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First
Community Corporation- focused strategy and vision to be the premier community bank in
their markets
Financial
Community Bank
(NASD: FCCO)
First Community
Corporation
5455 Sunset Blvd.
Lexington, SC 29072
Phone: 803-951-2265
Michael
Crapps
President and
Chief Executive Officer
Interview conducted by:
Lynn Fosse, Editor
CEOCFOinterviews.com
March 2003
Bio of CEO,
Michael C. “Mike” Crapps is a 1976
graduate of Lexington High School. He received a B.S. degree in Economics in 1980
from Clemson University and an M.B.A. degree from the University of South Carolina in
1984. He was an organizer of First Community Bank and currently serves as its
president and chief executive officer as well as on its board of directors. Mr.
Crapps is a graduate of the LSU Banking School of the South and serves the banking
industry as the chairman of the South Carolina Bankers Association. He was selected
as the 1997 Young Banker of the Year by the South Carolina Bankers Association. He
is also very active in community and civic organizations. He currently serves as the
immediate past chairman of the Greater Lexington Chamber of Commerce. He serves on
the board of directors of the Southeast Division of the American Cancer Society, the
Greater Columbia Community Relations Council, and the Saluda Shoals Park Foundation.
He has been involved with Palmetto Place Children’s Emergency Shelter, Friends of the
Lexington Library, and the YMCA of the Midlands. He is a past president of the
Columbia Clemson Club and is a member of the Lexington Rotary Club. Mr. Crapps was
also a member of the inaugural class of Leadership Lexington County. He is an
active member of St. Stephens Lutheran Church where he has served on the Finance Committee
and the Endowment Committee.
Company Profile:
First Community Corporation (Nasdaq:FCCO),
founded in 1995, is the bank holding company for First Community Bank, N.A. (the Bank).
The Company's only business is owning and managing the Bank. Previously traded on the
Over-the-Counter Bulletin Board, First Community Corporation began trading on the NASDAQ
Small Cap Market on January 15, 2003. The Bank is engaged in a general commercial
and retail banking business, emphasizing the needs of small to medium-sized businesses,
professional concerns and individuals, primarily in Richland and Lexington counties of
South Carolina and the surrounding area. The Bank has its main office located in the city
of Lexington, South Carolina, and five branch offices located in Forest Acres, Irmo, West
Columbia, Gilbert and Chapin, all of which are located in Lexington and Richland Counties.
Philosophy:
It is comfort. It is reassurance. So a smile is the basis for the way we do business at
First Community Bank.
Whether you're a first time customer or someone who's been around for years, we're here to
do more than meet your financial needs. We're here to get to know you, to welcome you to
the folds of the First Community family. It's more than a business philosophy. It's a rich
tradition, derived from generation after generation of neighbor helping neighbor.
And yet it is more. It's a responsibility to the communities we serve.
The Bank offers a full range of deposit services that are typically available in most
banks and savings and loan associations, including checking accounts, NOW accounts,
savings accounts and other time deposits of various types, ranging from daily money market
accounts to long-term certificates of deposit. The transaction accounts and time
certificates are tailored to the Bank's principal market area at rates competitive to
those offered in the area. In addition, the Bank offers certain retirement account
services, such as individual retirement accounts (IRAs).
The Bank also offers a full range of commercial and personal loans. Commercial loans
include both secured and unsecured loans for working capital (including inventory and
receivables), business expansion (including acquisition of real estate and improvements)
and purchase of equipment and machinery. Consumer loans include secured and unsecured
loans for financing automobiles, home improvements, education and personal investments.
The Bank also makes real estate construction and acquisition loans, and originates fixed-
and variable-rate mortgage loans in the name of a third party, which are sold into the
secondary market.
Other Bank services include cash management services, safe deposit boxes, travelers’
checks, direct deposit of payroll and social security checks, as well as automatic drafts
for various accounts. The Bank offers non-deposit investment products and other investment
brokerage services through a registered representative with an affiliation through GAA
Securities, Inc.
First Community recent added check imaging
and will be adding Internet banking to its roster of services.
With
six locations sprinkled throughout central South Carolina, First Community Bank has truly
assumed the position of the premier community bank of the Midlands.
CEOCFOinterviews: Mr. Crapps, please tell us about the
vision for First Community Corp and where you are today.
Mr. Crapps: “First Community Corp. was founded in 1995.
We are about seven years old now and the genesis was the opportunity there in the
middle of South Carolina for a community bank focused on locally owned and family owned
businesses and those individuals who valued personal relationships with a banker.
The board was and still is made up of individuals from our two county areas, Richland and
Lexington Counties. We opened the doors in 1995 with two offices, one in the Forest
Acres Community in Columbia and the other one in Lexington area. Part of our
strategic plan and vision was to be in the community neighborhood and settings around the
downtown area of Columbia. Columbia is the state capital of South Carolina, home of
the University of South Carolina and other state government offices, We felt the best
opportunity to differentiate ourselves from the competitors was to be in this community
neighborhood setting around the midlands area where people really did value the community
banking atmosphere that we would be providing. We started in Forest Acres in
Columbia and in Lexington; those two markets certainly have those values. We
became profitable in about 15 months. Our original projection was 19 and so we beat
that by about 4 months and once we saw that we had a business plan that resonated into the
marketplace, we began looking at other opportunities like a second stock offering in 1998.
We used those proceeds to open three additional offices in the same kind of markets,
communities and neighborhoods with the same kind of local identity as our initial two
communities. In 2001 we did our first acquisition buying a branch of a bank in the
Chapin community. That branch had about $13 million in deposits when we bought it
and today it has $22 million.”
CEOCFOinterviews:
Why the recent move to NASDAQ?
Mr. Crapps: “We felt NASDAQ was the natural next step
for us and for our shareholders; we felt it increased liquidity for our shareholders,
greater awareness of our company and we thought it was a very positive move for us.”
CEOCFOinterviews:
Tell me a little bit about the economy in your area. Has it been affected by the
general down turn at all?
Mr. Crapps: “I’d love to say that we were not
affected all, but, I think we are. The biggest thing we have seen in South Carolina,
like in many of the states, is the budget issue and because Columbia is the state capital
we are affected by the layoffs and slow down of purchases by the state government.
But, we are buffered somewhat in this area beyond the state government issue, because we
have the University of South Carolina, Fort Jackson, which is a large military base and
then a lot of large major employers. The economy is diverse enough to have a buffer built
in a town like this. Although we have been affected, our deposits continue to
grow. They grew last year over 30% and our portfolio grew over 10% last year and all
the quality indicators were in the positive direction and very strong last year. To the
extent that we are a reflective of our local economy and I think things are going very
nicely for us overall.”
CEOCFOinterviews:
How do you attract new business to the bank?
Mr. Crapps: “We work hard at it every single day, just
like you do. Our commercial banking officers are networking in the community.
We believe strongly in being well networked and connected in the communities
we serve. We want our bankers to be the best-known bankers in the market they are in
and we work hard at that. We are constantly out calling on folks. We think
banking is best done when you have a relationship with folks and you can sit down and
figure out solutions for people’s financial needs and so we are constantly working it
that way.”
CEOCFOinterviews:
You seem to be very community specific, treating each community in a unique manner. Please
explain that philosophy.
Mr. Crapps: “You are exactly right. Each community
is little unique and a little different and we want to hire the very best banker for that
community and the banker will be different for Chapin and different for Forest Acres.
Instead of coming up with one plan and saying that this plan will work for everybody, our
strategy and focus is on doing what is best for that individual community, that individual
location. Our vision is to be the best, the premier community bank in that markets
that we serve. We recognize that there are going to be uniqueness to that market
that we will need to understand and to meet. I’ll tell you a quick story about that.
I grew up here in Lexington and so part of it is just a reflection of the fact that
I value what this community has meant to me and I recognize the fact that it has meant a
lot to my family and me. My mother is fond of telling her friends that her son hasn’t
gone very far in life because my office is about three miles from the house that I grew up
in. Sometimes I’m not quite sure how to take what she says. Mothers are
like that.”
CEOCFOinterviews:
“Smile is the way we do business first at community bank”. What do
you do that is different than other banks?
Mr. Crapps: “I’ll give you a couple of stories to
illustrate that. In designing our buildings our offices are very open and set up in
a dynamic that our customers can see us and we can see them. When interviewing
tellers and customer service representatives for our bank we look for people who have that
natural warmth of personality. We can hire people who are professionally competent,
but what we are really looking for is that person that naturally exudes enthusiasm,
naturally has that warm personality. I’ve said it before, I’ve said to
employees, I’ve said it to a lot of people that “if your mamma hasn’t
taught you to be nice before you come to us, I can’t teach you to be nice”.
We can do some things to reinforce it, but the key component of our strategy is
what takes place everyday, hundred times a day, in the routine transactions that take
place between our customers and employees, whether it is in the lobby or out in the
drive-thru, on the telephone or somewhere in the community, those interactions that take
place are moments of truth. When they occur, that customer or prospective customer
is going to walk away from that interaction with a feeling for First Community Bank.
Whether their needs get met or not, and hopefully they did, they will have an
emotion or feeling about it and they will walk away saying “boy they sure are nice
people”, or “boy, they are not nice people”. They will share that
with other folks. So, it is extremely important for us to have every interaction
with them be a positive one. We hire people that do that and we do things to
reinforce it as we go along.
You
may be interested in knowing how we reinforce that. When we were first starting the bank,
we started in a temporary modular type and that modular unit was really small, so when a
customer walked in the door they may literally be within five or ten feet of our
employees. It was probably about a month before we actually opened the doors to the
building and I had all the employees in the lobby come back into this building and stand
about where the teller line would be or where the desk would be and had someone walk to
the front door so we can practice greeting someone walking through the door in this bigger
space. I wanted our employees to feel comfortable filling up this bigger lobby with their
personality. It is ok to laugh and smile and let those big personalities come
through in this bigger space. My employees thought I was crazy. They said we
had to be the only bank in the entire world practicing to say hello. That is how
important those little things are to us. But, to answer your question that is how we
go about doing this.”
CEOCFOinterviews: What do people find at First Community that is
different from our competition?
Mr. Crapps: “We have a very focused strategy. There are
seven particular areas that we focus on and seven strategies. We have tactics lined
up to support each of those strategies and teams involved on working on each of those
tactics to make sure we are doing those things and doing them right; then we will
successfully accomplish our goals and be that premier community bank. The primary
one is focused on customer service and sales excellence so that our employees understand
how important their roles are on this team and carry out that mission every single
day.”
CEOCFOinterviews: Do many customers take advantage of all your
services?
Mr. Crapps: “They take advantage of our full product line,
which includes not only the traditional bank deposit type accounts and the consumer, loan
accounts but we also offer a full service mortgage origination for residential mortgage
lending. We offer and have two fully licensed financial planning specialists who
represent a wide range of annuity products and mutual fund products as well as a discount
brokerage service. We now offer, through a joint venture arrangement, insurance
products like property and casualty and general business liability coverage . We
have a full range of products to offer our customers and for our employees to have at
their disposal while they are talking to our customers and looking for those needs that
they may have and yes to answer your question, they do have multiple services with
us. I’ll add one more, we will be introducing our Internet banking product
March 3rd.”
CEOCFOinterviews: Is there anything else you feel you need to add
to the mix that you are planning to offer?
Mr. Crapps:
“I think we need to enhance our brokerage type offerings, our financial planning
tools and constantly grow that and update that.”
CEOCFOinterviews:
Residential mortgages are almost a commodity these days. Why are people coming to
you?
Mr. Crapps:
“Mainly because our mortgage originators carry out that moment of truth better than
your off the street mortgage broker who is not concerned about a lasting relationship
here. We do not want to do just a single transaction with that person; we want to
develop a relationship so it is important that we get it right. Not just so that the
loan gets closed, but that the process goes well and our customer has a good feeling on
how this was handled. We don’t want that to be the only transaction they do with
us. We want to establish a relationship with them. It may be their first
experience with us and we want that to be a positive one so that it gives us an
opportunity to offer other products that we offer. It may be that they have all of
their banking products with us and this is another need or another opportunity for us to
work together and I want this to be a positive one for them as well. That is why I
think we can do it more successfully and I think that is why they continue to come to
us.”
CEOCFOinterviews:
How has the bank fared with the unprecedented rate cuts? In general, how do you manage
times that are so unpredictable?
Mr. Crapps:
“Our net interest margin has been squeezed like probably everyone else’s
has. When rates get this low, natural compression of rates takes place and
there is not enough room to maneuver between what we are paying on our funds and our
portfolios. The offsetting factor of that is, fortunately, we have been able to grow our
loan portfolio and earned good yields on a floating rate basis, so as the rates increase
we get the benefit of that higher rate.”
CEOCFOinterviews:
Do you see additional branches or additional acquisitions for the future?
Mr. Crapps:
“Yes. If I had my way we would have it before the day was over. We are
looking at a couple of branches right now.”
CEOCFOinterviews:
Tell me about community involvement with the bank. Is there a particular area that
you focus in?
Mr. Crapps:
“No, we don’t legislate that particular area. We want our bankers to be
involved. What we want them to do and what we encourage them to do is to find those
areas that contribute to the quality of life in their market and they have a passion
for. If they have a passion for it, they are going to do it well, number one, and
stick with it number two and it will make a difference in that community. As a
community bank we are going to do only as well as our community prospers. We
don’t take one particular area. With that being said, I will say that most of
our bankers are involved in their local Chamber of Commerce and I just recently just
finished up last year as chairman of my Chamber. As the leading business
organization in each of our communities our bankers tend to be involved in that as one of
the areas that they are involved in.”
CEOCFOinterviews:
Please tell us about your management team.
Mr. Crapps:
“ I am most proud of the executive leadership team of this organization. It is
made up of individuals who have been with us since day one. We have not had any
turnover in our executive team and we have people who are experts in their particular
area. Our CFO came to us with a background as a General Auditor of about a billion
dollar bank and prior to that he had done public accounting work concentrating in
financial institutions. He is an expert at the financial side of the bank and the
operations side of the bank. We have a Senior Credit Officer that was a credit
officer for a bank that had about a half a million dollar loan portfolio. He is a
true watchdog over that portfolio and makes sure that we are doing things the right way
with the loans going on our books. Our marketing and HR director is one person who
does both those jobs and is well trained in both of those areas. We’ve got team
members that are real experts in their particular functions and they come together and
work well together.”
CEOCFOinterviews:
What should a potential investor or shareholder know about First Community?
Mr. Crapps:
“The major risk in an investment in a bank is what is in their loan portfolio and one
of the core values of our company is that we are not going to compromise our underwriting
standards for anyone for any reason. We will sacrifice production and growth
opportunities to make sure that the quality of the portfolio is maintained. It is like I
said to other folks, if any banker worth a salt will say that to someone when they ask
about their lending philosophy or to answer your question, the proof is in the numbers and
if folks dig into the numbers of our organization, what they will find is that our
historical loan charge-offs are well below peer group numbers. This year 2002 our
charge-off ratio was 16 basis points and it looks like the industry is going to come in at
about 25 basis points. I can’t remember the exact number but in the 7 years we
have been in existence, I think our total charge offs total gross charge offs are
something in the $400,000 range; this is in the whole time we’ve been open as a
bank. We are doing that with a little bit more than a $100 million dollar loan
portfolio. It speaks volumes about not just saying we are going to maintain strong
credit quality, the numbers support that strategy and belief.”
CEOCFOinterviews:
How do you spend your day?
Mr. Crapps:
“Two primary things. One is, engage in discussions with our employees, our
officers, and our board members about the mission, vision and the strategy of the bank to
make sure that the things we are doing on a day-to-day basis supports the goals that we
set out for ourselves. Second, the other big thing I do is the interaction and
involvement with customers or prospective customers – making calls with our
commercial bankers and our own folks and out meeting those people, calling them on the
phone, thanking them for their business and finding out if there are other opportunities
for us to work together. Then third, the activities I am involved with in my
community.”
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