<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, 1999
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 July 31, 1999.
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,
1999 December 31,
(Unaudited) 1998
------------ -----------
ASSETS
<S> <C> <C>
Cash and due from banks $ 2,278,684 $ 2,316,369
Federal funds sold and securities purchased under
agreements to resell 10,613,647 3,290,403
Investment securities - available for sale 28,399,306 19,899,891
Investment securities - held to maturity (market value of
$2,710,327 and $2,957,892 at June 30, 1999 and
December 31, 1998, respectively) 2,795,034 2,942,760
Loans 47,144,326 40,819,405
Less, allowance for loan losses 633,575 532,025
------------ -----------
Net loans 46,510,751 40,287,380
Property, furniture and equipment - net 4,567,909 3,667,097
Other assets 854,395 747,676
------------ -----------
Total assets $ 96,019,726 $73,151,576
============ ===========
LIABILITIES
Deposits:
Non-interest bearing demand $ 11,296,740 $10,449,284
NOW and money market accounts 19,405,538 15,283,002
Savings 8,525,576 8,622,546
Time deposits less than $100,000 13,791,166 13,595,144
Time deposits $100,000 and over 26,652,941 8,055,794
------------ -----------
Total deposits 79,671,961 56,005,770
Securities sold under agreements to repurchase 2,013,700 2,737,700
Other borrowed money - demand note to US Treasury 131,794 32,413
Other liabilities 434,863 763,349
------------ -----------
Total liabilities 82,252,318 59,539,232
------------ -----------
SHAREHOLDERS' EQUITY
Common stock, par value $1.00 per share;
10,000,000 shares authorized; issued and outstanding
1,207,177 at June 30, 1999 and December 31, 1998,
respectively 1,207,177 1,207,177
Additional paid in capital 12,248,087 12,248,087
Retained earnings 485,321 114,029
Accumulated other comprehensive income (173,177) 43,051
------------ -----------
Total shareholders' equity 13,767,408 13,612,344
------------ -----------
Total liabilities and shareholders' equity $ 96,019,726 $73,151,576
============ ===========
</TABLE>
<PAGE> 4
FIRST COMMUNITY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Six
Months Ended Months Ended
June 30, June 30,
1999 1998
(Unaudited) (Unaudited)
---------- ----------
<S> <C> <C>
Interest income:
Loans, including fees $1,879,636 $1,477,520
Investment securities 788,622 449,641
Federal funds sold and securities purchased
under resale agreements 212,988 131,805
---------- ----------
Total interest income 2,881,246 2,058,966
---------- ----------
Interest expense:
Deposits 1,102,728 831,265
Federal funds sold and securities sold under agreement
to repurchase 61,556 74,678
Other borrowed money 2,021 2,040
---------- ----------
Total interest expense 1,166,305 907,983
---------- ----------
Net interest income 1,714,941 1,150,983
Provision for loan losses 126,000 98,000
---------- ----------
Net interest income after provision for loan losses 1,588,941 1,052,983
---------- ----------
Non-interest income:
Deposit service charges 102,144 94,810
Mortgage origination fees 55,304 34,682
Other 80,104 58,544
---------- ----------
Total non-interest income 237,552 188,036
---------- ----------
Non-interest expense:
Salaries and employee benefits 646,293 512,274
Occupancy 79,259 56,964
Equipment 106,827 86,518
Marketing and public relations 97,039 78,354
Other 326,922 232,578
---------- ----------
Total non-interest expense 1,256,340 966,688
---------- ----------
Net income before tax 570,153 274,331
Income taxes 198,861 --
========== ==========
$ 371,292 $ 274,331
========== ==========
Basic earnings per common share $ 0.31 $ 0.40
========== ==========
Diluted earnings per common share $ 0.30 $ 0.38
========== ==========
</TABLE>
<PAGE> 5
FIRST COMMUNITY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
June 30, June 30,
1999 1998
(Unaudited) (Unaudited)
---------- ----------
<S> <C> <C>
Interest income:
Loans, including fees $ 979,195 $ 778,686
Investment securities 418,366 235,113
Federal funds sold and securities purchased
under resale agreements 138,494 62,694
---------- ----------
Total interest income 1,536,055 1,076,493
---------- ----------
Interest expense:
Deposits 613,931 431,752
Federal funds sold and securities sold under agreement
to repurchase 32,403 36,947
Other borrowed money 1,244 976
---------- ----------
Total interest expense 647,578 469,675
---------- ----------
Net interest income 888,477 606,818
Provision for loan losses 63,500 55,000
---------- ----------
Net interest income after provision for loan losses 824,977 551,818
---------- ----------
Non-interest income:
Deposit service charges 55,440 48,939
Mortgage origination fees 32,818 27,402
Other 31,459 28,821
---------- ----------
Total non-interest income 119,717 105,162
---------- ----------
Non-interest expense:
Salaries and employee benefits 333,851 264,963
Occupancy 49,486 29,377
Equipment 58,292 46,073
Marketing and public relations 42,743 43,043
Other 171,806 115,512
---------- ----------
Total non-interest expense 656,178 498,968
---------- ----------
Net income before tax 288,516 158,012
Income taxes 99,879 --
---------- ----------
$ 188,637 $ 158,012
========== ==========
Basic earnings per common share $ 0.16 $ 0.23
========== ==========
Diluted earnings per common share $ 0.15 $ 0.22
========== ==========
</TABLE>
<PAGE> 6
FIRST COMMUNITY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Six months ended June 30, Three months ended June 30,
---------- ---------- ---------- -----------
1999 1998 1999 1998
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net income $ 371,292 $ 274,331 $ 188,637 $158,012
Other comprehensive income, net
of tax:
Unrealized gains (losses) arising
during the period, net of tax
effect of $116,429, $4,390 and
$88,236, $1,811 for the six months
and three months ended June
30, 1999 and 1998, respectively (216,228) 8,278 (164,262) 3,365
--------- ---------- --------- --------
Comprehensive income $ 155,064 $ 282,609 $ 24,375 $161,377
========= ========== ========= ========
</TABLE>
<PAGE> 7
FIRST COMMUNITY CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-in Retained Comprehensive
Stock Capital Earnings Income Total
----------- -------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1998 $ 1,207,177 $ 12,248,087 $114,029 $ 43,051 $13,612,344
Net income 371,292 371,292
Unrealized loss on securities
available-for-sale (216,228) (216,228)
----------- ------------ -------- --------- -----------
Balance June 30, 1999 $ 1,207,177 $ 12,248,087 $485,321 $(173,177) $13,767,408
=========== ============ ======== ========= ===========
</TABLE>
<PAGE> 8
FIRST COMMUNITY CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended June 30,
--------------------------------
1999 1998
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 371,292 $ 274,331
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation 97,262 65,638
Premium amortization (Discount accretion) (84,848) (49,266)
Provision for loan losses 126,000 98,000
(Increase) decrease in other assets 9,712 (117,183)
Increase (decrease) in accounts payable (328,486) 4,114
------------ -----------
Net cash provided in operating activities 190,932 275,634
------------ -----------
Cash flows form investing activities:
Purchase of investment securities available-for-sale (21,949,961) (7,684,007)
Maturity of investment securities available-for-sale 13,206,788 6,221,802
Purchase of investment securities held-to-maturity -- (1,508,125)
Maturity of investment securities held-to-maturity 143,673 1,000,000
Increase in loans (6,349,371) (4,141,868)
Purchase of property and equipment (998,074) (108,952)
------------ -----------
Net cash used in investing activities (15,946,945) (6,221,150)
------------ -----------
Cash flows from financing activities:
Increase in deposit accounts 23,666,191 8,610,245
Increase (decrease) in securities sold under agreements to repurchase (724,000) 17,500
Decrease in other borrowings 99,381 (3,187)
------------ -----------
Net cash provided from financing activities 23,041,572 8,624,558
------------ -----------
Net increase in cash and cash equivalents 7,285,559 2,679,042
Cash and cash equivalents at beginning
of period 5,606,772 5,489,066
------------ -----------
Cash and cash equivalents at end of period $ 12,892,331 $ 8,168,108
============ ===========
Supplemental disclosure:
Cash paid during the period for:
Interest $ 1,172,462 $ 910,658
Income taxes $ 406,010 $ --
Non-cash investing and financing activities:
Unrealized gain (loss) on securities available-for-sale $ (332,659) $ 12,668
</TABLE>
<PAGE> 9
FIRST COMMUNITY CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
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 - Commitments
The Company has entered into a contract to build a branch office in
Cayce/West Columbia. The contract to construct the facility is for
$528,000 and the cost of the land was $300,000. Cost incurred
through June 30, 1999 on the land and construction of the facility
amounted to approximately $368,000.
<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. First Community Bank
N.A. (the "Bank"), the Company's only subsidiary, began operations on August 17,
1995 from it's first office located in Lexington, South Carolina. On September
14, 1995 the company opened it's second office located in Forest Acres, South
Carolina. The company experienced its first quarterly profit in the fourth
quarter of 1996 and has been profitable each subsequent quarter through June 30,
1999.
During the first quarter of 1999 the bank opened it's third banking
office in Irmo, South Carolina. The Bank raised $6.6 million in net proceeds
from a secondary stock offering in July 1998. The proceeds of the offering were
to be used to fund the bank's continued growth through it's existing offices and
to open three additional branches within a period of six to eighteen months.
Since the offering the Bank has opened the Irmo office and has begun
construction on an additional office to be located in West Columbia, South
Carolina. It is anticipated that this office will open in November 1999.
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 Six Months Ended June 30, 1999
to the Six Months Ended June 30, 1998:
Net Income
The Company's net income was $371,000 or $.30 diluted earnings per
share for the six months ended June 30, 1999 as compared to net income of
$274,000 or $.38 per share for the six months ended June 30, 1998. This
improvement in earnings reflect the continued growth in the level of earning
assets since the Bank commenced operations. Earnings per share for the six
months ended June 30, 1999 reflects the addition of 517,500 shares of common
stock issued in a secondary offering which was closed on July 10, 1998. The
level of average earning assets was $80.7 million for the six months ended June
30, 1999 as compared to $51.6 million for the six months ended June 30, 1998.
This reflects a 56.4% increase in the level average earning assets for the two
periods. Net interest margin was from 4.28% for the six months ended June 30,
1999 as compared to 4.50% for the six months ended June 30, 1998. This decrease
in margin is primarily a result of a change in the mix of earning assets in
which loans represented 53.1 percent of earning assets for the six months ended
June 30, 1999 as compared to 61.0% of earning assets
<PAGE> 11
ITEM 2. CONTINUED PAGE 2
for the six months ended June 30, 1998. The decrease in the loan to earning
asset ratio was anticipated by management for a period of time as result of the
addition of $6.6 million in new capital in July 1998. As loans typically yield
higher returns than alternative investments management will continue to grow the
loan portfolio as a percentage of total earning assets. Non-interest income
increased 26.3% to $238,000 for the six months ended June 30, 1999 as compared
to $188,000 for the six months ended June 30, 1998. During these same periods
non-interest expense increased 30.0% to $1.3 million for the six months ended
June 30, 1999 as compared to $967,000 for the six months ended June 30, 1998.
Income tax expense for the six months ended June 30, 1999 was $199,000 whereas
during the same period in 1998 there was no income tax expense primarily as a
result of a reductions in the valuation allowance established for deferred tax
assets related to net operating loss carry forwards .
Net Interest Income
The table on page 18 shows yield and rate data for interest-bearing
balance sheet components during the six month periods ended June 30, 1999 and
1998, along with average balances and the related interest income and interest
expense amounts.
Net interest income was $1.7 million during the six months ended June 30, 1999
as compared to $1.2 million for the six months ended June 30, 1998. This
improvement of net interest income is a result of the increase of the level of
earning assets. The net interest margin was 4.28% for the six months ended June
30, 1999 as compared to 4.50% for the six months ended June 30, 1998. The
decrease in margin is primarily a result of a change in the mix of earning
assets in which loans represented 53.1% of earning assets for the six months
ended June 30, 1999 as compared to 61.0% of earning assets for the six months
ended June 30, 1998. 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, 1999 was $2.9
million as compared to $2.1 million for the six months ended June 30, 1998. The
average yield on earning assets during the first six months of 1999 was 7.20% as
compared to 8.05% during the same period of 1998. The largest component of
interest income for the six months ended June 30, 1999 was interest on loans and
amounted to $1.9 million as compared to $1.5 million for the comparable prior
year period. The overall yield on loans was 8.85% for the six months ended June
30, 1999 as compared to 9.47% for the six months ended June 30, 1998. The
reduction in loan yields was primarily a result of three reductions in the prime
rate during the fourth quarter of 1998. The investment portfolio income
increased $339,000, or 75.4%, to $789,000 for the six months ended June 30, 1999
as compared to $450,000 for the six months ended June 30, 1998. The increase in
investment portfolio income is a result of the average investment portfolio
balance being $13.6 million greater for the six month period ended June 30, 1999
as compared to the same period in the prior year. The yield on the investment
portfolio for the six months ended
<PAGE> 12
ITEM 2. CONTINUED PAGE 3
June 30 ,1999 was 5.51% as compared to 5.93% for the comparable period in 1998.
This decrease in yield also resulted from declining market rates in the fourth
quarter of 1998. Interest on overnight federal funds sold and securities
purchased under agreements to resell increased $81,000 or 61.4%, to$213,000 for
the six month period ended June 30, 1999 as compared to $132000 for the six
month period ended June 30, 1998.
Interest expense during the six months ended June 30, 1999 was $1.2 million with
an average rate paid on interest-bearing liabilities of 3.76% as compared to
$908,000 and 4.35% during the six months ended June 30, 1998. The primary reason
for the increase in interest expense was that average interest-bearing
liabilities were $20.4 million greater for the six months ended June 30, 1999 as
compared to the six months ended June 30, 1998. This was offset by a reduction
in the cost of interest bearing liabilities to 3.76% for the six months period
ended June 30, 1999 from 4.35 % in the comparable period of 1998.
Provision and Allowance for Loan Losses
The provision for loan losses was $126,000 and $98,000 for six months
ended June 30, 1999 and 1998, 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 1.34% at June 30, 1999. The Company had no nonperforming
loans at June 30, 1999. Net charge-offs during six months ended June 30, 1999,
amounted to approximately $24,000 as compared to $2,000 for the same period in
the prior year. Loans past due greater than 30 days amounted to $37,000 and
there were no loans greater than 60 days past due at June 30, 1999.
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, 1999 was
$238,000 as compared to $188,000 for the six months ended June 30, 1998. This
was primarily a result of increased income from mortgage loan fee originations
of $21,000 (59.5%). The company originates mortgage loans , which are closed in
the name of a third party, for which the company
<PAGE> 13
ITEM 2. CONTINUED PAGE 4
receives a fee. In addition fee income from the sale of non deposit products
increased by $14,000 for the six months ended June 30, 1999 as compared to the
same period in 1998.
Noninterest expense amounted to $1.3 million as compared to $967,000
during the six months ended June 30, 1999 and 1998, respectively. Salary and
employee benefits increased $134,000 or 26.2 % in the six months ended June 30,
1999 as compared to the comparable period in 1997. This increase is primarily a
result of hiring seven full time equivalent employees during the first six
months of 1999 as compared to the first six months of 1998. Five of these
positions were hired to staff the new branch office that opened in April 1999
located in Irmo, South Carolina. Occupancy expense increased by $22,000 in the
first six months of 1999 as compared to the same period in 1998. This is
primarily related to additional expenses related to the new branch office.
Equipment expense increased from $87,000 for the six months ended June 30, 1998
to $107,000 for the six months ended June 30, 1999. This is a result of
increased depreciation expense related to equipment in the new branch office as
well as additional data processing equipment purchased due to the overall growth
in the bank. Marketing and public relations expense increased by $19,000 or
23.8% in the six months ended June 30, 1999 as compared to the comparable
period in the prior year. This increase is a result of planned increases in
advertising and marketing during 1999 as compared to 1998. Other non-interest
expense increased $94,000 or 40.4 % in the six months ended June 30, 1999
compared to the same period in the prior year. An increase in computer service
bureau expense, supplies, and postage of $27,000, $15,000 and $8,000 account for
a majority 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, 1999 as compared to the same period in the prior year.
Comparison of Results of Operations for Three Months Ended June 30, 1999 to the
Three Months Ended June 30, 1998:
Net income for the second quarter of 1999 was $189,000, as compared to
$158,000 during the comparable period in 1998. 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 $87.0
million during the second quarter of 1999 as compared to $53.5 million during
the second quarter of 1998. The table on page 19 shows yield and rate data for
interest-bearing balance sheet components during the three month periods ended
June 30, 1999 and 1998, along with average balances and the related interest
income and interest expense amounts. The yield on average earning assets
decreased from 8.07% in the second quarter of 1998 to 7.08% in the second
quarter of 1999. This decrease is primarily a result of loans comprising 61.6%
of earning assets during the second quarter of 1998 as compared to 51.2% percent
during the second quarter of 1999. In addition, as previously explained in the
analysis of six month results, there were three reductions in prime rate during
the fourth quarter of 1998 that had an impact on overall market rates. The cost
of interest bearing liabilities was 3.80% in
<PAGE> 14
ITEM 2. CONTINUED PAGE 5
the second quarter of 1999 as compared to 4.30% in the second quarter of 1998.
This reduction was also a result of declining market rates during the fourth
quarter of 1998.
Total non-interest income increased by $15,000 during the second
quarter of 1999 as compared to the comparable period in 1998. Deposit service
charges accounted for approximately $7,000 of the increase in non-interest
income due to the increased numbers of accounts in second quarter of 1999 as
compared to the second quarter 1998. Mortgage loan fees amounted to $32,000
during the second quarter of 1999 as compared to $27,000 during the second
quarter of 1998.
Total non-interest expense increased by $157,000 in the second quarter
of 1999 as compared to the same quarter of 1998. This increase is primarily a
result of a $69,000 increase in salary and benefits expense, a $20,000 increase
in occupancy expense and a $12,000 increase in equipment expense. All of these
expense increases were primarily a result of the opening of the new branch in
Irmo, South Carolina in April 1999. As stated in the analysis of the six month
results, increases in computer service expense, supplies and postage accounted
for the balance of the increase as a result in the growth of the bank during
these periods.
Financial Position
Assets totaled $96.0 million at June 30, 1999 as compared to $73.2
million at December 31, 1998 an increase of $22.8 million. Loans grew by $6.3
million during the six months ended June 30, 1999, from $40.8 million to $47.1
million. This loan growth was funded by growth in deposits of $23.7 million from
$56.0 million at December 31, 1998 to $79.7 million at June 30, 1999.
Approximately $12.0 million of this deposit growth is a result of some short
term deposits being placed in the bank from various sources during this period.
As a result, the bank has maintained higher than normal overnight fund balances
and has purchased some short term investments to maintain the liquidity
necessary to fund the anticipated withdrawal of these deposits. In addition, to
funding loan growth the balance of the deposit growth was used to fund an
increase in investment securities of $8.4 and an increase in overnight
investments of $7.3 million from December 31, 1998 to June 30, 1999. The loan to
deposit ratio at June 30, 1999 was 59.2% as compared to 72.9% at December 31,
1998.
<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 were to be used to purchase properties and
construct three proposed branch facilities over an 18 to 24 month period. As of
June 30, 1999 the company has opened one new branch in Irmo, South Carolina and
has begun construction on a second new branch site located in West Columbia,
South Carolina. The Company intends to 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 40.6% of total assets at June 30, 1999.
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 June 30, 1999 the amount of certificates of deposits of $100,000 or
more represented 33.5% of total deposits. These deposits are issued to local
customers, many of which have other product relationships with the Bank, and
none of which 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.
<PAGE> 16
ITEM 2. CONTINUED PAGE 7
As previously stated the additional capital of $6.6 million raised in
the secondary offering closed in 1998 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 14.4% of total assets at
June 30, 1999 as compared to 18.6% at December 31, 1998. The bank's risked-based
capital ratios of Tier 1, total capital, and leverage ratio were 18.4%, 19.5%,
and 11.6%, respectively, at June 30, 1999. 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.
Year 2000
The company has a program designed to ensure that its operational and
financial systems will not be adversely affected by year 2000 software failures,
due to processing errors arising from calculations using the year 2000 date. The
Board of Directors and management of the company have established year 2000
compliance as a strategic initiative. While the company believes that is has
available resources to assure year 2000 compliance, it is to some extent
dependent on its outside core data processing servicer.
To date the company has expended cost to upgrade and test systems of
approximately $60,000 all of which was expended in 1998. An additional $15,000
in cost has been budgeted to be incurred in 1999. Capitalized cost for
installing new item processing hardware and software and a frame relay
communications network have been approximately $140,000. The cost of the Year
2000 project and the dates scheduled by the company for being compliant are
based on managements best estimates at this time. Additional cost to be incurred
are not deemed to be material to the company's financial position.
The company continues to evaluate the readiness of its vendors and its
customers as a part of its Year 2000 project plan. Management is addressing with
its customers the possible consequences of not being prepared for Year 2000.
Should large borrowers not sufficiently address this issue, the company may
experience an increase in loan defaults although any such amount is not
quantifiable at this time. Management has instituted a program to educate its
customers and instituted a credit review process that evaluates year 2000
exposure. At present, the company's review indicates exposure to credit risk
associated with year 2000 is considered to be low. The Company's credit review
procedures will continue to include an assessment of risk related to year 2000
throughout 1999.
The company has developed a comprehensive contingency and business
resumption plan which has been approved by the company's board of directors and
documents and outline
<PAGE> 17
ITEM 2. CONTINUED PAGE 8
options in the event any mission critical systems fail to operate despite all
of our Year 2000 efforts. In addition this plan addresses liquidity issues and
plans to prepare for higher than normal cash withdrawal demands by customers as
the millennium change draws closer. The contingency and business resumption plan
will be tested in the third quarter of 1999. In addition the company has
undertaken an extensive customer awareness program to inform our customers of
the progress that we have made in implementing our Year 2000 readiness plan. The
company's primary regulator is the Office of the Comptroller of the Currency and
thus we are subject to supervisory review of our Year 2000 preparedness and
progress. Additionally the company's core processing provider is also subject to
examinations of their Year 2000 readiness by federal banking regulatory
agencies.
Management presently believes that with the modifications already made
to systems and continued testing to these systems, the effects of the Year 2000
problem will be minimized. Testing of all mission critical systems has been
completed and an independent verification of such testing is substantially
complete. There can be no assurance however, that all year 2000 problems
affecting it have been identified or corrected or that the systems of other
vendors upon which the company rely's, including essential utilities and
telecommunications providers, will be Year 2000 compliant in a timely manner. If
the company's modifications and testing are ineffective, or if the company is
subject to failure of a critical vendor, the Year 2000 issue could have a
material impact on the company's financial condition and results of operations.
<PAGE> 18
FIRST COMMUNITY CORPORATION
YIELDS ON AVERAGE EARNING ASSETS AND RATES
ON AVERAGE INTEREST-BEARING LIABILITIES
<TABLE>
<CAPTION>
Six months ended June 30, 1999 Six months ended June 30, 1998
------------------------------------ -------------------------------------
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 $ 42,842,962 $1,879,636 8.85% $ 31,459,580 $1,477,520 9.47%
Securities 28,878,788 788,622 5.51% 15,301,499 449,641 5.93%
Federal funds sold and securities purchased
under agreements to resell 9,024,611 212,988 4.76% 4,806,358 131,805 5.53%
----------------------------------- -----------------------------------
Total earning assets 80,746,361 2,881,246 7.20% 51,567,437 2,058,966 8.05%
----------------------------------- -----------------------------------
Cash and due from banks 2,649,827 1,749,329
Premises and equipment 4,100,435 2,964,834
Other assets 908,478 415,985
Allowance for loan losses (578,062) (416,729)
============ ============
Total assets $ 87,827,039 $ 56,280,856
============ ============
LIABILITIES
Interest-bearing liabilities
Interest-bearing transaction accounts $ 10,588,145 44,662 0.85% $ 5,320,325 31,735 1.20%
Money market accounts 8,742,990 176,308 4.07% 6,966,037 154,880 4.48%
Savings deposits 8,668,483 150,067 3.49% 6,343,176 118,273 3.76%
Time deposits 31,174,834 731,691 4.73% 20,096,954 526,377 5.28%
Other short term borrowings 3,318,335 63,577 3.86% 3,365,779 76,718 4.60%
----------------------------------- ------------------------------------
Total interest-bearing liabilities 62,492,787 1,166,305 3.76% 42,092,271 907,983 4.35%
----------------------------------- ------------------------------------
Demand deposits 10,989,110 7,578,032
Other liabilities 584,807 353,163
Shareholders' equity 13,760,335 6,257,390
============ ============
Total liabilities and shareholders' equity $ 87,827,039 $ 56,280,856
============ ============
Net interest spread 3.44% 3.70%
Net interest income/margin $1,714,941 4.28% $1,150,983 4.50%
========== ==========
</TABLE>
<PAGE> 19
FIRST COMMUNITY CORPORATION
YIELDS ON AVERAGE EARNING ASSETS AND RATES
ON AVERAGE INTEREST-BEARING LIABILITIES
<TABLE>
<CAPTION>
Three months ended June 30, 1999 Three months ended June 30, 1998
------------------------------------- ------------------------------------
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 $ 44,552,572 $ 979,195 8.82% $ 32,987,589 $ 778,686 9.47%
Securities 30,727,075 418,366 5.46% 15,963,017 235,113 5.91%
Federal funds sold and securities purchased
under agreements to resell 11,761,037 138,494 4.72% 4,546,750 62,694 5.53%
----------------------------------- ----------------------------------
Total earning assets 87,040,684 1,536,055 7.08% 53,497,356 1,076,493 8.07%
----------------------------------- ----------------------------------
Cash and due from banks 2,643,581 1,837,571
Premises and equipment 4,330,266 2,956,255
Other assets 882,454 458,567
Allowance for loan losses (599,652) (440,177)
============ ============
Total assets $ 94,297,333 $ 58,309,572
============ ============
LIABILITIES
Interest-bearing liabilities
Interest-bearing transaction accounts 10,376,955 19,267 0.74% 5,813,740 17,121 1.18%
Money market accounts 9,227,384 94,096 4.09% 7,415,888 81,932 4.43%
Savings deposits 8,415,355 71,845 3.42% 6,592,458 61,493 3.74%
Time deposits 36,940,267 428,723 4.66% 20,634,507 271,206 5.27%
Other short term borrowings 3,472,216 33,647 3.89% 3,328,715 37,923 4.57%
----------------------------------- ----------------------------------
Total interest-bearing liabilities 68,432,177 647,578 3.80% 43,785,308 469,675 4.30%
----------------------------------- ----------------------------------
Demand deposits 11,592,289 7,849,108
Other liabilities 465,097 364,379
Shareholders' equity 13,807,770 6,310,777
============ ============
Total liabilities and shareholders' equity $ 94,297,333 $ 58,309,572
============ ============
Net interest spread 3.28% 3.77%
Net interest income/margin $ 888,477 4.09% $ 606,818 4.55%
========= ==========
</TABLE>
<PAGE> 20
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) Not applicable
(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 April 21, 1999.
The following six directors were elected at the meeting:
<TABLE>
<CAPTION>
VOTES
---------------------------------
For Against/Withheld
--- ----------------
<S> <C> <C>
Thomas C. Brown 989,359 1,400
Robert G. Clawson 989,359 1,400
O. A. Ethridge 989,359 1,400
W. James Kitchens, Jr. 989,359 1,400
Broadus Thompson 989,359 1,400
Mitchell M. Willoughby 989,359 1,400
</TABLE>
The Shareholders also voted on a proposal to approve the First Community
Corporation 1999 stock incentive plan. There were 644,819 shares voted for the
plan and 28,103 voted against or withheld their vote for the plan.
<PAGE> 21
The following eleven Directors term of office continued after the meeting:
<TABLE>
<S> <C>
Richard K. Bogan William A. Jordan
William L. Boyd III James C. Leventis
Chimin J. Chao Angelo Tsiantis
Michael C. Crapps Loretta R. Whitehead
Hinton G. Davis
Anita B. Easter
George H. Fann, Jr.
</TABLE>
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:
<TABLE>
<S> <C>
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).
</TABLE>
<PAGE> 22
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)
*Denotes executive compensation contract or arrangement.
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Company during
the quarter ended June 30, 1999
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, 1999 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, 1999, 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,278,684
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,613,647
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28,399,306
<INVESTMENTS-CARRYING> 2,795,034
<INVESTMENTS-MARKET> 2,710,327
<LOANS> 47,144,326
<ALLOWANCE> 633,575
<TOTAL-ASSETS> 96,019,726
<DEPOSITS> 79,671,961
<SHORT-TERM> 2,145,494
<LIABILITIES-OTHER> 434,863
<LONG-TERM> 0
0
0
<COMMON> 1,207,177
<OTHER-SE> 12,560,231
<TOTAL-LIABILITIES-AND-EQUITY> 96,019,726
<INTEREST-LOAN> 1,879,636
<INTEREST-INVEST> 788,622
<INTEREST-OTHER> 212,988
<INTEREST-TOTAL> 2,881,246
<INTEREST-DEPOSIT> 1,102,728
<INTEREST-EXPENSE> 1,166,305
<INTEREST-INCOME-NET> 1,714,941
<LOAN-LOSSES> 126,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,256,340
<INCOME-PRETAX> 570,153
<INCOME-PRE-EXTRAORDINARY> 371,292
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 371,292
<EPS-BASIC> 0.31
<EPS-DILUTED> 0.30
<YIELD-ACTUAL> 4.28
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 532,025
<CHARGE-OFFS> 26,450
<RECOVERIES> 2,000
<ALLOWANCE-CLOSE> 633,575
<ALLOWANCE-DOMESTIC> 633,575
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 633,575
</TABLE>
