-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LjPCyj9X2B6ZGA5UizmpFFYKBIhgSnvVhq4AUKyN0HDUo8GqwqY3hzUN7/uYdddN i7w/CLwOTcPFolJfPonNrg== 0000950144-99-003384.txt : 19990330 0000950144-99-003384.hdr.sgml : 19990330 ACCESSION NUMBER: 0000950144-99-003384 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST COMMUNITY CORP /SC/ CENTRAL INDEX KEY: 0000932781 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 571010751 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-28344 FILM NUMBER: 99575846 BUSINESS ADDRESS: STREET 1: 5455 SUNSET BLVD CITY: LEXINGTON STATE: SC ZIP: 29072 BUSINESS PHONE: 8032538875 10KSB 1 FIRST COMMUNITY CORPORATION/SC 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB (MARK ONE) X Annual Report under Section 13 or 15(d) of the Securities Exchange - ----- Act of 1934 (No Fee required) For the fiscal year ended December 31, 1998 ----------------- OR Transition Report under Section 13 or 15(d) of the Securities - ------ Exchange Act of 1934 (No fee required) For the transition period from to -------- -------- Commission file no. 33-86258 --------- First Community Corporation ---------------------------------------------- (Name of Small Business Issuer in Its Charter) South Carolina 57-1010751 --------------------------------- ------------------ (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 5455 Sunset Blvd., Lexington, South Carolina 29072 -------------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) (803) 951-2265 ---------------------------------------------- Issuer's Telephone Number, Including Area Code Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None 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 past 90 days. Yes X No --- --- Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] The aggregate market value of the voting stock as of March 15, 1999, held by non-affiliates of the registrant based on the average of the quoted bid and ask as of March 15, 1999, was $17,054,650. The issuer's revenues for its most recent fiscal year were $5,015,224. 1,207,177 shares of the Issuer's common stock were issued and outstanding as of March 15, 1999. Documents Incorporated by Reference Portions of the Registrant's definitive Proxy Statement for its April 21, 1999 Annual Meeting of Shareholders, are incorporated by reference into Part III thereof. Transitional Small Business Disclosure Format. (Check one): Yes No X --- --- ================================================================================ 2 PART I ITEM 1. BUSINESS. GENERAL First Community Corporation was incorporated as a South Carolina corporation on November 2, 1994, primarily to own and control all of the capital stock of First Community Bank, N.A. The company presently engages in no business other than owning and managing the bank. The bank is a national banking association which engages in a commercial banking business from its main office in Lexington, South Carolina and a second office located in Richland County, South Carolina. The bank's deposits are insured by the Federal Deposit Insurance Corporation (the "FDIC"), and it is a member of the Federal Reserve System. In July 1995, the Company completed its initial public offering of 688,077 shares of its common stock, at a price of $10.00 per share. On August 17, 1995, the bank opened for business. On July 10, 1998 the company closed a secondary offering in which it issued 517,500 shares of common stock. The net proceeds received in the secondary offering was approximately $6.6 million after deducting issuance cost. The proceeds are to be used to purchase properties and construct and outfit three branches in the next six to eighteen months. The estimated cost for the three branches is approximately $3.0 million. The remaining proceeds are to be used to support initial loan growth at the three new branch offices, as well as the company's two existing branches, and for other general corporate purposes. At December 31, 1998, the company has entered into contracts on two properties located in the Midlands of South Carolina. Branch construction on the first property located in Irmo, South Carolina has commenced with a projected opening on March 29, 1999. The contract on the second property is located in West Columbia, South Carolina and provides for a due diligence period and termination of the contract without penalty under certain conditions. It is anticipated that this property will be closed on during the first quarter of 1999. LOCATION AND SERVICE AREA The bank is engaged in a general commercial and retail banking business, emphasizing the needs of small-to-medium sized businesses, professional concerns and individuals, primarily in Columbia, South Carolina and the surrounding area, including Lexington and Richland Counties. The bank has its main office located in the city of Lexington, South Carolina in Lexington County and a branch office located in the city of Forest Acres, South Carolina in Richland County. A third branch is under construction in Irmo, South Carolina (Lexington County). See "Facilities." The Main Office primarily serves the area in and around Lexington, South Carolina, which is west of Columbia in Lexington County. The Forest Acres Office primarily serves the area around Forest Acres, South Carolina, which is east of Columbia in Richland County. The Branch under construction in Irmo, South Carolina will serve that community and is anticipated to be opened at the end of the first quarter 1999. Lexington County and Richland County are located in the geographic center of the state of South Carolina. Columbia, the capital of South Carolina, is located within and divided between these two counties. Columbia can be reached via three interstate highways: I-20, I-26, and I-77. Columbia is served by several airlines as well as by passenger and freight rail service. According to the U. S. Census Bureau, Richland and Lexington Coutnies which includes the projected service areas for both current sites of the bank and the two projected sites, had an estimated population in 1995 of 491,600. Lexington County had a population of 191,900 and Richland County had a population of 299,700. The principal components of the economy within the company's market areas are service industries, government, and wholesale and retail trade. The largest employers in the area each of which employs in excess of 3,000 people in the Midlands area, include Fort Jackson Army Base, the University of South Carolina, Policy Management Systems Corporation, Richland Memorial Hospital, 3 Blus Cross Blue Shield, SCANA Corporation and Pepsi Cola, Inc. The area has experienced steady growth over the past ten years and the Company expects the area, as well as the service industry needed to support it, to continue to grow. Both Richland and Lexington Counties have one of the highest per capita incomes in the state at, $40,500 in 1995 compared to $29,000 for South Carolina as a whole. BANKING SERVICES The bank offers a full range of deposit services that are typically available in most banks and savings and loan associations, including checking accounts, NOW accounts, savings accounts and other time deposits of various types, ranging from daily money market accounts to longer-term certificates of deposit. The transaction accounts and time certificates are tailored to the bank's principal market area at rates competitive to those offered in the area. In addition, the bank offers certain retirement account services, such as Individual Retirement Accounts (IRAs). All deposit accounts are insured by the FDIC up to the maximum amount allowed by law (generally, $100,000 per depositor subject to aggregation rules). The bank solicits these accounts from individuals, businesses, associations and organizations, and governmental authorities. The bank also offers a full range of commercial and personal loans. Commercial loans include both secured and unsecured loans for working capital (including inventory and receivables), business expansion (including acquisition of real estate and improvements), and purchase of equipment and machinery. Consumer loans include secured and unsecured loans for financing automobiles, home improvements, education and personal investments. The bank also makes real estate construction and acquisition loans. The bank originates fixed and variable rate mortgage loans in the name of a third party which are sold into the secondary market.. The bank's lending activities are subject to a variety of lending limits imposed by federal law. While differing limits apply in certain circumstances based on the type of loan or the nature of the borrower (including the borrower's relationship to the bank), in general the bank is subject to a loan-to-one-borrower limit of an amount equal to 15% of the bank's unimpaired capital and surplus, or 25% of the unimpaired capital and surplus if the excess over 15% is approved by the board of directors of the bank and is fully secured by readily marketable collateral. The bank may not make any loans to any director, officer, employee or 10% shareholder of the Company or the bank unless the loan is approved by the Board of Directors of the bank and is made on terms not more favorable to such person than would be available to a person not affiliated with the bank. Other bank services include cash management services, safe deposit boxes, travelers checks, direct deposit of payroll and social security checks, and automatic drafts for various accounts. The bank offers non-deposit investment products and other investment brokerage services through a registered representative with an affiliation through AAG Securities, Inc. The bank is associated with Honor and Plus networks of automated teller machines and Mastermoney debit cards that may be used by Bank customers throughout South Carolina and other regions. The bank also offers VISA and Mastercard credit card services through a correspondent bank as an agent for the bank. The bank does not plan to exercise trust powers during its initial years of operation. The bank may in the future offer a full-service trust department, but cannot do so without the prior approval of the OCC. COMPETITION The banking business is highly competitive. The bank competes as a financial intermediary with other commercial banks, savings and loan associations, credit unions and money market mutual funds operating in the Columbia area and elsewhere. As of December 31, 1998, there were thirteen commercial banks operating approximately 137 offices and four thrifts with a total of 4 offices in the Lexington and Richland county area. The company faces increased competition from both federally-chartered and state -chartered financial institutions, as well as credit unions, consumer finance companies, insurance companies and other institutions in the 4 company's market area. A number of these competitors are well established in the Lexington and Richland County Area. Most of them have substantially greater resources and lending limits than the bank and offer certain services, such as established branch networks and trust services, that the bank does not currently provide. The bank is the only one of these institutions that is locally owned and operated. The Company believes that the community bank focus of the bank with its emphasis on service to small and medium size businesses, individual and professional concerns, gives it an advantage in this market. EMPLOYEES The bank presently has 24 full-time employees and two part-time employees. The company does not have any employees other than its officers, none whom receive any remuneration for their services to the company. SUPERVISION AND REGULATION THE COMPANY Because it owns the outstanding common stock of the bank, the Company is a bank holding company within the meaning of the federal Bank Holding Company Act of 1956 (the "BHCA") and The South Carolina Bank Holding Company Act (the "South Carolina Act"). The activities of the Company are also governed by the Glass-Steagall Act of 1933 (the "Glass-Steagall Act"). Under the BHCA, the Company is subject to periodic examination by the Federal Reserve and files periodic reports of its operations and such additional information as the Federal Reserve may require. The Company's and the bank's activities are limited to banking, managing or controlling banks, furnishing services to or performing services for its subsidiaries, and engaging in other activities that the Federal Reserve determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. With certain limited exceptions, the BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve before (I) acquiring substantially all the assets of any bank, (ii) acquiring direct or indirect ownership or control of any voting shares of any bank if after such acquisition it would own or control more than 5% of the voting shares of such bank (unless it already owns or controls the majority of such shares), or (iii) merging or consolidating with another bank holding company. In addition, and subject to certain exceptions, the BHCA and the Change in Bank Control Act, together with regulations thereunder, require Federal Reserve approval (or, depending on the circumstances, no notice of disapproval) prior to any person or company acquiring "control" of a bank holding company, such as the Company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Control is rebuttably presumed to exist if a person acquires 10% or more but less than 25% of any class of voting securities. The regulations provide a procedure for challenge of the rebuttable control presumption. Under the BHCA, a bank holding company is generally prohibited from engaging in, or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in, nonbanking activities, unless the Federal Reserve Board, by order or regulation, has found those activities to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the activities that the Federal Reserve Board has determined by regulation to be proper incidents to the business of a bank holding company include making or servicing loans and certain types of leases, engaging in certain insurance and discount brokerage activities, performing certain data processing services, acting in certain circumstances as a fiduciary or investment or financial adviser, owning savings associations, and making investments in certain corporations or projects designed primarily to promote community welfare. 5 The Federal Reserve Board will impose certain capital requirements on the Company under the BHCA, including a minimum leverage ratio and a minimum ratio of "qualifying" capital to risk-weighted assets. These requirements are described below under "-- Capital Regulations." Subject to its capital requirements and certain other restrictions, the Company is able to borrow money to make a capital contribution to the bank, and such loans may be repaid from dividends paid from the bank to the Company (although the ability of the bank to pay dividends will be subject to regulatory restrictions as described below in "-- The bank -- Dividends"). The Company is also able to raise capital for contribution to the bank by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws. In accordance with Federal Reserve Board policy, the Company is expected to act as a source of financial strength to the bank and to commit resources to support the bank in circumstances in which the Company might not otherwise do so. Under the BHCA, the Federal Reserve Board may require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve Board's determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution's financial condition. The Company is also restricted in its activities by the provisions of the Glass-Steagall Act, which prohibit the Company from owning subsidiaries that are engaged principally in the issue, flotation, underwriting, public sale, or distribution of securities. The interpretation, scope, and application of the provisions of the Glass-Steagall Act currently are being considered and reviewed by regulators and legislators, and the interpretation and application of those provisions have been challenged in the federal courts. As a bank holding company registered under the South Carolina Act, the Company is subject to regulation by the South Carolina State Board of Financial Institutions (the "South Carolina Board"). Consequently, the Company must receive the approval of the South Carolina Board prior to engaging in the acquisitions of banking or nonbanking institutions or assets. The Company must also file with the South Carolina Board periodic reports with respect to its financial condition and operations, management, and intercompany relationships between the Company and its subsidiaries. The bank. The bank is operating as a national banking association incorporated under the laws of the United States and subject to examination by the OCC. Deposits in the bank are insured by the FDIC up to a maximum amount (generally $100,000 per depositor, subject to aggregation rules). The OCC and the FDIC regulate or monitor virtually all areas of the bank's operations, including security devices and procedures, adequacy of capitalization and loss reserves, loans, investments, borrowings, deposits, mergers, issuances of securities, payment of dividends, interest rates payable on deposits, interest rates or fees chargeable on loans, establishment of branches, corporate reorganizations, maintenance of books and records, and adequacy of staff training to carry on safe lending and deposit gathering practices. The OCC requires the bank to maintain certain capital ratios and imposes limitations on the bank's aggregate investment in real estate, bank premises, and furniture and fixtures. The bank is required by the OCC to prepare quarterly reports on the bank's financial condition and to conduct an annual audit of its financial affairs in compliance with minimum standards and procedures prescribed by the OCC. Under FDICIA, all insured institutions must undergo regular on-site examination by their appropriate banking agency. The cost of examinations of insured depository institutions and any affiliates is assessed by the appropriate agency against each institution or affiliate as it deems necessary or appropriate. Insured institutions are required to submit annual reports to the FDIC and the appropriate agency (and state supervisor when applicable). FDICIA also directs the FDIC to develop with other appropriate agencies a method for insured depository institutions to provide supplemental disclosure of the estimated fair market value of assets and 6 liabilities, to the extent feasible and practicable, in any balance sheet, financial statement, report of condition or any other report of any insured depository institution. FDICIA also requires the federal banking regulatory agencies to prescribe, by regulation, standards for all insured depository institutions and depository institution holding companies relating, among other things, to: (I) internal controls, information systems, and audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; and (v) asset quality. National banks and their holding companies which have been chartered or registered or undergone a change in control within the past two years or which have been deemed by the OCC or the Federal Reserve Board, respectively, to be troubled institutions must give the OCC or the Federal Reserve Board, respectively, thirty days prior notice of the appointment of any senior executive officer or director. Within the thirty day period, the OCC or the Federal Reserve Board, as the case may be, may approve or disapprove any such appointment. The Company and the bank will meet the criteria which trigger this additional approval during the first two years of operation. The FDIC establishes rates for the payment of premiums by federally insured banks and thrifts for deposit insurance. A separate Bank Insurance Fund ("BIF") and Savings Association Insurance Fund ("SAIF") are maintained for commercial banks and thrifts, respectively, with insurance premiums from the industry used to offset losses from insurance payouts when banks and thrifts fail. Beginning in 1993, insured depository institutions pay for deposit insurance under a risk-based premium system. Under this system, a BIF insured depositor institution paid to BIF from $.04 to $.31 per $100 of insured deposits depending on its capital levels and risk profile, as determined by its primary federal regulator subject to a minimum semi-annual assessment of $1,000 per institution. Once the BIF reached its legally mandated reserve ratio in mid-1995, the FDIC lowered premiums for well capitalized banks, eventually to $.00 per $100, with a minimum semi-annual assessment of $1,000. However, in 1996 Congress enacted the Deposit Insurance Funds Act of 1996, which eliminated the minimum assessment. It also separated, effective January 1, 1997, the Financing Corporation (FICO) assessment to service the interest on its bond obligations. The amount assessed on individual institutions, including the bank, by the FICO will be in addition to the amount paid for deposit insurance according to the risk-related assessment rate schedule. Increases in deposit insurance premiums or changes in risk classification will increase the bank's cost of funds, and there can be no assurance that such cost can be passed on the bank's customers. The bank is subject to the provisions of Section 23A of the Federal Reserve Act, which place limits on the amount of loans or extensions of credit to, or investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or obligations of affiliates. The aggregate of all covered transactions is limited in amount, as to any one affiliate, to 10% of the bank's capital and surplus and, as to all affiliates combined, to 20% of the bank's capital and surplus. Furthermore, within the foregoing limitations as to amount, each covered transaction must meet specified collateral requirements. Compliance is also required with certain provisions designed to avoid the taking of low quality assets. The bank is also subject to the provisions of Section 23B of the Federal Reserve Act which, among other things, prohibit an institution from engaging in certain transactions with certain affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with non-affiliated companies. The bank is subject to certain restrictions on extensions of credit to executive officers, directors, certain principal shareholders, and their related interests. Such extensions of credit (I) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and (ii) must not involve more than the normal risk of repayment or present other unfavorable features. A national bank may not pay dividends from its capital: All dividends must be paid out of undivided profits then on hand, after deducting expenses, including reserves for losses and bad debts. In addition, a national bank is prohibited from declaring a dividend on its shares of common stock until its surplus equals its stated 7 capital, unless there has been transferred to surplus no less than one-tenth of the bank's net profits of the preceding two consecutive half-year periods (in the case of an annual dividend). The approval of the OCC is required if the total of all dividends declared by a national bank in any calendar year exceeds the total of its net profits for that year combined with its retained net profits for the preceding two years, less any required transfers to surplus. National banks are required by the National Bank Act to adhere to branch office banking laws applicable to state banks in the states in which they are located. Under current South Carolina law, the bank may open branch offices throughout South Carolina with the prior approval of the OCC. In addition, with prior regulatory approval, the bank will be able to acquire existing banking operations in South Carolina. Furthermore, federal legislation has recently been passed which permits interstate branching. The new law permits out of state acquisitions by bank holding companies (subject to veto by new state law), interstate branching by banks if allowed by state law, interstate merging by banks, and de novo branching by national banks if allowed by state law. The Company currently has no plans or agreements whereby the bank would acquire other banks or thrifts. The Community Reinvestment Act requires that, in connection with examinations of financial institutions within their respective jurisdictions, the Federal Reserve, the FDIC, the OCC, or the Office of Thrift Supervision (the "OTS") shall evaluate the record of the financial institutions in meeting the credit needs of their local communities, including low and moderate income neighborhoods, consistent with the safe and sound operation of those institutions. These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. Interest and certain other charges collected or contracted for by the bank are subject to state usury laws and certain federal laws concerning interest rates. The bank's loan operations are also subject to certain federal laws applicable to credit transactions, such as the federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; the Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution will be fulfilling its obligation to help meet the housing needs of the community it serves; the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; the Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws. The deposit operations of the bank also are subject to the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records, and the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that act, which governs automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services. CAPITAL REGULATIONS The federal bank regulatory authorities have adopted risk-based capital guidelines for banks and bank holding companies that are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, account for off-balance sheet items. The guidelines are minimums, and the federal regulators have noted that banks and bank holding companies contemplating significant expansion programs should not allow expansion to diminish their capital ratios and should maintain in excess of the minimums. Neither the Company nor the bank has received any notice indicating that either entity will be subject to higher capital requirements. The current guidelines require all bank holding companies and federally-regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier 1 capital. Tier 1 capital includes common shareholders' equity, qualifying perpetual preferred 8 stock, and minority interests in equity accounts of consolidated subsidiaries, but excludes goodwill and most other intangibles and excludes the allowance for loan and lease losses. Tier 2 capital includes the excess of any preferred stock not included in Tier 1 capital, mandatory convertible securities, hybrid capital instruments, subordinated debt and intermediate term-preferred stock, and general reserves for loan and lease losses up to 1.25% of risk-weighted assets. Under these guidelines, banks' and bank holding companies' assets are given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance sheet items are given credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. These computations result in the total risk-weighted assets. Most loans are assigned to the 100% risk category, except for first mortgage loans fully secured by residential property and, under certain circumstances, residential construction loans, both of which carry a 50% rating. Most investment securities are assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% rating, and direct obligations of or obligations guaranteed by the United States Treasury or United States Government agencies, which have a 0% rating. The federal bank regulatory authorities have also implemented a leverage ratio, which is Tier 1 capital as a percentage of average total assets less intangibles, to be used as a supplement to the risk-based guidelines. The principal objective of the leverage ratio is to place a constraint on the maximum degree to which a bank holding company may leverage its equity capital base. The minimum required leverage ratio for top-rated institutions is 3%, but most institutions are required to maintain an additional cushion of at least 100 to 200 basis points. FDICIA established a new capital-based regulatory scheme designed to promote early intervention for troubled banks and requires the FDIC to choose the least expensive resolution of bank failures. The new capital-based regulatory framework contains five categories of compliance with regulatory capital requirements, including "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." To qualify as a "well capitalized" institution, a bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of no less than 6%, and a total risk-based capital ratio of no less than 10%, and the bank must not be under any order or directive from the appropriate regulatory agency to meet and maintain a specific capital level. Initially, the Organizers expect the bank to qualify as "well-capitalized." Under the FDICIA regulations, the applicable agency can treat an institution as if it were in the next lower category if the agency determines (after notice and an opportunity for hearing) that the institution is in an unsafe or unsound condition or is engaging in an unsafe or unsound practice. The degree of regulatory scrutiny of a financial institution will increase, and the permissible activities of the institution will decrease, as it moves downward through the capital categories. Institutions that fall into one of the three undercapitalized categories may be required to (I) submit a capital restoration plan; (ii) raise additional capital; (iii) restrict their growth, deposit interest rates, and other activities; (iv) improve their management; (v) eliminate management fees; or (vi) divest themselves of all or a part of their operations. Bank holding companies controlling financial institutions can be called upon to boost the institutions' capital and to partially guarantee the institutions' performance under their capital restoration plans. These capital guidelines can affect the Company in several ways. Subsequent to the initial public offering the Company's capital levels are more than adequate. However, rapid growth, poor loan portfolio performance, or poor earnings performance, or a combination of these factors, could change the Company's capital position in a relatively short period of time, making an additional capital infusion necessary. Effective January 1, 1997 the OCC amended the risk-based capital standards to incorporate a measure for market risk to cover all positions located in an institution's trading account, foreign exchange and commodity positions wherever located. The effect of the rule is that it requires any bank or bank holding company with significant exposure to market risk to measure the risk and hold capital commensurate with that risk. Since the 9 bank does not currently engage, nor has any plans to engage in trading, foreign exchange or commodity position activities, the rule does not have an effect on the required Bank capital levels. Failure to meet capital requirements would mean that a bank would be required to develop and file a plan with its primary federal banking regulator describing the means and a schedule for achieving the minimum capital requirements. In addition, such a bank would generally not receive regulatory approval of any application that requires the consideration of capital adequacy, such as a branch or merger application, unless the bank could demonstrate a reasonable plan to meet the capital requirement within a reasonable period of time. ENFORCEMENT POWERS FIRREA expanded and increased civil and criminal penalties available for use by the federal regulatory agencies against depository institutions and certain "institution-affiliated parties" (primarily including management, employees, and agents of a financial institution, independent contractors such as attorneys and accountants and others who participate in the conduct of the financial institution's affairs). These practices can include the failure of an institution to timely file required reports or the filing of false or misleading information or the submission of inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such violations. Criminal penalties for some financial institution crimes have been increased to twenty years. In addition, regulators are provided with greater flexibility to commence enforcement actions against institutions and institution-affiliated parties. Possible enforcement actions include the termination of deposit insurance. Further more, FIRREA expanded the appropriate banking agencies' power to issue cease and desist orders that may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions as determined by the ordering agency to be appropriate. RECENT LEGISLATIVE DEVELOPMENTS The Interstate Banking Act, passed by Congress in 1994, allows unrestricted interstate bank mergers and interstate acquisition of banks by bank holding companies, and ultimately will permit interstate de novo branching by banks. The states, however, may opt in or opt out of several of the Interstate Banking Act's provisions. In 1994, South Carolina amended its bank holding company act to opt into these provisions and allow nationwide interstate banking beginning in 1996. As a result of these new laws, the number of competitors in the Company's market may increase. However, the Company believes it can compete effectively in the market and that the legislation will not have a material adverse impact on the Company or the bank. From time to time, various bills are introduced in the United States Congress and at the state legislative level with respect to the regulation of financial institutions. Certain of these proposals, if adopted, could significantly change the regulation of banks and the financial services industry. The Company cannot predict whether any of these proposals will be adopted or, if adopted, how these proposals would affect the Company. EFFECT OF GOVERNMENTAL MONETARY POLICIES The earnings of the bank are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Board's monetary policies have had, and will likely continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve Board have major effects upon the levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies. 10 ITEM 2. DESCRIPTION OF PROPERTY. Lexington Property. The principal place of business of both the Company and the Main Office is located at 5455 Sunset Boulevard, Lexington, South Carolina 29072. The site of the bank's main office is a 2.29 acre plot of land. The site was purchased for $576,000. The Company and the bank are operating in an 8500 square foot facility located on this site. This site is designed to allow the addition of 12,000 square feet to the facility at some future date and as needed. Forest Acres Property. The bank also operates a Branch Office facility at 4404 Forest Drive, Columbia, South Carolina 29206. The Forest Acres site is a .71 acre plot of land which was acquired at a cost of $376,000. The banking facility is approximately 4,000 square feet with a total cost of construction of approximately $545,000 including paving and landscaping. The company has purchased one site and entered into a contract on another site as of December 31, 1998. The purchased site is located at 1030 Lake Murray Boulevard, Irmo, South Carolina and construction on this property has been initiated. The cost of this property was approximately $449,000 and construction cost are approximately $512,000. The site is approximately 1.0 acres and the banking facility will be approximately 3,000 square feet when completed. The site under contract is located at 506 Meeting Street, West Columbia, South Carolina and the contract purchase price is $300,000. The company has not yet entered into contract for the construction of the facility to be located at this site. ITEM 3. LEGAL PROCEEDINGS. Neither the company nor the bank is a party to, nor is any of their property the subject of, any material pending legal proceedings related to the business of the company or the bank. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's articles of incorporation authorize it to issue up to 10,000,000 shares of common stock, par value $1.00 per share (the "Common Stock"), of which 1,207,177 were issued and outstanding as of December 31, 1998. The stock is quoted on the OTC Bulletin Board under the trading symbol "FCCO." The Company has never paid any dividends. It is anticipated that earnings will be retained for several years to expand the bank's capital base to support deposit growth and that no dividends will be paid on the company's stock for several years. Moreover, the National Banking Act limits dividend payments by national banks such as the bank, which in turn could limit the Company's ability to pay dividends. The bank may only pay dividends out of its net profits then on hand, after deducting expenses, including losses and bad debts. In addition, the bank is prohibited from declaring a dividend on its shares of common stock until its surplus equals its stated capital, unless there has been transferred to surplus no less than one-tenth of the bank's net profits of the preceding two consecutive half-year periods (in the case of an annual dividend). The approval of the OCC will be required if the total of all dividends declared in any calendar year by the bank exceeds the bank's net profits to date, as defined, for that 11 year combined with its retained net profits for the preceding two years less any required transfers to surplus. At December 31, 1998, has $114,000 free of these restrictions. The OCC also has the authority under federal law to enjoin a national bank from engaging in what in its opinion constitutes an unsafe or unsound practice in conducting its business, including the payment of a dividend under certain circumstances. The following is a summary of stock prices for the Company since the stock began to be quoted on the OTC Bulletin Board.
1998 High Low ---- ---- --- Third quarter $17.00 $15.00 Fourth quarter $17.00 $15.00
12 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. GENERAL First Community Corporation is a one bank holding company. The Company commenced operations on November 2, 1994. 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 engages in a general commercial and retail banking business characterized by personalized service and local decision making, emphasizing the banking needs of small to medium-sized businesses, professional concerns and individuals. 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 it's first quarterly profit in the fourth quarter of 1996 and has experienced continued profits for each subsequent quarter through the fourth quarter of 1998. The Company has grown from approximately $38.1 million in total assets, $15.9 million in loans, $30.9 million in deposits and $5.8 million in shareholders' equity at December 31, 1996 to approximately $73.2 million in total assets, $40.3 million in loans $56.0 million in deposits and $13.6 million in shareholders' equity at December 31, 1998. In July 1998 the Company completed a secondary public offering of its common stock and raised $6.6 million in additional capital. Comparisons of the Company's and the Bank's results for all of the periods presented, particularly with respect to their banking operations, should be made with an understanding of the Company's short history. The following discussion is intended to assist the readers in understanding and evaluating the financial condition and results of operations of the Company. This review should be read in conjunction Company's financial statements and accompanying notes included elsewhere herein. This analysis provides an overview of the significant changes that occurred during the periods presented. In July 1998 the Company closed a secondary stock offering in which it raised approximately $6.6 million in additional capital. The use of the proceeds of this offering are to support its continued growth through its existing offices and by opening three additional branches in the next 12 to 18 months in other fast growing areas in the Midlands of South Carolina. At December 31, 1998 the Company has begun construction on one new location located in Irmo, South Carolina and has entered into a contract to purchase one additional location. The Irmo property was purchased for approximately $449,000 and the contract for the construction of the facility is for approximately $512,000. It is anticipated that the Irmo location will open at the end of the first quarter of 1999. The additional location is in Cayce-West Columbia, South Carolina. The Company has certain rights under the terms of the contract on Cayce-West Columbia which allow for an inspection and due diligence period and termination of the contract without penalty under certain conditions. The purchase price of the Cayce-West Columbia property is $300,000. Because the Company has not yet acquired this location or entered into a contract for the construction of the facility, it has not determined with certainty the cost to open the branch. The Company will use remaining proceeds beyond the cost of purchasing the properties and construction of facilities to support initial loan growth at the new branches, as well as at the Company's two existing branch offices, and for other general corporate purposes. RESULTS OF OPERATIONS The Company's net income was $847,000 or $0.90 per share for the year-ended December 31, 1998, as compared to a net income of $251,000 or $0.36 per share for the year ended December 31, 1997, and a loss of $282,000 or $0.41 per share for the year ended December 31, 1996. The increase in net income from 1997 to 1998 results primarily from a $857,000 increase in net interest income. Increased net interest income resulted 13 from continued growth in all categories of earning assets during 1998. Earning assets averaged $58.6 million in 1998 as compared to $40.6 million in 1997. Yields earned and rates paid on the various components of the balance sheet showed modest changes between the periods. Overall there was an improvement of 10 basis points in the net interest margin in 1998 as compared to 1997. A $174,000 increase in non-interest income in 1998 as compared to 1997 also contributed to the improvement in net income. Increases in non-interest income resulted from increased deposit and related account charges associated with increased deposit balances as well as a $77,000 increase in mortgage origination fees. The increases in net interest income and non-interest income were partially offset by a $391,000 increase in non-interest expense. All categories of non-interest expense increased during 1998 as compared to 1997. The increases in expenses primarily result from anticipated increases in staff during this period, higher marketing and advertising expenses, as well as increased expenses related to supplies and activity fees due to the growth in numbers and volumes of accounts. In addition, the Bank incurred approximately $50,000 of cost associated with remediation and testing of systems for year 2000 compliance. The improvement in net income in 1997 over a 1996 net loss of $282,000 is also a result of growth in the net interest margin and increases in non-interest income. The improvement in these areas as well as increases in non-interest expense in 1997 as compared to 1996 result from the substantial growth in the size of the Company during the period. Total assets grew from $38.1 million at December 31, 1996 to $51.0 million at December 31, 1997. Average earning assets increased to $40.6 million during 1997 as compared to $24.0 million during 1996. The return on average assets for 1998, 1997 and 1996, was 1.33%, 0.56% and (1.04%), respectively and return on average equity was 8.68%, 4.28% and (4.82%), respectively. Net Interest Income The largest component of operating earnings for the Company is net interest income, which is the difference between the income earned on assets and interest paid on deposits and borrowings used to support such assets. Net interest income is determined by the rates earned on the Company's interest-earning assets and the rates paid on its interest-bearing liabilities, the relative amounts of interest-earning assets and interest-bearing liabilities, and the degree of mismatch and the maturity and repricing characteristics of its interest-earning assets and interest-bearing liabilities. Net interest income totaled $2.7 million in 1998, $1.8 million in 1997 and $1.0 million in 1996. Net interest spread, the difference between the yield on earning assets and the rate paid on interest-bearing liabilities, was 3.57% in 1998 as compared to 3.55% in 1997 and 3.13% in 1996. The reason for the increase in net interest income between 1998 and 1997 was primarily due to the $18.0 million increase in the level of earning assets between the two periods. Similarly, the increase in net interest income of $778,000 in 1997 as compared to 1996 was the result of increases in the level of earning assets as well as an improvement in the net interest spread from 3.13% in 1996 as compared to 3.55% in 1997. In 1998 loans represented 57.3% of earning assets as compared to 57.1% in 1997. Loans typically provide a higher yield than other types of earning assets and thus one of the Company's goals is to continue to grow the loan portfolio as a percentage of earning assets. The yield on earning assets decreased from 7.86% in 1997 to 7.81% in 1998. The decrease was primarily a result of a decrease in general market rates during 1998 due to several reductions in the federal funds target rate established by the Federal Reserve Board and related decreases in the Bank's prime lending rate. This decrease in yield on average earning assets was partially offset by a decrease in the rate paid on interest-bearing liabilities to 4.24% in 1998 to 4.31% in 1997. The increase in net interest income in 1997 of $778,000 as compared to the prior year was a result of the Bank allocating a greater percentage of its earning assets to loans in 1997 than it did in 1996 (57.1% in 1997 as compared to 44.5% in 1996, based on average balances for each year). 14 Average Balances, Income Expenses and Rates. The following tables depict, for the periods indicated, certain information related to the Company's average balance sheet and its average yields on assets and average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been derived from daily averages.
AVERAGE BALANCES, INCOME AND EXPENSES, AND RATES (IN THOUSANDS) YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------------- 1998 1997 1996 ---- ---- ---- AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE ------- ------- ---- ------- ------- ---- ------- ------- ASSETS Earning Assets Loans (1) ...................................... $33,641 $ 3,152 9.37% 23,192 $ 2,184 9.42% $10,648 $1,005 9.43% Securities: Taxable ...................................... 17,561 1,032 5.88% 13,239 782 5.91% 10,856 635 5.85% Federal funds sold and securities purchased under agreement to resell .......... 7,411 395 5.33% 4,193 228 5.43% 2,446 130 5.33% ------ ------- ---- ------ ------- ---- ------- ------ ---- Total earning assets ......................... 58,613 4,579 7.81% 40,624 3,194 7.86% 23,950 1,770 6.20% ------- ---- ------ ------- ---- ------ ---- Cash and due from banks ........................... 1,900 1,349 928 Premises and equipment ............................ 3,149 2,873 2,020 Other assets ...................................... 452 351 258 Allowance for loan losses ......................... (464) (284) (132) ------- -------- ------- Total assets ................................. $63,650 $ 44,913 $27,024 ======= ======== ======= LIABILITIES Interest-Bearing Liabilities Interest-bearing transaction accounts(1) ....... $ 5,987 $ 69 1.15% $ 4,393 $ 61 1.40% $ 2,411 $ 36 1.49% Money market accounts .......................... 7,832 341 4.35% 4,740 213 4.50% 1,595 52 3.24% Savings deposits (1) ........................... 7,232 270 3.73% 6,264 240 3.84% 3,707 148 4.01% Time deposits (1) .............................. 21,045 1,101 5.23% 15,251 803 5.26% 8,646 459 5.31% Other short-term borrowings .................... 3,121 139 4.45% 1,662 75 4.48% 1,167 51 4.32% ------- ------- ---- ------ ------- ---- ------- ------ ---- Total interest-bearing liabilities ........... 45,217 1,920 4.24% 32,310 1,392 4.31% 17,526 746 4.26% ------- ---- ------ ------- ---- ------ ---- Demand deposits (1) ............................... 8,260 6,440 3,449 Other liabilities ................................. 417 296 197 Shareholders' equity .............................. 9,756 5,867 5,852 ------- -------- ------- Total liabilities and shareholders' equity ... 63,650 $44,913 $27,024 ======= ======== ======= Net interest spread ............................... 3.57% 3.55% 3.13% Net interest income/margin ........................ $ 2,659 4.54% $1,802 4.44% $1,024 4.28% ======= ====== ======
----------- (1) All loans and deposits are domestic. The Company had no nonaccrual loans during the periods presented. 15 The following table presents the dollar amount of changes in interest income and interest expense attributable to changes in volume and the amount attributable to changes in rate. The combined effect in both volume and rate, which cannot be separately identified, has been allocated proportionately to the change due to volume and due to rate.
(IN THOUSANDS) 1998 versus 1997 1997 versus 1996 Increase (decrease) due to Increase (decrease) due to -------------------------- -------------------------- Volume Rate Net Volume Rate Net ------ ---- --- ------ ---- --- ASSETS Earning Assets Loans $ 979 $(12) $967 $1,181 $ (1) $1,180 Securities 254 (3) 251 141 6 147 Federal funds sold and securities purchased under agreements to resell 171 (4) 167 95 (2) 97 -- Total earning assets 1,405 (20) 1,385 1,304 120 1,424 ----- INTEREST-BEARING LIABILITIES Interest-bearing transaction accounts 15 (6) 9 27 (2) 25 Money market accounts 134 (7) 127 135 27 162 Savings deposits 35 (7) 28 98 (6) 92 Time deposits 303 (4) 299 347 (4) 343 Other short term borrowings 65 0 65 22 2 24 ----- ----- Total interest-bearing liabilities 548 (20) 528 637 9 646 ----- ----- Net interest income $ 857 $ 778 ===== =====
Interest Sensitivity. The Company monitors and manages the pricing and maturity of its assets and liabilities in order to diminish the potential adverse impact that changes in interest rates could have on its net interest income. A monitoring technique employed by the Company is the measurement of the Company's interest sensitivity "gap," which is the positive or negative dollar difference between assets and liabilities that are subject to interest rate repricing within a given period of time. Also, asset/liability modeling is performed by the Company to assess the impact varying interest rates and balance sheet mix assumptions will have on net interest income. Interest rate sensitivity can be managed by repricing assets or liabilities, selling securities available-for-sale, replacing an asset or liability at maturity or by adjusting the interest rate during the life of an asset or liability. Managing the amount of assets and liabilities repricing in the same time interval helps to hedge the risk and minimize the impact on net interest income of rising or falling interest rates. The Company evaluates interest sensitivity risk and then formulates guidelines regarding asset generation and repricing, funding sources and pricing, and off-balance sheet commitments in order to decrease interest sensitivity risk. 16 The following table illustrates the Company's interest rate sensitivity at December 31, 1998. INTEREST SENSITIVITY ANALYSIS
(IN THOUSANDS) AFTER THREE THROUGH AFTER SIX GREATER THAN WITHIN SIX THROUGH WITHIN ONE YEAR OR THREE MONTHS MONTHS TWELVE MONTHS ONE YEAR NONSENSITIVE TOTAL ------------ ------ ------------- -------- ------------ ----- ASSETS Earning Assets Loans .................................... $ 16,146 $ 2,375 $ 2,862 $ 21,383 $19,436 $40,819 Securities ............................... 332 1,000 500 1,832 21,011 22,843 Federal funds sold and securities purchased under agreement to resell ..................... 3,290 3,290 3,290 -------- ------- -------- -------- ------- ------- Total earning assets ................... 19,768 3,375 3,362 26,505 40,447 66,952 -------- ------- -------- -------- ------- ------- LIABILITIES Interest-bearing liabilities Interest-bearing deposits NOW Accounts (1) ......................... 757 757 1,515 3,029 3,031 6,060 Money Market accounts .................... 9,223 9,223 9,223 Savings deposits (1) ..................... 1,078 1,078 2,156 4,312 4,311 8,623 Time deposits ............................ 10,287 4,877 4,165 19,329 2,323 21,652 -------- ------- -------- -------- ------- ------- Total interest-bearing deposits ........ 21,345 6,712 7,836 35,893 9,665 45,558 Other short-term borrowings ............. 2,738 2,738 2,738 -------- ------- -------- -------- ------- ------- Total interest-bearing liabilities ... 24,083 6,712 7,836 38,631 9,665 48,296 -------- ------- -------- -------- ------- ------- Period gap ................................. $( 4,315) $(3,337) $ (4,474) $(12,126) $30,782 $18,656 Cumulative gap ............................. $( 4,315) $(7,652) $(12,126) $(12,126) $18,656 $18,656 Ratio of cumulative gap to total earning assets ............................ (6.44%) (11.42%) (18.11%) (18.11%) 27.86%
(1)NOW and savings accounts are subject to immediate withdrawal and repricing. These deposits do not tend to immediately react to changes in interest rates and the company believes these deposits are a stable and predictable funding source. Therefore, these deposits are included in the repricing period that management believes most closely matches the periods in which they are likely to reprice rather than the period in which the funds can be withdrawn contractually. The Company generally would benefit from increasing market rates of interest when it has an asset-sensitive gap and generally would benefit from decreasing market rates of interest when it is liability sensitive. The Company currently is liability sensitive over all time frames. However, the Company's gap analysis is not a precise indicator of its interest sensitivity position. The analysis presents only a static view of the timing of maturities and repricing opportunities, without taking into consideration that changes in interest rates do not 17 affect all assets and liabilities equally. Net interest income is also impacted by other significant factors, including changes in the volume and mix of earning assets and interest-bearing liabilities. Provision and Allowance for Loan Losses The Company has developed policies and procedures for evaluating the overall quality of its credit portfolio and the timely identification of potential problem credits. 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 valid. Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the loan loss allowance will not be required. Additions to the allowance for loan losses, which are expended as the provision for loan losses on the Company's income statement, are made periodically to maintain the allowance at an appropriate level based on management's analysis of the potential risk in the loan portfolio. Currently, the allowance for loan losses is evaluated on an overall portfolio basis. Management intends to implement an allocation system in the future. This system will allocate the allowance to loan categories, and will be implemented at the time the size and mix of the portfolio support such a system. The amount of the provision is a function of the level of loans outstanding, the level of nonperforming loans, historical loan loss experience, the amount of loan losses actually charged against the reserve during a given period, and current and anticipated economic conditions. At December 31, 1998 and 1997, the allowance for loan losses amounted to $532,000 and $380,000, respectively. This represents 1.30% and 1.31% of outstanding loans at December 31, 1998 and 1997, respectively. There were no non-accrual, restructured or other non-performing loans at December 31, 1998, 1997 or 1996. In addition, there was $3,000 in loans delinquent greater than 30 days at December 31, 1998 and none were delinquent greater than 30 days at December 31, 1997 and 1996. The provision for loan losses was $179,000, $194,000 and $135,000 for the years ended December 31, 1998, 1997 and 1996, respectively. The provision was made based on management's assessment of general loan loss risk and asset quality. ALLOWANCE FOR LOAN LOSSES (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ----------------------- 1998 1997 1996 ------- ------- ------- Average loans outstanding $33,641 $23,192 $10,648 ======= ======= ======= Loans outstanding at period end $40,819 $29,000 $15,915 ------- ======= ======= Total nonperforming loans -- -- -- ======= ======= Beginning balance of allowance $ 380 $ 201 $ 77 Loans charged-off: 1-4 family residential mortgage loans -- -- -- Home equity loans -- -- -- Commercial loans 28 -- -- Lease receivables 2 14 10 Installment & credit card loans 4 4 11 ------- ------- ------- Total loans charged-off 34 18 11 ------- ------- ------- Recoveries of previous charge-offs: 1-4 family residential mortgage loans -- -- -- Home equity loans -- -- -- Commercial loans -- -- -- Lease receivables 7 3 -- Installment & credit card loans -- -- -- ------- ------- ------- Total recoveries 7 3 -- ------- ------- ------- Net loans charged-off 27 15 11 ------- ------- ------- Provision for loan losses 179 194 135 ------- ------- ------- Balance at period end $ 532 $ 380 $ 201 ------- ======= ======= Net charge-offs to average loans .08% .06% .10% Allowance as percent of total loans 1.30% 1.31% 1.26% Nonperforming loans as % of total loans -- -- -- Allowance as % of nonperforming loans -- -- --
Accrual of interest is discontinued on loans when management believes, after considering economic and business conditions and collection efforts, that a borrower's financial condition is such that the collection of interest is doubtful. A delinquent loan is generally placed in nonaccrual status when it becomes 90 days or more past due. At the time a loan is placed in nonaccrual status, all interest which has been accrued on the loan but remains unpaid is reversed and deducted from earnings as a reduction of reported interest income. No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain. Potential Problem Loans. A potential problem loan is one in which management has serious doubts about the borrower's future performance under the terms of the loan contract. These loans are current as to principal and interest and, accordingly, they are not included in nonperforming assets categories. At December 31, 1998, the Company had no loans considered by management to be potential problem loans. The level of potential problem loans is one factor to be used in the determination of the adequacy of the allowance for loan losses. Noninterest Income and Expense Noninterest Income. The Company's primary source of noninterest income is service charges on deposit accounts. In addition, the Company originates mortgage loans which are closed in the name of a third party for which the Company receives a fee. Other sources of noninterest income is derived from bankcard fees, commissions on check sales, safe deposit box rent, wire transfer and official check fees. Noninterest income for the year ended December 31, 1998, was $436,000 as compared to $262,000 for 1997. This increase is primarily a result of the substantial growth in deposit account balances and the related deposit account fees. These fees amounted to $205,000 in 1998 as compared to $171,000 in 1997. Mortgage loan origination fees amounted to $119,000 in 1998 as compared to $41,000 in 1997. This increase is a result of the low mortgage loan rate environment in 1998 and the substantial amount of homeowner refinancing that occurred in 1998 as compared to 1997. The Company continues to place emphasis on this source of revenue in an effort to increase mortgage loan fee income. During the first quarter of 1998 the Company employed a registered investment representative and began offering nondeposit investment products such as mutual funds, annuities, stocks and bonds. Fees generated from the sale of these products amounted to $44,000 during the year ended December 31, 1998. Noninterest income amounted to $126,000 in 1996. The 18 substantial increase in 1997 as compared to 1996 is attributable to increased deposit account balances and the related deposit account fees of $89,000 and an increase in mortgage loan origination fees of $17,000. Noninterest Expense. In the very competitive financial services market of recent years, management recognizes the need to place a great deal of emphasis on expense management and will continue to evaluate and monitor growth in discretionary expense categories in order to control future increases. Noninterest expense increased from $1,619,000 for the year ended December 31, 1997 to $2,009,816 for the year ended December 31, 1998. Salary and employee benefits increased $185,000 in 1998 as compared to 1997. This increase results from normal merit increases as well as the addition of three full time equivalent employees in 1998 as compared to 1997. The Company also instituted a matching program to the existing 401(k) plan during 1998 where it matches 50% of the employees contribution up to 4%. The Company also began paying incentive compensation to the mortgage loan originator based on production goals that were not paid in 1997. Equipment expense increased from $144,000 in 1997 to $180,000 in 1998. This increase is primarily due to increased maintenance expense of approximately $28,000 the majority of which relates to remediation expense for existing computer software and hardware to upgrade them to ensure that they are year 2000 compliant. Marketing and public relations expense increased to $131,000 in 1998 as compared to $90,000 in 1997. This increase is attributable to planned budgeted increases in advertising during the Bank's third full year of operations. Other expense increased from $395,000 in 1997 to $518,000 in 1998. This increase is partially due to an increase in computer service bureau from $96,000 in 1997 to $149,000 in 1998. Approximately $37,500 of the increase in computer service bureau expense relates to testing and remediation for year 2000 compliance, with the balance of the increase resulting from increased transaction volume. Correspondent bank fees, and other expenses increased due to the growth of the Company in 1998 as compared to 1997 and the resulting increased activity. Noninterest expense increased from $1,297,000 in 1996 to $1,619,000 in 1997. Salary and employee benefits increased $172,000 in 1997 as compared to 1996. This increase results from normal merit increases as well as the addition of two full time equivalent and one part time equivalent employees in late 1996 and early 1997. Equipment expense increased $42,000 in 1997 as compared to 1996 primarily as a result of increases in maintenance contract expense for computer hardware and software. Marketing and public relations expense increased to $90,000 in 1997 as compared to $36,000 in 1996. This increase is attributable to planned increases in advertising during the Bank's second full year of operations. The following table sets forth for the periods indicated the primary components of non-interest expense:
(IN THOUSANDS) YEAR ENDED DECEMBER 1998 1997 1996 ------ ------ ------ Salaries and employee benefits $1,061 $ 876 $ 704 Occupancy 118 114 130 Equipment 180 144 102 Marketing and public relations 131 90 36 Data processing 149 96 94 Supplies 56 52 44 Telephone 25 22 23 Correspondent services 51 38 30 Insurance 39 32 22 Professional fees 42 36 36 Postage 33 22 13 Other 125 97 63 ------ ------ ------ $2,010 $1,619 $1,297 ====== ====== ======
19 Income Tax Expense The company had a operating loss carry forward of approximately $733,000, and $984,000 for the years ended December 31, 1997, and 1996 , respectively. During the year ended December 31, 1998 the company utilized all of its net operating loss carry forward. The realization of a deferred tax benefit by the company as a result of net operating losses depends upon having sufficient taxable income of an appropriate character in the carry forward periods. The company recognizes deferred tax assets for future deductible amounts resulting from differences in the financial statement and tax bases of assets and liabilities and operating loss carry forwards. A valuation allowance is then established to reduce the deferred tax asset to the level that it is "more likely than not" that the tax benefit will be realized. The Company had fully offset the deferred tax assets resulting primarily from the net operating loss carry forwards by a valuation allowance in the same amount for each of the years ended December 31, 1997 and 1996. In 1998, the Company eliminated the remaining valuation allowance. The provision for income taxes for the year ended December 31, 1998 was $60,000. FINANCIAL POSITION Total assets at December 31, 1998, were $73.2 million as compared to $51.0 million at December 31, 1997. Average earning assets increased to $58.6 million during 1998 as compared to $40.6 million during 1997. Asset growth included a net increase in loans of $11.8 million and a $9.3 million increase in investment securities during 1998 as compared to 1997. This growth was primarily funded by an increase in deposit account balances of $13.1 million and proceeds from a secondary stock offering in 1998. Shareholders' equity totaled $13.6 million at December 31, 1998 as compared to $6.1 million at December 31, 1997. This increase was primarily due to the proceeds from the secondary stock offering of $6.6 million and retained net income of $847,000 during 1998. Earning Assets Loans. Loans typically provide higher yields than the other types of earning assets, and thus one of the Bank's goals is to have loans be the largest category of the Bank's earning assets. At December 31, 1998 loans accounted for 63.7% of earning assets as compared to 64.3% of earning assets at December 31, 1997. Associated with the higher loan yields are the inherent credit and liquidity risks which management attempts to control and counterbalance. Management is not willing to sacrifice asset quality in order to achieve its asset mix goals. Loans averaged $23.2 million during 1997, as compared to $33.6 million in 1998. The following table shows the composition of the loan portfolio by category:
(IN THOUSANDS) December 31, ---------------------------------------------------------------------------- 1998 1997 1996 ---------------------------------------------------------------------------- Percent Percent Percent Amount of Total Amount of Total Amount of Total ------ -------- ------ -------- ------ -------- Commercial, financial and agricultural $ 8,865 21.73% $ 7,148 24.65% $ 2,837 17.83% Real Estate: Construction 3,873 9.48% 2,006 6.92% 792 4.97% Mortgage-residential 6,538 16.01% 4,457 15.37% 2,602 16.35% Mortgage-commercial 15,305 37.49% 10,454 36.05% 6,639 41.72% Consumer 6,234 15.28% 4,880 16.83% 2,762 17.35% Leases 4 .01% 55 .18% 283 1.78% ------- ------ ------- ------ ------- ------- Total gross loans 40,819 100.00% 29,000 100.00% 15,915 100.00% ====== ====== ====== Allowance for loan losses (532) (380) (201) ------- ------- ------- Total net loans $40,287 $28,620 $15,714 ======= ======= =======
In the context of this discussion, a "real estate mortgage loan" is defined as any loan, other than loans for construction purposes, secured by real estate, regardless of the purpose of the loan. The Company follows the common practice of financial institutions in the Company's market area of obtaining a security interest in real estate whenever possible, in addition to any other available collateral. This collateral is taken to reinforce the likelihood of the ultimate repayment of the loan and tends to increase the magnitude of the real estate loan components. Generally the Company limits the loan-to-value ratio to 80%. The principal components of the Company's loan 20 portfolio, at year end 1998 and 1997, were commercial mortgage loans in the amount of $15.3 million and $10.4 million, representing 37.49% and 36.05% of the portfolio, respectively. A significant portion of these commercial mortgage loans are made to finance owner occupied real estate. Due to the short term the loan portfolio has existed, the current portfolio may not be indicative of the ongoing portfolio mix. Management maintains a conservative philosophy regarding its underwriting guidelines, and believes it will reduce the risk elements of its loan portfolio through strategies that diversify the lending mix. The repayment of loans in the loan portfolio as they mature is a source of liquidity for the Company. The following table sets forth the Company's loans maturing within specified intervals at December 31, 1998. LOAN MATURITY SCHEDULE AND SENSITIVITY TO CHANGES IN INTEREST RATES
(IN THOUSANDS) DECEMBER 31, 1998 --------------------------------------------------- OVER ONE YEAR ONE YEAR THROUGH OVER FIVE OR LESS FIVE YEARS YEARS TOTAL ------- ---------- ----- ----- Commercial, financial and agricultural ...................... $ 3,884 $ 4,536 $ 445 $ 8,865 Real estate - construction ........ 2,289 972 612 3,873 All other loans ................... 6,309 18,635 3,137 28,081 ------- ------- ------- ------- $12,482 $24,143 $ 4,194 $40,819 ======= ======= ======= ======= Loans maturing after one year with: Fixed interest rates ................................................................ $21,658 Floating interest rates ............................................................. 6,679 ------- $28,337 =======
The information presented in the above table is based on the contractual maturities of the individual loans, including loans which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms upon their maturity. Investment Securities. The investment securities portfolio is a significant component of the Company's total earning assets. Total securities averaged $17.6 million in 1998, as compared to $13.2 million in 1997. This represents 30.03% and 32.59% of the average earning assets for the year ended December 31, 1998 and 1997, respectively. The objective of the Company in its management of the investment portfolio is to maintain a portfolio of high quality, highly liquid investments with returns competitive with short term U.S. Treasury or agency obligations. This policy is particularly important as the Company continues to emphasize increasing the percentage of the loan portfolio to total earning assets. At December 31, 1998, the weighted average life of the portfolio was 2.5 years and the weighted average yield was 5.80%. The Company primarily invests in U.S. Treasury securities and securities of other U. S. Government agencies with maturities up to five years. In 1998, as a result of utilizing all prior net operating losses the Company began investing in south Carolina state and local government obligations with maturities of up to 15 years. 21 The following table shows, at carrying value, the scheduled maturities and average yields of securities held at December 31, 1997. INVESTMENT SECURITIES MATURITY DISTRIBUTION AND YIELDS (1)
(IN THOUSANDS) DECEMBER 31, 1998 ------------------------------------------------------------------------ AFTER ONE BUT AFTER FIVE BUT AFTER TEN WITHIN ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS YEARS --------------- ----------------- ---------------- ---------------- AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD ------ ----- ------ ----- ------ ----- ------ ----- Held-to-maturity: U.S. government agencies ............... $1,398 6.09% $ 500 6.25% State and local government ............. 682 5.94% $ 363 6.21% ------ ---- ------- ---- ------ ---- Total investment securities held-to- maturity ............................... 1,398 6.09% 1,182 6.08% 363 6.21% ------ ---- ------- ---- ------ ---- Available-for-sale: U.S. Treasury .......................... 1,722 5.93% 2,433 5.63% U.S. government agencies ............... 500 5.82% 7,860 5.92% 2,004 6.04% Mortgage-backed securities ............. 122 4.47% 3,765 5.74% 1,198 5.67% Other .................................. 296 6.00% ------ ---- ------- ---- ------ ---- ---- ---- Total investment securities available-for-sale ..................... 2,344 5.79% 14,058 5.82% 3,202 5.96% 296 6.00% ------ ---- ------- ---- ------ ---- ---- ---- Total investment securities ............ $3,742 5.82% $15,240 5.85% $3,555 5.98% $296 6.00% ====== ==== ======= ==== ====== ==== ==== ====
- ----------- (1) Investments with a call feature are shown as of the contractual maturity date. Short-Term Investments. Short-term investments, which consist of federal funds sold and securities purchased under agreements to resell, averaged $7.4 million in 1998, as compared to $4.2 million in 1997. At December 31, 1998, short-term investments totaled $3.3 million. These funds are a primary source of the Company's liquidity and are generally invested in an earning capacity on an overnight basis. 22 Deposits and Other Interest-Bearing Liabilities Deposits. Average total deposits were $50.4 million during 1998, compared to $37.1 million during 1997. Average interest-bearing deposits were $42.1 million in 1998, as compared to $30.6 million in 1997. The following table sets forth the deposits of the Company by category.
DEPOSITS DECEMBER 31, ---------------------------------------------------------------------- (IN THOUSANDS) 1998 1997 1996 --------------------- ------------------- ------------------- PERCENT OF PERCENT OF PERCENT OF AMOUNT DEPOSITS AMOUNT DEPOSITS AMOUNT DEPOSITS ------ -------- ------ -------- ------ -------- Demand deposit accounts................ $10,449 18.66% $ 7,554 17.88% $ 6,044 19.56% NOW accounts .......................... 6,060 10.82% 6,063 14.35% 3,989 12.91% Money market accounts.................. 9,223 16.47% 5,957 14.10% 1,974 6.39% Savings accounts....................... 8,623 15.40% 6,053 14.33% 7,154 23.15% Time deposits less than $100,000 ...... 13,595 24.27% 10,248 24.26% 6,732 21.78% Time deposits of $100,000 or over...... 8,056 14.38% 6,372 15.08% 5,008 16.21% ------- ------ ------- ------ ------- ------ Total deposits...................... $56,006 100.00% $42,247 100.00% $30,901 100.00% ======= ====== ======= ====== ======= ======
Core deposits, which exclude certificates of deposit of $100,000 or more, provide a relatively stable funding source for the Company's loan portfolio and other earning assets. The Company's core deposits were $47.3 million and $35.9 million at December 31, 1998 and 1997, respectively. A stable base of deposits are expected to be the Company's primary source of funding to meet both its short-term and long-term liquidity needs in the future. The maturity distribution of the Company's time deposits at December 31, 1997, is shown in the following table. MATURITIES OF CERTIFICATES OF DEPOSIT AND OTHER TIME DEPOSITS OF $100,000 OR MORE
(IN THOUSANDS) DECEMBER 31, 1997 --------------------------------------------------------------- AFTER SIX AFTER THREE THROUGH AFTER WITHIN THREE THROUGH TWELVE TWELVE MONTHS SIX MONTHS MONTHS MONTHS TOTAL ------ ---------- ------ ------ ----- Certificates of deposit of $100,000 or more .. $3,950 $1,712 $1,688 $706 $8,056 Other time deposits of $100,000 or more ...... -- -- -- -- -- ------ ------ ------ ---- ------ Total .............................. $3,950 $1,712 $1,688 $706 $8,056 ====== ====== ====== ==== ======
Large certificate of deposit customers tend to be extremely sensitive to interest rate levels, making these deposits less reliable sources of funding for liquidity planning purposes than core deposits. Some financial institutions partially fund their balance sheets using large certificates of deposit obtained through brokers. These 23 brokered deposits are generally expensive and are unreliable as long-term funding sources. Accordingly, the Company does not accept brokered deposits. Borrowed funds. Borrowed funds consist primarily of short-term borrowings in the form of securities sold under agreements to repurchase. These borrowings averaged $3.0 million and $1.5 million during 1998 and 1997, respectively. These repurchase agreements are generally originated with customers that have other relationships with the Company and tend to provide a stable and predictable source of funding. The Company has short term borrowings provided through a U.S. Treasury demand note associated with a treasury tax and loan account. The average balance of this note for 1998 and 1997, was $120,000 and $114,000, respectively. Capital Total shareholders' equity as of December 31, 1998 was $13.6 million, an increase of $7.5 million or approximately 122% compared with shareholders' equity of $6.1 million as of December 31, 1997. This increase was attributable to net income for the year ended December 31, 1998 of $847,000 a $40,000 increase in the market value of investment securities available-for-sale and $6.6 million in net proceeds from issuance of Common Stock in a secondary offering which closed on July 10, 1998. Under the capital guidelines of the OCC, the Bank is currently required to maintain a minimum risk-based total capital ratio of 8%, with at least 4% being Tier 1 capital. Tier 1 capital consists of common shareholders' equity, qualifying perpetual preferred stock, and minority interests in equity accounts of consolidated subsidiaries, less goodwill. In addition, the Bank must maintain a minimum Tier 1 leverage ratio (Tier 1 capital to total assets) of at least 3%, but this minimum ratio is increased by 100 to 200 basis points for other than the highest-rated institutions. The Company will be required by the Federal Reserve to meet the same guidelines once its consolidated total assets exceed $150 million. 24 The Company and the Bank exceeded their regulatory capital ratios, as set forth in the following table.
ANALYSIS OF CAPITAL (IN THOUSANDS) REQUIRED ACTUAL EXCESS ----------------- ------------------- ------------------ THE BANK: December 31, 1998 Risk Based Capital Tier I $ 1,959 4.00% $10,332 21.10% $ 8,373 17.10% Total Capital 3,917 8.00% 10,864 22.19% 6,947 14.19% Tier I Leverage 2,111 3.00% 10,232 14.68% 8,121 11.68% December 31, 1997 Tier I $ 1,401 4.00% $ 5,232 14.93% $ 3,831 10.93% Total Capital 2,803 8.00% 5,612 16.02% 2,806 8.02% Tier I Leverage 1,463 3.00% 5,232 10.73% 3,769 7.73%
REQUIRED ACTUAL EXCESS ----------------- ------------------- ------------------ THE COMPANY: December 31, 1998 Risk Based Capital Tier I $ 1,977 4.00% $13,560 27.43% $11,583 23.43% Total Capital 3,954 8.00% 14,092 28.51% 10,138 20.51% Tier I Leverage 2,188 3.00% 13,560 18.59% 11,372 15.59% December 31, 1997 Risk Based Capital Tier I $1,401 4.00% $ 6,098 17.41% $ 4,697 13.41% Total Capital 2,803 8.00% 6,478 18.49% 3,675 10.49% Tier I Leverage 1,464 3.00% 6,098 12.50% 4,634 9.50%
A condition of the original offering was that a minimum of 610,000 shares be subscribed to and fully paid for prior to approval to become a bank holding company. There was a total of 688,077 shares sold during the during the original offering period which closed on July 31, 1995 with gross proceeds after offering expenses 25 of $6.8 million. Approximately $6.0 million of the proceeds of the offering were used to capitalize the Bank. On July 10, 1998 the Company closed a secondary offering in which 517,500 additional shares were issued in with proceeds after offering expenses of approximately $6.6 million. Approximately $4.1 million of the proceeds from this offering was used to provide additional capital to the Bank. The Company is using the proceeds of this offering to support its continued growth through its existing offices and by opening three additional branches in the next six to eighteen months in other fast growing areas in the Midlands of South Carolina. The Company has entered into contract on one locations as of December 31, 1998 and has acquired one branch site and plans to open the new office at the end of the first quarter of 1999. It is anticipated that the proceeds from the offering are sufficient to support its proposed growth and expansion, including the establishment of up to three new branch offices. LIQUIDITY MANAGEMENT Liquidity management involves monitoring the Company's sources and uses of funds in order to meet its day-to-day cash flow requirements while maximizing profits. Liquidity represents the ability of a company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of the investment portfolio is very predictable and subject to a high degree of control at the time investment decisions are made. However, net deposit inflows and outflows are far less predictable and are not subject to nearly the same degree of control. Asset liquidity is provided by cash and assets which are readily marketable, or which can be pledged, or which will mature in the near future. Liability liquidity is provided by access to core funding sources, principally the ability to generate customer deposits in the company's market area. In addition, liability liquidity is provided through the ability to borrow against approved lines of credit (federal funds purchased) from correspondent banks and to borrow on a secured basis through securities sold under agreements to repurchase. With the successful completion of the common stock offering in 1995 and the secondary offering completed in July 1998, the Company has maintained a high level of liquidity that has been adequate to meet planned capital expenditures, as well as providing the necessary cash requirements of the Company and the Bank needed for operations. The Company's funds sold position, its primary source of liquidity, averaged $7.4 million during the year ended December 31, 1998, and was $3.3 million at December 31, 1998. The Company also maintains federal funds purchased lines, in the amount of $2,500,000, with several financial institutions, although these have not been utilized in 1998. Management regularly reviews the liquidity position of the Company and has implemented internal policies which establish guidelines for sources of asset based liquidity and limit the total amount of purchased funds used to support the balance sheet and funding from non core sources. 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 liquidity needs successfully. ACCOUNTING MATTERS 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 all 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. The Company adopted this 26 pronouncement during the first quarter of 1998. Reclassification of financial statements for earlier periods as required has been made in the financial statement included elsewhere herein. YEAR 2000 The Company recognizes that there is a business risk in computerized systems as a result of the change into the next century. The Federal Financial Institutions Examination Council ("FFIEC") issued an interagency statement on May 5, 1997, outlining five phases for institutions to effectively manage the Year 2000 challenge. The phases were: Awareness; Assessment; Renovation; Validation; and Implementation. The FFIEC encouraged institutions to have all critical applications identified and priorities set by September 30, 1997 and to have renovation work largely completed and testing well underway by December 31, 1998. 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. The Company continue to work aggressively on its Year 2000 project. The awareness and assessment phases are complete and the remediation phase is substantially complete as of December 31, 1998. The validation and implementation phases are well underway. The Company's core business system which is provided by our outside service provider are considered to be most critical. Extensive testing of this system have taken place with additional testing to occur in the first and second quarter of 1999. The service providers host hardware and operating systems were upgraded and compliant in the fourth quarter of 1998. The service provider has met the Company's expectations for delivery of the year 2000 compliant upgrades. The running of test in a "test environment" have been performed for certain critical dates with testing to follow on other critical dates to occur in the first and second quarters of 1999. Item processing systems were upgraded to be year 2000 compliant. Throughout 1999, the Company will continue to test for Year 2000 compliance on its core system as well as ancillary systems. To date the Company has expensed cost to upgrade and test systems of approximately $60,000 and has budgeted an additional $15,000 in cost to be incurred in 1999. Capitalized cost for installing new item processing hardware and software and a frame relay communications network have been approximately $130,000. 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. The Company is ion the process of developing a comprehensive contingency and business resumption plan which will document and outline options in the event any mission critical systems fail to operate despite all of our Year 2000 efforts. This plan will be completed in the first quarter of 1999. In addition the Company has undertaken a n 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 planned additional modifications and testing to existing systems, the effects of the Year 2000 problem will be minimized. There can be no assurance however, 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 not 27 completed in a timely manner or are in other ways 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. IMPACT OF INFLATION Unlike most industrial companies, the assets and liabilities of financial institutions such as the Company and the Bank are primarily monetary in nature. Therefore, interest rates have a more significant effect on the Company's performance than do the effects of changes in the general rate of inflation and change in prices. In addition, interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. As discussed previously, management seeks to manage the relationships between interest sensitive assets and liabilities in order to protect against wide interest rate fluctuations, including those resulting from inflation. 28 ITEM 7. FINANCIAL STATEMENTS. INDEX TO FINANCIAL STATEMENTS REPORT OF INDEPENDENT AUDITOR BALANCE SHEETS STATEMENTS OF OPERATIONS STATEMENTS OF COMPREHENSIVE INCOME STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY STATEMENTS OF CASH FLOWS NOTES TO FINANCIAL STATEMENTS
29 FIRST COMMUNITY CORPORATION BALANCE SHEETS
December 31, 1998 1997 ----------- ------------ ASSETS Cash and due from banks $ 2,316,369 $ 2,869,066 Federal funds sold and securities purchased under agreements to resell 3,290,403 2,620,000 Investment securities - available for sale 19,899,891 11,606,899 Investment securities - held to maturity (market value of $2,957,891 and $1,894,940 at December 31, 1998 and 1997, respectively) 2,942,760 1,900,000 Loans 40,819,405 28,999,906 Less, allowance for loan losses 532,025 380,120 ----------- ------------ Net loans 40,287,380 28,619,786 Property, furniture and equipment - net 3,667,097 2,983,224 Other assets 747,676 413,456 ----------- ------------ Total assets $73,151,576 $ 51,012,431 =========== ============ LIABILITIES Deposits: Non-interest bearing demand $10,449,284 $ 7,553,754 NOW and money market accounts 15,283,002 12,020,414 Savings 8,622,546 6,052,584 Time deposits less than $100,000 13,595,144 10,247,650 Time deposits $100,000 and over 8,055,794 6,372,330 ----------- ------------ Total deposits 56,005,770 42,246,732 Securities sold under agreements to repurchase 2,737,700 2,143,400 Other borrowed money - demand note to US Treasury 32,413 111,383 Other liabilities 763,349 396,063 ----------- ------------ Total liabilities 59,539,232 44,897,578 ----------- ------------ SHAREHOLDERS' EQUITY Preferred stock, par value $1.00 per share; 10,000,000 shares authorized; none issued and outstanding Common stock, par value $1.00 per share; 10,000,000 shares authorized; issued and outstanding 1,207,177 and 689,677 at December 31, 1998 and 1997, respectively 1,207,177 689,677 Additional paid in capital 12,248,087 6,155,237 Retained earnings 114,029 (732,904) Unrealized gain on securities available-for-sale 43,051 2,843 ----------- ------------ Total shareholders' equity 13,612,344 6,114,853 ----------- ------------ Total liabilities and shareholders' equity $73,151,576 $ 51,012,431 =========== ============
See Notes to Financial Statements 30 FIRST COMMUNITY CORPORATION Statements of Operations
Year Ended December 31, 1998 1997 1996 ---------- ---------- ----------- Interest income: Loans, including fees $3,151,523 $2,184,512 $ 1,004,243 Investment securities - available-for-sale 896,309 624,377 479,822 Investment securities - held-to-maturity 136,245 157,403 155,504 Federal funds sold and securities purchased under resale agreements 394,742 227,747 130,463 ---------- ---------- ----------- Total interest income 4,578,819 3,194,039 1,770,032 ---------- ---------- ----------- Interest expense: Deposits 1,780,634 1,317,360 695,626 Securities sold under agreement to repurchase 134,800 70,007 Other borrowed money 4,117 4,490 2,328 ---------- ---------- ----------- Total interest expense 1,919,551 1,391,857 697,954 ---------- ---------- ----------- Net interest income 2,659,268 1,802,182 1,072,078 Provision for loan losses 179,000 193,860 135,000 ---------- ---------- ----------- Net interest income after provision for loan losses 2,480,268 1,608,322 937,078 ---------- ---------- ----------- Non-interest income: Deposit service charges 205,236 170,863 82,192 Mortgage origination fees 118,608 41,428 24,930 Other 112,561 49,779 18,803 ---------- ---------- ----------- Total non-interest income 436,405 262,070 125,925 ---------- ---------- ----------- Non-interest expense: Salaries and employee benefits 1,061,502 876,091 704,416 Occupancy 118,351 114,008 129,978 Equipment 179,982 143,661 102,456 Marketing and public relations 131,545 90,197 35,596 Other 518,436 395,259 324,093 ---------- ---------- ----------- Total non-interest expense 2,009,816 1,619,216 1,296,539 ---------- ---------- ----------- Net income before tax 906,857 251,176 (233,536) Income taxes 59,924 -- -- ---------- ---------- ----------- Net income (loss) $ 846,933 $ 251,176 $ (233,536) ========== ========== =========== Basic earnings (loss) per common share $ 0.90 $ 0.36 $ (0.34) ========== ========== =========== Diluted earnings (loss) per common share $ 0.87 $ 0.36 $ (0.41) ========== ========== ===========
See Notes to Financial Statements 31 FIRST COMMUNITY CORPORATION Statements of Comprehensive Income
Year ended December 31, ------------------------------------ 1998 1997 1996 -------- -------- ---------- Net income (loss) $846,933 $251,176 $(281,631) Other comprehensive income (loss), net of tax: Unrealized gains (losses) arising during the period, net of tax effect of $21,584, $1,598 and $0, for the years ended December '31, 1998, 1997 and 1996, respectively 40,208 65,571 (71,768) -------- -------- --------- Comprehensive income (loss) $887,141 $316,747 $(353,399) ======== ======== =========
See Notes to Financial Statements 32 FIRST COMMUNITY CORPORATION Statement of Changes in Shareholder's Equity
Accumulated Additional Other Shares Common Paid-in Retained Comprehensive Issued Stock Capital Earnings Income Total --------- ---------- ----------- ---------- ------------- ----------- Balance December 31, 1995 688,077 $ 688,077 $ 6,140,837 $ (702,449) $ 9,040 $ 6,135,505 Net loss (281,631) (281,631) Other comprehensive income, net of tax - unrealized gain on available-for-sale securities (71,768) (71,768) --------- ---------- ----------- ---------- --------- ----------- Balance December 31, 1996 688,077 688,077 6,140,837 (984,080) (62,728) 5,782,106 Net income 251,176 251,176 Issuance of common stock 1,600 1,600 14,400 16,000 Other comprehensive income, net of tax - unrealized gain on available-for-sale securities 65,571 65,571 --------- ---------- ----------- ---------- --------- ----------- Balance December 31, 1997 689,677 689,677 6,155,237 (732,904) 2,843 6,114,853 Net income 846,933 846,933 Issuance of common stock 517,500 517,500 6,092,850 6,610,350 Other comprehensive income, - net of tax - unrealized gain on - available-for-sale securities 40,208 40,208 --------- ---------- ----------- ---------- --------- ----------- Balance December 31, 1998 1,207,177 $1,207,177 $12,248,087 $ 114,029 $ 43,051 $13,612,344 ========= ========== =========== ========== ========= ===========
See Notes to Financial Statements 33 FIRST COMMUNITY CORPORATION Statements of Cash Flows
Year Ended December 31, -------------------------------------------------- 1998 1997 1996 ------------ ------------ ------------ Cash flows from operating activities: Net income (loss) $ 846,933 $ 251,176 $ (281,631) Adjustments to reconcile net income to net cash used in operating activities: Depreciation 132,100 135,703 169,129 Premium amortization (Discount accretion) (52,721) (57,987) (4,070) Provision for loan losses 179,000 193,860 135,000 (Increase) decrease in other assets (355,804) (83,623) (142,965) Increase in accounts payable 367,286 171,112 114,060 ------------ ------------ ------------ ------------ ------------ ------------ Net cash provided (used) in operating activities 1,116,794 610,241 (10,477) ------------ ------------ ------------ Cash flows form investing activities: Purchase of investment securities available-for-sale (20,792,496) (7,680,975) (8,208,751) Maturity/call of investment securities available-for-sale 12,615,958 5,125,910 5,747,327 Sale of investment securities available-for-sale -- 286,647 Purchase of investment securities held-to-maturity (2,544,701) -- (1,400,333) Maturity/call of investment securities held-to-maturity 1,500,000 700,000 1,000,000 Increase in loans (11,846,594) (13,099,502) (12,092,752) Proceeds from sale of fixed assets -- 50,000 41,935 Purchase of property and equipment (815,973) (624,787) (1,191,345) ------------ ------------ ------------ Net cash used in investing activities (21,883,806) (15,242,707) (16,103,919) ------------ ------------ ------------ Cash flows from financing activities: Increase in deposit accounts 13,060,238 11,345,908 19,566,884 Proceeds from sale of common stock 6,610,350 16,000 -- Increase (decrease) in securities sold under agreements to repurchase 1,293,100 1,220,000 (708,100) Decrease in other borrowings (78,970) (188,176) 130,198 ------------ ------------ ------------ Net cash provided from financing activities 20,884,718 12,393,732 18,988,982 ------------ ------------ ------------ Net increase in cash and cash equivalents 117,706 (2,238,734) 2,874,586 Cash and cash equivalents at beginning of period 5,489,066 7,727,799 4,853,213 ------------ ------------ ------------ Cash and cash equivalents at end of period $ 5,606,772 $ 5,489,065 $ 7,727,799 ============ ============ ============ Supplemental disclosure: Cash paid during the period for: Interest $ 1,879,980 $ 1,280,508 $ 650,670 Taxes $ 2,420 Non-cash investing and financing activities: Unrealized gain (loss) on securities available-for-sale $ 40,208 $ 65,571 $ (71,768)
See Notes to Financial Statements 34 FIRST COMMUNITY CORPORATION NOTES TO FINANCIAL STATEMENTS Note 1 - ORGANIZATION AND BASIS OF PRESENTATION The consolidated financial statements include the accounts of First Community Corporation (the Company)and its wholly owned subsidiary First Community Bank, N.A. (the Bank). All material intercompany transactions are eliminated in consolidation. The Company was organized on November 2, 1994, as a South Carolina corporation, and was formed to become a bank holding company. The Bank opened for business on August 17, 1995. Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The financial statements are prepared in accordance with generally accepted accounting principles which require management to make estimates and assumptions that effect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the reserve for loan losses. The estimation process includes management's judgment as to future losses on existing loans based on an internal review of the loan portfolio, including an analysis of the borrowers current financial position, the consideration of current and anticipated economic conditions and the effect on specific borrowers. In determining the collectibility of loans management also considers the fair value of underlying collateral. Various regulatory agencies, as an integral part of their examination process, review the Company's allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Because of these factors it is possible that the allowance for loan losses could change materially. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand, due from banks, federal funds sold and securities purchased under agreements to resell. Generally federal funds are sold for a one-day period and securities purchased under agreements to resell mature in less than 90 days. Investment Securities Investment securities are classified as either held-to-maturity or available-for-sale. In determining such classification, securities that the Company has the positive intent and ability to hold to maturity are classified as held-to maturity and are carried at amortized cost. All other securities are classified as available-for-sale and carried at estimated fair values with unrealized gains and losses included in shareholders' equity on an after tax basis. At June 30, 1995, all investment securities were classified Gains and losses on the sale of available-for-sale securities are determined using the specific identification method. Declines in the fair value of individual held-to-maturity and available-for-sale securities below their cost that are other than temporary result in write-downs of the individual securities to their fair value. Premiums and discounts are recognized in interest income using the interest method over the period to maturity. 35 Loans and Allowance for Loan Losses Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest is recognized over the term of the loan based on the loan balance outstanding. Fees charged for originating loans, if any, are deferred and offset by the deferral of certain direct expenses associated with loans originated. The net deferred fees are recognized as yield adjustments by applying the interest method. The allowance for loan losses is maintained at a level believed to be adequate by management to absorb potential losses in the loan portfolio. Management's determination of the adequacy of the allowance is based on an evaluation of the portfolio, economic conditions and volume, growth and composition of the portfolio. The accrual of interest on impaired loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the asset's estimated useful life. Marketing and Public Relations Expense The Company expenses marketing and public relations expense as incurred Income Taxes A deferred income tax liability or asset is recognized for the estimated future effects attributable to differences in the tax bases of assets or liabilities and their reported amounts in the financial statements as well as operating loss and tax credit carryforwards. The deferred tax asset or liability is measured using the enacted tax rate expected to apply to taxable income in the period in which the deferred tax asset or liability is expected to be realized. Stock Based Compensation Cost The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". Accordingly, compensation cost for stock options is measured as the excess, if any, of the market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123) was issued in October 1995, and encourages but does not require, adoption of a fair value method of accounting for employee stock based compensation plans. See Note 12. Earnings/Loss Per Share During February 1997, Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128) was issued and specifies the computation, presentation and disclosure requirements for earnings per share for entities with publicly held common stock or potential common stock. SFAS 128 requires entities with other than simple capital structures to present basic and diluted per share amounts for income from continuing operations and net income. Basic earnings per share is calculated by the Company by dividing net income by the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted average number of shares outstanding plus the weighted average number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Diluted earnings per share include the effects of outstanding stock options issued by the Company. See Note 13. 36 Note 3 - INVESTMENT SECURITIES The amortized cost and estimated fair values of investment securities are summarized below: HELD-TO-MATURITY:
Gross Gross Amortized Unrealized Unrealized Cost Gain Loss Fair Value -------------------------------------------------------------- December 31, 1998: U.S. Government agency securities $1,898,382 $ 12,010 $ -- $ 1,910,392 State and local government 1,034,378 3,122 -- 1,037,500 Other 10,000 -- -- 10,000 ---------- ----------- ----------- ----------- $2,942,760 $ 15,132 -- $ 2,957,892 ========== =========== =========== =========== December 31, 1997: U.S. Government agency securities $1,900,000 -- $ 5,060 $ 1,894,940 ========== =========== =========== ===========
AVAILABLE-FOR-SALE:
Gross Gross Amortized Unrealized Unrealized Cost Gain Loss Fair Value ----------- ----------- ----------- ----------- December 31, 1998: US Treasury securities $ 4,109,148 $ 46,231 $ -- $ 4,155,379 US Government agency securities 10,342,764 35,062 13,003 10,364,823 Mortgage-backed securities 5,086,046 10,799 12,856 5,083,989 Other 295,700 -- -- 295,700 ----------- ----------- ----------- ----------- $19,833,658 $ 92,092 $ 25,859 $19,899,891 =========== =========== =========== =========== December 31, 1997: US Treasury securities $ 5,792,837 $ 14,514 $ 3,162 $ 5,804,189 US Government agency securities 4,847,059 8,068 13,848 4,841,279 Mortgage-backed securities 809,532 -- 1,131 808,401 Other 153,030 -- -- 153,030 ----------- ----------- ----------- ----------- $11,602,458 $ 22,582 $ 18,141 $11,606,899 =========== =========== =========== ===========
The amortized cost and fair value of investment securities at December 31, 1998, by contractual maturity, follow. Expected maturities differ from contractual maturities because borrowers may have the right to call or prepay the obligations with or without pre-payment penalties.
Held-to-maturity Available-for-sale ---------------- ------------------ Amortized Fair Amortized Fair Cost Value Cost Value ---------- ----------- ----------- ----------- Due in one year or less $ -- $ -- $ 2,331,731 $ 2,343,950 Due after one year through five years 1,398,383 1,406,293 14,003,789 14,058,148 Due after five years through ten years 1,181,532 1,188,748 3,202,438 3,202,093 Due after ten years 362,845 362,851 295,700 295,700 ---------- ----------- ----------- ----------- $2,942,760 $ 2,957,892 $19,833,658 $19,899,891 ========== =========== =========== ===========
Securities with an amortized cost of $3,589,903 and fair value of $3,614,411 at December 31, 1998, were pledged to secure public deposits, demand notes due the U.S. Treasury and 37 securities sold under agreements to repurchase. During the year ended December 31, 1997, there were proceeds from the sale and call of securities from the available-for-sale portfolio of $586,647. Gross gains amounted to $2,345 and gross losses amounted to $2,304. There were no sales of securities during 'the years ended December 31, 1998 and 1996. Note 4 - LOANS Loans summarized by category are as follows:
December 31, 1998 1997 ----------- ----------- Commercial, financial and agricultural $ 8,864,872 $ 7,148,239 Real estate - construction 3,873,121 2,005,911 Real estate - mortgage Commercial 15,305,403 10,453,666 Residential 6,538,421 4,456,963 Consumer 6,233,693 4,880,202 Leases 3,895 54,925 ----------- ----------- $40,819,405 $28,999,906 =========== ===========
Activity in the allowance for loan losses was as follows:
December 31, 1998 1997 1996 --------- --------- --------- Balance at the beginning of year $ 380,120 $ 200,860 $ 76,750 Provision for loan losses 179,000 193,860 135,000 Charged off loans (33,980) (17,357) (11,205) Recoveries 6,885 2,757 315 --------- --------- --------- Balance at end of year $ 532,025 $ 380,120 $ 200,860 ========= ========= =========
Loans outstanding to Bank directors, executive officers and their related business interests amounted to $3,483,610 and $2,101,797 at December 31, 1998 and 1997, respectively. Total loans made during the year ended December 31, 1998 totalled $1,734,203 and repayments totalled $352,390. Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with an unrelated persons and generally do not involve more than the normal risk of collectibility. Note 5 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following:
December 31, 1998 1997 ----------- ----------- Land $ 952,774 $ 952,774 Premises 1,742,438 1,742,438 Equipment 643,542 491,102 Construction in process 655,846 -- ----------- ----------- 3,994,600 3,186,314 Accumulated depreciation 327,503 203,090 ----------- ----------- $ 3,667,097 $ 2,983,224 =========== ===========
Provision for depreciation included in operating expenses for the years ended December 31, 1998, 1997, and 1996 amounted to $132,100, $135,703 and $169,129, respectively. 38 At December 31, 1998 the company has begun construction on one new location located in Irmo, South Carolina and has entered into a contract to purchase one additional location. The Irmo property was puurchased for approximately $449,000 and the contract for the construction of the facility is for approximattely $512,000. Total construction cost incurred through December 31, 1998 amounts to approximately $144,000. The additional location is in Cayce-West Columbia, South Carolina. The Company has certain rights under the terms of the contract on Cayce-West Columbia which allow for an inspection and due diligence period and termination of the contract without penalty under certain conditions. The purchase price of the Cayce-West columbia property is $300,000. Because the Company has not enrtered into a contract for costruction of this facility, it has not determined with certainty the cost to open the branch. Note 6 - DEPOSITS At December 31, 1998, the scheduled maturities of Certificates of Deposits are as follows: 1999 $19,312,109 2000 1,323,943 2001 1,004,886 2002 10,000 ----------- $21,650,938 ===========
Note 7 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE Securities sold under agreements to repurchase generally mature within one to four days from the transaction date. The weighted average interest rate at December 31, 1998 and 1997, was 4.52% and 5.49%, respectively. The maximum month-end balance during 1998 and 1997 was $4,973,500 and $2,492,800, respectively. Note 8 - INCOME TAXES The Company's accounting and reporting for the effect of income taxes is in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The realization of a deferred tax benefit by the Company depends upon having sufficient taxable income of an appropriate character in the carryforward periods. Under SFAS 109 deferred tax assets are recognized for future deductible amounts resulting from differences in the financial statement and tax bases of assets and liabilities and operating loss carryforwards. A valuation allowance is then established to reduce that deferred tax asset to the level that it is "more likely than not" that the tax benefit will be realized. At December 31, 1997 a net deferred tax asset in the amount of $259,199 has been offset by a valuation allowance. Income tax expense for the years ended December 31, 1998, 1997 and 1996 consists of the following:
Year ended December 31 1998 1997 1996 ---------- ----------- ----------- Current Federal $ 208,080 $ -- $ -- State 16,812 -- -- ---------- ---------- ---------- 224,892 -- -- ---------- ---------- ---------- Deferred Federal 86,271 85,141 (94,276) State 7,890 7,789 (8,551) ---------- ---------- ---------- 94,161 92,930 (102,827) ---------- ---------- ---------- Change in valuation allowance (259,129) (92,930) 102,827 ---------- ---------- ---------- Income tax expense $ 59,924 $ -- $ -- ========== ========== ==========
39 A reconciliation from expected federal tax expense (benefit) to effective income tax expense for the periods indicated are as follows:
Year ended December 31 1998 1997 1996 --------- -------- --------- Expected federal income tax expense (benefit) $ 308,331 $ 85,399 (95,755) State income tax net of federal benefit 26,934 7,459 (8,365) Change in beginning of year valuation allowance (259,129) (92,930) 102,827 Other (16,212) 72 1,293 --------- -------- --------- $ 59,924 $ -- $ -- ========= ======== =========
The following is a summary of the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities:
December 31, 1998 1997 -------- --------- Assets: Provision for bad debts $191,480 $ 136,808 Deferred pre-opening cost 45,068 73,532 Net operating loss -- 52,911 Other -- 5,418 -------- --------- Total deferred tax assets 236,548 268,669 Valuation reserve -- (259,199) -------- --------- Net deferred tax asset 236,548 9,470 -------- --------- Liabilities: Cash basis accounting for tax purposes 9,110 5,975 Tax depreciation in excess of book depreciation 62,399 1,897 Unrealized gain on securities available for sale 23,838 1,598 -------- --------- Total deferred tax liabilities 95,347 9,470 -------- --------- Net deferred tax asset recognized $141,201 $ -- ======== =========
Note 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments" (SFAS 107), requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below. Cash and short term investments - The carrying amount of these financial instruments (cash and due from banks, federal funds sold and securities purchased under agreements to resell) approximate fair value. All mature within 90 days and do not present unanticipated credit concerns. Investment Securities - Fair values are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. 40 Loans - For certain categories of loans, such as variable rate loans and other lines of credit, the carrying amount, is a reasonable estimate of fair value as the Company has the ability to reprice the loan as interest rate changes occur. The fair value of other loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. As discount rates are based on current loan rates as well as management estimates, the fair values presented may not be indicative of the value negotiated in an actual sale. Accrued Interest Receivable - The fair value approximates the carrying value. Deposits - The fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposits is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturities. Short Term Borrowings - the carrying value of short term borrowings (securities sold under agreements to repurchase and demand notes to the U.S. Treasury) approximate fair value. Accrued Interest Payable - The fair value approximates the carrying value. Commitments to Extend Credit - The fair value of these commitments are immaterial because their underlying interest rates approximate market. The carrying amount and estimated fair value of the Company's financial instruments are as follows:
December 31, 1998 December 31, 1997 ---------------------------- ---------------------------- Carrying Fair Carrying Fair Amount Value Amount Value ----------- ----------- ----------- ----------- Financial Assets: Cash and short term investments $ 5,606,772 $ 5,606,772 $ 5,489,066 $ 5,489,066 =========== =========== =========== =========== Investment securities: Held-to-maturity $ 2,942,760 $ 2,957,891 $ 1,900,000 $ 1,894,940 Available-for-sale 19,899,891 19,899,891 11,606,899 11,606,899 ----------- ----------- ----------- ----------- Total investment securities $22,842,651 $22,857,782 $13,506,899 $13,501,839 =========== =========== =========== =========== Loans Adjustable rate $12,671,956 $12,671,956 $11,465,832 $11,465,832 Fixed rate 28,147,449 28,276,842 17,534,074 17,534,074 ----------- ----------- ----------- ----------- Total loans 40,819,405 40,948,798 28,999,906 28,999,906 Allowance for loan losses 532,025 -- 380,120 -- ----------- ----------- ----------- ----------- Net loans $40,287,380 $40,948,798 $28,619,786 $28,999,906 =========== =========== =========== =========== Accrued interest receivable $ 528,710 $ 528,710 $ 339,455 $ 339,455 =========== =========== =========== =========== Financial liabilities: Deposits Non-interest bearing demand 9,750,484 9,750,484 7,553,754 7,553,754 NOW and money market accounts 15,283,002 15,283,002 12,020,414 12,020,414 Savings 8,622,546 8,622,546 6,052,584 6,052,584 Certificates of deposit 21,650,938 21,754,227 16,619,980 16,639,498 ----------- ----------- ----------- ----------- Total deposits $55,306,970 $55,410,259 $42,246,732 $42,266,250 =========== =========== =========== =========== Short term borrowings $ 3,468,913 $ 3,468,913 $ 2,254,783 $ 2,254,783 =========== =========== =========== =========== Accrued interest payable $ 276,237 $ 276,237 $ 236,667 $ 236,667 =========== =========== =========== ===========
41 Note 10 - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK The Bank is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of these instruments. The Bank uses the same credit policies in making commitments as for on-balance sheet instruments. At December 31, 1998, the Bank had commitments to extend credit of $9,022,000. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require a payment of a fee. Since commitments may expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the party. Collateral held varies but may include inventory, property and equipment, residential real estate and income producing commercial properties. The primary market area served by the Bank is Lexington and Richland Counties within the Midlands of South Carolina. Management closely monitors its credit concentrations and attempts to diversify the portfolio within its primary market area. At December 31, 1998, management does not consider there to be any significant credit concentration within the portfolio. Although, the Bank's loan portfolio as well as existing commitments reflect the diversity of its primary market area, a substantial portion of its debtors ability to honor their contracts is dependent upon the economic stability of the area. Note 11 - OTHER EXPENSES A summary of the components of other non-interest expense is as follows:
December 31, 1998 1997 1996 -------- -------- -------- Data processing $149,043 $ 96,143 $ 93,712 Supplies 55,695 52,063 43,940 Telephone 24,828 22,385 22,630 Correspondent services 50,564 38,097 29,854 Insurance 38,708 32,380 22,100 Postage 32,740 21,863 13,051 Professional fees 42,077 35,585 35,942 Other 124,781 96,743 62,864 -------- -------- -------- $518,436 $395,259 $324,093 ======== ======== ========
Note 12 - STOCK OPTIONS The Company has adopted the 1996 Stock Option Plan under which an aggregate of 110,000 shares have been reserved for issuance by the Company upon the grant of stock options or restricted stock awards. The plan provides for the grant of options to key employees and Directors as determined by a Stock Option Committee made up of at least two members of the Board of Directors. During the year ended December 31, 1996, 88,000 shares were granted, at an option price of $10.00 per share, which are exercisable for a period of ten years from the date of grant. 42 Stock option transactions for the year ended December 31, 1998 and 1997 are summarized as follows:
1998 1997 ---- ---- Weighted Weighted Average Average Shares Exercise Price Shares Exercise Price ------- -------------- --------- -------------- Outstanding at the beginning of year 84,000 $10.00 $ 88,000 $10.00 Granted -- -- -- -- Exercised -- -- (1,600) 10.00 Forfeited -- -- (2,400) 10.00 ------ ------ -------- ------ Outstanding at end of year 84,000 $10.00 84,000 $10.00 ====== ====== ======== ====== Option exercisable at end of year 64,000 $10.00 47,200 $10.00 ====== ====== ======== ======
In October 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" (SFAS 123) The statement defines a fair value based method of accounting for employee stock options granted after December 31, 1994. However, SFAS 123 allows an entity to account for these plans according to Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), provided pro forma disclosure of net income and earnings per share are made as if SFAS 123 had been applied. The Company has elected to use APB 25 and provide the required pro-forma disclosures. Accordingly, no compensation cost has been recognized in the financial statements for the Company's stock option plan. The following summarizes pro-forma data in accordance with SFAS 123:
Year ended December 31, 1998 1997 1996 -------- ----------------------- ---------- Net income, pro-forma $832,106 $228,712 $ (321,951) Basic earnings/loss per common share, pro-forma $ 0.88 $ 0.33 $ (0.47) Diluted earnings loss per common share, pro-forma $ 0.86 $ 0.33 $ (0.47)
The assumptions used in estimating compensation cost on a pro-forma basis were: dividend yield of 0.6%, expected life of six years, volatility of near 0% and risk free interest rate of 6.36%. Note 13 - EMPLOYEE BENEFIT PLAN The Company maintains a 401 (k) plan which covers substantially all employees. Participants may contribute up to the maximum allowed by the regulation. During the year ended December 31, 1998 and 1997 the plan expense amounted to $31,569 and $15,350, respectively. In 1998 the Company began matching 50% of an employees contribution up to 4.00% of the participants contribution. 43 Note 14 - EARNINGS PER SHARE The following reconciles the numerator and denominator of the basic and diluted earnings per share computation:
Year ended December 31, 1998 1997 1996 --------------------------------------------- Numerator (Included in basic and diluted earnings per share) $ 846,933 $ 251,176 $ (281,631) ========= ========= ========== Denominator Weighted average common shares outstanding for: Basic earnings per share 942,725 689,015 688,077 Dilutive securities: Stock options - Treasury stock method 26,741 14,276 3,615 --------- --------- ---------- Diluted earnings per share 969,466 703,291 691,692 ========= ========= ==========
The average market price used in calculating the assumed number of shares issued for the years ended December 31, 1998, 1997 and 1996 was $14.67, $12.00 and $10.50, respectively. Note 15 - CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS The Bank is subject to various federal and state regulatory requirements, including regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting, and other factors. The Bank is required to maintain minimum Tier 1 capital, total risked based capital and Tier 1 leverage ratios of 4%, 8% and 3%, respectively. At December 31, 1998, the most recent notification from the Comptroller of the Currency categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be well capitalized the Bank must maintain minimum Tier 1 capital, Total risk-based capital and Tier 1 leverage ratios of 6%, 10% and 5%, respectively. There are no conditions or events since that notification that management believes have changed the Bank's well capitalized status. The Company will be required by the Federal Reserve to meet the same guidelines once its consolidated assets exceed $150 million. The actual capital amounts and ratios for the Bank and the Company are as follows:
1998 1997 ----------------------- ----------------------- Amount Ratio Amount Ratio ------ ----- ------ ----- First Community Corporation Tier 1 Capital $ 13,560,293 27.43% $ 6,098,008 17.41% Total Risked Based Capital 14,092,378 28.51% 6,478,008 18.49% Tier 1 Leverage 13,560,293 18.59% 6,098,008 12.50% First Community Bank, NA Tier 1 Capital $ 10,332,245 21.10% $ 5,232,345 14.93% Total Risked Based Capital 10,864,270 22.19% 5,612,345 16.02% Tier 1 Leverage 10,332,245 14.68% 4,982,000 14.79%
The Company's dividend payments (when available) will be made primarily from dividends received from the Bank. Under applicable federal law, the Comptroller of the Currency restricts national bank total dividend payments in any calendar year to net profits of that year combined with retained net profits for the two preceding years. At December 31, 1998, there was $114,000 in retained net profits free of such restriction. 44 Note 16 - PARENT COMPANY FINANCIAL INFORMATION The balance sheets, statements of operations and cash flows for First Community Corporation (Parent Only) follow: Condensed Balance Sheets
At December 31, --------------------------- 1998 1997 ----------- ---------- Assets: Cash on deposit $ 277,200 $ 852 Interest-bearing deposits with the Bank 648,489 878,486 Securities purchased under agreement to resell 1,310,402 -- Investment securities available-for-sale 1,000,000 -- Investment in Bank subsidiary 10,341,246 5,246,346 Other 6,092 480 ----------- ---------- Total assets $13,583,429 $6,126,164 =========== ========== Liabilities: Other 14,136 14,154 ----------- ---------- Shareholders' equity 13,569,293 6,112,010 ----------- ---------- Total liabilities and shareholders' equity $13,583,429 $6,126,164 =========== ==========
Condensed Statements of Operations
Year ended December 31, ------------------------------------- 1998 1997 1996 -------- -------- --------- Income: Interest income $102,182 $ 39,445 $ 40,582 -------- -------- --------- Expenses: Other 81,300 40,655 22,446 -------- -------- --------- Equity in undistributed earnings (loss) of subsidiary 826,051 252,386 (299,767) -------- -------- --------- Net Income/(loss) $846,933 $251,176 $(281,631) ======== ======== =========
Condensed Statements of Cash Flows Year ended December 31, ------------------------------------------ 1998 1997 1996 ----------- --------- --------- Cash flows from operating activities: Net Income/(loss) $ 846,933 $ 251,176 $(281,631) Adjustments to reconcile net income/(loss) to net cash used by operating activities Increase in equity in undistributed (earnings) loss of subsidiary - 1997 (826,051) (252,386) 299,767 Other-net (5,629) 4,073 11,618 ----------- --------- --------- Net cash provided (used) by operating activities 15,253 2,863 29,754 ----------- --------- --------- Cash flows from investing activities: Investment in subsidiary (4,268,850) -- - (Purchase) maturity of investment security available-for sale (1,000,000) -- 749,688 ----------- --------- --------- Net cash provided (used) by investing activities (5,268,850) -- 749,688 ----------- --------- --------- Cash flows from financing activities: Proceeds from issuance of common stock 6,610,350 16,000 -- ----------- --------- --------- Increase in cash and deposits with Bank 1,356,753 18,863 779,442 Cash and cash equivalent, beginning of period 879,338 860,475 81,033 ----------- --------- --------- Cash and cash equivalent, end of period $ 2,236,091 $ 879,338 $ 860,475 =========== ========= =========
45 REPORT OF INDEPENDENT AUDITOR The Board of Directors First Community Corporation Lexington, South Carolina I have audited the accompanying balance sheets of First Community Corporation as of December 31, 1998 and 1997, and the related statements of operations, statements of comprehensive income, changes in shareholders' equity and cash flows for the three years ended December 31, 1998. These financial statements are the responsibility of management. My responsibility is to express an opinion on these financial statements based on my audits. I conducted the audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of First Community Corporation at December 31, 1998 and 1997 and the results of its operations and its cash flows for the three years ended December 31, 1998, in conformity with generally accepted accounting principles. /s/Clifton D. Bodiford Certified Public Accountant Columbia, SC January 13, 1999 46 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. NOT APPLICABLE. PART III ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information required by this item is set form under "Election of Director" on pages 1 through 5 of the Registrant's Proxy Statement filed in connection with the 1999 Annual Meeting of Shareholders (the "1998 Proxy Statement"), which information is incorporated herein by reference. ITEM 10. EXECUTIVE COMPENSATION. The information required by this item is set forth under "Compensation of Directors and Executive Officers" on pages 9 through 10 of the 1999 Proxy Statement, which information is incorporated herein by reference. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item is set forth under "Security Ownership of Certain Beneficial Owners and Management" on page 11 of the 1999 Proxy Statement, which information is incorporated herein by reference. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this item is set forth under "Certain Relationships and Related Transactions" on page 12 of the 1999 Proxy Statement, which information is incorporated herein by reference. ITEM 13. EXHIBITS, LIST 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).* 47 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, S.C. (Incorporated by reference to the Company's 1995 Annual Report 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 the Company's 1995 Annual Report 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). 10.8 First Community Corporation 1999 Stock Incentive Plan 21.1 Subsidiaries of the company. 27 Financial Data Schedule (for SEC use only) * Denotes executive compensation contract or arrangement. (b) Reports on Form 8-K No reports on Form 8-K were filed during the fourth quarter of the year ended December 31, 1998. 48 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. First Community Corporation Date: March 26, 1999 By: /s/ Michael C. Crapps -------------------------------------- Michael C. Crapps President and Chief Executive Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date /s/ Richard K. Bogan Director March 26, 1999 - -------------------------- Richard K. Bogan /s/ William L. Boyd, III Director March 26, 1999 - -------------------------- William L. Boyd, III /s/ Thomas C. Brown Director March 26, 1999 - -------------------------- Thomas C. Brown /s/Chimin J. Chao Director March 26, 1999 - -------------------------- Chimin J. Chao /s/ Robert G. Clawson Director March 26, 1999 - -------------------------- Robert G. Clawson /s/ Michael C. Crapps Director, President and Chief March 26, 1999 - -------------------------- Executive Office Michael C. Crapps /s/ Hinton G. Davis Director March 26, 1999 - -------------------------- Hinton G. Davis /s/ Anita B. Easter Director March 26, 1999 - -------------------------- Anita B. Easter /s/ O.A. Ethridge Director March 26, 1999 - -------------------------- O.A. Ethridge /s/ George H. Fann, Jr. Director March 26, 1999 - -------------------------- George H. Fann, Jr.
49
Signature Title Date /s/William A. Jordan Director March 26, 1999 - -------------------------- William A. Jordan /s/ W. James Kitchens, Jr. Director March 26, 1999 - -------------------------- W. James Kitchens, Jr. /s/ James C. Leventis Director, Chairman of the Board and March 26, 1999 - -------------------------- Secretary James C. Leventis /s/ Broadus Thompson Director March 26, 1999 - -------------------------- Broadus Thompson /s/ Angelo L. Tsiantis Director March 26, 1999 - -------------------------- Angelo L. Tsiantis /s/Loretta R. Whitehead Director March 26, 1999 Loretta R. Whitehead Director March 26, 1999 /s/Mitchell M. Willoughby - -------------------------- Mitchell M. Willoughby
EX-10.8 2 FIRST COMMUNITY CORPORATION 1999 STOCK INCENTIVE 1 EXHIBIT 10.8 FIRST COMMUNITY CORPORATION 1999 STOCK INCENTIVE PLAN 2 FIRST COMMUNITY CORPORTION 1999 STOCK INCENTIVE PLAN TABLE OF CONTENTS ARTICLE I DEFINITIONS..........................................................................................1 ARTICLE II THE PLAN.............................................................................................4 2.1 NAME....................................................................................................4 2.2 PURPOSE.................................................................................................4 2.3 EFFECTIVE DATE..........................................................................................5 ARTICLE III PARTICIPANTS.........................................................................................5 ARTICLE IV ADMINISTRATION.......................................................................................5 4.1 DUTIES AND POWERS OF THE COMMITTEE......................................................................5 4.2 INTERPRETATION; RULES...................................................................................5 4.3 NO LIABILITY............................................................................................6 4.4 MAJORITY RULE...........................................................................................6 4.5 COMPANY ASSISTANCE......................................................................................6 ARTICLE V SHARES OF STOCK SUBJECT TO PLAN......................................................................6 5.1 LIMITATIONS.............................................................................................6 5.2 ANTIDILUTION............................................................................................7 ARTICLE VI OPTIONS..............................................................................................8 6.1 TYPES OF OPTIONS GRANTED................................................................................8 6.2 OPTION GRANT AND AGREEMENT..............................................................................8 6.3 OPTIONEE LIMITATIONS....................................................................................8 6.4 $100,000 LIMITATION.....................................................................................9 6.5 EXERCISE PRICE..........................................................................................9 6.6 EXERCISE PERIOD.........................................................................................9 6.7 OPTION EXERCISE........................................................................................10 6.8 RELOAD OPTIONS.........................................................................................11 6.9 NONTRANSFERABILITY OF OPTION...........................................................................11 6.10 TERMINATION OF EMPLOYMENT OR SERVICE...................................................................11 6.11 EMPLOYMENT RIGHTS......................................................................................12 6.12 CERTAIN SUCCESSOR OPTIONS..............................................................................12 6.13 EFFECT OF A CORPORATE TRANSACTION......................................................................12 ARTICLE VII RESTRICTED STOCK....................................................................................12 7.1 AWARDS OF RESTRICTED STOCK.............................................................................12 7.2 NON-TRANSFERABILITY....................................................................................13 7.3 LAPSE OF RESTRICTIONS..................................................................................13 7.4 TERMINATION OF EMPLOYMENT..............................................................................13 7.5 TREATMENT OF DIVIDENDS.................................................................................13 7.6 DELIVERY OF SHARES.....................................................................................13 ARTICLE VIII STOCK CERTIFICATES..................................................................................14 ARTICLE IX TERMINATION AND AMENDMENT...........................................................................14 9.1 TERMINATION AND AMENDMENT..............................................................................14
i 3 9.2 EFFECT ON GRANTEE'S RIGHTS.............................................................................15 ARTICLE X RELATIONSHIP TO OTHER COMPENSATION PLANS.............................................................15 ARTICLE XI MISCELLANEOUS........................................................................................15 11.1 REPLACEMENT OR AMENDED GRANTS..........................................................................15 11.2 FORFEITURE FOR COMPETITION.............................................................................15 11.3 LEAVE OF ABSENCE.......................................................................................15 11.4 PLAN BINDING ON SUCCESSORS.............................................................................16 11.5 HEADINGS, ETC., NO PART OF PLAN........................................................................16 11.6 SECTION 16 COMPLIANCE..................................................................................16 EXHIBIT A TO FIRST COMMUNITY CORPORATION 1999 STOCK INCENTIVE PLAN - FORM OF STOCK OPTION AGREEMENT.........................................................................................1 SCHEDULE A........................................................................................................6 SCHEDULE B........................................................................................................7
ii 4 FIRST COMMUNITY CORPORTION 1999 STOCK INCENTIVE PLAN ARTICLE I DEFINITIONS As used herein, the following terms have the following meanings unless the context clearly indicates to the contrary: "Award" shall mean a grant of Restricted Stock. "Board" shall mean the Board of Directors of the Company. "Cause" (i) with respect to the Company or any subsidiary which employs the recipient of an Award or Option (the "recipient") or for which such recipient primarily performs services, the commission by the recipient of an act of fraud, embezzlement, theft or proven dishonesty, or any other illegal act or practice (whether or not resulting in criminal prosecution or conviction), or any act or practice which the Committee shall, in good faith, deem to have resulted in the recipient's becoming unbondable under the Company's or the subsidiary's fidelity bond; (ii) the willful engaging by the recipient in misconduct which is deemed by the Committee, in good faith, to be materially injurious to the Company or any subsidiary, monetarily or otherwise, including, but not limited, improperly disclosing trade secrets or other confidential or sensitive business information and data about the Company or any subsidiaries and competing with the Company or its subsidiaries, or soliciting employees, consultants or customers of the Company in violation of law or any employment or other agreement to which the recipient is a party; or (iii) the willful and continued failure or habitual neglect by the recipient to perform his or her duties with the Company or the subsidiary substantially in accordance with the operating and personnel policies and procedures of the Company or the subsidiary generally applicable to all their employees. For purposes of this Plan, no act or failure to act by the recipient shall be deemed to be "willful" unless done or omitted to be done by recipient not in good faith and without reasonable belief that the recipient's action or omission was in the best interest of the Company and/or the subsidiary. Notwithstanding the foregoing, if the recipient has entered into an employment agreement that is binding as of the date of employment termination, and if such employment agreement defines "Cause," then the definition of "Cause" in such agreement shall apply to the recipient in this Plan. "Cause" under either (i), (ii) or (iii) shall be determined by the Committee. "Code" shall mean the United States Internal Revenue Code of 1986, including effective date and transition rules (whether or not codified). Any reference herein to a specific section of the Code shall be deemed to include a reference to any corresponding provision of future law. "Committee" shall mean a committee of at least two Directors appointed from time to time by the Board, having the duties and authority set forth herein in addition to any other authority granted by the Board. In selecting the Committee, the Board shall consider (i) the benefits under Section 162(m) of the Code of having a Committee composed of "outside directors" (as that term is defined in the Code) for certain grants of Options to highly compensated executives, and (ii) the 5 benefits under Rule 16b-3 of having a Committee composed of either the entire Board or a Committee of at least two Directors who are Non-Employee Directors for Options granted to or held by any Section 16 Insider. At any time that the Board shall not have appointed a committee as described above, any reference herein to the Committee shall mean the Board. "Company" shall mean First Community Corporation. "Corporate Transaction" shall mean the occurrence of any of the following events: (i) a merger or consolidation in which securities possessing more than 50% of the total combined voting power of the Company's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction; (ii) the sale, transfer or other disposition of all or substantially all of the Company's assets in complete liquidation or dissolution of the Company; or (iii) the grant of any bank regulatory approval (or notice of no disapproval) by the Office of Thrift Supervision or any other regulatory authority for permission to acquire control of the Company or any of its banking subsidiaries. "Director" shall mean a member of the Board and any person who is an advisory or honorary director of the Company if such person is considered a director for the purposes of Section 16 of the Exchange Act, as determined by reference to such Section 16 and to the rules, regulations, judicial decisions, and interpretative or "no-action" positions with respect thereto of the Securities and Exchange Commission, as the same may be in effect or set forth from time to time. "Employee" shall mean a person who constitutes an employee of the Company as such term is defined in the instructions to the Form S-8 Registration Statement under the Securities Act of 1933, and also includes non-employees to whom an offer of employment has been extended. "Exchange Act" shall mean the Securities Exchange Act of 1934. Any reference herein to a specific section of the Exchange Act shall be deemed to include a reference to any corresponding provision of future law. "Exercise Price" shall mean the price at which an Optionee may purchase a share of Stock under a Stock Option Agreement. "Fair Market Value" on any date shall mean (i) the closing sales price of the Stock, regular way, on such date on the national securities exchange having the greatest volume of trading in the Stock during the thirty-day period preceding the day the value is to be determined or, if such exchange was not open for trading on such date, the next preceding date on which it was open; (ii) if the Stock is not traded on any national securities exchange, the average of the 2 6 closing high bid and low asked prices of the Stock on the over-the-counter market on the day such value is to be determined, or in the absence of closing bids on such day, the closing bids on the next preceding day on which there were bids; or (iii) if the Stock also is not traded on the over-the-counter market, the fair market value as determined in good faith by the Board or the Committee based on such relevant facts as may be available to the Board, which may include opinions of independent experts, the price at which recent sales have been made, the book value of the Stock, and the Company's current and future earnings. "Grantee" shall mean a person who is an Optionee or a person who has received an Award of Restricted Stock. "Incentive Stock Option" shall mean an option to purchase any stock of the Company, which complies with and is subject to the terms, limitations and conditions of Section 422 of the Code and any regulations promulgated with respect thereto. "Non-Employee Director" shall have the meaning set forth in Rule 16b-3 under the Exchange Act, as the same may be in effect from time to time, or in any successor rule thereto, and shall be determined for all purposes under the Plan according to interpretative or "no-action" positions with respect thereto issued by the Securities and Exchange Commission. "Officer" shall mean a person who constitutes an officer of the Company for the purposes of Section 16 of the Exchange Act, as determined by reference to such Section 16 and to the rules, regulations, judicial decisions, and interpretative or "no-action" positions with respect thereto of the Securities and Exchange Commission, as the same may be in effect or set forth from time to time. "Option" shall mean an option, whether or not an Incentive Stock Option, to purchase Stock granted pursuant to the provisions of Article VI hereof. "Optionee" shall mean a person to whom an Option has been granted hereunder. "Parent" shall mean any corporation (other than the Company or a Subsidiary) in an unbroken chain of corporations ending with the Company if, at the time of the grant (or modification) of the Option, each of the corporations other than the Company or a Subsidiary owns stock possessing 50% or more of the total combined voting power of the classes of stock in one of the other corporations in such chain. "Permanent and Total Disability" shall have the same meaning as given to that term by Code Section 22(e)(3) and any regulations or rulings promulgated thereunder. "Plan" shall mean the First Community Corporation 1999 Stock Incentive Plan, the terms of which are set forth herein. "Purchasable" shall refer to Stock which may be purchased by an Optionee under the terms of this Plan on or after a certain date specified in the applicable Stock Option Agreement. 3 7 "Qualified Domestic Relations Order" shall have the meaning set forth in the Code or in the Employee Retirement Income Security Act of 1974, or the rules and regulations promulgated under the Code or such Act. "Reload Option" shall have the meaning set forth in Section 6.8 hereof. "Restricted Stock" shall mean Stock issued, subject to restrictions, to a Grantee pursuant to Article VII hereof. "Restriction Agreement" shall mean the agreement setting forth the terms of an Award, and executed by a Grantee as provided in Section 7.1 hereof. "Section 16 Insider" shall mean any person who is subject to the provisions of Section 16 of the Exchange Act, as provided in Rule 16a-2 promulgated pursuant to the Exchange Act. "Stock" shall mean the Common Stock, par value $1.00, of the Company or, in the event that the outstanding shares of Stock are hereafter changed into or exchanged for shares of a different stock or securities of the Company or some other entity, such other stock or securities. "Stock Option Agreement" shall mean an agreement between the Company and an Optionee under which the Optionee may purchase Stock hereunder, a sample form of which is attached hereto as Exhibit A (which form may be varied by the Committee in granting an Option). "Subsidiary" shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the grant (or modification) of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. ARTICLE II THE PLAN 2.1 Name. This Plan shall be known as the "First Community Corporation 1999 Stock Incentive Plan." 2.2 Purpose. The purpose of the Plan is to advance the interests of the Company, its Subsidiaries, and its shareholders by affording Employees and Directors of the Company and its Subsidiaries an opportunity to acquire or increase their proprietary interests in the Company. The objective of the issuance of the Options and Awards is to promote the growth and profitability of the Company and its Subsidiaries because the Grantees will be provided with an additional incentive to achieve the Company's objectives through participation in its success and growth and by encouraging their continued association with or service to the Company. 4 8 2.3 Effective Date. The Plan shall become effective on February 16, 1999; provided, however, that if the shareholders of the Company have not approved the Plan on or prior to the first anniversary of such effective date, then all options granted under the Plan shall be non-Incentive Stock Options. If, at the time of any amendment to the Plan, shareholder approval is required by the Code for Incentive Stock Options and such shareholder approval has not been obtained (or is not obtained within 12 months thereof), any Incentive Stock Options issued under the Plan shall automatically become options which do not qualify as Incentive Stock Options. ARTICLE III PARTICIPANTS The class of persons eligible to participate in the Plan shall consist of all Directors and Employees of the Company or any Subsidiary. ARTICLE IV ADMINISTRATION 4.1 Duties and Powers of the Committee. The Plan shall be administered by the Committee. The Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as it may determine. The Committee shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it may deem necessary. The Committee shall have the power to act by unanimous written consent in lieu of a meeting, and to meet telephonically. In administering the Plan, the Committee's actions and determinations shall be binding on all interested parties. The Committee shall have the power to grant Options or Awards in accordance with the provisions of the Plan and may grant Options and Awards singly, in combination, or in tandem. Subject to the provisions of the Plan, the Committee shall have the discretion and authority to determine those individuals to whom Options or Awards will be granted and whether such Options shall be accompanied by the right to receive Reload Options, the number of shares of Stock subject to each Option or Award, such other matters as are specified herein, and any other terms and conditions of a Stock Option Agreement or Restriction Agreement. The Committee shall also have the discretion and authority to delegate to any Officer its powers to grant Options or Awards under the Plan to any person who is an Employee of the Company but not an Officer or Director. To the extent not inconsistent with the provisions of the Plan, the Committee may give a Grantee an election to surrender an Option or Award in exchange for the grant of a new Option or Award, and shall have the authority to amend or modify an outstanding Stock Option Agreement or Restriction Agreement, or to waive any provision thereof, provided that the Grantee consents to such action. 4.2 Interpretation; Rules. Subject to the express provisions of the Plan, the Committee also shall have complete authority to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to it, to determine the details and provisions of each Stock Option Agreement, and to make all other determinations necessary or advisable for the administration of the Plan, including, without limitation, the amending or altering of the Plan and any Options or Awards 5 9 granted hereunder as may be required to comply with or to conform to any federal, state, or local laws or regulations. If an option granted under the Plan is intended to be an Incentive Stock Option but does not qualify as an Incentive Stock Option for any reason, then the option granted shall remain valid but shall be a non-Incentive Stock Option. 4.3 No Liability. Neither any member of the Board nor any member of the Committee shall be liable to any person for any act or determination made in good faith with respect to the Plan or any Option or Award granted hereunder. 4.4 Majority Rule. A majority of the members of the Committee shall constitute a quorum, and any action taken by a majority at a meeting at which a quorum is present, or any action taken without a meeting evidenced by a writing executed by all the members of the Committee, shall constitute the action of the Committee. 4.5 Company Assistance. The Company shall supply full and timely information to the Committee on all matters relating to eligible persons, their employment, death, retirement, disability, or other termination of employment, and such other pertinent facts as the Committee may require. The Company shall furnish the Committee with such clerical and other assistance as is necessary in the performance of its duties. ARTICLE V SHARES OF STOCK SUBJECT TO PLAN 5.1 Limitations. Subject to any antidilution adjustment pursuant to the provisions of Section 5.2 hereof, the maximum number of shares of Stock that may be issued hereunder shall be 71,000. The number of shares of Stock available for issuance hereunder shall automatically increase on the first trading day each calendar year beginning January 1, 2000, by an amount equal to 3% of the shares of Stock outstanding at that; but this automatic increase shall only apply to the extent that the total number of shares available for issuance under the Plan and the Company's existing 1996 Stock Option Plan, (not including any shares actually issued upon the exercise of Options) does not exceed 15% of the shares of Stock outstanding (subject to adjustment under Section 5.2). Any or all shares of Stock subject to the Plan may be issued in any combination of Incentive Stock Options, non-Incentive Stock Options, or Restricted Stock, and the amount of Stock subject to the Plan may be increased from time to time in accordance with Article IX, provided that the total number of shares of Stock issuable pursuant to Incentive Stock Options may not be increased to more than 71,000 (other than pursuant to anti-dilution adjustments) without shareholder approval. Shares subject to an Option or issued as an Award may be either authorized and unissued shares or shares issued and later acquired by the Company. The shares covered by any unexercised portion of an Option that has terminated for any reason (except as set forth in the following paragraph), or any forfeited portion of an Award, may again be optioned or awarded under the Plan, and such shares shall not be considered as having been optioned or issued in computing the number of shares of Stock remaining available for option or award hereunder. 6 10 If Options are issued in respect of options to acquire stock of any entity acquired, by merger or otherwise, by the Company (or any Subsidiary of the Company), to the extent that such issuance shall not be inconsistent with the terms, limitations and conditions of Code section 422 or Rule 16b-3 under the Exchange Act, the aggregate number of shares of Stock for which Options may be granted hereunder shall automatically be increased by the number of shares subject to the Options so issued; provided, however, that the aggregate number of shares of Stock for which Options may be granted hereunder shall automatically be decreased by the number of shares covered by any unexercised portion of an Option so issued that has terminated for any reason, and the shares subject to any such unexercised portion may not be optioned to any other person. 5.2 Antidilution. (a) If (x) the outstanding shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of merger, consolidation, reorganization, recapitalization, reclassification, combination or exchange of shares, or stock split or stock dividend, (y) any spin-off, spin-out or other distribution of assets materially affects the price of the Company's stock, or (z) there is any assumption and conversion to the Plan by the Company of an acquired company's outstanding option grants, then: (i) the aggregate number and kind of shares of Stock for which Options or Awards may be granted hereunder shall be adjusted proportionately by the Committee; and (ii) the rights of Optionees (concerning the number of shares subject to Options and the Exercise Price) under outstanding Options and the rights of the holders of Awards (concerning the terms and conditions of the lapse of any then-remaining restrictions), shall be adjusted proportionately by the Committee. (b) If the Company shall be a party to any reorganization in which it does not survive, involving merger, consolidation, or acquisition of the stock or substantially all the assets of the Company, the Committee, in its sole discretion, may (but is not required to): (i) notwithstanding other provisions hereof, declare that all Options granted under the Plan shall become exercisable immediately notwithstanding the provisions of the respective Stock Option Agreements regarding exercisability, that all such Options shall terminate 30 days after the Committee gives written notice of the immediate right to exercise all such Options and of the decision to terminate all Options not exercised within such 30-day period, and that all then-remaining restrictions pertaining to Awards under the Plan shall immediately lapse; and/or (ii) notify all Grantees that all Options or Awards granted under the Plan shall be assumed by the successor corporation or substituted on an equitable basis with options or restricted stock issued by such successor corporation. (c) If the Company is to be liquidated or dissolved in connection with a reorganization described in Section 5.2(b), the provisions of such Section shall apply. In all other 7 11 instances, the adoption of a plan of dissolution or liquidation of the Company shall, notwithstanding other provisions hereof, cause all then-remaining restrictions pertaining to Awards under the Plan to lapse, and shall cause every Option outstanding under the Plan to terminate to the extent not exercised prior to the adoption of the plan of dissolution or liquidation by the shareholders, provided that, notwithstanding other provisions hereof, the Committee may declare all Options granted under the Plan to be exercisable at any time on or before the fifth business day following such adoption notwithstanding the provisions of the respective Stock Option Agreements regarding exercisability. (d) The adjustments described in paragraphs (a) through (c) of this Section 5.2, and the manner of their application, shall be determined solely by the Committee, and any such adjustment may provide for the elimination of fractional share interests; provided, however, that any adjustment made by the Board or the Committee shall be made in a manner that will not cause an Incentive Stock Option to be other than an Incentive Stock Option under applicable statutory and regulatory provisions. The adjustments required under this Article V shall apply to any successors of the Company and shall be made regardless of the number or type of successive events requiring such adjustments. ARTICLE VI OPTIONS 6.1 Types of Options Granted. The Committee may, under this Plan, grant either Incentive Stock Options or Options which do not qualify as Incentive Stock Options. Within the limitations provided in this Plan, both types of Options may be granted to the same person at the same time, or at different times, under different terms and conditions, as long as the terms and conditions of each Option are consistent with the provisions of the Plan. Without limitation of the foregoing, Options may be granted subject to conditions based on the financial performance of the Company or any other factor the Committee deems relevant. 6.2 Option Grant and Agreement. Each Option granted hereunder shall be evidenced by minutes of a meeting or the written consent of the Committee and by a written Stock Option Agreement executed by the Company and the Optionee. The terms of the Option, including the Option's duration, time or times of exercise, exercise price, whether the Option is intended to be an Incentive Stock Option, and whether the Option is to be accompanied by the right to receive a Reload Option, shall be stated in the Stock Option Agreement. No Incentive Stock Option may be granted more than ten years after the earlier to occur of the effective date of the Plan or the date the Plan is approved by the Company's shareholders. Separate Stock Option Agreements may be used for Options intended to be Incentive Stock Options and those not so intended, but any failure to use such separate agreements shall not invalidate, or otherwise adversely affect the Optionee's interest in, the Options evidenced thereby. 6.3 Optionee Limitations. The Committee shall not grant an Incentive Stock Option to any person who, at the time the Incentive Stock Option is granted: 8 12 (a) is not an employee of the Company or any of its Subsidiaries (as the term "employee" is defined by the Code); or (b) owns or is considered to own stock possessing at least 10% of the total combined voting power of all classes of stock of the Company or any of its Parent or Subsidiary corporations; provided, however, that this limitation shall not apply if at the time an Incentive Stock Option is granted the Exercise Price is at least 110% of the Fair Market Value of the Stock subject to such Option and such Option by its terms would not be exercisable after five years from the date on which the Option is granted. For the purpose of this subsection (b), a person shall be considered to own: (i) the stock owned, directly or indirectly, by or for his or her brothers and sisters (whether by whole or half blood), spouse, ancestors and lineal descendants; (ii) the stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust in proportion to such person's stock interest, partnership interest or beneficial interest therein; and (iii) the stock which such person may purchase under any outstanding options of the Company or of any Parent or Subsidiary. 6.4 $100,000 Limitation. Except as provided below, the Committee shall not grant an Incentive Stock Option to, or modify the exercise provisions of outstanding Incentive Stock Options held by, any person who, at the time the Incentive Stock Option is granted (or modified), would thereby receive or hold any Incentive Stock Options of the Company and any Parent or Subsidiary, such that the aggregate Fair Market Value (determined as of the respective dates of grant or modification of each option) of the stock with respect to which such Incentive Stock Options are exercisable for the first time during any calendar year is in excess of $100,000 (or such other limit as may be prescribed by the Code from time to time); provided that the foregoing restriction on modification of outstanding Incentive Stock Options shall not preclude the Committee from modifying an outstanding Incentive Stock Option if, as a result of such modification and with the consent of the Optionee, such Option no longer constitutes an Incentive Stock Option; and provided that, if the $100,000 limitation (or such other limitation prescribed by the Code) described in this Section 6.4 is exceeded, the Incentive Stock Option, the granting or modification of which resulted in the exceeding of such limit, shall be treated as an Incentive Stock Option up to the limitation and the excess shall be treated as an Option not qualifying as an Incentive Stock Option. 6.5 Exercise Price. The Exercise Price of the Stock subject to each Option shall be determined by the Committee. Subject to the provisions of Section 6.3(b) hereof, the Exercise Price of an Incentive Stock Option shall not be less than the Fair Market Value of the Stock, and the Exercise Price of a non-Incentive Stock Option shall not be less than 85% of the Fair Market Value of the Stock, as of the date the Option is granted (or in the case of an Incentive Stock Option that is subsequently modified, on the date of such modification). 6.6 Exercise Period. The period for the exercise of each Option granted hereunder shall be determined by the Committee, but the Stock Option Agreement with respect to each Option intended to be an Incentive Stock Option shall provide that such Option shall not be exercisable after the expiration of ten years from the date of grant (or modification) of the Option. 9 13 6.7 Option Exercise. (a) Unless otherwise provided in the Stock Option Agreement or Section 6.6 hereof, an Option may be exercised at any time or from time to time during the term of the Option as to any or all full shares which have become Purchasable under the provisions of the Option, but not at any time as to less than 100 shares unless the remaining shares that have become so Purchasable are less than 100 shares. The Committee shall have the authority to prescribe in any Stock Option Agreement that the Option may be exercised only in accordance with a vesting schedule during the term of the Option. (b) An Option shall be exercised by (i) delivery to the Company at its principal office a written notice of exercise with respect to a specified number of shares of Stock and (ii) payment to the Company at that office of the full amount of the Exercise Price for such number of shares in accordance with Section 6.7(c). If requested by an Optionee, an Option may be exercised with the involvement of a stockbroker in accordance with the federal margin rules set forth in Regulation T (in which case the certificates representing the underlying shares will be delivered by the Company directly to the stockbroker). (c) The Exercise Price is to be paid in full in cash upon the exercise of the Option and the Company shall not be required to deliver certificates for the shares purchased until such payment has been made; provided, however, that in lieu of cash, in the Company's discretion all or any portion of the Exercise Price may be paid by tendering to the Company shares of Stock duly endorsed for transfer and owned by the Optionee, or by authorization to the Company to withhold shares of Stock otherwise issuable upon exercise of the Option, in each case to be credited against the Exercise Price at the Fair Market Value of such shares on the date of exercise (however, no fractional shares may be so transferred, and the Company shall not be obligated to make any cash payments in consideration of any excess of the aggregate Fair Market Value of shares transferred over the aggregate Exercise Price); provided further, that the Board may provide in a Stock Option Agreement (or may otherwise determine in its sole discretion at the time of exercise) that, in lieu of cash or shares, all or a portion of the Exercise Price may be paid by the Optionee's execution of a recourse note equal to the Exercise Price or relevant portion thereof, subject to compliance with applicable state and federal laws, rules and regulations. Notwithstanding the above, the Company shall not be obligated to accept tender of shares of Stock as payment of the Exercise Price if doing so would result in a charge to the Company's earnings for financial reporting purposes. (d) In addition to and at the time of payment of the Exercise Price, the Optionee shall pay to the Company in cash the full amount of any federal, state, and local income, employment, or other withholding taxes applicable to the taxable income of such Optionee resulting from such exercise; provided, however, that in the discretion of the Committee any Stock Option Agreement may provide that all or any portion of such tax obligations, together with additional taxes not exceeding the actual additional taxes to be owed by the Optionee as a result of such exercise, may, upon the irrevocable election of the Optionee, be paid by tendering to the Company whole shares of Stock duly endorsed for transfer and owned by the Optionee, or by authorization to the Company to withhold shares of Stock otherwise issuable upon exercise of the Option, in either case in that number of shares having a Fair Market Value on the date of exercise 10 14 equal to the amount of such taxes thereby being paid, and subject to such restrictions as to the approval and timing of any such election as the Committee may from time to time determine to be necessary or appropriate to satisfy the conditions of the exemption set forth in Rule 16b-3 under the Exchange Act, if such rule is applicable. (e) The holder of an Option shall not have any of the rights of a shareholder with respect to the shares of Stock subject to the Option until such shares have been issued and transferred to the Optionee upon the exercise of the Option. 6.8 Reload Options. (a) The Committee may specify in a Stock Option Agreement (or may otherwise determine in its sole discretion) that a Reload Option shall be granted, without further action of the Committee, (i) to an Optionee who exercises an Option (including a Reload Option) by surrendering shares of Stock in payment of amounts specified in Sections 6.7(c) or 6.7(d) hereof, (ii) for the same number of shares as are surrendered to pay such amounts, (iii) as of the date of such payment and at an Exercise Price equal to the Fair Market Value of the Stock on such date, and (iv) otherwise on the same terms and conditions as the Option whose exercise has occasioned such payment, except as provided below and subject to such other contingencies, conditions, or other terms as the Committee shall specify at the time such exercised Option is granted; provided, that the Committee may require that the shares surrendered in payment as provided above must have been held by the Optionee for at least six months prior to such surrender. (b) Unless provided otherwise in the Stock Option Agreement, a Reload Option may not be exercised by an Optionee (i) prior to the end of a one-year period from the date that the Reload Option is granted, and (ii) unless the Optionee retains beneficial ownership of the shares of Stock issued to such Optionee upon exercise of the Option referred to above in Section 6.8(a)(i) for a period of one year from the date of such exercise. 6.9 Nontransferability of Option. Other than as provided below, no Option shall be transferable by an Optionee other than by will or the laws of descent and distribution or, in the case of non-Incentive Stock Options, pursuant to a Qualified Domestic Relations Order, and, during the lifetime of an Optionee, Options shall be exercisable only by such Optionee (or by such Optionee's guardian or legal representative, should one be appointed). However, a Non-Incentive Stock Option may, in connection with the Optionee's estate plan, be assigned in whole or in part during Optionee's lifetime to one or more members of the Optionee's immediate family or to a trust established for the exclusive benefit of one or more such family members. The assigned portion shall be exercisable only by the person or persons who acquire a proprietary interest in the Option pursuant to such assignment. The terms applicable to the assigned portion shall be the same as those in effect for this Option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Committee may deem appropriate. 6.10 Termination of Employment or Service. The Committee shall have the power to specify, with respect to the Options granted to a particular Optionee, the effect upon such Optionee's right to exercise an Option of termination of such Optionee's employment or service 11 15 under various circumstances, which effect may include immediate or deferred termination of such Optionee's rights under an Option, or acceleration of the date at which an Option may be exercised in full; provided, however, that in no event may an Incentive Stock Option be exercised after the expiration of ten years from the date of grant thereof. Unless a Stock Option Agreement specifically provides otherwise, in the event the recipient of an Option or Award is terminated from his or her employment or other service to the Company or its subsidiaries for Cause, Options and Awards, whether vested or unvested, granted to such person shall terminate immediately and shall not thereafter be exercisable. 6.11 Employment Rights. Nothing in the Plan or in any Stock Option Agreement shall confer on any person any right to continue in the employ of the Company or any of its Subsidiaries, or shall interfere in any way with the right of the Company or any of its Subsidiaries to terminate such person's employment at any time. 6.12 Certain Successor Options. To the extent not inconsistent with the terms, limitations and conditions of Code section 422 and any regulations promulgated with respect thereto, an Option issued in respect of an option held by an employee to acquire stock of any entity acquired, by merger or otherwise, by the Company (or any Subsidiary of the Company) may contain terms that differ from those stated in this Article VI, but solely to the extent necessary to preserve for any such employee the rights and benefits contained in such predecessor option, or to satisfy the requirements of Code section 424(a). 6.13 Effect of a Corporate Transaction. All Options, to the extent outstanding at the time of a Corporate Transaction but not otherwise fully exercisable, shall automatically accelerate so that the Options shall, immediately prior to the effective date of the Corporate Transaction, become exercisable for all shares at the time subject to such Options and may be exercised for any or all of those shares as fully vested shares of Stock. ARTICLE VII RESTRICTED STOCK 7.1 Awards of Restricted Stock. The Committee may grant Awards of Restricted Stock, which shall be governed by a Restriction Agreement between the Company and the Grantee. Each Restriction Agreement shall contain such restrictions, terms, and conditions as the Committee may, in its discretion, determine, and may require that an appropriate legend be placed on the certificates evidencing the subject Restricted Stock. Shares of Restricted Stock granted pursuant to an Award hereunder shall be issued in the name of the Grantee as soon as reasonably practicable after the Award is granted, provided that the Grantee has executed the Restriction Agreement governing the Award, the appropriate blank stock powers and, in the discretion of the Committee, an escrow agreement and any other documents which the Committee may require as a condition to the issuance of such Shares. If a Grantee shall fail to execute the foregoing documents within any time period prescribed by the Committee, the Award shall be void. At the discretion of the Committee, Shares issued 12 16 in connection with an Award shall be deposited together with the stock powers with an escrow agent designated by the Committee. Unless the Committee determines otherwise and as set forth in the Restriction Agreement, upon delivery of the Shares to the escrow agent, the Grantee shall have all of the rights of a shareholder with respect to such Shares, including the right to vote the Shares and to receive all dividends or other distributions paid or made with respect to the Shares. 7.2 Non-Transferability. Until any restrictions upon Restricted Stock awarded to a Grantee shall have lapsed in a manner set forth in Section 7.3, such shares of Restricted Stock shall not be transferable other than by will or the laws of descent and distribution, or pursuant to a Qualified Domestic Relations Order, nor shall they be delivered to the Grantee. 7.3 Lapse of Restrictions. Restrictions upon Restricted Stock awarded hereunder shall lapse at such time or times (but, with respect to any award to a Grantee who is also a Section 16 Insider, not less than six months after the date of the Award) and on such terms and conditions as the Committee may, in its discretion, determine at the time the Award is granted or thereafter. 7.4 Termination of Employment. The Committee shall have the power to specify, with respect to each Award granted to any particular Grantee, the effect upon such Grantee's rights with respect to such Restricted Stock of the termination of such Grantee's employment under various circumstances, which effect may include immediate or deferred forfeiture of such Restricted Stock or acceleration of the date at which any then-remaining restrictions shall lapse. 7.5 Treatment of Dividends. At the time an Award of Restricted Stock is made the Committee may, in its discretion, determine that the payment to the Grantee of any dividends, or a specified portion thereof, declared or paid on such Restricted Stock shall be (i) deferred until the lapsing of the relevant restrictions and (ii) held by the Company for the account of the Grantee until such lapsing. In the event of such deferral, there shall be credited at the end of each year (or portion thereof) interest on the amount of the account at the beginning of the year at a rate per annum determined by the Committee. Payment of deferred dividends, together with interest thereon, shall be made upon the lapsing of restrictions imposed on such Restricted Stock, and any dividends deferred (together with any interest thereon) in respect of Restricted Stock shall be forfeited upon any forfeiture of such Restricted Stock. 7.6 Delivery of Shares. Except as provided otherwise in Article VIII below, within a reasonable period of time following the lapse of the restrictions on shares of Restricted Stock, the Committee shall cause a stock certificate to be delivered to the Grantee with respect to such shares and such shares shall be free of all restrictions hereunder. 13 17 ARTICLE VIII STOCK CERTIFICATES The Company shall not be required to issue or deliver any certificate for shares of Stock purchased upon the exercise of any Option granted hereunder or any portion thereof, or deliver any certificate for shares of Restricted Stock granted hereunder, prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which the Stock is then listed; (b) The completion of any registration or other qualification of such shares which the Committee shall deem necessary or advisable under any federal or state law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body; (c) The obtaining of any approval or other clearance from any federal or state governmental agency or body which the Committee shall determine to be necessary or advisable; and (d) The lapse of such reasonable period of time following the exercise of the Option as the Board from time to time may establish for reasons of administrative convenience. Stock certificates issued and delivered to Grantees shall bear such restrictive legends as the Company shall deem necessary or advisable pursuant to applicable federal and state securities laws. The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Stock pursuant to Options shall relieve the Company of any liability with respect to the non-issuance or sale of the Stock as to which such approval shall not have been obtained. However, the Company shall use its best efforts to obtain all such approvals. ARTICLE IX TERMINATION AND AMENDMENT 9.1 Termination and Amendment. The Board may at any time terminate the Plan; provided, however, that the Board (unless its actions are approved or ratified by the shareholders of the Company within twelve months of the date that the Board amends the Plan) may not amend the Plan to: (a) Increase the total number of shares of Stock issuable pursuant to Incentive Stock Options under the Plan, except as contemplated in Section 5.2 hereof; or (b) Change the class of employees eligible to receive Incentive Stock Options that may participate in the Plan. 14 18 9.2 Effect on Grantee's Rights. No termination, amendment, or modification of the Plan shall affect adversely a Grantee's rights under a Stock Option Agreement or Restriction Agreement without the consent of the Grantee or his legal representative. ARTICLE X RELATIONSHIP TO OTHER COMPENSATION PLANS The adoption of the Plan shall not affect any other stock option, incentive, or other compensation plans in effect for the Company or any of its Subsidiaries; nor shall the adoption of the Plan preclude the Company or any of its Subsidiaries from establishing any other form of incentive or other compensation plan for employees or Directors of the Company or any of its Subsidiaries. ARTICLE XI MISCELLANEOUS 11.1 Replacement or Amended Grants. At the sole discretion of the Committee, and subject to the terms of the Plan, the Committee may modify outstanding Options or Awards or accept the surrender of outstanding Options or Awards and grant new Options or Awards in substitution for them. However no modification of an Option or Award shall adversely affect a Grantee's rights under a Stock Option Agreement or Restriction Agreement without the consent of the Grantee or his legal representative. 11.2 Forfeiture for Competition. If a Grantee provides services to a competitor of the Company or any of its Subsidiaries, whether as an employee, officer, director, independent contractor, consultant, agent, or otherwise, such services being of a nature that can reasonably be expected to involve the skills and experience used or developed by the Grantee while an Employee, then that Grantee's rights under any Options outstanding hereunder shall be forfeited and terminated, and any shares of Restricted Stock held by such Grantee subject to remaining restrictions shall be forfeited, subject in each case to a determination to the contrary by the Committee. 11.3 Leave of Absence. Unless provided otherwise in a particular Stock Option Agreement, the following provisions shall apply upon an Optionee's commencement of an authorized leave of absence: (a) The exercise schedule in effect for such Option shall be frozen as of the first day of the authorized leave, and the Option shall not become exercisable for any additional installments of shares of Stock during the period Optionee remains on such leave. (b) Should the Optionee resume active Employee status within 60 days after the start date of the authorized leave, Optionee shall, for purposes of the applicable exercise 15 19 schedule, receive service credit for the entire period of such leave. If the Optionee does not resume active Employee status within such 60-day period, then no service credit shall be given for the entire period of such leave. (c) If the Option is an Incentive Stock Option, then the following additional provision shall apply: If the leave of absence continues for more than three months, then the Option shall automatically convert to a Non-Incentive Stock Option under the Federal tax laws upon the expiration of such three-month period, unless the Optionee's reemployment rights are guaranteed by statute or written agreement. Following any such conversion of the Option, all subsequent exercises of the Option, whether effected before or after Optionee's return to active Employee status, shall result in an immediate taxable event, and the Company shall be required to collect from Optionee the Federal, state and local income and employment withholding taxes applicable to such exercise. (d) In no event shall the Option become exercisable for any additional shares or otherwise remain outstanding if Optionee does not resume Employee status prior to the Expiration Date of the option term. 11.4 Plan Binding on Successors. The Plan shall be binding upon the successors and assigns of the Company. 11.5 Headings, etc., No Part of Plan. Headings of Articles and Sections hereof are inserted for convenience and reference; they do not constitute part of the Plan. 11.6 Section 16 Compliance. With respect to Section 16 Insiders, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed void to the extent permitted by law and deemed advisable by the Committee. In addition, if necessary to comply with Rule 16b-3 with respect to any grant of an Option hereunder, and in addition to any other vesting or holding period specified hereunder or in an applicable Stock Option Agreement, any Section 16 Insider acquiring an Option shall be required to hold either the Option or the underlying shares of Stock obtained upon exercise of the Option for a minimum of six months. 16 20 EXHIBIT A to First Community Corporation 1999 Stock Incentive Plan - Form of Stock Option Agreement FIRST COMMUNITY CORPORTION STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this ____ day of _______________, _____________, by and between First Community Corporation, (the "Company"), and _________________ (the "Optionee"). WHEREAS, on _____________________, the Board of Directors of the Company adopted a Stock Incentive Plan known as the "First Community Corporation 1999 Stock Incentive Plan" (the "Plan"), and recommended that the Plan be approved by the Company's shareholders; and WHEREAS, the Committee has granted the Optionee a stock option to purchase the number of shares of the Company's common stock as set forth below, and in consideration of the granting of that stock option the Optionee intends to remain in the employ of the Company; and WHEREAS, the Company and the Optionee desire to enter into a written agreement with respect to such option in accordance with the Plan. NOW, THEREFORE, as an employment incentive and to encourage stock ownership, and also in consideration of the mutual covenants contained herein, the parties hereto agree as follows. 1. Incorporation of Plan. This option is granted pursuant to the provisions of the Plan and the terms and definitions of the Plan are incorporated herein by reference and made a part hereof. A copy of the Plan has been delivered to, and receipt is hereby acknowledged by, the Optionee. 2. Grant of Option. Subject to the terms, restrictions, limitations and conditions stated herein, the Company hereby evidences its grant to the Optionee, not in lieu of salary or other compensation, of the right and option (the "Option") to purchase all or any part of the number of shares of the Company's Common Stock, no par value per share (the "Stock"), set forth on Schedule A attached hereto and incorporated herein by reference. The Option shall be exercisable in the amounts and at the time specified on Schedule A. The Option shall expire and shall not be exercisable on the date specified on Schedule A or on such earlier date as determined pursuant to Section 8, 9, or 10 hereof. Schedule A states whether the Option is intended to be an Incentive Stock Option. A-1 21 3. Purchase Price. The price per share to be paid by the Optionee for the shares subject to this Option (the "Exercise Price") shall be as specified on Schedule A, which price shall be an amount not less than the Fair Market Value of a share of Stock as of the Date of Grant (as defined in Section 11 below) if the Option is an Incentive Stock Option. 4. Exercise Terms. The Optionee must exercise the Option for at least the lesser of 100 shares or the number of shares of Purchasable Stock as to which the Option remains unexercised. In the event this Option is not exercised with respect to all or any part of the shares subject to this Option prior to its expiration, the shares with respect to which this Option was not exercised shall no longer be subject to this Option. 5. Option Non-Transferable. No Option shall be transferable by an Optionee other than by will or the laws of descent and distribution or, in the case of non-Incentive Stock Options, pursuant to a Qualified Domestic Relations Order. During the lifetime of an Optionee, Options shall be exercisable only by such Optionee (or by such Optionee's guardian or legal representative, should one be appointed). 6. Notice of Exercise of Option. This Option may be exercised by the Optionee, or by the Optionee's administrators, executors or personal representatives, by a written notice (in substantially the form of the Notice of Exercise attached hereto as Schedule B) signed by the Optionee, or by such administrators, executors or personal representatives, and delivered or mailed to the Company as specified in Section 14 hereof to the attention of the President, the Chief Operating Officer or such other officer as the Company may designate. Any such notice shall (a) specify the number of shares of Stock which the Optionee or the Optionee's administrators, executors or personal representatives, as the case may be, then elects to purchase hereunder, (b) contain such information as may be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by (i) a certified or cashier's check payable to the Company in payment of the total Exercise Price applicable to such shares as provided herein, (ii) shares of Stock owned by the Optionee and duly endorsed or accompanied by stock transfer powers having a Fair Market Value equal to the total Exercise Price applicable to such shares purchased hereunder, or (iii) a certified or cashier's check accompanied by the number of shares of Stock whose Fair Market Value when added to the amount of the check equals the total Exercise Price applicable to such shares purchased hereunder. Upon receipt of any such notice and accompanying payment, and subject to the terms hereof, the Company agrees to issue to the Optionee or the Optionee's administrators, executors or personal representatives, as the case may be, stock certificates for the number of shares specified in such notice registered in the name of the person exercising this Option. 7. Adjustment in Option. The number of Shares subject to this Option, the Exercise Price and other matters are subject to adjustment during the term of this Option in accordance with Section 5.2 of the Plan. A-2 22 8. Termination of Employment. (a) Except as otherwise specified in Schedule A hereto, in the event of the termination of the Optionee's employment with the Company or any of its Subsidiaries, other than a termination that is either (i) for cause, (ii) voluntary on the part of the Optionee and without written consent of the Company, or (iii) for reasons of death or disability or retirement, the Optionee may exercise this Option at any time within 30 days after such termination to the extent of the number of shares which were Purchasable hereunder at the date of such termination. (b) Except as specified in Schedule A attached hereto, in the event of a termination of the Optionee's employment that is either (i) for cause or (ii) voluntary on the part of the Optionee and without the written consent of the Company, this Option, to the extent not previously exercised, shall terminate immediately and shall not thereafter be or become exercisable. (c) Unless and to the extent otherwise provided in Exhibit A hereto, in the event of the retirement of the Optionee at the normal retirement date as prescribed from time to time by the Company or any Subsidiary, the Optionee shall continue to have the right to exercise any Options for shares which were Purchasable at the date of the Optionee's retirement provided that, on the date which is three months after the date of retirement, the Options will become void and unexercisable unless on the date of retirement the Optionee enters into a noncompete agreement with First Community Corporation and continues to comply with such noncompete agreement. This Option does not confer upon the Optionee any right with respect to continuance of employment by the Company or by any of its Subsidiaries. This Option shall not be affected by any change of employment so long as the Optionee continues to be an employee of the Company or one of its Subsidiaries. 9. Disabled Optionee. In the event of termination of employment because of the Optionee's Permanent and Total Disability, the Optionee (or his or her personal representative) may exercise this Option, within a period ending on the earlier of (a) the last day of the one year period following the Optionee's death or (b) the expiration date of this Option, to the extent of the number of shares which were Purchasable hereunder at the date of such termination. 10. Death of Optionee. Except as otherwise set forth in Schedule A with respect to the rights of the Optionee upon termination of employment under Section 8(a) above, in the event of the Optionee's death while employed by the Company or any of its Subsidiaries or within three months after a termination of such employment (if such termination was neither (i) for cause nor (ii) voluntary on the part of the Optionee and without the written consent of the Company), the appropriate persons described in Section 6 hereof or persons to whom all or a portion of this Option is transferred in accordance with Section 5 hereof may exercise this Option at any time within a period ending on the earlier of (a) the last day of the one year period following the Optionee's death or (b) the expiration date of this Option. If the Optionee was an employee of the Company at the time of death, this Option may be so exercised to the extent of the number of shares that were Purchasable hereunder at the date of death. If the A-3 23 Optionee's employment terminated prior to his or her death, this Option may be exercised only to the extent of the number of shares covered by this Option which were Purchasable hereunder at the date of such termination. 11. Date of Grant. This Option was granted by the Committee on the date set forth in Schedule A (the "Date of Grant"). 12. Compliance with Regulatory Matters. The Optionee acknowledges that the issuance of capital stock of the Company is subject to limitations imposed by federal and state law and the Optionee hereby agrees that the Company shall not be obligated to issue any shares of Stock upon exercise of this Option that would cause the Company to violate law or any rule, regulation, order or consent decree of any regulatory authority (including without limitation the Securities and Exchange Commission) having jurisdiction over the affairs of the Company. The Optionee agrees that he or she will provide the Company with such information as is reasonably requested by the Company or its counsel to determine whether the issuance of Stock complies with the provisions described by this Section 12. 13. Restriction on Disposition of Shares. The shares purchased pursuant to the exercise of an Incentive Stock Option shall not be transferred by the Optionee except pursuant to the Optionee's will, or the laws of descent and distribution, until such date which is the later of two years after the grant of such Incentive Stock Option or one year after the transfer of the shares to the Optionee pursuant to the exercise of such Incentive Stock Option. 14. Miscellaneous. (a) This Agreement shall be binding upon the parties hereto and their representatives, successors and assigns. (b) This Agreement is executed and delivered in, and shall be governed by the laws of, the State of Georgia. (c) Any requests or notices to be given hereunder shall be deemed given, and any elections or exercises to be made or accomplished shall be deemed made or accomplished, upon actual delivery thereof to the designated recipient, or three days after deposit thereof in the United States mail, registered, return receipt requested and postage prepaid, addressed, if to the Optionee, at the address set forth below and, if to the Company, to the executive offices of the Company at ______________________________________, or at such other addresses that the parties provide to each other in accordance with the notice requirements hereof. (d) This Agreement may not be modified except in writing executed by each of the parties hereto. IN WITNESS WHEREOF, the Committee has caused this Stock Option Agreement to be executed on behalf of the Company, and the Optionee has executed this Stock Option Agreement, all as of the day and year first above written. A-4 24 FIRST COMMUNITY CORPORATION OPTIONEE By: --------------------------------- ---------------------------------- Name: Name: ----------------------------- Title: Address: -------------------------- A-5 25 SCHEDULE A TO STOCK OPTION AGREEMENT BETWEEN FIRST COMMUNITY CORPORATION AND ---------------------------- Dated: ___________________ 1. Number of Shares Subject to Option:_________________ Shares. 2. This Option (Check one) [ ] is [ ] is not an Incentive Stock Option. 3. Option Exercise Price: $___________ per Share. 4. Date of Grant: ___________________ 5. Option Vesting Schedule: Check one: ( ) Options are exercisable with respect to all shares on or after the date hereof ( ) Options are exercisable with respect to the number of shares indicated below on or after the date indicated next to the number of shares:
No. of Shares Vesting Date ------------- ------------
6. Option Exercise Period: Check One: ( ) All options expire and are void unless exercised on or before _______________, 19____. ( ) Options expire and are void unless exercised on or before the date indicated next to the number of shares:
No. of Shares Expiration Date ------------- ---------------
7. Effect of Termination of Employment of Optionee (if different from that set forth in Sections 8 and 10 of the Stock Option Agreement): 26 SCHEDULE B NOTICE OF EXERCISE The undersigned hereby notifies First Community Corporation (the "Company") of this election to exercise the undersigned's stock option to purchase _____ shares of the Company's common stock, no par value per share (the "Common Stock"), pursuant to the Stock Option Agreement (the "Agreement") between the undersigned and the Company dated _______________________, 19____. Accompanying this Notice is (1) a certified or a cashier's check in the amount of $________________ payable to the Company, and/or (2) _______________ shares of the Company's Common Stock presently owned by the undersigned and duly endorsed or accompanied by stock transfer powers, having an aggregate Fair Market Value (as defined in the First Community Corporation 1999 Stock Incentive Plan) as of the date hereof of $________________, and/or (3) authorization to withhold shares of Stock otherwise issuable upon exercise of the Option having an aggregate Fair Market Value (as defined in the Plan) as of the date hereof of $________________, with such shares of Stock that are withheld being credited against the Exercise Price, such amounts of (1), (2) and (3) being equal, in the aggregate, to the purchase price per share set forth in Section 3 of the Agreement multiplied by the number of shares being purchased hereby (in each instance subject to appropriate adjustment pursuant to Section 5.2 of the First Community Corporation 1999 Stock Incentive Plan). IN WITNESS WHEREOF, the undersigned has set his hand and seal, this _______ day of ____________________ , _________. OPTIONEE [OR OPTIONEE'S ADMINISTRATOR, EXECUTOR OR PERSONAL REPRESENTATIVE] -------------------------------------------- Name: Position (if other than Optionee): EX-21.1 3 SUBSIDARIES OF THE COMPANY 1 EXHIBIT 21.1 SUBSIDIARIES OF REGISTRANT First Community Bank, N.A. EX-27 4 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998, CONTAINED IN FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-KSB. YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 2,316,369 0 3,290,403 0 19,899,891 2,942,760 2,957,892 40,819,405 532,025 73,151,576 56,005,770 2,770,113 763,349 0 0 0 1,207,177 12,405,167 73,151,576 3,151,523 1,032,554 394,742 4,578,819 1,780,634 1,919,551 2,659,268 179,000 0 2,009,816 906,857 906,857 0 0 846,933 0.90 0.87 4.54 0 0 0 0 380,120 33,980 6,885 532,025 532,025 0 0
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