FIRST COMMUNITY CORP /SC/ — Annual Report 2019

Jun 28, 2019

11-K 1 e19328_fcco-11k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 11-K

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FOR ANNUAL REPORTS OF EMPLOYEE STOCK

PURCHASE, SAVINGS AND SIMILAR PLANS

PURSUANT TO SECTION 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

x ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018

OR

o TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-28344

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A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

First Community Bank 401(k) Plan

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

First Community Corporation

5455 Sunset Blvd

Lexington, South Carolina 29072

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REQUIRED INFORMATION

The following financial statements and supplemental schedule for the First Community Bank 401(k) Plan are being filed herewith:

Audited Financial Statements:

Report of Independent Registered Public Accounting Firm – Elliott Davis, LLC

Statements of Net Assets Available for Benefits as of December 31, 2018 and 2017

Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2018

Notes to Financial Statements for the Year Ended December 31, 2018

Supplemental Schedule:

Schedule of Assets Held – December 31, 2018

The following exhibit is being filed herewith:

Exhibit No.	Description
23.1	Consent of Independent Registered Public Accounting Firm – Elliott Davis, LLC

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First Community Bank

401(k) Plan

Report on Financial Statements

For the year ended December 31, 2018

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First Community Bank 401(k) Plan

Contents

	Page
Independent Auditor’s Report	1-2
Financial Statements
Statements of Net Assets Available for Benefits	3
Statement of Changes in Net Assets Available for Benefits	4
Notes to Financial Statements	5-11
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)	12

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Report of Independent Registered Public Accounting Firm

To the Trustees of

First Community Bank 401(k) Plan

Lexington, South Carolina

Opinion on the Financial Statements

We have audited the accompanying statements of net assets available for benefits of First Community Bank 401(k) Plan (the “Plan”) as of December 31, 2018 and 2017, the related statement of changes in net assets available for benefits for the year then ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2018 and 2017, and the changes in net assets available for benefits for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

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Report on Supplemental Information

The supplemental information in the accompanying Schedule H, Line 4i, Schedule of Assets (Held at End of Year) as of December 31, 2018 has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental information is presented for the purpose of additional analysis and is not a required part of the financial statements but includes supplemental information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental information is the responsibility of the Plan’s management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information in the accompanying information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information in the accompanying schedule as of December 31, 2018 is fairly stated in all material respects in relation to the basic financial statements as a whole.

/s/ Elliott Davis, LLC

We have served as the Plan’s auditor since 2006.

Columbia, South Carolina

June 28, 2019

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First Community Bank 401(k) Plan

Statements of Net Assets Available for Benefits

December 31, 2018 and 2017

	2018	2017
Assets
Investments at fair value (see Note 4)	$ 15,923,933	$ 15,699,215
Receivables
Participant contributions	—	21,217
Employer contributions	311,160	190,385
Notes receivable from participants	380,863	292,998
Total receivables	692,023	504,600
Total assets	16,615,956	16,203,815
Liabilities
Fees payable	5,247	3,937
Net assets available for benefits	$ 16,610,709	$ 16,199,878

See Notes to Financial Statements

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First Community Bank 401(k) Plan

Statement of Changes in Net Assets Available for Benefits

For the year ended December 31, 2018

Additions:
Investment income
Interest and dividends	$ 1,113,461
Contributions
Employer contributions	794,715
Employee contributions	1,935,063
Total contributions	2,729,778
Interest income on notes receivable from participants	18,404
Total additions	3,861,643
Deductions:
Net depreciation in fair value of investments	2,188,251
Administrative expenses	54,898
Distributions paid to participants	1,207,663
Total deductions	3,450,812
Net increase	410,831
Net assets available for benefits, beginning of year	16,199,878
Net assets available for benefits, end of year	$ 16,610,709

See Notes to Financial Statements

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First Community Bank 401(k) Plan

Notes to Financial Statements

December 31, 2018

Note 1. Description of the Plan

The following description of First Community Bank (the “Bank”) 401(k) Plan (the “Plan”) provides only general information. The Bank is a subsidiary of First Community Corporation (the “Company”). The Plan is currently sponsored and maintained by the Bank. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.

General:

The Plan is a defined contribution plan covering all employees of the Bank who have completed at least three months of service and are age eighteen or older. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

Contributions:

Each year, participants may elect to defer a portion of their eligible compensation, as defined by the Plan. Participants who have attained the age of fifty before the end of the plan year are eligible to make catch up contributions. Participants may also contribute amounts representing distributions from other qualified benefit or defined contribution plans. Participants direct the investment of their contributions into various investment options offered by the Plan. The Bank makes a matching contribution equal to 100% of employee contributions which do not exceed 3% of compensation, plus 50% of employee contributions which exceed 3% but do not exceed 5% of compensation. Additional profit sharing amounts may be contributed at the option of the Bank’s board of directors to each eligible participant equal to a uniform percentage of each participant’s compensation. Eligible participants are defined as those having one year of service and employed as of year end. The exact percentage, if any, will be determined by the Bank. During the year ended December 31, 2018, the Bank made $311,160 in additional profit sharing contributions. Contributions are subject to certain Internal Revenue Service (“IRS”) limitations.

Participant accounts:

Each participant’s account is credited with the participant’s contributions, Bank contributions and Plan earnings. Participant accounts are charged with an allocation of administrative expenses that are paid by the Plan. Allocations are based on participant earnings, account balances, or specific participant transactions, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

Vesting:

Participants are immediately vested in their contributions and in the employer safe harbor matching contributions, plus actual earnings thereon. Vesting in the Bank’s discretionary contribution portion of their accounts is based on years of continuous service. A participant is 100% vested after six years of credited service.

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First Community Bank 401(k) Plan

Notes to Financial Statements

December 31, 2018

Note 1. Description of the Plan, Continued

Notes receivable from participants:

Participants may borrow from their accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. The $50,000 maximum amount will be reduced by the participant’s highest outstanding note balance in the previous 12 months, even if amounts have been repaid. The notes are secured by the balance in the participant’s account. The interest rate is the prime interest rate as set by the Wall Street Journal plus 1%, or such other rate as determined by the Plan Administrator on the basis of relevant factors including but not limited to the rates charged by local banks for notes of similar duration and security level. The rate of interest will be constant throughout the term of the note. All notes are required to be repaid within five years of the note. If a participant notifies the Plan Administrator in writing that the entire proceeds of the note was used to acquire a dwelling unit that will, within a reasonable time, be used as the principal residence of the participant the note will be required to be repaid within 15 years of the original date of the note. Notes are to be repaid on the basis of substantially level amortization over the term of the note with payments made through salary reduction each pay period if available. All or any part of the outstanding balance of a note can be repaid at any time without penalty.

Payment of benefits:

On termination of service, a participant may elect to receive a lump-sum amount equal to the value of the participant’s vested interest in his or her account, less any notes receivable outstanding. Hardship distributions are permitted upon demonstration of financial hardship. All fully vested balances are available for distribution after the participant reaches the age of 59½.

Forfeited accounts:

At December 31, 2018 and 2017, forfeited nonvested accounts totaled $159 and $0, respectively. Forfeitures may be used to reduce the Bank’s future contributions to the Plan as well as in payment of administrative expenses. In 2018, administrative expenses were reduced by $2,972 from forfeited nonvested accounts.

Note 2. Summary of Significant Accounting Policies and Activities

Basis of accounting:

The financial statements of the Plan are prepared on the accrual basis of accounting.

Investment valuation and income recognition:

Investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Plan Administrative Committee determines the Plan’s valuation policies utilizing information provided by the investment advisors. See Note 4 for discussion of fair value measurements.

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First Community Bank 401(k) Plan

Notes to Financial Statements

December 31, 2018

Note 2. Summary of Significant Accounting Policies and Activities, Continued

Investment valuation and income recognition, continued:

Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net depreciation includes the Plan’s gains and losses on investments bought and sold as well as held during the year.

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Concentration of credit risk:

At December 31, 2018 and 2017, investments in First Community Corporation Unitized Stock Fund comprised 15% and 16% of the Plan’s assets, respectively. At December 31, 2018 and 2017, the unitized common stock fund was valued at $2,450,273 and $2,577,555, respectively. At December 31, 2018 and 2017, the number of shares of the Company’s common stock in the unitized stock fund held by the Plan was 119,426 and 107,282 shares, respectively.

Notes receivable from participants :

Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Interest income is recorded on the accrual basis. Related fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2018 or 2017. If a participant ceases to make loan repayments and the Plan Administrator deems the participant loan to be in default, the participant loan balance is reduced and a benefit payment is recorded.

Payment of benefits:

Benefits are recorded when paid.

Expenses:

Certain expenses of maintaining the Plan are paid directly by the Bank and are excluded from these financial statements. Fees related to the administration of notes receivable from participants and other distributions to participants are charged directly to the participant’s account and are included in administrative expenses. Investment related expenses are included in net depreciation of fair value of investments.

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First Community Bank 401(k) Plan

Notes to Financial Statements

December 31, 2018

Note 2. Summary of Significant Accounting Policies and Activities, Continued

Recently issued accounting pronouncements:

No accounting standards have been issued or proposed by the FASB or other standards-setting bodies that are expected to have a material impact on the Plan’s net assets or changes in net assets.

Note 3. Plan Termination

Although it has not expressed any intent to do so, the Bank has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in their employer contributions.

Note 4. Fair Value Measurements

The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described as follows:

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.

Level 2: Inputs to the valuation methodology include:

· Quoted prices for similar assets or liabilities in active markets;

· Quoted prices for identical or similar assets or liabilities in inactive markets;

· Inputs other than quoted prices that are observable for the asset or liability;

· Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

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First Community Bank 401(k) Plan

Notes to Financial Statements

December 31, 2018

Note 4. Fair Value Measurements, Continued

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of relevant observable inputs and minimize the use of unobservable inputs.

The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2018 and 2017.

Mutual funds : Valued at the daily closing price as reported by the fund. Mutual funds held by the Plan are open-end mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily Net Asset Value (“NAV”) and to transact at that price. The mutual funds held by the Plan are deemed to be actively traded.

Common collective trust fund: Valued at NAV. The NAV, as provided by the trustee, is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund less its liabilities. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Participant transactions (purchases and sales) may occur daily. Were the Plan to initiate a full redemption of the collective trust, the investment adviser reserves the right to temporarily delay withdrawal from the trust in order to ensure that securities liquidations will be carried out in an orderly business manner.

First Community Corporation Unitized Stock Fund : Valued at the closing price of First Community Corporation’s common stock reported on the active market on which the individual securities are traded plus the carrying value of the cash component of the fund, which approximates fair value.

The following tables set forth by level, within the fair value hierarchy, the Plan’s fair value measurements as of December 31, 2018 and 2017:

	December 31, 2018 — Level 1	Level 2	Level 3	Total
Mutual funds	$ 13,153,560	$ —	$ —	$ 13,153,560
First Community Corporation
Unitized Stock Fund	2,450,273	—	—	2,450,273
Total assets in the fair value hierarchy	$ 15,603,833	$ —	$ —	15,603,833
Investments measured at NAV (a)				320,100
Investments at fair value				$ 15,923,933
	December 31, 2017
	Level 1	Level 2	Level 3	Total
Mutual funds	$ 12,646,828	$ —	$ —	$ 12,646,828
First Community Corporation
Unitized Stock Fund	2,577,555	—	—	2,577,555
Total assets in the fair value hierarchy	$ 15,224,383	$ —	$ —	15,224,383
Investments measured at NAV (a)				474,832
Investments at fair value				$ 15,699,215

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First Community Bank 401(k) Plan

Notes to Financial Statements

December 31, 2018

Note 4. Fair Value Measurements, Continued

(a) Certain investments that were measured at NAV per share or its equivalent have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statements of net assets available for benefits.

The following table for December 31, 2018 and 2017 sets forth a summary of the Plan’s assets reported at NAV as a practical expedient to estimate fair value:

	December 31, 2018	Unfunded	Redemption	Redemption
Investment	Fair value	commitment	frequency	notice period
Common collective trust fund	$ 320,100	$ —	Daily	(a)

	December 31, 2017	Unfunded	Redemption	Redemption
Investment	Fair value	commitment	frequency	notice period
Common collective trust fund	$ 474,832	$ —	Daily	(a)

(a) Participants may redeem units of the Fund for the purpose of funding a bona fide benefit payment, making a participant loan, honoring an employee-directed transfer of the employee’s interest in the plan to another investment election that is a noncompeting investment, or paying Trustee fees. Participants may make withdrawals from the Fund for other purposes generally only upon 12 months’ advance written notice to the Trustee.

Note 5. Tax Status

The Company has adopted the Plan based on a prototype plan document sponsored by Ascensus, Inc. Ascensus, Inc. has received an opinion letter from the IRS dated March 31, 2014 that states that the form of the prototype plan is acceptable under Section 401 of the Internal Revenue Code (“IRC”). The Plan has been amended since the date of the IRS opinion letter on the prototype plan. The Company and the plan administrator believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC.

Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the plan and recognize a tax liability if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the internal revenue service. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.

Note 6. Related-Party and Party in Interest Transactions

Certain Plan assets are invested in a fund that includes the Company’s common stock as described in Note 2. These investments are considered party in interest transactions. Fees incurred by the Plan for investment management services are included in net depreciation in fair value of investments, as they are paid through revenue sharing, rather than a direct payment. As described in Note 2, the Plan made direct payments to the third party administrator of $54,898 which were not covered by revenue sharing. The Bank pays directly any other fees related to the Plan’s operations.

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First Community Bank 401(k) Plan

Notes to Financial Statements

December 31, 2018

Note 7. Risks and Uncertainties

The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the 2018 Statement of Net Assets Available for Benefits.

Note 8. Reconciliation of Financial Statements to Form 5500

The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:

	2018	2017
Net assets available for benefits per the financial statements	$ 16,610,709	$ 16,199,878
Fees payable	5,247	3,937
Net assets available for benefits per the Form 5500	$ 16,615,956	$ 16,203,815

The following is a reconciliation of the changes in net assets per the financial statements to the Form 5500 for the year ended December 31, 2018:

Net increase per the financial statements	$
Fees payable as of December 31, 2018	5,247
Fees payable as of December 31, 2017	(3,937	)
Net income per the Form 5500	$ 412,141

Note 9. Subsequent Events

The Plan has evaluated subsequent events through June 28, 2019, the date the financial statements were available to be issued.

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First Community Bank 401(k) Plan

EIN 57-1030051, Plan No. 001

Schedule H, Line 4i - Schedule of Assets (Held at End of Year)

As of December 31, 2018

(a) — Identity	(b) — Identity of issuer,	(c) — Description of investment including		(e)
of party	borrower, lessor,	maturity date, rate of interest,	(d)	Current
involved	or similar party	collateral, par or maturity value	Cost	value
Investments:
	American Beacon Large Cap Value Inst	Mutual Fund	**	$ 177,664
	American Funds EuroPacific Growth Class R-5	Mutual Fund	**	138,619
	JPMorgan Mid Cap Growth Class R-6	Mutual Fund	**	377,281
	Metropolitan West Total Return Bond I	Mutual Fund	**	127,678
	T Rowe Price New America Growth	Mutual Fund	**	2,252,056
	T Rowe Price Small-Cap Value Fund	Mutual Fund	**	436,141
	Templeton Global Bond Adv	Mutual Fund	**	39,081
	Vanguard 500 Index Fund - Admiral	Mutual Fund	**	775,796
	Vanguard Mid Cap Index Fund - Admiral	Mutual Fund	**	502,293
	Vanguard Small Cap Index - Admiral	Mutual Fund	**	443,314
	Vanguard Developed Mkts Index Adm	Mutual Fund	**	62,351
	Vanguard Target Retirement 2015	Mutual Fund	**	639,697
	Vanguard Target Retirement 2020	Mutual Fund	**	166,050
	Vanguard Target Retirement 2025	Mutual Fund	**	3,149,402
	Vanguard Target Retirement 2030	Mutual Fund	**	523,967
	Vanguard Target Retirement 2035	Mutual Fund	**	1,435,512
	Vanguard Target Retirement 2040	Mutual Fund	**	192,163
	Vanguard Target Retirement 2045	Mutual Fund	**	519,436
	Vanguard Target Retirement 2050	Mutual Fund	**	87,226
	Vanguard Target Retirement 2055	Mutual Fund	**	269,311
	Vanguard Target Retirement 2060	Mutual Fund	**	73,494
	Vanguard Target Retirement 2065	Mutual Fund	**	2,483
	Vanguard Target Retirement Income	Mutual Fund	**	55,012
	Vanguard REIT Index Admiral	Mutual Fund	**	11,064
	Vanguard Shrt-Term Infl-Prot Sec Idx Admiral	Mutual Fund	**	60,742
	Vanguard Total Bond Market Index - Admiral	Mutual Fund	**	25,494
	Vanguard Wellesley Income Admiral	Mutual Fund	**	180,811
	Vanguard Wellington Admiral	Mutual Fund	**	429,422
	Federated Capital Preservation Fund	Common collective trust Fund	**	320,100
*	First Community Corporation	Unitized Stock fund	**	2,450,273
Notes Receivable:
*	Notes Receivable from participants	Notes (4.25% - 6.25%)	**	380,863
				$ 16,304,796

• Indicates a party in interest

** Cost information omitted due to participant-directed plan

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

| | FIRST
COMMUNITY BANK 401(k) PLAN | |
| --- | --- | --- |
| | By
FIRST COMMUNITY BANK, Trustee | |
| Date:
June 28, 2019 | By: | /s/
Joseph G. Sawyer |
| | Printed
Name: Joseph G. Sawyer | |
| | Title:
Chief Financial Officer | |