<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 June 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
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(State of Incorporation) (I.R.S. Employer Identification)
5455 Sunset Boulevard, Lexington, South Carolina 29072
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(Address of Principal Executive Offices)
(803) 951-2265
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(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 July 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
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
1998 December 31,
(Unaudited) 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 3,131,797 $ 2,869,066
Federal funds sold and securities purchased under
agreements to resell 5,036,311 2,620,000
Investment securities - available for sale 13,130,950 11,606,899
Investment securities - held to maturity
(market value of $2,408,490 and
$1,894,940 at June 30, 1998 and
December 31, 1997, respectively) 2,408,213 1,900,000
Loans 33,140,062 28,999,906
Less, allowance for loan losses 476,408 380,120
------------ ------------
Net loans 32,663,654 28,619,786
Property, furniture and equipment - net 3,026,538 2,983,224
Other assets 530,639 413,456
------------ ------------
Total assets $ 59,928,102 $ 51,012,431
============ ============
LIABILITIES
Deposits:
Non-interest bearing demand $ 8,425,961 $ 7,553,754
NOW and money market accounts 13,815,026 12,020,414
Savings 6,948,162 6,052,584
Time deposits less than $100,000 12,359,882 10,247,650
Time deposits $100,000 and over 9,307,946 6,372,330
------------ ------------
Total deposits 50,856,977 42,246,732
Securities sold under agreements to repurchase 2,160,900 2,143,400
Other borrowed money - demand note to US Treasury 108,196 111,383
Other liabilities 404,567 396,063
------------ ------------
Total liabilities 53,530,640 44,897,578
------------ ------------
SHAREHOLDERS' EQUITY
Common stock, par value $1.00 per share;
10,000,000 shares authorized; issued
and outstanding 689,677 at June 30, 1998
and December 31, 1997, respectively 689,677 689,677
Additional paid in capital 6,155,237 6,155,237
Accumulated deficit (458,573) (732,904)
Unrealized gain on securities available-for-sale 11,121 2,843
------------ ------------
Total shareholders' equity 6,397,462 6,114,853
------------ ------------
Total liabilities and shareholders' equity $ 59,928,102 $ 51,012,431
============ ============
</TABLE>
<PAGE> 4
FIRST COMMUNITY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Six
Months Ended Months Ended
June 30, June 30,
1998 1997
(Unaudited) (Unaudited)
---------- ----------
<S> <C> <C>
Interest income:
Loans, including fees $1,477,520 $ 913,310
Investment securities - taxable 449,641 375,419
Federal funds sold and securities purchased
under resale agreements 131,805 126,520
---------- ----------
Total interest income 2,058,966 1,415,249
---------- ----------
Interest expense:
Deposits 831,265 590,366
Federal funds sold and securities sold under agreement
to repurchase 74,678 33,803
Other borrowed money 2,040 2,193
---------- ----------
Total interest expense 907,983 626,362
---------- ----------
Net interest income 1,150,983 788,887
Provision for loan losses 98,000 97,000
---------- ----------
Net interest income after provision for loan losses 1,052,983 691,887
---------- ----------
Non-interest income:
Deposit service charges 94,810 82,204
Mortgage origination fees 34,682 14,867
Other 58,544 19,605
---------- ----------
Total non-interest income 188,036 116,676
---------- ----------
Non-interest expense:
Salaries and employee benefits 512,274 415,794
Occupancy 56,964 58,300
Equipment 86,518 67,277
Marketing and public relations 78,354 42,028
Other 232,578 180,233
---------- ----------
Total non-interest expense 966,688 763,632
---------- ----------
Net income $ 274,331 $ 44,931
========== ==========
Basic earnings per common share $ 0.40 $ 0.07
========== ==========
Diluted earnings per common share $ 0.38 $ 0.06
========== ==========
</TABLE>
<PAGE> 5
FIRST COMMUNITY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
June 30, June 30,
1998 1997
(Unaudited) (Unaudited)
---------- --------
<S> <C> <C>
Interest income:
Loans, including fees $ 778,686 $502,086
Investment securities - taxable 235,113 181,625
Federal funds sold and securities purchased
under resale agreements 62,694 78,281
---------- --------
Total interest income 1,076,493 761,992
---------- --------
Interest expense:
Deposits 431,752 323,493
Federal funds sold and securities sold under agreement
to repurchase 36,947 22,396
Other borrowed money 976 1,103
---------- --------
Total interest expense 469,675 346,992
---------- --------
Net interest income 606,818 415,000
Provision for loan losses 55,000 60,000
---------- --------
Net interest income after provision for loan losses 551,818 355,000
---------- --------
Non-interest income:
Deposit service charges 48,939 48,281
Mortgage origination fees 27,402 12,171
Other 28,821 10,452
---------- --------
Total non-interest income 105,162 70,904
---------- --------
Non-interest expense:
Salaries and employee benefits 264,963 215,943
Occupancy 29,377 29,411
Equipment 46,073 35,320
Marketing and public relations 43,043 25,558
Other 115,512 90,400
---------- --------
Total non-interest expense 498,968 396,632
---------- --------
Net income $ 158,012 $ 29,272
========== ========
Basic earnings per common share $ 0.23 $ 0.04
========== ========
Diluted earnings per common share $ 0.22 $ 0.04
========== ========
</TABLE>
<PAGE> 6
FIRST COMMUNITY CORPORATION
Statements of Comprehensive Income
<TABLE>
<CAPTION>
Six months ended June 30, Three months ended June 30,
------------------------- ---------------------------
1998 1997 1998 1997
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Net income $274,331 $ 44,931 $158,012 $29,272
Other comprehensive income, net of tax:
Unrealized gains (losses) arising during the
period, net of tax effect of $4,390, $0.00
and $1,811, $0.00 for the six months and
three months ended June
30, 1998 and 1997, respectively 8,278 (3,013) 3,365 40,201
-------- -------- -------- -------
Comprehensive income $282,609 $ 41,918 $161,377 $69,473
======== ======== ======== =======
</TABLE>
<PAGE> 7
FIRST COMMUNITY CORPORATION
Statement of Changes in Shareholder's Equity
Six Months ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-in Accumulated Comprehensive
Stock Capital Deficit Income 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 274,331 274,331
Unrealized loss on securities
available-for-sale 8,278 8,278
-------- ---------- --------- ------- ----------
Balance June 30, 1998 $689,677 $6,155,237 $(458,573) $11,121 $6,397,462
======== ========== ========= ======= ==========
</TABLE>
<PAGE> 8
FIRST COMMUNITY CORPORATION
Statements of Cash Flows
<TABLE>
<CAPTION>
Six months ended June 30,
--------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 274,331 $ 44,931
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation 65,638 70,239
Premium amortization (Discount accretion) (49,266) (4,941)
Provision for loan losses 98,000 97,000
(Increase) decrease in other assets (117,183) (35,397)
Increase in accounts payable 4,114 37,466
----------- -----------
Net cash provided in operating activities 275,634 209,298
----------- -----------
Cash flows form investing activities:
Purchase of investment securities available-for-sale (7,684,007) (4,587,592)
Maturity of investment securities available-for-sale 6,221,802 3,427,523
Purchase of investment securities held-to-maturity (1,508,125) --
Maturity of investment securities held-to-maturity 1,000,000 --
Increase in loans (4,141,868) (7,114,189)
Proceeds from sale of fixed assets -- 50,000
Purchase of property and equipment (108,952) (577,095)
----------- -----------
Net cash used in investing activities (6,221,150) (8,801,353)
----------- -----------
Cash flows from financing activities:
Increase in deposit accounts 8,610,245 8,701,206
Proceeds from exercise of stock options -- 16,000
Increase (decrease) in securities sold under agreements to repurchase 17,500 241,600
Decrease in other borrowings (3,187) (140,080)
----------- -----------
Net cash provided from financing activities 8,624,558 8,818,726
----------- -----------
Net increase in cash and cash equivalents 2,679,042 226,671
Cash and cash equivalents at beginning
of period 5,489,066 7,727,799
----------- -----------
Cash and cash equivalents at end of period $ 8,168,108 $ 7,954,470
=========== ===========
Supplemental disclosure:
Cash paid during the period for:
Interest $ 910,658 $ 587,521
Non-cash investing and financing activities:
Unrealized gain (loss) on securities available-for-sale $ 12,668 $ (3,013)
</TABLE>
<PAGE> 9
FIRST COMMUNITY CORPORATION
Notes to Financial Statements
June 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 on May 28, 1998, to
purchase a branch site on Highway 60 in Irmo, South Carolina for a
total purchase price of $448,780. The Company must close within 75
days of August 11, 1998 or forfeit the $10,000 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 June 30, 1998.
This report contains "forward-looking statements" relating to, without
limitation, future economic performance, plans and objectives of management for
future operations, and projections of revenues and other financial items that
are based on the beliefs of the Company's management, as well as assumptions
made by and information currently available to the Company's management. The
words "expect," "estimate," "anticipate," and "believe," as well as similar
expressions, are intended to identify forward-looking statements. 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 Six Months Ended June 30, 1998
to the Six Months Ended June 30, 1997:
Net Income
The Company's net income was $274,000 for the six months ended June 30,
1998 as compared to net income of $45,000 for the six months ended June 30,
1997. This improvement in earnings reflects the continued growth in the level of
earning assets since the Bank commenced operations. The level of average earning
assets was $51.6 million for the six months ended June 30, 1998 as compared to
$37.4 million for the six months ended June 30, 1997. This reflects a 40.0%
increase in the level average earning assets for the two periods. In addition,
net interest margin improved from 4.26% to 4.50% for the six months ended June
30, 1997 and 1998, respectively. Non-interest income increased 61.2% to $188,000
for the six months ended June 30, 1998 as compared to $116,000 for the six
months ended June 30, 1997. During these same periods non-interest expense
increased 26.6% to $967,000 for the six months ended June 30, 1998 as compared
to $764,000 for the six months ended June 30, 1997.
Net Interest Income
The table on page 14 shows yield and rate data for interest-bearing
balance sheet components during the six month periods ended June 30, 1998 and
1997, along with average balances and the related interest income and interest
expense amounts.
<PAGE> 11
Page 2
Item 2. Continued
Net interest income was $1.2 million during the six months ended June 30, 1998
as compared to $789,000 for the six months ended June 30, 1997. The net interest
margin was 4.50% for the six months ended June 30, 1998 as compared to 4.26% for
the six months ended June 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 six months ended June 30, 1997 average loans
accounted for 52.6% of earning assets whereas for the six months ended June 30,
1998 they represented 61.0% 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 six months ended June 30, 1998 was $2.1
million as compared to $1.4 million for the six months ended June 30, 1997. The
average yield on earning assets during the first six months of 1998 was 8.05% as
compared to 7.63% during the same period of 1997. The largest component of
interest income for the six months ended June 30, 1998 was interest on loans and
amounted to $1.5 million as compared to $913,000 for the comparable prior year
period. The overall yield on loans was 9.47% for the six months ended June 30,
1998 as compared to 9.37% for the six months ended June 30, 1997. The investment
portfolio income increased $74,000, or 19.8%, to $450,000 for the six months
ended June 30, 1998 as compared to $375,000 for the six months ended June 30,
1997. The increase in investment portfolio income is a result of the average
investment portfolio balance being $2.3 million greater for the six month period
ended June 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 $5,000 or 4.2%, to $132,000 for the six month period ended June
30, 1998 as compared to $127,000 for the six month period ended June 30, 1997.
Interest expense during the six months ended June 30, 1998 was $908,000 with an
average rate paid on interest-bearing liabilities of 4.35% as compared to
$626,000 and 4.29% during the six months ended June 30, 1997. The primary reason
for the increase in interest expense was that average interest-bearing
liabilities were $12.7 million greater for the six months ended June 30, 1998 as
compared to the six months ended June 30, 1997.
Provision and Allowance for Loan Losses
The provision for loan losses was $98,000 and $97,000 for six months
ended June 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 1.44% at June 30, 1998. The Company had no nonperforming
loans at June 30, 1998. Charge-offs during six months ended June 30, 1998,
amounted to approximately $2,000 as compared to $10,000 for the same period in
the prior year.
<PAGE> 12
Page 3
Item 2. Continued
Loans past due greater than 30 days amounted to $29,000 and there were no loans
greater than 60 days past due at June 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 six months ended June 30, 1998 was
$188,000 as compared to $117,000 for the six months ended June 30, 1997. This
was primarily a result of increased income from deposit service charges of
$13,000 (15.3%), resulting from the increase in 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 $35,000 in the six months ended June 30, 1998 as compared to
$15,000 in the comparable period during the prior year. This increase was a
result of more emphasis being placed on this service during the first six months
of 1998 and the favorable rate market that existed during this period, which
resulted in more refinancings. Other income during the six months ended June 30,
1998 was $59,000 as compared to $20,000 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
$29,000 in fee income during the first six months of 1998.
Noninterest expense amounted to $967,000 as compared to $764,000 during
the six months ended June 30, 1998 and 1997, respectively. Salary and employee
benefits increased $97,000 or 23.3 % in the six months ended June 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 six months of 1998 as compared to the first six 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 $67,000 for the six months ended June 30, 1997
to $87,000 for the six months ended June 30, 1998. This increase is primarily
due to approximately $10,000 expensed on upgrading computer software as well as
testing related to year 2000 compliance. Marketing and public relations expense
increased by $36,000 or 86.4% in the six months ended ended June 30, 1998 as
compared to the comparable period in the prior year. This increase is a result
of planned increases
<PAGE> 13
Page 4
Item 2. Continued
in advertising and marketing during 1998 as compared to 1997. Other non-interest
expense increased $52,000 or 29.0 % in the six months ended June 30, 1998
compared to the same period in the prior year. An increase in supplies,
correspondent bank charges and postage of $10,000, $9,000 and $7,000 account for
half 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 six months ended June 30,
1998 as compared to the same period in the prior year. Directors fees increased
by $5,000 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
$3,000 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 June 30, 1998 to the
Three Months Ended June 30, 1997:
Net income for the second quarter of 1998 was $158,000, as compared to
$29,000 during the comparable period in 1997. This improvement, as explained in
the six months results, is due to the significant increase in the level of
earning assets during these two periods. Average earning assets were $53.5
million during the second quarter of 1998 as compared to $39.9 million during
the second quarter of 1997. The table on page 15 shows yield and rate data for
interest-bearing balance sheet components during the three month periods ended
June 30, 1998 and 1997, along with average balances and the related interest
income and interest expense amounts. The yield on average earning assets
increased from 7.65% in the second quarter of 1997 to 8.07% in the second
quarter of 1998. This increase is a result of loans comprising 61.6% of earning
assets during the second quarter of 1998 as compared to 54.2% percent during the
second quarter of 1997. The cost of interest bearing liabilities was 4.33% in
second quarter of 1997 as compared to 4.30% in the second quarter of 1998.
Total non-interest income increased by $34,000 during the second
quarter of 1998 as compared to the comparable period in 1997. As explained in
the analysis of six 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 $14,000 in the second quarter of 1998 and as previously
explained the program was not offered in 1997. Mortgage loan fees amounted to
$12,000 during the second quarter of 1997 as compared to $27,000 during the
second quarter of 1998. This increase is primarily a result of an increased
emphasis on this source of revenue.
Total non-interest expense increased by $102,000 in the second quarter
of 1998 as compared to the same quarter of 1997. This increase is primarily a
result of a $49,000 increase in salary and benefits expense, a $11,000 increase
in equipment expense and a $17,000 increase in marketing expense. As stated in
the analysis of the six month results, the salary increase is a result of the
addition of three full time employees during the second quarter of 1998 as
compared to
<PAGE> 14
Page 5
Item 2. Continued
the second quarter of 1997. The increase in marketing expense is a result of
planned increases in advertising during the Company's third full year of
operations. Equipment expense increased as result of needed upgrades on software
equipment as well as cost of testing related to year 2000.
Financial Position
Assets totaled $59.9 million at June 30, 1998 as compared to $51.0
million at December 31, 1997 an increase of $8.9 million. Loans grew by $4.2
million during the six months ended June 30, 1998, from $28.9 million to $33.1
million. This loan growth was funded by growth in deposits of $8.7 million from
$42.2 million at December 31, 1997 to $50.8 million at June 30, 1998. The
balance of the deposit growth was primarily used to fund an increase in
investment securities of $2.0 and an increase in overnight investments of $2.4
million from December 31, 1997 to June 30, 1998. The loan to deposit ratio at
June 30, 1998 was 65.2% as compared to 68.6% at December 31, 1997. 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.
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 demand.
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 30.3% of total assets at June 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
<PAGE> 15
Page 6
Item 2. Continued
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 June 30, 1998 the amount of certificates of deposits of $100,000 or
more represented 18.3% of total deposits. These deposits are issued to local
customers, many of which have other product relationships with the Bank, and
none of which 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 10.7% of total
assets at June 30, 1998 as compared to 12.0% at December 31, 1997. The Bank's
risked-based capital ratios of Tier 1, total capital, and leverage ratio were
13.5%, 14.7%, and 9.4%, respectively, at June 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> 16
FIRST COMMUNITY CORPORATION
Yields on Average Earning Assets and Rates
on Average Interest-Bearing Liabilities
<TABLE>
<CAPTION>
Six months ended June 30, 1998 Six months ended June 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 $ 31,459,580 1,477,520 9.47% $ 19,665,301 913,310 9.37%
Securities:
Taxable 15,301,499 449,641 5.93% 12,969,969 375,419 5.84%
Federal funds sold and securities purchased
under agreements to resell 4,806,358 131,805 5.53% 4,748,367 126,520 5.37%
-------------------------------------- ---------------------------------------
Total earning assets 51,567,437 2,058,966 8.05% 37,383,637 1,415,249 7.63%
-------------------------------------- ---------------------------------------
Cash and due from banks 1,749,329 1,320,793
Premises and equipment 2,964,834 2,733,170
Other assets 415,985 323,334
Allowance for loan losses (416,729) (231,822)
=============== ===============
Total assets $ 56,280,856 $ 41,529,112
=============== ===============
Liabilities
Interest-bearing liabilities
Interest-bearing transaction accounts 5,320,325 31,735 1.20% 3,756,939 27,896 1.50%
Money market accounts 6,966,037 154,880 4.48% 3,150,669 66,148 4.23%
Savings deposits 6,343,176 118,273 3.76% 6,504,897 124,669 3.86%
Time deposits 20,096,954 526,377 5.28% 14,365,942 371,653 5.22%
Other short term borrowings 3,365,779 76,718 4.60% 1,639,761 35,996 4.43%
-------------------------------------- ---------------------------------------
Total interest-bearing liabilities 42,092,271 907,983 4.35% 29,418,208 626,362 4.29%
-------------------------------------- ---------------------------------------
Demand deposits 7,578,032 6,086,192
Other liabilities 353,163 242,901
Shareholders' equity 6,257,390 5,781,811
=============== ===============
Total liabilities and shareholders' equity $ 56,280,856 $ 41,529,112
=============== ===============
Net interest spread 3.70% 3.34%
Net interest income/margin $1,150,983 4.50% $ 788,887 4.26%
============== ============
</TABLE>
<PAGE> 17
FIRST COMMUNITY CORPORATION
Yields on Average Earning Assets and Rates
on Average Interest-Bearing Liabilities
<TABLE>
<CAPTION>
Three months ended June 30, 1998 Three months ended June 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 $ 32,987,589 778,686 9.47% $ 21,653,245 502,086 9.30%
Securities:
Taxable 15,963,017 235,113 5.91% 12,490,869 181,625 5.83%
Federal funds sold and securities purchased
under agreements to resell 4,546,750 62,694 5.53% 5,793,352 78,281 5.42%
-------------------------------------- -------------------------------------
Total earning assets 53,497,356 1,076,493 8.07% 39,937,466 761,992 7.65%
-------------------------------------- -------------------------------------
Cash and due from banks 1,837,571 1,391,210
Premises and equipment 2,956,255 2,845,207
Other assets 458,567 337,205
Allowance for loan losses (440,177) (250,921)
=============== ===============
Total assets $ 58,309,572 $ 44,260,167
=============== ===============
Liabilities
Interest-bearing liabilities
Interest-bearing transaction accounts 5,813,740 17,121 1.18% 4,249,611 15,855 1.50%
Money market accounts 7,415,888 81,932 4.43% 3,693,647 40,804 4.43%
Savings deposits 6,592,458 61,493 3.74% 6,751,383 65,113 3.87%
Time deposits 20,634,507 271,206 5.27% 15,400,565 201,721 5.25%
Other short term borrowings 3,328,715 37,923 4.57% 2,074,102 23,499 4.54%
-------------------------------------- -------------------------------------
Total interest-bearing liabilities 43,785,308 469,675 4.30% 32,169,308 346,992 4.33%
-------------------------------------- -------------------------------------
Demand deposits 7,849,108 6,073,158
Other liabilities 364,379 239,642
Shareholders' equity 6,310,777 5,778,059
=============== ===============
Total liabilities and shareholders' equity $ 58,309,572 $ 44,260,167
=============== ===============
Net interest spread 3.77% 3.32%
Net interest income/margin $ 606,818 4.55% $ 415,000 4.17%
============== ============
</TABLE>
<PAGE> 18
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 and 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.
The Annual Meeting of Shareholders was held on May 20, 1998.
The following six directors were elected at the meeting:
VOTES
----------------------------------------
For Against/Withheld
--- ----------------
Richard K. Bogan 487,641 0
Michael C. Crapps 487,141 500
Hinton G. Davis 487,641 0
Anita B. Easter 487,641 0
George H. Fann, Jr. DMD 487,641 0
Angelo L. Tsiantis 487,641 0
<PAGE> 19
The following eleven Directors term of office continued after the
meeting:
William L. Boyd III.
Thomas C. Brown O. A. Ethridge DMD
Robert G. Clawson W. James Kitchens, Jr
Chimin J. Chao Broadus Thompson
William A. Jordan Loretta R. Whitehead
James C. Leventis Mitchell Willoughby
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).
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).
<PAGE> 20
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)
*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 June 30, 1998
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: August 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 FINANCIAL
STATEMENTS FOR THE SIX MONTHS ENDED JUNE 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,036,311
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,130,950
<INVESTMENTS-CARRYING> 2,408,213
<INVESTMENTS-MARKET> 2,408,490
<LOANS> 33,140,062
<ALLOWANCE> 476,408
<TOTAL-ASSETS> 59,928,102
<DEPOSITS> 50,856,977
<SHORT-TERM> 2,269,096
<LIABILITIES-OTHER> 404,567
<LONG-TERM> 0
0
0
<COMMON> 689,677
<OTHER-SE> 5,707,785
<TOTAL-LIABILITIES-AND-EQUITY> 59,928,102
<INTEREST-LOAN> 1,477,520
<INTEREST-INVEST> 449,641
<INTEREST-OTHER> 131,805
<INTEREST-TOTAL> 2,058,966
<INTEREST-DEPOSIT> 831,265
<INTEREST-EXPENSE> 907,983
<INTEREST-INCOME-NET> 1,150,983
<LOAN-LOSSES> 98,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 0
<INCOME-PRETAX> 966,688
<INCOME-PRE-EXTRAORDINARY> 274,331
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 274,331
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.38
<YIELD-ACTUAL> 4.50
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 380,120
<CHARGE-OFFS> 1,712
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 476,408
<ALLOWANCE-DOMESTIC> 476,408
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
