FIRST COMMUNITY CORP SC

For the period ended Dec 31, 2023. Filed Mar 21, 2024.

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FY2023 · Filed Mar 21, 2024

FCCO$33.11+0.6%Stored close · as of Nov 9, 2026

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
	For the fiscal year ended December 31, 2023
Or
☐	Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to

Commission file number:000-28344

First Community Corporation

(Exact name of registrant as specified in its charter)

5455 Sunset Blvd.,
South Carolina	57-1010751
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Lexington, South Carolina	29072
(Address of principal executive offices)	(Zip Code)

803-951-2265

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $1.00 par value per share	FCCO	The NASDAQ Capital Market

Securities registered pursuant to Section 12(g) of the Act:None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 past 90 days. Yes ☒ No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated Filer ☐	Non-accelerated Filer ☒	Smaller reporting company ☒	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso No ☒

As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $126,574,711 based on the closing price of $17.36 on June 30, 2023, as reported on The NASDAQ Capital Market.7,629,005 shares of the registrant’s common stock were issued and outstanding as of March 21, 2024.

Documents Incorporated by Reference

Portions of the registrant’s Definitive Proxy Statement for its 2024 Annual Meeting of Shareholders are incorporated by reference into Part III, Items 10-14 of this Form 10-K.

TABLE OF CONTENTS

	Page No.
PART I	7
Item 1. Business	7
Item 1A. Risk Factors	30
Item 1B. Unresolved Staff Comments	46
Item 1C. Cybersecurity	46
Item 2. Properties	47
Item 3. Legal Proceedings	47
Item 4. Mine Safety Disclosures	47
PART II	48
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities	48
Item 6. [Reserved]	49
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	80
Item 8. Financial Statements and Supplementary Data	80
Consolidated Balance Sheets	84
Consolidated Statements of Income	85
Consolidated Statements of Comprehensive Income (Loss)	86
Consolidated Statements of Changes in Shareholders’ Equity	87
Consolidated Statements of Cash Flows	88
Notes to Consolidated Financial Statements	89
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	131
Item 9A. Controls and Procedures	131
Item 9B. Other Information	131
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	131
PART III	132
Item 10. Directors, Executive Officers and Corporate Governance	132
Item 11. Executive Compensation	132
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	132
Item 13. Certain Relationships and Related Transactions, and Director Independence	132
Item 14. Principal Accountant Fees and Services	132
PART IV	133
Item 15. Exhibits, Financial Statement Schedules	133
SIGNATURES	136

CAUTIONARY STATEMENT REGARDING

FORWARD-LOOKING STATEMENTS

This report, including information included or incorporated by reference in this report, contains statements which constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may relate to, among other matters, the financial condition, results of operations, plans, objectives, future performance, and the business of our company. Forward-looking statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words “may,” “approximately,” “is likely,” “would,” “could,” “should,” “will,” “expect,” “anticipate,” “predict,” “project,” “potential,” “continue,” “assume,” “believe,” “intend,” “plan,” “forecast,” “goal,” and “estimate,” as well as similar expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ materially from those anticipated in our forward-looking statements include, without limitation, those described under the heading “Risk Factors” in this Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the U.S. Securities and Exchange Commission (the “SEC”) and the following:

·	credit losses as a result of, among other potential factors, declining real estate values, increasing interest rates, increasing unemployment, or changes in customer payment behavior or other factors;

·	the amount of our loan portfolio collateralized by real estate and weaknesses in the real estate market;

·	restrictions or conditions imposed by our regulators on our operations;

·	the adequacy of the level of our allowance for credit losses and the amount of credit loss provisions required in future periods;

·	examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for credit losses, write-down assets, or take other actions;

·	risks associated with actual or potential information gatherings, investigations or legal proceedings by customers, regulatory agencies or others;

·	reduced earnings due to higher credit impairment charges resulting from additional decline in the value of our securities portfolio, specifically as a result of increasing default rates, and loss severities on the underlying real estate collateral;

·	increases in competitive pressure in the banking and financial services industries;

changes in the interest rate environment, which are affected by many factors beyond our control, including inflation, recession, unemployment, money supply, domestic and international events and changes in the United States and other financial markets, and that could reduce anticipated or actual margins; temporarily reduce the market value of our available-for-sale investment securities and temporarily reduce accumulated other comprehensive income or increase accumulated other comprehensive loss, which temporarily could reduce shareholders’ equity;

·	enterprise risk management may not be effective in mitigating risk and reducing the potential for losses;
·	changes in political conditions or the legislative or regulatory environment, including governmental initiatives affecting the financial services industry, including as a result of the presidential administration and congressional elections;

·	general economic conditions resulting in, among other things, a deterioration in credit quality;

changes occurring in business conditions and inflation, including the impact of inflation on us, including a decrease in demand for new mortgage loan and commercial real estate loan originations and refinancings, an increase in competition for deposits, and an increase in non-interest expense, which may have an adverse impact on our financial performance;

·	changes in access to funding or increased regulatory requirements with regard to funding, which could impair our liquidity;

·	FDIC assessment which has increased, and may continue to increase, our cost of doing business;
·	cybersecurity risk related to our dependence on internal computer systems and the technology of outside service providers, as well as the potential impacts of third party security breaches, which subject us to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events;

·	changes in deposit flows, which may be negatively affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, and returns available to customers on alternative investments;

·	changes in technology, including the increasing use of artificial intelligence;

·	our current and future products, services, applications and functionality and plans to promote them;

·	changes in monetary and tax policies, including potential changes in tax laws and regulations;

·	changes in accounting standards, policies, estimates and practices as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the SEC and the Public Company Accounting Oversight Board;

·	our assumptions and estimates used in applying critical accounting policies, which may prove unreliable, inaccurate or not predictive of actual results;

·	the rate of delinquencies and amounts of loans charged-off;

·	the rate of loan growth in recent years and the lack of seasoning of a portion of our loan portfolio;

·	our ability to maintain appropriate levels of capital, including levels of capital required under the capital rules implementing Basel III;

·	our ability to successfully execute our business strategy;

·	our ability to attract and retain key personnel;
·	our ability to retain our existing customers, including our deposit relationships;

·	our use of brokered deposits may be an unstable and/or expensive deposit source to fund earning asset growth;
·	our ability to obtain brokered deposits as an additional funding source could be limited;
·	adverse changes in asset quality and resulting credit risk-related losses and expenses;
·	the potential effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics (including COVID-19), war or terrorist activities, such as the war in Ukraine, the Middle East conflict, and the conflict between China and Taiwan, disruptions in our customers’ supply chains, disruptions in transportation, essential utility outages or trade disputes and related tariffs;

·	disruptions due to flooding, severe weather or other natural disasters; and

·	other risks and uncertainties described under “Risk Factors” below.

Because of these and other risks and uncertainties, our actual future results may be materially different from the results indicated by any forward-looking statements. For additional information with respect to factors that could cause actual results to differ from the expectations stated in the forward-looking statements, see “Risk Factors” under Part I, Item 1A of this Annual Report on Form 10-K. In addition, our past results of operations do not necessarily indicate our future results. Therefore, we caution you not to place undue reliance on our forward-looking information and statements.

All forward-looking statements in this report are based on information available to us as of the date of this report. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that these expectations will be achieved. We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.

Summary of Material Risks

An investment in our securities involves risks, including those summarized below. For a more complete discussion of the material risks facing our business, see Item 1A—Risk Factors.

Economic and Geographic-Related Risks

·	Our business may be adversely affected by economic conditions.

C****redit and Interest Rate Risks

·	Our decisions regarding credit risk and allowance for credit losses may significantly harm our business.
·	We may have higher credit losses than we have allowed for in our allowance for credit losses.
·	Our concentration of credit exposure in commercial real estate means that challenges in this market could harm our business, financial condition, and results of operations.
·	Limits imposed by bank regulators on commercial and multi-family real estate lending could restrict our growth and harm our earnings.
·	Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value.
·	Our focus on lending to small to mid-sized community-based businesses may increase our credit risk.
·	Our underwriting decisions may materially and adversely affect our business.
·	Our financial condition could suffer if we rely on misleading information from our clients or counterparties.
·	If we fail to effectively manage credit risk, our business and financial condition will suffer.
·	Changes in prevailing interest rates may reduce our profitability.

Capital and Liquidity Risks

·	Changes in the financial markets could impair the value of our investment portfolio.
·	The Bank must adhere to strict capital requirements, which could become even stricter in the future.

Risks Related to Our Industry

·	Inflationary pressures and rising prices may affect our results of operations and financial condition.
·	The Federal Reserve has implemented significant economic strategies that have affected interest rates, inflation, asset values, and the shape of the yield curve.
·	Adverse developments affecting the financial services industry, such as the 2023 bank failures or concerns involving liquidity, may have a material adverse effect on our operations
·	Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition.
·	We could experience a loss due to competition with other financial institutions or nonbank companies.
·	We may be adversely affected by the soundness of other financial institutions.
·	Failure to keep pace with technological changes could adversely affect our business.
·	New lines of business or new products and services may subject us to additional risk.
·	Consumers may decide not to use banks to complete their financial transactions.
·	We use brokered deposits, which may be an unstable and costly source of funding for asset growth.
·	Our ability to obtain brokered deposits as an additional funding source may become limited.
·	Consumers may decide not to use banks to complete their financial transactions.

Risks Related to Our Strategy

·	We may be adversely affected by risks associated with future mergers and acquisitions, including execution risk, which could disrupt our business and dilute shareholder value.
·	We may be exposed to difficulties in combining the operations of acquired businesses into our own operations, which may prevent us from achieving the expected benefits from our acquisition activities.
·	New or acquired banking office facilities and other facilities may not be profitable.

Risks Related to Our Human Capital

·	We are dependent on key individuals, and the loss of one or more of these individuals could limit our growth and adversely affect our prospects.

Operational Risks

·	System or infrastructure failures, including cyber-attacks, could disrupt our operations, lead to the disclosure of confidential information, harm our reputation, or increase costs and losses.
·	Our information systems may experience failure, interruption or breach in security.
·	We are at risk of increased losses from fraud.
·	Our use of third party vendors and our other ongoing third party business relationships are subject to increasing regulatory requirements and attention.
·	If we fail to maintain our reputation, our performance may be harmed.

L****egal, Accounting, Regulatory and Compliance Risks

·	We are subject to extensive regulation that could restrict our activities, have an adverse impact on our operations, and impose financial requirements or limitations on the conduct of our business.
·	Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.
·	Failure to comply with federal and state fair lending laws could result in significant penalties for us.
·	Changes in accounting standards could materially affect our financial statements.
·	The Federal Reserve may require us to commit capital resources to support the Bank.
·	We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities.
·	We are involved in various claims and lawsuits related to our business. Litigation is uncertain, making it difficult to determine the expenses and ultimate exposure for many of these matters.
·	We may become involved in suits, legal proceedings, investigations, and proceedings by governmental and self-regulatory agencies, which could have adverse consequences.
·	Changes in tax laws and regulations or their interpretations could negatively impact us.
·	A reduction in our ability to realize deferred tax assets could negatively affect our operating results.

R****isks Related to an Investment In our Common Stock

·	Our ability to pay cash dividends is limited, and future dividends may not be able to be paid even if we desire to.
·	Our stock price may be volatile, which could result in losses to our investors and litigation against us.
·	Future sales of stock by shareholders, or the expectation of such sales, could lower our stock price.
·	We may need to raise capital under unfavorable terms due to economic or other circumstances. Issuing common stock could dilute existing shareholders’ ownership and book value per share, potentially impacting our ability to obtain additional capital.
·	Provisions of our articles of incorporation and bylaws, South Carolina law, and state and federal banking regulations, could delay or prevent a takeover by a third party.
·	An investment in our common stock is not an insured deposit.

General Risks

·	Increasing scrutiny and evolving expectations with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.
·	Climate change could have a material adverse impact on us and our customers.
·	Our historical operating results may not be indicative of our future operating results.
·	A downgrade of the U.S. credit rating could harm our business, results of operations, and financial condition.

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