First Community Corporation Announces Annual and Fourth Quarter Earnings and Increased Cash Dividend

LEXINGTON, S.C., Jan. 22, 2020 /PRNewswire/ --

Highlights

• Net income of $11.0 million in 2019 and $2.7 million for the fourth quarter
• Diluted EPS of $1.45 per common share for the year of 2019 and $0.36 per common share for the fourth quarter
• Increased cash dividend to $0.12 per common share, the 72^nd consecutive quarter of cash dividends paid to common shareholders, highest dividend ever paid by the company
• Pure (non-CD) deposit growth, including customer cash management accounts, of $75.4 million during the year, a 9.4% growth rate
• Loan growth of $18.6 million during the year, a 2.6 % growth rate
• Key credit quality metrics continue to be excellent with 2019 net loan recoveries of $293 thousand and non-performing assets of 0.32% and past dues of 0.06% at year end
• Mortgage revenue of $4.6 million, a 16.9% increase in 2019
• Investment advisory revenue of $2.0 million, a 20.1% increase in 2019

Today, First Community Corporation (Nasdaq:  FCCO), the holding company for First Community Bank, reported net income for the fourth quarter and year end of 2019.  For the year ended December 31, 2019 net income was $11.0 million and diluted earnings per share were $1.45.  Net income for the fourth quarter of 2019 was $2.7 million and diluted earnings per share were $0.36.  First Community President and CEO Michael Crapps commented, "We are pleased with our pure deposit growth, the performance of our loan portfolio, and the benefit that our fee income lines of business provide; all of which continue to be strengths of our company.  Our model is built on the diversity of revenue so that in times of margin pressure our sources of fee revenue, mortgage and investment advisory lines of business, really outperform."      

Cash Dividend and Capital
The Board of Directors has approved an increase in the cash dividend for the fourth quarter of 2019 to $0.12 per common share.  This dividend is payable on February 14, 2020 to shareholders of record of the company's common stock as of January 31, 2020.  Mr. Crapps commented, "The entire board is pleased that our company's strong financial performance enables us to increase the cash dividend to the highest level ever paid by the company.  We are also proud that dividend payments have continued uninterrupted for 72 consecutive quarters." 

During the third quarter of 2019, the Company completed the previously announced repurchase of 300,000 shares of the company's outstanding common stock at a cost of $5,637,257 with an average price per share of $18.79.  The company also announced during the third quarter of 2019 the approval of a second share repurchase of up to 200,000 shares of the company's outstanding common stock.  No share repurchases have been made under the second share repurchase.  Crapps noted, "Our initial share repurchase was completed very quickly.  This approved second share repurchase provides us with some flexibility in managing capital going forward."   

In 2018, the Federal Reserve increased the asset size to qualify as a small bank holding company.  As a result of this change, the company is generally not subject to the Federal Reserve capital requirements unless advised otherwise.  The bank remains subject to capital requirements including a minimum leverage ratio and a minimum ratio of "qualifying capital" to risk weighted assets.  These requirements are essentially the same as those that applied to the company prior to the change in the definition of a small bank holding company.  Each of the regulatory capital ratios for the bank exceed the well capitalized minimum levels currently required by regulatory statute.  At December 31, 2019, the bank's regulatory capital ratios (Leverage, Tier I Risk Based and Total Risk Based) were 9.95%, 13.44%, and 14.23%, respectively.  This compares to the same ratios as of December 31, 2018 of 9.98%, 13.19%, and 13.96%, respectively. As of December 31, 2019, the bank's Common Equity Tier One ratio was 13.44% compared to 13.19% at December 31, 2018.  Further, the company's Tangible Common Equity to Tangible Assets ratio was 9.02% as of December 31, 2019 compared to 8.92% as of December 31, 2018.

Asset Quality
The company's asset quality remains excellent.  The non-performing assets ratio was 0.32% of total assets at December 31, 2019 compared to 0.37% at December 31, 2018.  The nominal level of non-performing assets was $3.7 million at year-end 2019 down from $4.0 million at the end of 2018.  The past due ratio for all loans was 0.06% at year-end 2019 down from 0.26% at year-end 2018. 

During the fourth quarter the bank experienced net loan recoveries of $79 thousand, with overall net loan recoveries for the year of 2019 of $293 thousand.   The ratio of classified loans plus OREO now stands at 5.12% of total bank regulatory risk-based capital as of December 31, 2019. 

Balance Sheet
(Numbers in millions)

Mr. Crapps commented, "Loan growth was muted in 2019 as production was offset by higher than normal levels of early payoffs.  In 2017 and 2018, the ratio of loan portfolio growth to loan production was 38.9%.  In 2019, that same ratio was only 13.4%.  A highlight of the year was strong pure deposit growth, including cash management accounts, of $75.4 million which represents an annual growth rate of 9.4%.  Cost of funds, although up year-over-year, declined on a linked quarter basis after peaking in the third quarter."

Revenue

Net Interest Income/Net Interest Margin
Net interest income for the year of 2019 increased 3.1% to $36.8 million compared to $35.7 million for the year of 2018.  On a linked quarter basis net interest income was flat at $9.4 million.  The net interest margin, on a taxable equivalent basis, was 3.56% for the fourth quarter of 2019 compared to 3.60% in the third quarter of the year after adjusting for the benefit of a non-accrual interest recovery in the third quarter.  Mr. Crapps commented, "Margin and net interest margin continue to be a point of focus for us given the rate environment and the competition for loans and deposits.  While margin is an important metric to measure, we are also focused on net interest income which translates directly to increasing revenue." 

Non-Interest Income
During the fourth quarter, the bank made the decision to consolidate the mortgage support and credit functions into its Administrative Center.  This was done to gain greater efficiency and collaboration. This action resulted in a write down of the real estate in the amount of $282 thousand as a charge to Non-Interest Income.  Once the building is sold, occupancy cost will be positively impacted by $91 thousand annually.

The mortgage line of business had another record quarter with $39.1 million in production.  This represents a 51.6% increase over the production in the fourth quarter of 2018.  Revenue also had a substantial increase at 58.9% over the same time period. 

In the fourth quarter of 2019, the investment advisory line of business had $585 thousand in revenue which represents a 22.9% increase as compared to the fourth quarter of 2018.  Notably, Assets Under Management (AUM) ended 2019 at $369.7 million, which represents a 28% increase during the year.

Mr. Crapps noted, "Our strategy of generating revenue streams from multiple lines of business continues to serve us well and both the mortgage and investment advisory lines of business performed nicely in 2019 with revenue increases of 16.9% and 20.1% respectively. We continue to focus on leveraging each of our lines of business."

Non-Interest Expense
Non-interest expense increased during the fourth quarter of 2019 by $73 thousand driven by the planned increase in marketing expense and miscellaneous technology related items.  This was partially offset by reduced compensation, FDIC insurance and OREO expenses.  Mr. Crapps commented, "During 2018 and 2019, we made significant strategic investments in our franchise, including three new offices, our mobile and digital banking platforms and additional team members. While certain expenses will fluctuate on a quarterly basis, the annualized rate of increase is planned to decelerate as we strive for operating leverage and greater efficiency."

First Community Corporation stock trades on the NASDAQ Capital Market under the symbol "FCCO" and is the holding company for First Community Bank, a local community bank based in the Midlands of South Carolina.  First Community Bank is a full-service commercial bank offering deposit and loan products and services, residential mortgage lending and financial planning/investment advisory services for businesses and consumers.  First Community serves customers in the Midlands, Aiken, and Upstate, South Carolina markets as well as Augusta, Georgia.  For more information, visit www.firstcommunitysc.com.

FORWARD-LOOKING STATEMENTS
Certain statements in this news release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans, goals, projections and expectations, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.  Such risks, uncertainties and other factors, include, among others, the following: (1) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (2) the strength of the United States economy in general and the strength of the local economies in which we conduct operations may be different than expected resulting in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on the company's loan portfolio and allowance for loan losses; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for loan loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (4) changes in the U.S. legal and regulatory framework; (5) adverse conditions in the stock market, the public debt markets and other capital markets (including changes in interest rate conditions) could have a negative impact on the company; (6) technology and cybersecurity risks, including potential business disruptions, reputational risks, and financial losses, associated with potential attacks on or failures by our computer systems and computer systems of our vendors and other third parties; and (7) risks, uncertainties and other factors disclosed in our most recent Annual Report on Form 10-K filed with the SEC, or in any of our Quarterly Reports on Form 10-Q or Current Reports on Form 8-K filed with the SEC since the end of the fiscal year covered by our most recently filed Annual Report on Form 10-K, which are available at the SEC's Internet site (http://www.sec.gov).

Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. We can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by our company or any person that the future events, plans, or expectations contemplated by our company will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

The tables below provide a reconciliation of non‑GAAP measures to GAAP for the periods indicated:

Certain financial information presented above is determined by methods other than in accordance with generally accepted accounting principles ("GAAP"). These non-GAAP financial measures include "tangible book value at period end," "return on average tangible common equity" and "tangible common shareholders' equity to tangible assets." "Tangible book value at period end" is defined as total equity reduced by recorded intangible assets divided by total common shares outstanding. "Tangible common shareholders' equity to tangible assets" is defined as total common equity reduced by recorded intangible assets divided by total assets reduced by recorded intangible assets. Our management believes that these non-GAAP measures are useful because they enhance the ability of investors and management to evaluate and compare our operating results from period-to-period in a meaningful manner. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

SOURCE First Community Corporation