First Community Corporation Announces Third Quarter Earnings and Cash Dividend

Oct 20, 2010, 12:00 ET from First Community Corporation

LEXINGTON, S.C., Oct. 20 /PRNewswire-FirstCall/ -- Today, First Community Corporation (Nasdaq: FCCO), the holding company for First Community Bank, reported net income available to common shareholders for the third quarter of 2010.  First Community demonstrated continued profitability with net income available to common shareholders of $228 thousand for the quarter.  This compares to $309 thousand in the second quarter of 2010, and $511 thousand (excluding the non-cash Goodwill impairment charge) in the third quarter of 2009.  As of September 30, 2010 year-to-date 2010 net income available to common shareholders was $960 thousand.  This compares to $1.17 million (excluding the non-cash Goodwill impairment charge) during the same period in 2009.  Diluted earnings per common share were $.07 in the third quarter of 2010.  This compares to $.10 per share in the second quarter of 2010 and $.16 (excluding the non-cash Goodwill impairment charge) in the third quarter of 2009.  

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Capital and Cash Dividend

During the third quarter of 2010, all of the company's regulatory capital ratios continued to increase as compared to the prior year.  Each of these ratios (Leverage, Tier I Risk Based, and Total Risk Based) exceed the well capitalized minimum levels currently required by regulatory statute and the previously communicated higher capital ratios expected by the Bank's primary regulator, the Office of the Comptroller of the Currency.  These new expectations are 8.00%, 10.00% and 12.00%, respectively.  At the end of the third quarter, the company's regulatory capital ratios (Leverage, Tier I Risk Based, and Total Risk Based) were 8.75%, 13.33% and 14.55%, respectively.  This compares to the same ratios as of September 30, 2009, of 8.24%, 11.90% and 12.96%, respectively.  Additionally, it should be noted that the regulatory capital ratios for the company's wholly owned subsidiary, First Community Bank, were 8.33%, 12.62% and 13.83%, respectively, as of September 30, 2010.  Further, the company's ratio of tangible common equity to tangible assets continued its growth, increasing from 4.69% at September 30, 2009, to 5.22% as of September 30, 2010.  The company has previously noted that, in the current regulatory environment with a heightened emphasis for banks to have less leverage and higher levels of capital, capital planning will continue to be a focus for the company.  The improvement in the capital ratios is a result of the company's continued earnings and its previously announced strategy of controlling the overall size of its balance sheet.      

The company also announced that the Board of Directors has approved a cash dividend for the third quarter of 2010.  The company will pay a $.04 per share dividend to holders of the company's common stock.  This dividend is payable November 15, 2010, to shareholders of record as of November 1, 2010.  

Asset Quality

Non-performing assets were 2.19% ($13.4 million) of total assets at the end of the quarter.  This ratio compares favorably with the bank's peer group non-performing assets ratio which the company believes to be in excess of 4.00%.  

Non-accrual loans decreased in the third quarter from $6.9 million to $5.7 million, while other real estate owned (OREO) increased from $4.7 million to $7.4 million.  This increase was primarily driven by three credits, which includes two residential properties and one commercial property.  It is also noteworthy that approximately $1.0 million of OREO has already been sold, or is under contract to sell, since the end of the third quarter.  

Trouble debt restructurings, that are still accruing interest, total $3.8 million, which is unchanged from the prior quarter.  

Additionally, it should be noted that loans past due 30-89 days decreased to $2.0 million (0.59% of loans) from $2.2 million (0.65% of loans) on a linked quarter basis.  

The company's investment portfolio includes securities that were rated AAA at the time of purchase, but have since been downgraded below investment grade by the rating agencies.  These downgrades have been primarily driven by the impact of the economic recession and the stress on the residential housing sector.  The ratings do not reflect the discounted purchase price paid by the Bank and; therefore, only reflect the rating agencies' analysis of the performance of the security overall and not the actual risk of loss to the bank.  The company's analysis, which includes an independent third-party valuation, identified other than temporary impairment (OTTI) charge to earnings of $119 thousand on its non-agency mortgage backed securities and a $320 thousand OTTI charge related to a pooled trust preferred security owned in its portfolio in the third quarter.  The remaining balance of the trust preferred security is $1.5 million.    

Balance Sheet

The company's success in growth of core deposits continued in the third quarter of 2010.  Core deposits grew by $4.2 million, a 4.4% annualized rate of increase.  During the last twelve months, the company has grown core deposits by $41.0 million, which is an 11.9% growth rate.  Core accounts (checking and savings) have increased by 843 accounts during that same period of time.  

The loan portfolio contracted by $7.8 million (2.3%) during the quarter, although the bank had commercial and consumer loan production of $10.5 million.

The company continued to move forward with its previously announced strategy to improve the mix of the overall balance sheet.  During the second quarter, funds available from the core deposit growth and cash flow from the investment portfolio allowed the company the opportunity to completely eliminate its remaining brokered certificates of deposit.

Mike Crapps, President and CEO of the company, noted, "We continue to be very focused on serving our target market of local businesses and professionals.  We are excited about our success in the very important area of core deposits and we continue to seek new loan opportunities, but find new loan demand to be relatively weak in the marketplace.  We are disappointed that loan demand has remained weak, resulting in our excess cash being invested in the securities portfolio instead of loans.  We are well positioned to assist our customers in achieving their financial goals and the structure of our balance sheet provides flexibility for us to grow our core deposits and loans without substantially increasing our overall total assets.  This strategy is important to our net interest margin and preservation of regulatory capital ratios."

Net Interest Income/Net Interest Margin

Net interest income was relatively unchanged on a year-over-year basis with the net interest margin improving by 10 basis points to 3.21%.  Mr. Crapps commented, "The balance sheet is well positioned for rising interest rates, while only marginally exposed to any further decline that may occur."  

Non-Interest Income

Non-interest income in the third quarter showed a decrease of $238 thousand (20.5%) on a year-over-year basis.  One primary reason for this decline was lower deposit service charges which declined by $140 thousand.  This decline was primarily the result of lower overdraft charges following the implementation of Regulation E changes which were effective July 1, 2010.  The other primary cause of the decline in non-interest income was the additional OTTI explained above and largely related to a pooled trust preferred security held in the investment portfolio.  

These declines were partially offset by a significant increase in mortgage origination fees.  These fees increased by $183 thousand (115.1%) during the third quarter of 2010, as compared to the third quarter of 2009.  

Non-Interest Expense

Non-interest expense was $4.6 million in the third quarter of 2010 as compared to $4.2 million in the second quarter.  This increase is primarily attributable to increased salary and benefit costs ($127 thousand) which include commissions paid on the higher levels of mortgage production; increased FDIC insurance expense ($114 thousand); and increased costs associated with other real estate owned, i.e. legal expenses, property taxes, disposition expense, etc. ($140 thousand).  Mr. Crapps commented, "The additional OREO expense this quarter includes approximately $150 thousand related to the disposition of one property. "

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 operates eleven banking offices located in Lexington, Forest Acres, Irmo, Gilbert, Cayce - West Columbia, Chapin, Northeast Columbia, Newberry, Prosperity, Red Bank and Camden.  

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 and expectations, and are thus prospective.  Such forward-looking statements are subject to risks, uncertainties, and other factors, such as a downturn in the economy, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.

Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate.  Therefore, 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.

FIRST COMMUNITY CORPORATION

BALANCE SHEET DATA

(Dollars in thousand, except per share data)

At September 30,

December 31,

2010

2009

2009

 Total Assets

$        611,449

$        632,120

$          605,827

 Other short-term investments (1)

21,599

$          16,795

14,092

 Investment Securities

203,305

221,088

195,844

 Loans

329,713

345,428

344,187

 Allowance for Loan Losses

4,841

4,558

4,854

 Total Deposits

461,631

447,280

449,576

 Securities Sold Under Agreements to Repurchase

15,883

19,269

20,676

 Federal Home Loan Bank Advances

68,826

102,023

73,326

 Junior Subordinated Debt

15,464

15,464

15,464

 Shareholders' Equity

43,889

42,165

41,440

 Book Value Per  Common Share

$            10.07

$              9.62

$                9.38

 Tangible Book Value Per Common Share

$              9.75

$              9.12

$                8.92

 Equity to Assets

7.18%

6.67%

6.84%

 Tangible common equity to tangible assets

5.22%

4.69%

4.80%

 Loan to Deposit Ratio

71.42%

77.23%

76.56%

 Allowance for Loan Losses/Loans

1.47%

1.32%

1.41%

(1) Includes federal funds sold, securities sold under agreements to resell and interest-bearing deposits

 Regulatory Ratios:

  Leverage Ratio

8.75%

8.24%

8.41%

  Tier 1 Capital Ratio

13.33%

11.90%

12.41%

  Total Capital Ratio

14.55%

12.96%

13.56%

Average Balances:

Three months ended

Nine months ended

September 30,

September 30,

2010

2009

2010

2009

 Average Total Assets

$      609,750

$        654,227

$     608,462

$          653,839

 Average Loans

334,098

340,451

339,140

334,991

 Average Earning Assets

556,334

577,610

555,379

575,253

 Average Deposits

460,310

440,157

457,694

434,968

 Average Other Borrowings

100,500

139,649

103,129

144,259

 Average Shareholders' Equity

43,351

67,812

42,537

68,242

Asset Quality

 Nonperforming Assets:

  Non-accrual loans

$          5,652

$            5,919

$         5,652

$              5,919

  Other real estate owned

7,374

1,681

7,374

1,681

  Accruing loans past due 90 days or more

340

17

340

17

           Total nonperforming assets

$        13,366

$            7,617

$       13,366

$              7,617

Loans charged-off

$             269

$               281

$         1,446

$              2,142

Overdrafts charged-off

14

16

35

52

Loan recoveries

(44)

(39)

(86)

(89)

Overdraft recoveries

(7)

(4)

(17)

(25)

 Net Charge-offs

$             232

$               254

$         1,378

$              2,080

 Net Charge-offs to Average Loans

0.07%

0.07%

0.41%

0.62%

FIRST COMMUNITY CORPORATION 

INCOME STATEMENT DATA

(Dollars in thousands, except per share data)

Three months ended

Three months ended

Three months ended

Nine months ended

September 30,

June 30,

March 31,

September 30,

2010

2009

2010

2009

2010

2009

2010

2009

 Interest Income

$         6,818

$         7,714

$          6,869

$           7,662

$          7,155

$          7,919

$        20,842

$       23,295

 Interest Expense

2,335

3,233

2,404

3,340

2,448

3,609

7,187

10,182

 Net Interest Income

4,483

4,481

4,465

4,322

4,707

4,310

13,655

13,113

 Provision for Loan Losses

235

665

580

941

550

451

1,365

2,057

 Net Interest Income After Provision

4,248

3,816

3,885

3,381

4,157

3,859

12,290

11,056

 Non-interest Income:

   Deposit service charges

459

599

478

576

485

556

1,421

1,731

   Mortgage origination fees

342

159

225

246

124

217

691

622

   Investment advisory fees and non-deposit commissions

82

85

160

103

174

149

416

337

   Gain (loss) on sale of securities

218

291

104

9

2

354

324

654

   Fair value gain (loss) adjustment

(201)

(185)

(247)

230

(196)

21

(644)

66

   Other-than-temporary-impairment write-down on securities

(440)

(179)

(216)

(85)

(143)

(657)

(799)

(921)

   Other

462

390

425

423

376

408

1,265

1,221

 Total non-interest income

922

1,160

929

1,502

822

1,048

2,674

3,710

 Non-interest Expense:

   Salaries and employee benefits

2,305

2,112

2,178

2,127

2,127

2,013

6,610

6,252

   Occupancy

312

307

292

289

314

300

918

896

   Equipment

290

321

295

304

288

319

873

944

   Marketing and public relations

105

99

105

55

91

107

301

261

   FDIC assessment

323

215

209

566

204

121

735

902

   Other real estate expense

243

23

103

30

190

85

536

138

   Amortization of intangibles

155

156

155

155

155

155

466

466

   Impairment of goodwill

-

27,761

-

-

-

-

-

27,761

   Other

911

926

868

903

817

924

2,597

2,753

 Total non-interest expense

4,644

31,920

4,205

4,429

4,186

4,024

13,036

40,373

 Income (loss) before taxes

526

(26,944)

609

454

793

883

1,928

(25,607)

 Income tax expense (benefit)

132

141

134

40

204

311

471

492

 Net Income (loss)

394

(27,085)

475

414

$             589

$             572

$          1,457

$      (26,099)

 Preferred stock dividends

166

165

166

165

166

164

497

493

 Net income available to common shareholders

$            228

$      (27,250)

$             309

$              249

$             423

$             408

$             960

$      (26,592)

 Per share data:

    Net income (loss), basic

$           0.07

$          (8.35)

$            0.10

$             0.08

$            0.13

$            0.13

$            0.29

$          (8.17)

    Net income (loss), diluted

$           0.07

$          (8.35)

$            0.10

$             0.08

$            0.13

$            0.13

$            0.29

$          (8.17)

 Average number of shares outstanding - basic

3,263,983

3,261,631

3,243,548

3,239,863

3,238,046

3,231,411

3,259,395

3,255,020

 Average number of shares outstanding - diluted

3,263,983

3,261,631

3,243,548

3,239,863

3,238,046

3,231,411

3,259,395

3,255,020

 Return on average assets

0.15%

N/A

0.20%

0.15%

0.39%

0.25%

0.21%

N/A

 Return on average common equity

2.80%

N/A

3.96%

1.74%

7.71%

2.86%

4.07%

N/A

 Return on average common tangible equity

2.90%

N/A

4.13%

3.62%

8.08%

5.88%

4.24%

N/A

 Net Interest Margin (non taxable equivalent)

3.20%

3.08%

3.23%

3.02%

3.44%

3.05%

3.29%

3.05%

 Net Interest Margin (taxable equivalent)

3.21%

3.11%

3.25%

3.04%

3.46%

3.08%

3.31%

3.07%

Reconciliation of GAAP Net Income available to common

    shareholders to operating earnings available to

    common shareholders: (1)

Net income available to common shareholders (GAAP)

228

(27,250)

309

249

423

408

960

(26,592)

    Goodwill impairment

-

27,761

-

-

-

-

-

27,761

 Operating earnings available to common shareholders

$            228

$            511

$             309

$              249

$             423

$             408

$             960

$         1,169

  Per share data:

  Net income (loss) diluted (GAAP)

$           0.07

$          (8.35)

$            0.10

$             0.08

$            0.13

$            0.13

$            0.29

$          (8.17)

    Goodwill impairment

-

8.51

-

-

-

-

-

8.53

  Net income (loss) diluted - operating earnings

$           0.07

$           0.16

$            0.10

$             0.08

$            0.13

$            0.13

$            0.29

$           0.36

  (1) Operating earnings equals GAAP net loss plus one time impairment of goodwill

SOURCE First Community Corporation