UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended March 31, 2004 |
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission File Number 000-32609
FIRST COMMUNITY CAPITAL CORPORATION
(Exact name of small business issuer as specified in its charter)
| Texas (State or other jurisdiction of incorporation or organization) |
76-0676739 (I.R.S. Employer Identification Number) |
14200 Gulf Freeway
Houston, Texas 77034
(Address of principal executive offices, including zip code)
(281) 996-1000
(Issuer’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨.
Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange Act). Yes ¨ No x
As of April 30, 2004, there were 2,880,441 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.
FIRST COMMUNITY CAPITAL CORPORATION
| Page | ||||
| PART I—FINANCIAL INFORMATION |
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| Item 1. Consolidated Financial Statements |
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| Consolidated Statements of Condition as of March 31, 2004 (Unaudited) and December 31, 2003 |
3 | |||
| Consolidated Statements of Earnings for the Three Months Ended March 31, 2004 and 2003 (Unaudited) |
4 | |||
| 5 | ||||
| 6 | ||||
| Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003 (Unaudited) |
7 | |||
| 8 | ||||
| Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations |
11 | |||
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
24 | |||
| 25 | ||||
| PART II—OTHER INFORMATION |
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| 26 | ||||
| Item 2. Changes In Securities, Use Of Proceeds and Issuer Repurchases of Equity Securities |
26 | |||
| 26 | ||||
| 26 | ||||
| 26 | ||||
| 26 | ||||
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Statements and financial discussion and analysis contained in this quarterly report on Form 10-Q of First Community Capital Corporation (the “Company”) that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe the Company’s future plans, strategies and expectations, are based on assumptions and involve a number of risks and uncertainties, many of which are beyond the Company’s control. The important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation:
| • | changes in interest rates and market prices, which could reduce the Company’s net interest margins, asset valuations and expense expectations; |
1
| • | changes in the levels of loan prepayments and the resulting effects on the value of the Company’s loan portfolio; |
| • | changes in local economic and business conditions which adversely affect the Company’s customers and their ability to transact profitable business with the Company, including the ability of the Company’s borrowers to repay their loans according to their terms or a change in the value of the related collateral; |
| • | increased competition for deposits and loans adversely affecting rates and terms; |
| • | the timing, impact and other uncertainties of the Company’s ability to enter new markets successfully and capitalize on growth opportunities; |
| • | increased credit risk in the Company’s assets and increased operating risk caused by a material change in commercial, consumer and/or real estate loans as a percentage of the total loan portfolio; |
| • | the failure of assumptions underlying the establishment of and provisions made to the allowance for possible credit losses; |
| • | changes in the availability of funds resulting in increased costs or reduced liquidity; |
| • | increased asset levels and changes in the composition of assets and the resulting impact on the Company’s capital levels and regulatory capital ratios; |
| • | the Company’s ability to acquire, operate and maintain cost effective and efficient systems without incurring unexpectedly difficult or expensive but necessary technological changes; |
| • | the loss of senior management or operating personnel and the potential inability to hire qualified personnel at reasonable compensation levels; and |
| • | changes in statutes and government regulations or their interpretations applicable to banks and the Company’s present and future subsidiaries, including changes in tax requirements and tax rates. |
The Company undertakes no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the applicable cautionary statements.
2
FIRST COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
MARCH 31, 2004 (UNAUDITED) AND DECEMBER 31, 2003
| ASSETS | March 31, 2004 |
December 31, 2003 |
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| Cash and non-interesting bearing due from banks |
$ | 31,043,450 | $ | 24,304,702 | ||||
| Federal funds sold |
4,063,585 | — | ||||||
| Total cash and cash equivalents |
35,107,035 | 24,304,702 | ||||||
| Securities available for sale |
115,870,635 | 116,096,938 | ||||||
| Interest-bearing deposits in financial institutions |
3,731,860 | 8,265,835 | ||||||
| Other investments |
3,000,000 | 290,000 | ||||||
| Loans and leases, net of unearned fees |
340,059,402 | 287,439,012 | ||||||
| Less allowance for possible credit losses |
(3,757,025 | ) | (2,929,852 | ) | ||||
| Loans and leases, net |
336,302,377 | 284,509,160 | ||||||
| Bank premises and equipment, net |
11,615,876 | 11,074,480 | ||||||
| Accrued interest receivable |
1,835,139 | 1,753,559 | ||||||
| Federal Home Loan Bank stock |
3,193,600 | 2,590,400 | ||||||
| Federal Reserve Bank stock |
988,900 | 619,300 | ||||||
| Texas Independent Bank stock |
50,000 | 40,000 | ||||||
| Bank owned life insurance |
8,758,334 | 8,698,334 | ||||||
| Other real estate owned |
2,573,660 | 924,208 | ||||||
| Goodwill |
12,133,687 | 6,578,425 | ||||||
| Core deposit intangible |
2,507,812 | 1,719,959 | ||||||
| Other assets |
2,397,550 | 1,773,137 | ||||||
| $ | 540,066,465 | $ | 469,238,437 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Liabilities |
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| Deposits: |
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| Noninterest-bearing |
$ | 120,409,458 | $ | 94,707,239 | ||||
| Interest-bearing |
317,084,601 | 272,588,789 | ||||||
| Total Deposits |
437,494,059 | 367,296,028 | ||||||
| Federal Home Loan Bank borrowings |
42,264,570 | 43,764,570 | ||||||
| Accrued interest payable and other liabilities |
2,763,054 | 1,725,002 | ||||||
| Junior subordinated debentures |
18,000,000 | 18,000,000 | ||||||
| Total Liabilities |
500,521,683 | 430,785,600 | ||||||
| Stockholders’ Equity |
||||||||
| Preferred stock, Series A |
3,850 | 3,850 | ||||||
| Preferred stock, Series B |
3,757 | 3,757 | ||||||
| Common stock |
28,933 | 28,900 | ||||||
| Treasury stock, at par |
(128 | ) | (128 | ) | ||||
| Capital surplus |
34,624,722 | 34,576,191 | ||||||
| Retained earnings |
4,772,148 | 4,426,212 | ||||||
| Accumulated other comprehensive income (loss) |
111,500 | (585,945 | ) | |||||
| Total Stockholders’ Equity |
39,544,782 | 38,452,837 | ||||||
| $ | 540,066,465 | $ | 469,238,437 | |||||
See accompanying notes.
3
FIRST COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
| 2004 |
2003 |
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| INTEREST INCOME |
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| Interest and fees on loans and leases |
$ | 5,526,339 | $ | 4,715,690 | ||||
| Securities available for sale |
1,140,175 | 905,205 | ||||||
| Other investments |
26,526 | 61,972 | ||||||
| Federal funds sold |
16,984 | 28,629 | ||||||
| Total Interest Income |
6,710,024 | 5,711,496 | ||||||
| INTEREST EXPENSE |
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| Deposits |
1,290,003 | 1,341,045 | ||||||
| Subordinated debentures |
265,773 | — | ||||||
| Other borrowed funds |
225,401 | 232,519 | ||||||
| Total Interest Expense |
1,781,177 | 1,573,564 | ||||||
| NET INTEREST INCOME |
4,928,847 | 4,137,932 | ||||||
| PROVISION FOR POSSIBLE CREDIT LOSSES |
(475,001 | ) | (475,000 | ) | ||||
| NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE CREDIT LOSSES |
4,453,846 | 3,662,932 | ||||||
| NON-INTEREST INCOME |
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| Service charges |
1,020,843 | 837,108 | ||||||
| Gain on sales of securities |
66,361 | 133,172 | ||||||
| Other |
136,640 | 142,679 | ||||||
| Total Non-Interest Income |
1,223,844 | 1,112,959 | ||||||
| NON-INTEREST EXPENSE |
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| Salaries and employee benefits |
2,454,503 | 1,770,035 | ||||||
| Net occupancy and equipment expense |
979,160 | 585,433 | ||||||
| Professional and outside service fees |
618,718 | 393,757 | ||||||
| Office expenses |
337,838 | 266,060 | ||||||
| Minority interest expense, trust preferred securities |
— | 191,914 | ||||||
| Other |
897,244 | 730,051 | ||||||
| Total Non-Interest Expense |
5,287,463 | 3,937,250 | ||||||
| EARNINGS BEFORE INCOME TAXES |
390,227 | 838,641 | ||||||
| INCOME TAXES |
44,291 | 187,273 | ||||||
| NET EARNINGS |
$ | 345,936 | $ | 651,368 | ||||
| NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS |
$ | 258,348 | $ | 563,780 | ||||
| BASIC EARNINGS PER COMMON SHARE |
$ | 0.09 | $ | 0.20 | ||||
| DILUTED EARNINGS PER COMMON SHARE |
$ | 0.08 | $ | 0.19 | ||||
See accompanying notes.
4
FIRST COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
| Three Months Ending March 31, |
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| 2004 |
2003 |
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| NET EARNINGS |
$ | 345,936 | $ | 651,368 | |||
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX |
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| Unrealized gain (loss) on available for sale securities |
697,445 | (160,058 | ) | ||||
| COMPREHENSIVE INCOME |
$ | 1,043,381 | $ | 491,310 | |||
See accompanying notes.
5
FIRST COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
| March 31, 2004 (Unaudited) |
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| Preferred Series A |
Preferred Series B |
Common Stock |
Treasury Stock |
Capital Surplus |
Retained Earnings |
Accumulated Other |
Total |
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| Balance-December 31, 2003 |
$ | 3,850 | $ | 3,757 | $ | 28,900 | $ | (128 | ) | $ | 34,576,191 | $ | 4,426,212 | $ | (585,945 | ) | $ | 38,452,837 | |||||||||
| Issuance of Common Stock (3,320 shares) |
— | — | 33 | — | 48,531 | — | — | 48,564 | |||||||||||||||||||
| Net Earnings |
— | — | — | — | — | 345,936 | — | 345,936 | |||||||||||||||||||
| Unrealized Gain on Securities |
— | — | — | — | — | — | 697,445 | 697,445 | |||||||||||||||||||