92,321 94,709 (2,388) -2.5%
- ---------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, no par value. Authorized 10,000,000
shares; issued and outstanding 2,052,270 in 1999
and 2,037,195 in 1998 7,758 7,746 12 0.2%
Unrealized gain (loss) on securities available-for-sale (46) 14 (60) 428.6%
Retained earnings 2,092 1,689 403 23.9%
- ---------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 9,804 9,449 355 3.8%
- ---------------------------------------------------------------------------------------------------------------------
$ 102,112 104,158 (2,046) -2.0%
=====================================================================================================================
</TABLE>
3
<PAGE> 4
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
June 30, 1999
($ amounts in thousands except earnings per share)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------------------------------------
Amount %
INTEREST INCOME: 1999 1998 Change Change
---------- ----- ------ ------
<S> <C> <C> <C> <C>
Loans, including fees $ 2,067 1,684 383 22.7%
Securities:
Taxable 44 92 (48) -52.2%
Tax exempt 8 19 --
Federal funds sold 42 64 (22) -34.4%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 2,161 1,859 302 16.2%
- ------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 728 710 18 2.5%
Other borrowings 133 118 15 12.7%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 861 828 33 4.0%
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 1,299 1,031 268 26.0%
PROVISION FOR LOAN LOSSES 86 15 71 473.3%
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,213 1,016 197 19.4%
- ------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME:
Service charges on deposit accounts 161 210 (49) -23.3%
Asset Gains -- -- -- ERR
Other service charges, commissions and fees 98 96 2 2.1%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 259 306 (47) -15.4%
- ------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries and employee benefits 469 433 36 8.3%
Occupancy expense -- 126 (126) -100.0%
Other operating expenses 436 324 112 34.6%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 905 883 22 2.5%
- ------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 568 439 129 29.4%
INCOME TAXES 213 163 50 30.7%
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 355 276 79 28.6%
==============================================================================================================================
EARNINGS PER SHARE $ 0.17 0.14 0.03 23.8%
==============================================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 2,047,655 1,981,170 66,485 3.4%
==============================================================================================================================
</TABLE>
4
<PAGE> 5
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
June 30, 1999
($ amounts in thousands except earnings per share)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------------------------------
Amount %
INTEREST INCOME: 1999 1998 Change Change
---------- ----- ------ -------
<S> <C> <C> <C> <C>
Loans, including fees $ 3,943 3,278 665 20.3%
Securities:
Taxable 80 219 (139) -63.5%
Tax exempt 14 39 --
Federal funds sold 132 105 27 25.7%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 4,169 3,641 528 14.5%
- ------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 1,518 1,422 96 6.8%
Other borrowings 250 203 47 23.2%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 1,768 1,625 143 8.8%
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 2,400 2,016 384 19.0%
PROVISION FOR LOAN LOSSES 126 135 (9) -6.7%
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,274 1,881 393 20.9%
- ------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME:
Service charges on deposit accounts 290 337 (47) -13.9%
Asset Gains -- 169 (169) -100.0%
Other service charges, commissions and fees 181 190 (9) -4.7%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 471 696 (225) -32.3%
- ------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries and employee benefits 913 870 43 4.9%
Occupancy expense 137 237 (100) -42.2%
Other operating expenses 724 614 110 17.9%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 1,774 1,722 52 3.0%
- ------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 972 855 117 13.7%
INCOME TAXES 363 317 46 14.5%
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 609 539 70 13.0%
==============================================================================================================================
EARNINGS PER SHARE $ 0.30 0.27 0.02 9.0%
==============================================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 2,043,451 1,980,255 63,196 3.2%
==============================================================================================================================
</TABLE>
5
<PAGE> 6
FIRST COMMUNITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------------
SIX MONTHS ENDED
JUNE 30,
------------------------------------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 1999 1998
=========================================================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 579 539
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 157 113
Provision for loan losses 126 135
Increase in accrued income receivable 60 33
Other, net (530) (696)
- -------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 422 124
- -------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in federal funds sold 11,123 1,531
Maturities and redemptions of securities
available for sale 923 3,887
Purchases of securities available-for-sale (3,000) --
Net increase in loans (6,707) (6,520)
Purchases of premises and equipment (87) (404)
- -------------------------------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES 2,252 (1,506)
- -------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (631) (414)
Purchase and retirement of common stock -- (250)
Proceeds of sale of common stock 82 17
Repayments of FHLB advances -- --
Increase in borrowings from FHLB 3,000 3,000
Increase in securities sold under agreements
to repurchase 77 288
Increase in deposits (4,963) (397)
- -------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES (2,435) 2,244
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 239 862
------------ -----------
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 3,570 3,905
- -------------------------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 3,809 4,767
=========================================================================================================================
CASH PAYMENTS FOR INTEREST $ 1,768 1,795
------------ -----------
CASH PAYMENTS FOR INCOME TAXES $ 363 570
=========================================================================================================================
</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, 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 $102 million at June 30,
1999 reflecting a decline from December 31, 1998 but relatively no change since
March 31, 1999.
Loans have increased $6.6 million or 7.5% during the first six months of 1999.
The increased loans were funded through an $ 11.1 million decrease in fed funds
sold since December 31, 1998.
NONPERFORMING ASSETS AND RISK ELEMENTS. Nonperforming assets at June 30, 1999
amounted to $64,000, or .07% 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 June 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 June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $3.8 million as of June
30, 1999. In addition, loans and investment securities repricing or maturing
within one year or less exceed $29.6 million at June 30, 1999. The Bank has
approximately $2.9 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 $75,000 at June 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 $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, 1999, is $9.8 million or approximately 9.6% 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, 1999, are as follows:
Tier 1 leverage 9.61%
Tier 1 risk-based 11.93%
Total risk-based 13.01%
8
<PAGE> 9
RESULTS OF OPERATIONS
The Company had net income of $355,000 for the three months ending June 30,
1999, compared with $276,000 for the same period last year, resulting in an
increase of 28.6%. For six months ending June 30, 1999, net income was $609,000
compared with $539,000 for 1998, or an increase of 13.0%.
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 $384,000 for the first six months
ending June 30, 1999, or an increase of 19.0%. Earning assets through June 30,
1999 increased $11.6 million and interest-bearing liabilities also increased
$10.4 million compared to June 30, 1998, reflecting increases of 12.5% and
12.9%, respectively.
Noninterest income for the six months ending June 30, 1999 was $471,000 compared
to $696,000 for the same period in 1998 reflecting a decrease of $225,000 or
32.3%. Non interest income in 1998 was unusually high due to the non recurring
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, 1999 was $290,000
compared with $337,000 for the same period in 1998 reflecting an decrease of
13.9%.
The provision for loan losses was $126,000 in the first six months of 1999
compared with $135,000 for the same period in 1998. The allowance for loan
losses of $885,000 at June 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
In June 1997, the Bank formed a Year 2000 Committee which meets on a regular
basis. All internal, date sensitive equipment has been inventoried and tested
for Year 2000 readiness. The Bank is currently in process of testing both
internal and external software as well as third parties with which the Bank
exchanges data. During October, 1998, the Bank converted its core processing
system to Bankline software which is nationally known and currently certified as
Year 2000 compliant. Year 2000 related costs for 1998 and 1999 total an
estimated $188,000 which includes all labor, equipment, and software upgrades or
replacements. However, management does not anticipate expenses to increase by
the total estimated cost since much of the labor cost will involve a
reallocation of current staff responsibilities.
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 June 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)
August 16, 1999 /s/ John L. Campbell
--------------- -------------------------------
(Date) John L. Campbell, President
August 16, 1999 /s/ Matthew V. Branham
--------------- -------------------------------
(Date) Matthew V. Branham,
Vice President
Chief Financial 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 SIX MONTHS ENDED JUNE 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,809
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,398
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 87,605
<ALLOWANCE> 885
<TOTAL-ASSETS> 102,112
<DEPOSITS> 78,498
<SHORT-TERM> 12,605
<LIABILITIES-OTHER> 1,205
<LONG-TERM> 0
0
0
<COMMON> 7,758
<OTHER-SE> 2,046
<TOTAL-LIABILITIES-AND-EQUITY> 102,112
<INTEREST-LOAN> 3,943
<INTEREST-INVEST> 94
<INTEREST-OTHER> 132
<INTEREST-TOTAL> 4,169
<INTEREST-DEPOSIT> 1,518
<INTEREST-EXPENSE> 1,768
<INTEREST-INCOME-NET> 2,400
<LOAN-LOSSES> 126
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,821
<INCOME-PRETAX> 925
<INCOME-PRE-EXTRAORDINARY> 925
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 579
<EPS-BASIC> .30
<EPS-DILUTED> .30
<YIELD-ACTUAL> 5.17
<LOANS-NON> 64
<LOANS-PAST> 128
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 869
<CHARGE-OFFS> 114
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 885
<ALLOWANCE-DOMESTIC> 885
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
