The move will save First Community Bank of East Tennessee hundreds of thousands of dollars a year and and allow officials to focus more on the bank's business instead of SEC reporting obligations, bank officials said.
First Community Corp., parent of First Community Bank, recently received shareholder approval to proceed with the plan to de-register with the SEC, according to a news release from the bank.
The reclassification will allow the bank to consolidate ownership of First Community's common stock and reduce the number of shareholders of record of common stock to less than 300 while adding two classes of preferred stock.
"We feel like this action is in the best interest of our stockholders, customers and employees," said Mark Gamble, First Community chairman and chief executive officer. "The â€˜going private' transaction, as it is referred to, is something many banks have done or are pursuing to avoid the added administrative, audit and legal expenses necessary to comply with the Sarbanes-Oxley Act."
To comply with that federal act, documents, testing and assessment of internal control is required. The estimated cost to First Community to comply with act would have been $300,000 to $500,000 a year, according to the bank.
"All of a sudden we're under the same corporate governances as larger, publicly traded companies such as Eastman Chemical, General Electric and United Airlines, among others," Gamble said. "The cost of being a publicly registered company now is something we feel like we can no longer justify in light of our existing regulatory oversight provided by the FDIC (Federal Deposit Insurance Corporation), the state of Tennessee, the Federal Home Loan Bank of Cincinnati and the Federal Reserve Bank, as well as our own external auditors."
Jerry Greene, president and chief operating officer, said some community banks merged, were sold or went out of business because of the Sarbanes-Oxley Act (SOX).
"Further regulation through SOX is unnecessary, increases costs and takes our focus away from our core mission of providing local bank decision-making and personalized service," Greene said.
First Community Bank has more than $230 million in assets and offers savings, checking, certificates of deposits, investment services, and consumer and mortgage loans. Founded in 1993, it has locations in Rogersville, Church Hill, Kingsport and Colonial Heights.