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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended June 30, 2022
   
o 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: 000-28344

 

FIRST COMMUNITY CORPORATION
(Exact name of registrant as specified in its charter)
 
South Carolina 57-1010751
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

5455 Sunset Boulevard, Lexington, South Carolina 29072

(Address of principal executive offices) (Zip Code)

 

(803) 951-2265

(Registrant’s telephone number, including area code)

 

Not Applicable

 (Former name, former address and former fiscal year, if changed since last report)

 

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

 

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

 

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 the past 90 days.    Yes x   No o

 

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 such files).     x Yes   o 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 o   Accelerated filer o
Non-accelerated Filer x   Smaller reporting company x
    Emerging growth company o

 

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. o

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: On August 10, 2022, 7,566,633 shares of the issuer’s common stock, par value $1.00 per share, were issued and outstanding.

 
 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION 1
Item 1. Financial Statements 1
  Consolidated Balance Sheets 1
  Consolidated Statements of Income 2
  Consolidated Statements of Comprehensive Income (Loss) 4
  Consolidated Statements of Changes in Shareholders’ Equity 5
  Consolidated Statements of Cash Flows 8
  Notes to Consolidated Financial Statements 9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33
Item 3. Quantitative and Qualitative Disclosures About Market Risk 62
Item 4. Controls and Procedures 62
     
PART II – OTHER INFORMATION 63
Item 1.  Legal Proceedings 63
Item 1A. Risk Factors 63
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 63
Item 3. Defaults Upon Senior Securities 63
Item 4. Mine Safety Disclosures 63
Item 5. Other Information 63
Item 6. Exhibits 64
     
SIGNATURES 65
 
 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

FIRST COMMUNITY CORPORATION

CONSOLIDATED BALANCE SHEETS

 

   June 30,     
(Dollars in thousands, except par values)  2022   December 31, 
   (Unaudited)   2021 
ASSETS          
Cash and due from banks  $27,485   $21,973 
Interest-bearing bank balances   76,918    47,049 
Investment securities held-to-maturity, fair value of $229,198 and $0 at June 30, 2022 and December 31, 2021, respectively   233,730    — 
Investment securities available-for-sale   337,254    564,839 
Other investments, at cost   1,929    1,785 
Loans held-for-sale   4,533    7,120 
Loans held-for-investment   916,332    863,702 
Less, allowance for loan losses   11,220    11,179 
Net loans held-for-investment   905,112    852,523 
Property and equipment - net   32,251    32,831 
Lease right-of-use asset   2,972    2,842 
Bank owned life insurance   29,589    29,231 
Other real estate owned   984    1,165 
Intangible assets   840    919 
Goodwill   14,637    14,637 
Other assets   16,590    7,594 
Total assets  $1,684,824   $1,584,508 
LIABILITIES          
Deposits:          
Non-interest bearing  $476,024   $444,688 
Interest bearing   992,951    916,603 
Total deposits   1,468,975    1,361,291 
Securities sold under agreements to repurchase   71,800    54,216 
Junior subordinated debt   14,964    14,964 
Lease liability   3,096    2,950 
Other liabilities   8,397    10,089 
Total liabilities   1,567,232    1,443,510 
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; 20,000,000 shares authorized; issued and outstanding 7,566,633 at June 30, 2022 7,548,638 at December 31, 2021   7,567    7,549 
Nonvested restricted stock and stock units   1,093    (294)
Additional paid in capital   92,487    92,139 
Retained earnings   42,988    38,325 
Accumulated other comprehensive income (loss)   (26,543)   3,279 
Total shareholders’ equity   117,592    140,998 
Total liabilities and shareholders’ equity  $1,684,824   $1,584,508 

 

See Notes to Consolidated Financial Statements

1
 

FIRST COMMUNITY CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

(Dollars in thousands, except per share amounts)  Six Months ended June 30, 
   2022   2021 
Interest and dividend income:          
Loans, including fees  $18,307   $19,191 
Investment securities - taxable   3,453    2,852 
Investment securities - non taxable   755    776 
Other short term investments and CD’s   193    63 
Total interest income   22,708    22,882 
Interest expense:          
Deposits   642    967 
Securities sold under agreement to repurchase   47    47 
Other borrowed money   235    209 
Total interest expense   924    1,223 
Net interest income   21,784    21,659 
Provision for (release of) loan losses   (195)   345 
Net interest income after provision for (release of) loan losses   21,979    21,314 
Non-interest income:          
Deposit service charges   527    458 
Mortgage banking income   1,320    2,133 
Investment advisory fees and non-deposit commissions   2,393    1,834 
Gain (loss) on sale of other assets   (45)   77 
Other   2,188    2,212 
Total non-interest income   6,383    6,714 
Non-interest expense:          
Salaries and employee benefits   12,294    11,912 
Occupancy   1,491    1,464 
Equipment   661    613 
Marketing and public relations   807    709 
FDIC Insurance assessments   235    315 
Other real estate expense   76    84 
Amortization of intangibles   79    109 
Other   4,499    4,212 
Total non-interest expense   20,142    19,418 
Net income before tax   8,220    8,610 
Income tax expense   1,601    1,812 
Net income  $6,619   $6,798 
           
Basic earnings per common share  $0.88   $0.91 
Diluted earnings per common share  $0.87   $0.90 
2
 

FIRST COMMUNITY CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

(Dollars in thousands, except per share amounts)  Three Months ended June 30, 
   2022   2021 
Interest and dividend income:          
Loans, including fees  $9,304   $9,741 
Investment securities - taxable   1,674    1,507 
Investment securities - non taxable   375    387 
Other short term investments and CD’s   160    29 
Total interest income   11,513    11,664 
Interest expense:          
Deposits   309    448 
Securities sold under agreement to repurchase   22    19 
Other borrowed money   131    105 
Total interest expense   462    572 
Net interest income   11,051    11,092 
Provision for (release of) loan losses   (70)   168 
Net interest income after provision for (release of) loan losses   11,121    10,924 
Non-interest income:          
Deposit service charges   262    212 
Mortgage banking income   481    1,143 
Investment advisory fees and non-deposit commissions   1,195    957 
Gain (loss) on sale of other assets   (45)   — 
Other   1,116    1,106 
Total non-interest income   3,009    3,418 
Non-interest expense:          
Salaries and employee benefits   6,175    5,948 
Occupancy   786    734 
Equipment   329    338 
Marketing and public relations   446    313 
FDIC Insurance assessments   105    146 
Other real estate expense   29    55 
Amortization of intangibles   40    52 
Other   2,278    2,292 
Total non-interest expense   10,188    9,878 
Net income before tax   3,942    4,464 
Income tax expense   812    921 
Net income  $3,130   $3,543 
           
Basic earnings per common share  $0.42   $0.47 
Diluted earnings per common share  $0.41   $0.47 

 

See Notes to Consolidated Financial Statements

3
 

FIRST COMMUNITY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

         
(Dollars in thousands)  Six months ended June 30, 
   2022   2021 
         
Net income  $6,619   $6,798 
           
Other comprehensive income:           
           
Unrealized loss during the period on available-for-sale securities, net of tax benefit of $4,447 and $1,021, respectively   (16,730)   (3,841)
           
Unrealized loss during the period on available-for-sale securities transferred to held-to-maturity, net of tax benefit of $3,508 and $0, respectively.   (13,198)   — 
           
Reclassification adjustment for amortization on unrealized losses on securities transferred from available-for-sale to held-to-maturity, net of tax expense of $28 and $0 respectively.   106    — 
           
Other comprehensive loss   (29,822)   (3,841)
           
Comprehensive income (loss)  $(23,203)  $2,957 
           
(Dollars in thousands)  Three months ended June 30, 
   2022   2021 
         
Net income  $3,130   $3,543 
           
Other comprehensive income:
          
           
Unrealized gain during the period on available-for-sale securities, net of tax expense of $414 and $616, respectively   1,558    2,320 
           
Unrealized loss during the period on available-for-sale securities transferred to held-to-maturity, net of tax benefit of $3,508 and $0, respectively.   (13,198)   — 
           
Reclassification adjustment for amortization on unrealized losses on securities transferred from available-for-sale to held-to-maturity, net of tax expense of $28 and $0 respectively.   106    — 
           
Other comprehensive income (loss)   (11,534)   2,320 
           
Comprehensive income (loss)  $(8,404)  $5,863 

 

See Notes to Consolidated Financial Statements

4
 

FIRST COMMUNITY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Six months ended June 30, 2022 and 2021

(Unaudited)

 

               Nonvested       Accumulated     
   Common       Additional   Restricted       Other     
(Dollars and shares in thousands)  Shares   Common   Paid-in   Stock and   Retained   Comprehensive     
   Issued   Stock   Capital   Stock Units   Earnings   Income (loss)   Total 
Balance, December 31, 2021   7,549   $7,549   $92,139   $(294)  $38,325   $3,279   $140,998 
Net income                       6,619         6,619 
Other comprehensive loss net of tax benefit of $7,927                            (29,822)   (29,822)
Issuance of common stock   1    1    27                   28 
Issuance of restricted stock   9    9    190    (199)             — 
Amortization of compensation on restricted stock                  168              168 
Stock units granted                  1,418              1,418 
Shares forfeited   (2)   (2)   (40)                  (42)
Dividends: Common ($0.26 per share)                       (1,956)        (1,956)
Dividend reinvestment plan   10    10    171                   181 
Balance, June 30, 2022   7,567   $7,567   $92,487   $1,093   $42,988   $(26,543)  $117,592 
                                    
                       Accumulated     
   Common       Additional   Nonvested       Other     
(Dollars and shares in thousands)  Shares   Common   Paid-in   Restricted   Retained   Comprehensive     
   Issued   Stock   Capital   Stock   Earnings   Income (loss)   Total 
Balance, December 31, 2020   7,500   $7,500   $91,380   $(283)  $26,453   $11,287   $136,337 
Net income                       6,798         6,798 
Other comprehensive loss net of tax benefit of $1,021                            (3,841)   (3,841)
Issuance of common stock   12    12    124                   136 
Issuance of restricted stock   21    21    353    (374)             — 
Amortization of compensation on restricted stock                  177              177 
Shares forfeited   (4)   (4)   (66)                  (70 
Dividends: Common ($0.24 per share)                       (1,794)        (1,794)
Dividend reinvestment plan   11    11    173                   184 
Balance, June 30, 2021   7,540   $7,540   $91,964   $(480)  $31,457   $7,446   $137,927 

 

See Notes to Consolidated Financial Statements

5
 

FIRST COMMUNITY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

               Nonvested       Accumulated     
   Common       Additional   Restricted       Other     
(Dollars in thousands)  Shares   Common   Paid-in   Stock and   Retained   Comprehensive     
   Issued   Stock   Capital   Stock Units   Earnings   Income (loss)   Total 
Balance, December 31, 2021   7,549   $7,549   $92,139   $(294)  $38,325   $3,279   $140,998 
Net income                       3,489         3,489 
Other comprehensive loss net of tax benefit of $4,862                            (18,288)   (18,288)
Issuance of common stock   1    1    27                   28 
Issuance of restricted stock   7    7    147    (154)             — 
Amortization of compensation on restricted stock                  79              79 
Shares forfeited   (2)   (2)   (40)                  (42)
Dividends: Common ($0.13 per share)                       (977)        (977)
Dividend reinvestment plan   5    5    88                   93 
Balance, March 31, 2022   7,560   $7,560   $92,361   $(369)  $40,837   $(15,009)  $125,380 
Net income                       3,130         3,130 
Other comprehensive income net of tax benefit of $3,066                            (11,534)   (11,534)
Issuance of restricted stock   2    2    43    (45)             — 
Amortization of compensation on restricted stock                  89              89 
Stock units                  1,418              1,418 
Dividends: Common ($0.13 per share)                       (979)        (979)
Dividend reinvestment plan   5    5    83                   88 
Balance, June 30, 2022   7,567   $7,567   $92,487   $1,093   $42,988   $(26,543)  $117,592 

 

See Notes to Consolidated Financial Statements

6
 

FIRST COMMUNITY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

                       Accumulated     
   Common       Additional   Nonvested       Other     
(Dollars in thousands)  Shares   Common   Paid-in   Restricted   Retained   Comprehensive     
   Issued   Stock   Capital   Stock   Earnings   Income (loss)   Total 
Balance, December 31, 2020   7,500   $7,500   $91,380   $(283)  $26,453   $11,287   $136,337 
Net income                       3,255         3,255 
Other comprehensive loss net of tax of $1,637                            (6,161)   (6,161)
Issuance of common stock   2    2    44                   46 
Issuance of restricted stock   21    21    353    (374)             — 
Amortization of compensation on restricted stock                  84              84 
Shares retired / forfeited   (4)   (4)   (66)                  (70)
Dividends: Common ($0.12 per share)                       (896)        (896)
Dividend reinvestment plan   6    6    86                   92 
Balance, March 31, 2021   7,525   $7,525   $91,797   $(573)  $28,812   $5,126   $132,687 
Net income                       3,543         3,543 
Other comprehensive income net of tax of $616                            2,320    2,320 
Issuance of common stock   10    10    80                   90 
Amortization of compensation on restricted stock                  93              93 
Dividends: Common ($0.12 per share)                       (898)        (898)
Dividend reinvestment plan   5    5    87                   92 
Balance, June 30, 2021   7,540   $7,540   $91,964   $(480)  $31,457   $7,446   $137,927 

 

See Notes to Consolidated Financial Statements

7
 

FIRST COMMUNITY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Six months ended
June 30,		 
(Dollars in thousands)  2022   2021 
Cash flows from operating activities:          
Net income  $6,619   $6,798 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:          
Depreciation   855    853 
Net amortization of premium on investment securities available for sale   1,613    1,089 
Net amortization of premium on investment securities held-to-maturity   78    — 
(Release of) provision for loan losses   (195)   345 
Write-downs of other real estate owned   19    33 
Origination of loans held-for-sale   (44,683)   (76,404)
Sale of loans held-for-sale   47,270    110,008 
(Gain) Loss on sale of other real estate owned   45    (77)
Amortization of intangibles   79    109 
Accretion on acquired loans   (25)   (64)
(Gain) Loss on fair value of securities   1    (2)
(Increase) decrease in other assets   (1,422)   786 
Increase (decrease) in other liabilities   (1,546)   (2,042)
Net cash (used in) provided by operating activities   8,708    41,432 
Cash flows from investing activities:          
Purchase of investment securities available-for-sale   (81,692)   (139,458)
Purchase of investment securities held-to-maturity   (6,843)     
Purchase of other investment securities   (144)   (20)
Maturity/call of investment securities available-for-sale   40,867    24,424 
Maturity/call of investment securities held-to-maturity   1,947      
Proceeds from sales of other investments   —    355 
Increase in loans   (52,368)   (34,338)
Proceeds from sale of other real estate owned   117    201 
Purchase of property and equipment   (300)   (277)
Net disposal of property and equipment   24    — 
Net cash used in investing activities   (98,392)   (149,113)
Cash flows from financing activities:          
Increase in deposit accounts   107,684    100,470 
Increase in securities sold under agreements to repurchase   17,584    19,573 
Shares retired / forfeited   (42)   (70)
Dividends paid: Common Stock   (1,956)   (1,794)
Restricted stock units granted   1,418    — 
Proceeds from issuance of Common Stock   28    136 
Change in non-vested restricted stock   168    177 
Dividend reinvestment plan   181    184 
Net cash provided by financing activities   125,065    118,676 
Net increase in cash and cash equivalents   35,381    10,995 
Cash and cash equivalents at beginning of period   69,022    64,992 
Cash and cash equivalents at end of period  $104,403   $75,987 
Supplemental disclosure:          
Cash paid during the period for:          
Interest  $1,028   $2,396 
Income taxes  $1,867   $2,837 
Non-cash investing and financing activities:          
Unrealized loss on securities available-for-sale, net of tax  $(16,730)  $(3,841)
Unrealized loss on securities held-to-maturity, net of tax   (13,092)     
Transfer of investment securities available-for-sale to held-to-maturity   245,619    — 
Transfer of loans to foreclosed property  $—   $145 

 

See Notes to Consolidated Financial Statements

8
 

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1—Nature of Business and Basis of Presentation

 

Basis of Presentation

 

In the opinion of management, the accompanying unaudited consolidated balance sheets, and the consolidated statements of income, comprehensive income, changes in shareholders’ equity, and the cash flows of First Community Corporation (the “Company”) and its wholly owned subsidiary, First Community Bank (the “Bank”), present fairly in all material respects the Company’s financial position at June 30, 2022 and December 31, 2021, the Company’s results of operations for the three and six months ended June 30, 2022 and 2021, and cash flows for the six months ended June 30, 2022 and 2021. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

 

In the opinion of management, all adjustments necessary to fairly present the consolidated financial position and consolidated results of operations have been made. All such adjustments are of a normal, recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements and notes thereto are presented in accordance with the instructions for Quarterly Reports on Form 10-Q. The information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 should be referred to in connection with these unaudited interim financial statements.

Risk and Uncertainties

 

The COVID-19 pandemic and variants of the virus continue to create disruptions to the global economy and financial markets and to businesses and the lives of individuals throughout the world. As the COVID-19 pandemic has evolved from its emergence in early 2020, so has its impact. While vaccine availability and uptake has increased, the longer-term macro-economic effects on global supply chains, inflation, labor shortages and wage increases continue to impact many industries. Moreover, with the potential for new strains of COVID-19 to emerge, governments and businesses may re-impose aggressive measures to help slow its spread in the future. For this reason, among others, as the COVID-19 pandemic continues, the potential or lasting impacts on our business, financial condition and results of operations remains uncertain and difficult to assess. Our business, financial condition and results of operations generally rely upon the ability of our borrowers to repay their loans, the value of collateral underlying our secured loans, and demand for loans and other products and services we offer, which are highly dependent on the business environment in our primary markets where we operate and in the United States as a whole. The unprecedented and rapid spread of COVID-19 and its variants and their associated impacts on trade (including supply chains and export levels), travel, employee productivity, unemployment, consumer spending, and other economic activities have resulted and continue to result in volatility and disruption in financial markets.

 

In addition, due to the COVID-19 pandemic, market interest rates declined to historical lows and the reductions in interest rates, low interest rate environment, and the other effects of the COVID-19 pandemic had an adverse effect on our business, financial condition and results of operations. However, during 2022, market interest rates have started to increase. The Federal Open Market Committee (FOMC) made the following increases to the target range of federal funds during the first six months of 2022:

 

-0.25% on March 16, 2022;
-0.50% on May 4, 2022; and
-0.75% on June 15, 2022.

 

The target range of federal funds was 1.50% - 1.75% at June 30, 2022 compared to 0.25% - 0.50% at March 31, 2022, and compared to 0.00% - 0.25% at December 31, 2021 and June 30, 2021. Changes in market interest rates can have a significant impact on the level of income and expense recorded on a large portion of our interest-earning assets and interest-bearing liabilities, and on the market value of all interest-earning assets, other than those possessing a short term to maturity.

9
 

Note 2—Earnings Per Common Share

 

The following reconciles the numerator and denominator of the basic and diluted earnings per common share computation:

 

(In thousands except average market price and per share data)

 

   Six months   Three months 
   Ended June 30,   Ended June 30, 
   2022   2021   2022   2021 
                 
Numerator (Net income available to common shareholders)  $6,619   $6,798   $3,130   $3,543 
Denominator                    
Weighted average common shares outstanding for:                    
Basic shares   7,522    7,478    7,526    7,486 
Dilutive securities:                    
Deferred compensation   31    28    29    29 
Restricted stock – Treasury stock method   52    22    52    22 
Diluted shares   7,605    7,528    7,607    7,537 
Earnings per common share:                    
Basic   0.88    0.91    0.42    0.47 
Diluted   0.87    0.90    0.41    0.47 
The average market price used in calculating assumed number of shares  $20.25   $18.95   $19.50   $19.44 

 

Reclassification of Stock Units

 

In June 2022, all of the Company’s stock units were reclassified from “Other liabilities” to “Nonvested restricted stock and stock units” and are included in “Nonvested restricted stock and restricted stock and stock units” on the Balance Sheet for all periods presented.

 

The table below shows the balance as of June 30, 2022 for each type of stock unit reclassified.

 

 

(Dollars in thousands)    
Type of stock unit  Balance 
Nonemployee Director deferred compensation stock units   1,201 
Time-Based Restricted Stock Units   79 
Performance-Based Restricted Stock Units   138 
Total stock units reclassified   1,418 

 

Non-Employee Director Deferred Compensation Plan

Under the Company’s Non-Employee Director Deferred Compensation Plan, as amended and restated effective as of January 1, 2021, a director may elect to defer all or any part of annual retainer and monthly meeting fees payable with respect to service on the board of directors or a committee of the board. Units of common stock are credited to the director’s account as of the last day of such calendar quarter during which the compensation is earned and are included in dilutive securities in the table above. The non-employee director’s account balance is distributed by issuance of common stock within 30 days following such director’s separation from service from the board of directors. At June 30, 2022 and December 31, 2021, there were 90,446 and 85,765 units in the plan, respectively. The equity related to the plan at June 30, 2022 and December 31, 2021 amounted to $1.2 million and $1.1 million, respectively, and is included in “Nonvested restricted stock and stock units” on the balance sheet.

10
 

First Community Corporation 2011 Stock Incentive Plan

In 2011, the Company and its shareholders adopted a stock incentive plan whereby 350,000 shares were reserved for issuance by the Company upon the grant of stock options or restricted stock awards under the plan (the “2011 Plan”). The 2011 Plan provided 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. Options are exercisable for a period of ten years from the date of grant. There were no stock options outstanding and exercisable at June 30, 2022, December 31, 2021 and June 30, 2021. The 2011 Plan expired on March 15, 2021 and no new awards may be granted under the 2011 Plan. However, any awards outstanding under the 2011 Plan will continue to be outstanding and governed by the provisions of the 2011 Plan.

Under the 2011 Plan, the employee restricted shares and units generally cliff vest over a three-year period and the non-employee director shares vest approximately one year after issuance. The unrecognized compensation cost at June 30, 2022 and December 31, 2021 for non-vested employee restricted shares amounted to $199.4 thousand and $293.9 thousand, respectively. The related compensation expense for restricted shares is expensed over the vesting period and was $44.2 thousand and $93.4 thousand for the three months ended June 30, 2022, and June 30, 2021, respectively. The related compensation expense for restricted shares was $94.5 thousand and $177.6 thousand for the six months ended June 30, 2022 and June 30, 2021, respectively. Each unit is convertible into one share of common stock at the time the unit vests. The related compensation cost for time-based units (“TRSUs”) is expensed over the vesting period and was $4.8 thousand and $8.3 thousand respectively, for the three months ended June 30, 2022 and June 30, 2021. The related compensation cost for TRSUs for the six months periods ended June 30, 2022 and June 30, 2021 was $11.9 thousand and $16.6 thousand, respectively. The unrecognized compensation cost for non-vested TRSUs at June 30, 2022 and December 31, 2021 was $44.6 thousand and $35.1 thousand, respectively.

Historically, the Company granted time-based equity awards that vested based on continued service. Beginning in 2021 and in addition to time-based equity awards, the Company began granting performance-based equity awards in the form of performance-based restricted stock units, with the target number of performance-based restricted stock units for the Company’s Chief Executive Officer and other executive officers representing 50% of total target equity awards. These performance-based restricted stock units cliff vest over three years and include conditions based on the following performance measures: total shareholder return, return on average equity, and non-performing assets. The Company granted 13,302 performance-based restricted stock units (“PRSUs”) with a fair value of $234.0 thousand during 2021. The related compensation cost for the PRSUs is expensed over the vesting period and was $19.5 thousand and $19.5 thousand, respectively, for the three months ended June 30, 2022 and June 30, 2021. The related compensation cost for PRSUs for the six months ended June 30, 2022 and June 30, 2021 were $39.0 thousand and $26.0 thousand, respectively. The unrecognized compensation expense related to the PRSUs was $104.0 thousand and $65.0 thousand at June 30, 2022 and December 31, 2021, respectively.

First Community Corporation 2021 Omnibus Equity Incentive Plan

In 2021, the Company and its shareholders adopted an omnibus equity incentive plan whereby 225,000 shares were reserved for issuance by the Company to help the company attract, retain and motivate directors, officers, employees, consultants and advisors of the Company and its subsidiaries (the “2021 Plan”). The 2021 Plan replaced the 2011 Plan. No awards were granted under the 2021 Plan as of June 30, 2021. During the six months ended June 30, 2022, the Company granted 7,358 restricted stock awards to Directors with a fair value of $154 thousand. The restricted stock awards will fully vest on January 1, 2023. During the six months ended June 30, 2022, the Company granted 2,201 restricted stock awards to officers with a fair value of $36.6 thousand and vesting periods ranging from one to three years. The related compensation expense for all restricted shares is expensed over the vesting period and was $48.0 thousand and $73.7 thousand for the three and six months ended June 30, 2022, respectively. At June 30, 2022 the unrecognized compensation cost for non-vested shares amounted to $125.9 thousand. During the six months ended June 30, 2022, the Company granted 11,738 TRSUs and 11,738 PRSUs with a total fair value of $245.7 thousand and $245.7 thousand, respectively. The related compensation cost for TRSUs and PRSUs is expensed over the vesting period and was $20.5 thousand and $20.5 thousand respectively, for the three months ended June 30, 2022. The related compensation cost for the six months ended June 30, 2022, was $34.1 thousand and $34.1 thousand, respectively. At June 30, 2022, the Company had 186,094 shares reserved for future grants under the 2021 Plan.

11
 

Note 3—Investment Securities

 

The amortized cost and estimated fair values of investment securities are summarized below:

 

AVAILABLE-FOR-SALE:

 

       Gross   Gross     
   Amortized   Unrealized   Unrealized     
(Dollars in thousands)  Cost   Gains   Losses   Fair Value 
June 30, 2022                    
US Treasury securities  $60,454   $—   $(3,131)  $57,323 
Government Sponsored Enterprises   2,500    —    (311)   2,189 
Mortgage-backed securities   256,725    29    (12,933)   243,821 
Small Business Administration pools   25,830    148    (415)   25,563 
State and local government        —    —    — 
Corporate and other securities   8,773    47    (462)   8,358 
Total  $354,282   $224   $(17,252)  $337,254 
                     
       Gross   Gross     
   Amortized   Unrealized   Unrealized     
(Dollars in thousands)  Cost   Gains   Losses   Fair Value 
December 31, 2021                    
US Treasury securities  $15,736   $—   $300   $15,436 
Government Sponsored Enterprises   2,499    2    —    2,501 
Mortgage-backed securities   398,125    3,596    3,992    397,729 
Small Business Administration pools   30,835    505    67    31,273 
State and local government   105,469    4,918    539    109,848 
Corporate and other securities   8,024    157    129    8,052 
Total  $560,688   $9,178   $5,027   $564,839 

12
 

HELD-TO-MATURITY:

 

       Gross   Gross     
   Amortized   Unrealized   Unrealized     
(Dollars in thousands)  Cost   Gains   Losses   Fair Value 
June 30, 2022                    
US Treasury securities  $—   $—   $—   $— 
Government Sponsored Enterprises   —    —    —    — 
Mortgage-backed securities   131,209    18    (2,698)   128,529 
Small Business Administration pools   —    —    —    — 
State and local government   102,521    12    (1,864)   100,669 
Corporate and other securities   —</