<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
- ----- Act of 1934 for the quarterly period ended September 30, 1998
Transition report under Section 13 or 15(d) of the Exchange Act for the
- ----- transition period from to
--------------------- ------------------------
Commission File No. 33-86258
FIRST COMMUNITY CORPORATION
---------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
South Carolina 57-1010751
-------------- ----------
(State of Incorporation) (I.R.S. Employer Identification)
5455 Sunset Boulevard, Lexington, South Carolina 29072
------------------------------------------------------
(Address of Principal Executive Offices)
(803) 951-2265
--------------
(Issuer's Telephone Number, Including Area Code)
- -------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
---- ----
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
1,207,177 shares of common stock, par value $1.00 per share, were
issued and outstanding as of October 31, 1998.
Transitional Small Business Disclosure Format (check one): Yes No X
---- ----
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial statements of First Community Corporation (the "Company")
are set forth in the following pages.
<PAGE> 3
FIRST COMMUNITY CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1998 December 31,
(Unaudited) 1997
------------- ------------
ASSETS
<S> <C> <C>
Cash and due from banks $ 2,194,435 $ 2,869,066
Federal funds sold and securities purchased under
agreements to resell 9,656,956 2,620,000
Investment securities - available for sale 18,134,333 11,606,899
Investment securities - held to maturity (market value of
$2,304,254 and $1,894,940 at September 30, 1998 and
December 31, 1997, respectively) 2,290,642 1,900,000
Loans 34,718,422 28,999,906
Less, allowance for loan losses 516,504 380,120
------------ ------------
Net loans 34,201,918 28,619,786
Property, furniture and equipment - net 3,446,227 2,983,224
Other assets 476,484 413,456
------------ ------------
Total assets $ 70,400,995 $ 51,012,431
============ ============
LIABILITIES
Deposits:
Non-interest bearing demand $ 9,105,228 $ 7,553,754
NOW and money market accounts 14,301,059 12,020,414
Savings 7,562,680 6,052,584
Time deposits less than $100,000 13,678,754 10,247,650
Time deposits $100,000 and over 8,851,817 6,372,330
------------ ------------
Total deposits 53,499,538 42,246,732
Securities sold under agreements to repurchase 2,921,600 2,143,400
Other borrowed money - demand note to US Treasury 65,690 111,383
Other liabilities 511,707 396,063
------------ ------------
Total liabilities 56,998,535 44,897,578
------------ ------------
SHAREHOLDERS' EQUITY
Common stock, par value $1.00 per share;
10,000,000 shares authorized; issued and outstanding
1,207,177 and 689,677 at September 30, 1998 and December
31, 1997, respectively 1,207,177 689,677
Additional paid in capital 12,280,454 6,155,237
Accumulated deficit (151,602) (732,904)
Unrealized gain on securities available-for-sale 66,431 2,843
------------ ------------
Total shareholders' equity 13,402,460 6,114,853
------------ ------------
Total liabilities and shareholders' equity $ 70,400,995 $ 51,012,431
============ ============
</TABLE>
<PAGE> 4
FIRST COMMUNITY CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Nine
Months Ended Months Ended
September 30, September 30,
1998 1997
(Unaudited) (Unaudited)
-------------- -------------
<S> <C> <C>
Interest income:
Loans, including fees $ 2,310,598 $ 1,501,475
Investment securities - taxable 715,695 579,142
Federal funds sold and securities purchased
under resale agreements 286,962 188,377
------------ ------------
Total interest income 3,313,255 2,268,994
------------ ------------
Interest expense:
Deposits 1,300,457 951,694
Federal funds sold and securities sold under agreement
to repurchase 106,708 49,653
Other borrowed money 3,041 3,344
------------ ------------
Total interest expense 1,410,206 1,004,691
------------ ------------
Net interest income 1,903,049 1,264,303
Provision for loan losses 140,000 158,860
------------ ------------
Net interest income after provision for loan losses 1,763,049 1,105,443
------------ ------------
Non-interest income:
Deposit service charges 150,154 121,821
Mortgage origination fees 59,736 28,458
Other 86,072 33,751
------------ ------------
Total non-interest income 295,962 184,030
------------ ------------
Non-interest expense:
Salaries and employee benefits 783,978 633,671
Occupancy 86,161 85,282
Equipment 129,146 103,784
Marketing and public relations 108,239 72,728
Other 370,185 277,833
------------ ------------
Total non-interest expense 1,477,709 1,173,298
------------ ------------
Net income $ 581,302 $ 116,175
============ ============
Basic earnings per common share $ 0.67 $ 0.17
============ ============
Diluted earnings per common share $ 0.65 $ 0.17
============ ============
</TABLE>
<PAGE> 5
FIRST COMMUNITY CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
September 30, September 30,
1998 1997
(Unaudited) (Unaudited)
------------- -------------
<S> <C> <C>
Interest income:
Loans, including fees $ 833,078 $ 588,165
Investment securities - taxable 266,054 203,723
Federal funds sold and securities purchased
under resale agreements 155,157 61,857
------------ ------------
Total interest income 1,254,289 853,745
------------ ------------
Interest expense:
Deposits 469,192 361,328
Federal funds sold and securities sold under agreement
to repurchase 32,030 15,850
Other borrowed money 1,001 1,151
------------ ------------
Total interest expense 502,223 378,329
------------ ------------
Net interest income 752,066 475,416
Provision for loan losses 42,000 61,860
------------ ------------
Net interest income after provision for loan losses 710,066 413,556
------------ ------------
Non-interest income:
Deposit service charges 55,344 39,617
Mortgage origination fees 25,054 13,591
Other 27,528 14,146
------------ ------------
Total non-interest income 107,926 67,354
------------ ------------
Non-interest expense:
Salaries and employee benefits 271,704 217,877
Occupancy 29,197 26,982
Equipment 42,628 36,507
Marketing and public relations 29,885 30,700
Other 137,607 97,600
------------ ------------
Total non-interest expense 511,021 409,666
------------ ------------
Net income $ 306,971 $ 71,244
============ ============
Basic earnings per common share $ 0.26 $ 0.10
============ ============
Diluted earnings per common share $ 0.26 $ 0.10
============ ============
</TABLE>
<PAGE> 6
FIRST COMMUNITY CORPORATION
STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
---------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $581,302 $116,175 $306,971 $ 71,244
Other comprehensive income, net of tax:
Unrealized gains (losses) arising
during the period, net of tax
effect of $34,239, $34,500 and
$29,780, $36,120 for the nine
and three months ended September
30, 1998 and 1997, respectively 63,588 64,081 55,310 67,094
-------- -------- -------- --------
Comprehensive income $644,890 $180,256 $362,281 $138,338
======== ======== ======== ========
</TABLE>
<PAGE> 7
FIRST COMMUNITY CORPORATION
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Unrealized Gain
Additional on Securites
Common Paid-in Accumulated Available for
Stock Capital Deficit Sale Total
---------- ----------- ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1997 $ 689,677 $ 6,155,237 $(732,904) $ 2,843 $ 6,114,853
Net income 581,302 581,302
Issuance of common stock 517,500 6,125,217 6,642,717
Unrealized gain on
securities available-for-sale 63,588 63,588
---------- ----------- --------- ------- -----------
Balance September 30,1998 $1,207,177 $12,280,454 $(151,602) $66,431 $13,402,460
========== =========== ========= ======= ===========
</TABLE>
<PAGE> 8
FIRST COMMUNITY CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended September 30,
-----------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 581,302 $ 116,175
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation 98,406 103,227
Premium amortization (Discount accretion) (56,533) (50,457)
Provision for loan losses 140,000 158,860
(Increase) decrease in other assets (63,028) (413,456)
Increase in accounts payable 81,472 396,063
------------ ------------
Net cash used in operating activities 781,619 310,412
------------ ------------
Cash flows form investing activities:
Purchase of investment securities available-for-sale (14,999,449) (5,586,967)
Maturity of investment securities available-for-sale 8,626,271 3,986,915
Purchase of investment securities held-to-maturity (1,890,605) -
Maturity of investment securities held-to-maturity 1,500,000 -
Increase in loans (5,722,132) (28,778,646)
Proceeds from sale of fixed assets - 50,000
Purchase of property and equipment (561,409) (617,398)
------------ ------------
Net cash used in investing activities (13,047,324) (30,946,096)
------------ ------------
Cash flows from financing activities:
Increase in deposit accounts 11,252,806 42,246,732
Proceeds from sale of common stock 6,642,717 16,000
Increase (decrease) in securities sold under agreements to repurchase 778,200 2,143,400
Decrease in other borrowings (45,693) 111,383
------------ ------------
Net cash provided from financing activities 18,628,030 44,517,515
------------ ------------
Net increase in cash and cash equivalents 6,362,325 13,881,831
Cash and cash equivalents at beginning
of period 5,489,066 7,727,799
------------ ------------
Cash and cash equivalents at end of period $ 11,851,391 $ 21,609,630
============ ============
Supplemental disclosure:
Cash paid during the period for:
Interest $ 1,392,276 $ 910,133
Non-cash investing and financing activities:
Unrealized gain (loss) on securities available-for-sale $ 97,760 $ 64,081
</TABLE>
<PAGE> 9
FIRST COMMUNITY CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
Note 1 - Basis of Presentation
The consolidated financial statements include the accounts of First
Community Corporation and its wholly owned subsidiary First
Community Bank, N.A. All material inter-company transactions are
eliminated in consolidation. In the opinion of management,
the unaudited financial statements reflect all adjustments
necessary for a fair presentation of the balance sheet and results
of operations for the periods presented.
Note 2 - Adoption of Recent Accounting Pronouncement
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 130 ("SFAS 130"),
"Reporting Comprehensive Income." SFAS 130 established standards
for reporting and display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set of
general purpose financial statements. SFAS 130 requires that items
that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other
financial statements. SFAS 130 requires that companies (i) classify
items of other comprehensive income by their nature in a financial
statement and (ii) display the accumulated balance of other
comprehensive income separately from retained earnings and
additional paid-in-capital in the equity section of the statement
of financial position at the end of an accounting period. SFAS 130
is effective for fiscal years beginning after December 31, 1997,
and the Company began following the statement in the first quarter
of 1998. As required by the statement, reclassification of earlier
periods has been reflected in the financial statements.
Note 3 - On July 10, 1998 the Company completed a secondary stock
offering in which 517,500 shares of common stock were issued. The
proceeds to the Company after underwriting discount and expenses
amounted to approximately $6.6 million.
Note 4 - The Company has entered into a contract to build a new branch on
Highway 60 in Irmo, South Carolina. The land was purchased on
September 11, 1998 for $449,000. The contract to build the branch
building was entered into on October 7, 1998 and amounts to
approximately $512,000
The Company has entered into a contract on September 25, 1998, to
purchase land for a future branch site on Highway 1, near Gilbert,
South Carolina for a total purchase price of $60,000. The Company
must close within 75 days of September 25, 1998 or forfeit the
earnest money deposit, unless OCC approval for the branch is not
received.
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
First Community Corporation (the Company) is a one bank holding company
which was incorporated in South Carolina on November 2, 1994 and from that date
through August 16, 1995, the Company was a development stage company. First
Community Bank N.A. (the "Bank"), the Company's only subsidiary, began
operations on August 17, 1995. The Company expected to experience losses until
the Bank grew its assets to a point where the assets generated revenue from
operations which exceeded the Bank's fixed costs. The Company experienced its
first quarterly profit in the fourth quarter of 1996 and has been profitable
each subsequent quarter through September 30, 1998.
The following discussion contains forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in the forward-looking statements, and the
Company's operating performance each quarter is subject to various risks and
uncertainties that are discussed in detail in the Company's filings with the
Securities and Exchange Commission, including the "Risk Factors" section in the
Company's Registration Statement on Form S-2 (Registration Number 33-86258) as
filed with and declared effective by the Securities and Exchange Commission.
Comparison of Results of Operations for Nine Months Ended September 30,
1998 to the Nine Months Ended September 30, 1997:
Net Income
The Company's net income was $581,000 for the nine months ended
September 30, 1998 as compared to net income of $116,000 for the nine months
ended September 30, 1997. This improvement in earnings reflect the continued
growth in the level of earning assets since the Bank commenced operations. The
level of average earning assets was $55.7 million for the nine months ended
September 30, 1998 as compared to $39.3 million for the nine months ended
September 30, 1997. This reflects an 41.7% increase in the level average earning
assets for the two periods. In addition, net interest margin improved from 4.30%
to 4.57% for the nine months ended September 30, 1997 and 1998, respectively.
Non-interest income increased 60.9% to $296,000 for the nine months ended
September 30, 1998 as compared to $184,000 for the nine months ended September
30, 1997. During these same periods non-interest expense increased 25.9% to $1.5
million for the nine months ended September 30, 1998 as compared to $1.2 million
for the nine months ended September 30, 1997.
Net Interest Income
The table on page 17 shows yield and rate data for interest-bearing
balance sheet components during the nine month periods ended September 30, 1998
and 1997, along with average balances and the related interest income and
interest expense amounts.
<PAGE> 11
ITEM 2. CONTINUED PAGE 2
Net interest income was $1.9 million during the nine months ended September 30,
1998 as compared to $1.3 million for the nine months ended September 30, 1997.
The net interest margin was 4.57% for the nine months ended September 30, 1998
as compared to 4.30% for the nine months ended September 30, 1997. This
improvement of net interest income is a result of the increase of the level of
earning assets as well as the change in the mix of earning assets. For the nine
months ended September 30, 1997 average loans accounted for 54.9% of earning
assets whereas for the nine months ended September 30, 1998 they represented
58.3% of earning assets. Loans typically provide a higher yield then the Bank's
alternative uses of these funds such as securities and short-term overnight
investments.
Interest income during the nine months ended September 30, 1998 was
$3.3 million as compared to $2.3 million for the nine months ended September 30,
1997. The average yield on earning assets during the first nine months of 1998
was 7.95% as compared to 7.71% during the same period of 1997. The largest
component of interest income for the nine months ended September 30, 1998 was
interest on loans and amounted to $2.3 million as compared to $1.5 million for
the comparable prior year period. The overall yield on loans was 9.50% for the
nine months ended September 30, 1998 as compared to 9.31% for the nine months
ended September 30, 1997. The investment portfolio income increased $137,000, or
23.6%, to $716,000 for the nine months ended September 30, 1998 as compared to
$579,000 for the nine months ended September 30, 1997. The increase in
investment portfolio income is a result of the average investment portfolio
balance being $3.1 million greater for the nine month period ended September 30,
1998 as compared to the same period in the prior year. Interest on overnight
federal funds sold and securities purchased under agreements to resell increased
$99,000 or 52.3%, to $287,000 for the nine month period ended September 30, 1998
as compared to $188,000 for the nine month period ended September 30, 1997.
Interest expense during the nine months ended September 30, 1998 was
$1.4 million with an average rate paid on interest-bearing liabilities of 4.31%
as compared to $1.0 million and 4.30% during the nine months ended September 30,
1997. The primary reason for the increase in interest expense was that average
interest-bearing liabilities were $12.4 million greater for the nine months
ended September 30, 1998 as compared to the nine months ended September 30,
1997.
Provision and Allowance for Loan Losses
The provision for loan losses was $140,000 and $159,000 for nine months
ended September 30, 1998 and 1997, respectively, and reflects management's
estimate of the amount necessary to maintain the allowance for loan losses at a
level believed to be adequate in relation to the current size, mix and quality
of the portfolio. The Company's allowance for loan losses as a percentage of its
period-end loans was 1.49% at September 30, 1998. The Company had no
<PAGE> 12
ITEM 2. CONTINUED PAGE 3
nonperforming loans at September 30, 1998. Charge-offs during nine months ended
September 30, 1998, amounted to approximately $4,000 as compared to $13,000 for
the same period in the prior year. Loans past due greater than 30 days amounted
to $4,000 and there were no loans greater than 60 days past due at September 30,
1998.
The loan portfolio is periodically reviewed to evaluate the outstanding
loans and to measure both the performance of the portfolio and the adequacy of
the allowance for loan losses. This analysis includes a review of delinquency
trends, actual losses, and internal credit ratings. Management's judgment as to
the adequacy of the allowance is based upon a number of assumptions about future
events which it believes to be reasonable, but which may or may not be
reasonable. However, because of the inherent uncertainty of assumptions made
during the evaluation process, there can be no assurance that loan losses in
future periods will not exceed the allowance for loan losses or that additional
allocations to the allowance will not be required.
Noninterest Income and Expense
Noninterest income during the nine months ended September 30, 1998 was
$296,000 as compared to $184,000 for the nine months ended September 30, 1997.
This was primarily a result of increased income from deposit service charges of
$28,000 (23.3%), resulting from the increase deposit balances during the
comparable periods. The Company also originates mortgage loans, which are
closed in the name of a third party, for which the Company receives a fee. These
fees increased to $60,000 in the nine months ended September 30, 1998 as
compared to $28,000 in the comparable period during the prior year. This
increase was a result of more emphasis being placed on this service during the
first nine months of 1998 and the favorable rate market that exist during this
period, which resulted in more refinancings. Other income during the nine months
ended September 30, 1998 was $86,000 as compared to $34,000 during the same
period in the prior year. This increase is primarily due to the introduction of
an investment services program, in late 1997, for the sale of non-deposit
investment products such as stocks, bonds, mutual funds and annuities. This
program generated $37,000 in fee income during the first nine months of 1998.
Noninterest expense amounted to $1.5 million as compared to $1.2
million during the nine months ended September 30, 1998 and 1997, respectively.
Salary and employee benefits increased $150,000 or 23.7 % in the nine months
ended September 30, 1998 as compared to the comparable period in 1997. This
increase results from normal merit increases as well as the addition of three
full time equivalent employees during the first nine months of 1998 as compared
to the first nine months of 1997. The Company also began paying incentive
compensation to the mortgage originator based on production goals during 1998
that were not paid in 1997. The Company also instituted a matching program to
the existing 401 (k) plan during 1998. Equipment expense increased from $104,000
for the nine months ended September 30, 1997 to $129,000 for the nine months
ended September 30, 1998. This increase is primarily due to approximately
<PAGE> 13
ITEM 2. CONTINUED PAGE 4
$20,000 expended on upgrading computer software as well as testing related to
year 2000 compliance. Marketing and public relations expense increased by
$36,000 or 48.8% in the nine months ended September 30, 1998 as compared to the
comparable period in the prior year. This increase is a result of planned
increases in advertising and marketing during 1998 as compared to 1997. Other
non-interest expense increased $92,000 or 33.0 % in the nine months ended
September 30, 1998 compared to the same period in the prior year. An increase in
computer service bureau, supplies, correspondent bank charges and postage of
$25,000, $14,000, $7,000 and $10,000, respectively account for 60% of the
increase in other non-interest expense. These expense categories are primarily
impacted by the numbers of accounts and the volume of activity, and have
increased due to the growth of the Bank for the nine months ended September 30,
1998 as compared to the same period in the prior year. Directors fees increased
by $6,000 in 1998 as compared to 1997 because Directors did not begin to receive
these fees until the second quarter of 1997. Contributions expense increased by
$4,000 as a result of management decision to increase this expense appropriately
as the Company continues to increase its size and profitability.
Comparison of Results of Operations for Three Months Ended September 30, 1998 to
the Three Months Ended September 30, 1997:
Net income for the third quarter of 1998 was $307,000, as compared to
$71,000 during the comparable period in 1997. This improvement, as explained in
the nine months results, is due to the significant increase in the level of
earning assets during these two periods. Average earning assets were $63.9
million during the third quarter of 1998 as compared to $43.2 million during the
third quarter of 1997. The table on page 18 shows yield and rate data for
interest-bearing balance sheet components during the three month periods ended
September 30, 1998 and 1997, along with average balances and the related
interest income and interest expense amounts. The yield on average earning
assets decreased from 7.84% in the third quarter of 1997 to 7.79% in the third
quarter of 1998. This decrease is primarily a result of the proceeds from the
secondary public offering which was completed on July 10, 1998 being invested in
overnight funds and investment securities rather than higher yielding loans.
Loans as a percentage of earning assets during the three months ended September
30, 1997 amounted to 58.6% as compared to 54.1% for the three months ended
September 30, 1998. The cost of interest bearing liabilities was 4.30% in third
quarter of 1997 as compared to 4.24% in the third quarter of 1998.
Total non-interest income increased by $40,000 during the third quarter
of 1998 as compared to the comparable period in 1997. As explained in the
analysis of nine month results, the increase is primarily due to increased fees
related to deposit and loan balances and related activity charges. In addition,
investment fee income from the sale of non-deposit investment products was
approximately $23,000 in the third quarter of 1998 and as previously explained
the program was not offered in 1997.
<PAGE> 14
ITEM 2. CONTINUED PAGE 5
Total non-interest expense increased by $101,000 in the third quarter
of 1998 as compared to the same quarter of 1997. This increase is primarily a
result of a $54,000 increase in salary and benefits expense and a $6,000
increase in equipment expense. As stated in the analysis of the nine month
results, the salary increase is a result of the addition of three full time
employees during the third quarter of 1998 as compared to the third quarter of
1997. Equipment expense increased as result of needed upgrades on software
equipment as well as cost of testing related to year 2000. Other expenses
increased by $40,000 in the third quarter of 1998 as compared to the third
quarter of 1997. This included increases in computer service bureau expense and
supplies. Computer service bureau increased by $23,000 due to additional cost of
approximately $10,000 passed on to the Company by its data processing service
provider related to year 2,000 testing, as well as increased volumes due to the
growth of the Company.
Financial Position
Assets totaled $70.4 million at September 30, 1998 as compared to $51.0
million at December 31, 1997 an increase of $19.4 million. Loans grew by $5.7
million during the nine months ended September 30, 1998, from $29.0 million to
$34.7 million. This loan growth was funded by growth in deposits of $11.3
million from $42.2 million at December 31, 1997 to $53..5 million at September
30, 1998. The balance of the deposit growth plus the addition of $6.6 million in
net proceeds from a secondary stock offering completed in July 1998, was
primarily used to fund an increase in investment securities of $6.9 and an
increase in overnight investments of $7.0 million from December 31, 1997 to
September 30, 1998. The loan to deposit ratio at September 30, 1998 was 63.9% as
compared to 68.4% at December 31, 1997. It is anticipated that this ratio will
increase as management invests more of the Bank's assets in the higher earning
loan portfolio as compared to the investment portfolio.
Property, furniture and equipment balances increased $463,000 from $3.0
million at December 31, 1997 to $3.4 million at September 30, 1998. This
increase is a result of the purchase of property for a branch site to be located
in Irmo, South Carolina in the amount of $449,000. The Company has entered into
a contract to build the branch facility and it is anticipated that the branch
will open in April of 1999. The amount of the contract to build the branch
facility is for approximately $512,000. In addition, the Company entered into a
contract to purchase land for a future branch site near Gilbert, South Carolina
on September 25, 1998. The cost of the land is approximately $60,000.
The Company's management closely monitors and seeks to maintain
appropriate levels of interest earning assets and interest bearing liabilities
so that maturities of assets are such that adequate funds are provided to meet
customer withdrawals and other demand for funds.
<PAGE> 15
ITEM 2. CONTINUED PAGE 6
Liquidity and Capital Resources
On July 10, 1998, the Company closed on a secondary stock offering
whereby 517,500 additional shares of common stock were issued at a price of
$14.00 per share. The net proceeds to the Company after the underwriters
discount and expenses amounted to approximately $6.6 million. As explained in
the Form S-2 as filed with the Securities and Exchange Commission approximately
$3.0 million of the proceeds are to be used to purchase properties and construct
three proposed branch facilities over the next 18 to 24 months. The Company will
use the balance of the proceeds to support initial loan growth at the three new
branch offices, as well as at the Company's two existing offices, and for
general corporate purposes.
Management believes that the Company's liquidity remains adequate to
meet operating and loan funding requirements. Federal funds sold and investment
securities available-for sale represent 39.4% of total assets at September 30,
1998. Management believes that its existing stable base of core deposits along
with continued growth in this deposit base will enable the Company to meet its
long term and short term liquidity needs successfully. These needs include the
ability to respond to short-term demand for funds caused by the withdrawal of
deposits, maturity of repurchase agreements, extensions of credit, and the
payment of operating expenses. Sources of liquidity in addition to deposit
gathering activities include maturing loans and investments, purchase of federal
funds from other financial institutions, and selling securities under agreements
to repurchase. The Company monitors closely the level of large certificates of
deposits in amounts of $100,000 or more as they tend to be extremely sensitive
to interest rate levels, and thus less reliable sources of funding for liquidity
purposes. At September 30, 1998 the amount of certificates of deposits of
$100,000 or more represented 16.5% of total deposits. These deposits are issued
to local customers, many of which have other product relationships with the
Bank, and none of these deposits are brokered deposits. Management is not aware
of any trends, events or uncertainties that may result in a significant adverse
effect on the Company's liquidity position.
However, no assurances can be given in this regard, as rapid growth,
deterioration in loan quality, and poor earnings, or a combination of these
factors, could change the Company's liquidity position in a relatively short
period of time.
The capital needs of the Company have been primarily met to date
through the initial common stock offering which raised approximately $6.8
million. This capital was sufficient to fund the activities of the Bank during
the initial stages of operations and has allowed the Bank to remain a "well
capitalized" institution until sufficient income was generated from operations
to fund its activities on an on-going basis. As previously stated the additional
capital of $6.6 million raised in the secondary offering is expected to enable
the Company to meet the capital needs related to expansion plans while
maintaining it status as a "well capitalized institution. Shareholders' equity
was 19.0% of total assets at September 30, 1998 as compared to 12.0% at
<PAGE> 16
ITEM 2. CONTINUED PAGE 7
December 31, 1997. The Bank's risked-based capital ratios of Tier 1, total
capital, and leverage ratio were 22.9%, 24.7%, and 15.1%, respectively, at
September 30, 1998. This compares to required OCC regulatory capital guidelines
for Tier 1 capital, total capital, and leverage capital ratios of 4.0%, 8.0%,
and 3.0%, respectively. The Company will be required by the Federal Reserve to
meet the same guidelines once its consolidated total assets exceed $150 million.
<PAGE> 17
FIRST COMMUNITY CORPORATION
YIELDS ON AVERAGE EARNING ASSETS AND RATES
ON AVERAGE INTEREST-BEARING LIABILITIES
<TABLE>
<CAPTION>
Nine months ended September 30, 1998 Nine months ended September 30, 1997
--------------------------------------- ---------------------------------------
Average Interest Yield/ Average Interest Yield/
Balance Earned/Paid Rate Balance Earned/Paid Rate
------- ----------- ------ ------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets
Loans $ 32,524,542 2,310,598 9.50% $ 21,567,447 1,501,475 9.31%
Securities:
Taxable 16,214,143 715,695 5.90% 13,116,452 579,142 5.90%
Federal funds sold and securities purchased
under agreements to resell 6,985,641 286,962 5.49% 4,652,272 188,377 5.41%
------------------------------------- ---------------------------------------
Total earning assets 55,724,326 3,313,255 7.95% 39,336,171 2,268,994 7.71%
------------------------------------- ---------------------------------------
Cash and due from banks 1,795,512 1,363,489
Premises and equipment 3,010,073 2,829,250
Other assets 428,608 329,083
Allowance for loan losses (442,083) (258,052)
------------- ---------------
Total assets $ 60,516,436 $ 43,599,941
============= ===============
LIABILITIES
Interest-bearing liabilities
Interest-bearing transaction accounts 5,716,261 51,077 1.19% 4,280,279 46,566 1.45%
Money market accounts 7,550,683 250,703 4.44% 4,212,618 140,266 4.45%
Savings deposits 6,620,197 185,523 3.75% 6,287,824 180,714 3.84%
Time deposits 20,638,330 813,154 5.27% 14,892,483 584,148 5.24%
Other short term borrowings 3,207,046 109,749 4.58% 1,583,715 52,997 4.47%
------------------------------------- ---------------------------------------
Total interest-bearing liabilities 43,732,517 1,410,206 4.31% 31,256,919 1,004,691 4.30%
------------------------------------- ---------------------------------------
Demand deposits 7,923,009 6,262,052
Other liabilities 382,797 266,097
Shareholders' equity 8,478,113 5,814,873
------------- ---------------
Total liabilities and shareholders' equity $ 60,516,436 $ 43,599,941
============= ===============
Net interest spread 3.64% 3.41%
Net interest income/margin $1,903,049 4.57% $1,264,303 4.30%
============== =============
</TABLE>
<PAGE> 18
FIRST COMMUNITY CORPORATION
YIELDS ON AVERAGE EARNING ASSETS AND RATES
ON AVERAGE INTEREST-BEARING LIABILITIES
<TABLE>
<CAPTION>
Three months ended September 30, 1998 Three months ended September 30, 1997
------------------------------------ -----------------------------------
Average Interest Yield/ Average Interest Yield/
Balance Earned/Paid Rate Balance Earned/Paid Rate
------- ----------- ------ ------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets
Loans $ 34,619,741 833,078 9.55% $ 25,309,712 $ 588,165 9.22%
Securities:
Taxable 18,009,670 266,054 5.86% 13,404,639 203,723 6.03%
Federal funds sold and securities purchased
under agreements to resell 11,273,141 155,157 5.46% 4,463,214 61,857 5.50%
------------------------------------ -----------------------------------
Total earning assets 63,902,552 1,254,289 7.79% 43,177,565 853,745 7.84%
------------------------------------ -----------------------------------
Cash and due from banks 1,886,374 1,447,488
Premises and equipment 3,099,077 3,018,275
Other assets 453,438 340,397
Allowance for loan losses (491,966) (309,656)
-------------- -------------
Total assets $ 68,849,475 $ 47,674,069
============== =============
LIABILITIES
Interest-bearing liabilities
Interest-bearing transaction accounts 6,495,220 19,342 1.18% 5,309,895 18,670 1.39%
Money market accounts 8,700,909 95,823 4.37% 6,301,887 74,118 4.67%
Savings deposits 7,165,208 67,250 3.72% 5,860,754 56,045 3.79%
Time deposits 21,703,419 286,777 5.24% 15,928,394 212,495 5.29%
Other short term borrowings 2,894,757 33,031 4.53% 1,473,450 17,001 4.58%
------------------------------------ -----------------------------------
Total interest-bearing liabilities 46,959,513 502,223 4.24% 34,874,380 378,329 4.30%
------------------------------------ -----------------------------------
Demand deposits 8,601,719 6,608,039
Other liabilities 441,107 311,730
Shareholders' equity 12,847,136 5,879,920
============== =============
Total liabilities and shareholders' equity $ 68,849,475 $ 47,674,069
============== =============
Net interest spread 3.54% 3.54%
Net interest income/margin $ 752,066 4.67% $ 475,416 4.37%
============ ============
</TABLE>
<PAGE> 19
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Company or
any of its subsidiaries is a party or of which any of their property is the
subject.
ITEM 2. CHANGES IN SECURITIES.
(a) On July 6 1998, the Company issued 450,000 shares of
authorized common stock at a price of $14.00 per share in a
public offering underwritten by Edgar Norris & Co and
registered under The Securities Act of 1933 and filed with the
Securities Exchange Commission on Form S-2. On July 10, 1998
the Company issued 67,500 shares of authorized common stock at
$14.00 per share pursuant to the over allotment option under
the underwriting agreement with Edgar Norris & Co.
(b) Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to security holders for a vote during
the three months ended September 30, 1998.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
3.1 Amended and Restated Articles of Incorporation
(incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement No. 33-86258 on Form
S-1).
<PAGE> 20
3.2 Bylaws (incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement No. 33-86258 on
Form S-1).
4.1 Provisions in the Company's Articles of Incorporation
and Bylaws defining the rights of holders of the
Company's Common Stock (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement
No. 33-86258 on Form S-1).
10.1 Employment Agreement dated June 1, 1994, by and
between Michael C. Crapps and the Company
(incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement no. 33-86258 on Form
S-1).*
10.2 Employment Agreement dated June 1, 1994, by and
between James C. Leventis and the Company
(incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement No. 33-86258 on Form
S-1).*
10.3 Construction agreement dated January 11, 1996 by and
between the Bank and Summerfield Associates, Inc. to
build permanent banking facility in Lexington, South
Carolina (incorporated by reference to Exhibit 10.3
to the Company's Annual Report for fiscal year ended
December 31, 1995 on Form 10-KSB).
10.4 Contract of sale of real estate dated August 1, 1994
between First Community Bank (In Organization) and
Three Seventy-Eight Company, Inc. (Incorporated by
reference to the Company's Registration Statement No.
33-86258 on Form S-1).
10.5 Contract of sale of real estate dated July 28, 1994,
between First Community Bank (In Organization) and
the Crescent Partnership (Incorporated by reference
to the Company's Registration Statement No. 33-86258
on Form S-1).
10.6 First Community Corporation 1996 Stock Option Plan
(Incorporated by reference to Exhibit 10.6 to the
Company's Annual Report for fiscal year ended
December 31, 1995 on Form 10-KSB).
10.7 Construction Agreement dated November 7, 1996 by and
between the Bank and Summerfield Associates, Inc. To
build a banking facility in Forest Acres, South
Carolina. (Incorporated by reference to the Company's
1996 Annual Report on Form 10 KSB)
27 Financial Data Schedule (for SEC use only)
*Denotes executive compensation contract or arrangement.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Company during
the quarter ended September 30, 1998
<PAGE> 21
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIRST COMMUNITY CORPORATION
(REGISTRANT)
Date: November 11, 1998 By: /s/ Michael C. Crapps
----------------- -------------------------------------
Michael C. Crapps
President and Chief Executive Officer
By: /s/ Joseph G. Sawyer
--------------------------------------
Joseph G. Sawyer
Senior Vice President, Principal Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST COMMUNITY CORPORATION FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998, CONTAINED IN FORM 10- QSB AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,194,435
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,656,956
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,134,333
<INVESTMENTS-CARRYING> 2,290,642
<INVESTMENTS-MARKET> 2,304,254
<LOANS> 34,718,422
<ALLOWANCE> 516,504
<TOTAL-ASSETS> 70,400,995
<DEPOSITS> 53,499,538
<SHORT-TERM> 2,987,290
<LIABILITIES-OTHER> 511,707
<LONG-TERM> 0
0
0
<COMMON> 1,207,177
<OTHER-SE> 12,195,283
<TOTAL-LIABILITIES-AND-EQUITY> 70,400,995
<INTEREST-LOAN> 2,310,598
<INTEREST-INVEST> 715,695
<INTEREST-OTHER> 286,962
<INTEREST-TOTAL> 3,313,255
<INTEREST-DEPOSIT> 1,300,457
<INTEREST-EXPENSE> 1,410,206
<INTEREST-INCOME-NET> 1,903,049
<LOAN-LOSSES> 140,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,477,709
<INCOME-PRETAX> 581,302
<INCOME-PRE-EXTRAORDINARY> 581,302
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 581,302
<EPS-PRIMARY> 0.67
<EPS-DILUTED> 0.65
<YIELD-ACTUAL> 7.95
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 380,120
<CHARGE-OFFS> 3,616
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 516,504
<ALLOWANCE-DOMESTIC> 516,504
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
