First Community Corporation Announces Third Quarter Results and Cash Dividend

Highlights

• Net income increase of 29.2%. Third quarter net income was $1,552,000 ($0.23 per share) as compared to $1,201,000 ($0.18 per share) in the prior quarter.
• On September 26, 2014, completed the previously announced Purchase and Assumption Agreement of approximately $40.1 million in deposits and $8.7 million in loans in downtown Columbia.
• Key credit quality metrics were excellent with annualized charge-offs of five basis points and non-performing assets of 1.19%.
• Cash dividend of $0.06 per common share, which is the 51st consecutive quarter of cash dividends paid to common shareholders
• Regulatory capital ratios remain strong at 10.33% (Tier 1 Leverage) and 16.61% (Total Capital) along with Tangible Common Equity / Tangible Assets (TCE/TA) ratio of 8.03%

LEXINGTON, SC –  Today, First Community Corporation (Nasdaq: FCCO), the holding company for First Community Bank, reported net income for the third quarter of 2014.  On a linked quarter basis, net income increased 29.2% from $1.201 million in the second quarter of 2014 to $1.552 million in the third quarter of the year.  Year-over-year, net income increased 48.4% from $1.046 million in the third quarter of 2013 to $1.552 million in the third quarter of 2014.  Diluted earnings per common share were $0.23 for the third quarter of 2014 as compared to $0.18 for the second quarter of 2014 and $0.20 for the third quarter of 2013.

Year-to-date 2014 net income was $3.615 million compared to $3.287 million during the first nine months of 2013.  Diluted earnings per share for the first half of 2014 were $0.55, compared to $0.62 during the same time period in 2013.  The nine month results for 2014 include merger and acquisition related expenses of $474 thousand.  Core net income (excluding securities gains/losses, merger expenses, and loss on early extinguishment of debt) year-to-date in 2014 was $3.930 million compared to $3.303 million during the same time period in 2013.  Core diluted earnings per share for the nine month period of 2014 were $0.60 as compared to $0.62 during the same time period in 2013.

Additionally, on September 26, 2014, the company completed the acquisition of $40.1 million in deposits and$8.7 million in loans from First South Bank.  The final premium paid was $714 thousand, which represents 1.78% of total deposits.  This represents all of the deposits and a portion of the loans at First South’s Columbia banking office, located at 1333 Main Street.  These accounts have been transferred to First Community’s new downtownColumbia office, located at 1213 Lady Street, near the corner of Main and Lady Streets.  Mike Crapps, President and CEO, commented, “This transaction accelerates the profitability for our new office from the typical two to three year period to being profitable now.  This continues a period of real growth for our company, which includes the acquisition of Savannah River Banking Company in Aiken, South Carolina, and Augusta, Georgia; the opening of our first downtown Columbia location; the groundbreaking for our future banking office inBlythewood; and the deposit and loan purchase discussed above.  Total assets have increased by 31.2% during 2014 to now reach $830.9 million.”

Cash Dividend and Capital

The Board of Directors has approved a cash dividend for the third quarter of 2014.  The company will pay a$0.06 per share dividend to holders of the company’s common stock.  This dividend is payable November 14, 2014 to shareholders of record as of November 3, 2014.  Mr. Crapps commented, “Our entire board is pleased that our performance enables the company to continue its cash dividend for the 51st consecutive quarter.”

Each of the regulatory capital ratios (Leverage, Tier I Risk Based and Total Risk Based) exceed the well capitalized minimum levels currently required by regulatory statute.  At September 30, 2014, the company’s regulatory capital ratios (Leverage, Tier I Risk Based and Total Risk Based) were 10.33%, 15.78%, and 16.61%, respectively.  This compares to the same ratios as of September 30, 2013, of 10.64%, 17.29%, and 18.40%, respectively.  Additionally, the regulatory capital ratios for the company’s wholly owned subsidiary, First Community Bank, were 9.86%, 15.09%, and 15.92% respectively as of September 30, 2014.  Further, the company’s ratio of tangible common equity to tangible assets was 8.03% as of September 30, 2014.

Asset Quality

The asset quality metrics were excellent, led by the non-performing assets ratio decreasing to 1.19% of total assets, as compared to the prior quarter ratio of 1.41%.  The nominal level of non-performing assets decreased to $9.904 million from $11.109 million at the end of the prior quarter.

Trouble debt restructurings, that are still accruing interest, declined slightly during the quarter to $551 thousandfrom $560 thousand.  Loans past due 30-89 days were $1.9 million (0.42% of loans) this quarter.

Net loan charge-offs for the quarter were $55 thousand (0.05% annualized ratio) as compared to the 2014 second quarter total of $489 thousand (0.44% annualized ratio).  As of September 30, 2014, net charge-offs year-to-date were $758 thousand (0.23% annualized ratio).

The ratio of classified loans plus OREO now stands at 23.35% of total regulatory risk-based capital as ofSeptember 30, 2014.

Mr. Crapps commented, “With the deposit assumption and loan purchase closing late in the quarter, there was only a minimal impact on the quarter average balance sheet numbers.  However, the period-end results do show the outcomes of this transaction; therefore, it is important to examine the changes more closely.  We continue to be frustrated by the lack of growth in the loan portfolio, which decreased by $4.8 million on an organic basis in the quarter.  Loan production levels were relatively flat quarter-over-quarter, with the headwind of loan payments and payoffs continuing.  We have enhanced our loan production efforts with additional tools.  Loan production will continue to be an area of focus for us as we aim to increase our loan to asset ratio.  Conversely, we are pleased with our success in the growth of our non-CD deposits, which increased on an organic basis by $7.2 million in the quarter.  This is the equivalent of an annualized growth rate of 5.8%.”

Revenue

Total revenue has now increased five consecutive quarters as the bank’s diverse revenue model continues to demonstrate strength.

Net Interest Income/Net Interest Margin

The net interest margin, on a non-tax equivalent basis, increased to 3.40% for the third quarter.  This represents an increase of eight basis points over the prior quarter and increase of 30 basis points over the third quarter of 2013.  The tax equivalent net interest margin increased by similar amounts to be 3.48% for this quarter.  This increase resulted in higher net interest income for the third quarter, as compared to the prior quarter.

Non-Interest Income

Non-interest income was $2.3 million for the third quarter, which represents an increase of $401 thousand(21.1%) over the prior quarter.  This increase was driven by the mortgage banking line of business and the financial planning/investment advisory line of business.  Mortgage loan production in the third quarter increased by 22.9% over the prior quarter to $25.8 million.  This increase in production, along with higher yields (3.94% in the third quarter as compared to 3.34% in the second quarter), resulted in revenues increasing 45.0% to $1.016 million.  Mr. Crapps commented, “While the third quarter is always helped by some seasonal factors, this year was especially good.  While the yield is probably not sustainable, we were pleased with the outcome for this quarter.”

The financial planning/investment advisory unit experienced an increase in revenue of 34.8% in the third quarter, as compared to the prior quarter.  Mr. Crapps commented, “While we continue to build recurring revenue in this line of business, there is some variation that is driven by the product mix.  Our mission is to provide objective financial advice with the execution of the ultimate financial plan being customized to each individual client.  This will inevitably result in products being recommended that are very unique to each client.”

Non-Interest Expense

Non-interest expense increased by $275 thousand (4.80%) on a linked quarter basis to $6.060 million.  This increase is primarily the result of an increase in salary and employee benefit costs, driven by mortgage banking commissions, additional human resources applied to our regulatory compliance and audit teams, and adjustments in incentive plan accruals.

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 fourteen banking offices located in the Midlands, Aiken, and Augusta, Georgia in addition to First Community Financial Consultants, a financial planning/investment advisory division.       

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.

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 thousands, except per share data)
			At September 30,			December 31,
			2014	2013		2013
Total Assets			$    830,917	$635,927		$     633,309
Other short-term investments (1)			43,654	9,958		5,927
Investment Securities			263,924	230,712		227,079
Loans held for sale			3,404	2,529		3,790
Loans			448,556	345,064		347,597
Allowance for Loan Losses			4,156	4,323		4,219
Goodwill			4,390	571		571
Other Intangibles			1,918	32		–
Total Deposits			686,971	508,592		497,071
Securities Sold Under Agreements to Repurchase			17,650	17,076		18,634
Federal Home Loan Bank Advances			32,312	34,330		43,325
Junior Subordinated Debt			15,464	15,464		15,464
Shareholders’ Equity			72,563	52,862		52,671
Book Value Per  Common Share			$       10.89	$     9.98		$          9.93
Tangible Book Value Per Common Share			$         9.95	$     9.87		$          9.83
Tangible Book Value Per Common Share (Excluding AOCI)			$         9.86	$   10.19		$        10.30
Equity to Assets			8.73%	8.31%		8.32%
Tangible common equity to tangible assets			8.03%	8.23%		8.23%
Loan to Deposit Ratio			65.79%	68.34%		70.69%
Allowance for Loan Losses/Loans			0.93%	1.25%		1.21%
Allowance for Loan Losses/Loans plus credit mark			1.33%	1.25%		1.21%
(1) Includes federal funds sold, securities sold under agreements to resell and interest-bearing deposits
Regulatory Ratios:
Leverage Ratio			10.33%	10.64%		10.77%
Tier 1 Capital Ratio			15.78%	17.29%		17.60%
Total Capital Ratio			16.61%	18.40%		18.68%
Tier 1 Regulatory Capital			$     79,942	$  67,192		$       68,756
Total Regulatory Capital			$     84,098	$  71,515		$       72,975
Average Balances:
		Three months ended			Nine months ended
		September 30,			September 30,
		2014	2013		2014	2013
Average Total Assets		$          781,551	$    631,158		$       767,293	$     621,952
Average Loans		445,060	344,544		435,076	342,183
Average Earning Assets		713,890	585,419		701,659	576,917
Average Deposits		638,596	505,935		621,360	493,890
Average Other Borrowings		65,782	67,484		71,953	68,798
Average Shareholders’ Equity		71,724	52,353		68,348	54,004
Asset Quality:
		September 30,	June 30,	March 31,	December 31,
		2014	2014	2014	2013
Loan Risk Rating by Category (End of Period)
Special Mention		$            13,039	$     11,274	$  13,891	$         10,708
Substandard		15,730	15,795	15,358	10,609
Doubtful		–	–	–	–
Pass		419,787	417,601	414,619	326,280
		$          448,556	$    444,670	$443,868	$       347,597
		September 30,	June 30,	March 31,	December 31,
		2014	2014	2014	2013
Nonperforming Assets:
Non-accrual loans		$              6,795	$       7,647	7,865	$          5,406
Other real estate owned		3,014	3,302	3,147	3,370
Accruing loans past due 90 days or more		95	160	125	1
Total nonperforming assets		$              9,904	$     11,109	$  11,137	$          8,777
Accruing trouble debt restructurings		$                551	$          560	$      568	$             576
		Three months ended			Nine months ended
		September	September		September	September
		30, 2014	30, 2013		30, 2014	30, 2013
Loans charged-off		$                  70	$          271		$             796	$           472
Overdrafts charged-off		11	14		29	24
Loan recoveries		(16)	(36)		(50)	(66)
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