UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): July 22, 2020

 

   First Community Corporation   

(Exact name of registrant as specified in its charter)

 

   South Carolina    

(State or other jurisdiction of incorporation)

     
000-28344   57-1010751
(Commission File Number)   (IRS Employer Identification No.)
     
5455 Sunset Blvd, Lexington, South Carolina   29072
(Address of principal executive offices)   (Zip Code)

 

   (803) 951-2265   

(Registrant’s telephone number, including area code)

 

   Not Applicable   

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of exchange on which registered
Common stock, par value $1.00 per share FCCO The Nasdaq Stock Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o 

 
 

Item 2.02. Results of Operations and Financial Condition.

 

On July 22, 2020, First Community Corporation (the “Company”), holding company for First Community Bank, issued a press release announcing its financial results for the period ended June 30, 2020. The Company announced that the Board of Directors has approved a cash dividend for the second quarter of 2020. The Company will pay a $0.12 per share dividend to holders of the Company’s common stock. This dividend is payable on August 17, 2020 to shareholders of record as of August 3, 2020.

 

A copy of the press release is attached hereto as Exhibit 99.1.

 

FORWARD-LOOKING STATEMENTS

 

Certain statements in this report may 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. Forward looking statements can be identified by words such as “anticipated,” “expects,” “intends,” “believes,” “may,” “likely,” “will” or other statements that indicate future periods. 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, including, but not limited to, due to the negative impacts and disruptions resulting from the outbreak of the novel coronavirus, or COVID-19, on the economies and communities we serve, which may have an adverse impact on the our business, operations and performance, and could have a negative impact on our credit portfolio, share price, borrowers, and on the economy as a whole, both domestically and globally; (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 legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action, including, but not limited to, the Coronavirus Aid, Relief, and Economic Security Act, or the “CARES Act”; (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, except as required by law.

   

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

Item Exhibit and Exhibit List
   
99.1 Earnings Press Release for the period ended June 30, 2020.

 

 
 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  FIRST COMMUNITY CORPORATION
       
  By: /s/ D. Shawn Jordan  
  Name: 

D. Shawn Jordan

 
  Title: Chief Financial Officer  

 

Dated: July 22, 2020

 

 

(LOGO)

  News Release
  For Release July 22, 2020
  9:00 A.M.

 

 Contact: (803) 951- 2265
 D. Shawn Jordan, EVP & Chief Financial Officer or
Robin D. Brown, EVP & Chief Marketing Officer

 

First Community Corporation Announces Second Quarter Results and Cash Dividend

 

Highlights for Second Quarter of 2020

·Net income of $2.217 million.
·Pre-tax pre-provision earnings of $3.999 million, up 9.2% year-over year and 20.9% linked quarter.
·Diluted EPS of $0.30 per common share for the quarter and $0.54 year-to-date through June 30, 2020
·Total loans increased during the second quarter by $67.843 million, an annualized growth rate of 36.4%. Excluding Paycheck Protection Program or PPP loans, loan growth was $19.978 million, a 10.7% annualized growth rate.
·Facilitated PPP loans (combined direct and external channels) for 896 customers totaling $80.7 million as of July 17, 2020.
·Pure deposit growth, including customer cash management, of $133.5 million, an annualized growth rate of 59.9%.
·Record quarter for mortgage line of business with revenue growth of 27.0% year-over-year.
·Net interest margin on a tax equivalent basis of 3.38%, including PPP loans and 3.40% excluding PPP loans.
·Strong credit quality metrics with non-performing assets (NPAs) of 0.25%, past due ratio of 0.04% and net loan charge-offs excluding overdrafts of $4.7 thousand, with a year-to-date through June 30, 2020 net recovery of $3.6 thousand.
·Cash dividend of $0.12 per common share, which is the 74th consecutive quarter of cash dividends paid to common shareholders.

 

Lexington, SC – July 22, 2020 Today, First Community Corporation (Nasdaq: FCCO), the holding company for First Community Bank, reported net income for the second quarter of 2020 of $2.217 million as compared to $2.881 million in the second quarter of 2019. Diluted earnings per common share were $0.30 for the second quarter of 2020 as compared to $0.37 for the second quarter of 2019. On a linked quarter basis, net income increased 23.6% from $1.794 million in the first quarter of 2020 and diluted earnings per common share increased 25.0% from $0.24. Pre-tax pre-provision earnings or PTPPE in the second quarter of 2020 were $3.999 million compared to second quarter of 2019 PTPPE of $3.662 million and first quarter 2020 PTPPE of $3.307 million, an increase of 9.2% and 20.9% respectively.

 
 

Year-to-date through June 30, 2020 net income was $4.011 million compared to $5.376 million during the first six months of 2019. Diluted earnings per share for the first half of 2020 were $0.54, compared to $0.70 during the same time period in 2019. Year-to-date through June 30, 2020 PTPPE were $7.306 million compared to $6.868 million during the first half of 2019, an increase of 6.4%. Mike Crapps, First Community President and CEO, commented, “We are pleased with growth in our core earnings even during these unprecedented times. Our ability to quickly launch a platform to process PPP loans along with the revenue diversification with our three lines of business helped to support our performance in the second quarter. While our credit metrics remain strong, again this quarter we increased the provision for loan losses in anticipation of potential future impact from the COVID-19 pandemic.”

 

Cash Dividend and Capital

 

The Board of Directors approved a cash dividend for the second quarter of 2020. The company will pay a $0.12 per share dividend to holders of the company’s common stock. This dividend is payable August 17, 2020 to shareholders of record as of August 3, 2020. Mr. Crapps commented, “Our entire board is pleased that our performance enables the company to continue its cash dividend for the 74th consecutive quarter.”

 

During the second quarter, no share repurchases have been made under our existing share repurchase plan approved during the third quarter of 2019. Our existing repurchase plan provides the company 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 June 30, 2020, the bank’s regulatory capital ratios (Leverage, Tier I Risk Based and Total Risk Based) were 9.31%, 13.02%, and 14.03%, respectively. This compares to the same ratios as of June 30, 2019 of 10.20%, 13.47%, and 14.25%, respectively. As of June 30, 2020, the bank’s Common Equity Tier I ratio was 13.02% compared to 13.47% at June 30, 2019.

 

Asset Quality / Allowance for Loan and Lease Losses

 

Asset quality metrics remained strong as of June 30, 2020. The non-performing assets ratio for the second quarter was 0.25% of total assets and total past dues (ratio) was 0.04%. Net loan charge-offs excluding overdrafts for the quarter were $4.7 thousand and the year-to-date through June 30, 2020 net recovery is $3.6 thousand. The ratio of classified loans plus OREO now stands at 5.41% of total bank regulatory risk-based capital as of June 30, 2020.

 

Mr. Crapps indicated, “As a way to serve our many local businesses and individuals during the past few challenging months, we proactively offered payment deferrals for up to 90 days to our loan customers.” The company reported that at its peak, there were payment deferments on loans totaling approximately $206.9 million (26.9% of the non-PPP loan portfolio). Loans in which payments have been deferred decreased to $175.0 million (22.7% of the non-PPP loan portfolio) at June 30, 2020 and $110.6 million (14.4% of the non-PPP loan portfolio) at July 16, 2020. This is primarily the result of payments being restarted at the conclusion of their payment deferral period. It is also noteworthy that the percentage of loans, in certain identified industries deemed to be “high risk” due to the pandemic, is largely unchanged from prior disclosures.

 

Even with strong credit quality metrics, due to the uncertainty of future credit losses related to the COVID-19 pandemic and its effect on local businesses, the bank funded $1.250 million to the provision for loan losses in the second quarter compared to $9 thousand in the second quarter of 2019. Year-to-date through June 30, 2020, the bank has funded $2.325 million in provision for loan losses compared to $114 thousand during the first six months of 2019. During the first six months of 2020, the ratio of the Allowance for Loan Loss to total loans has increased from 0.90% as of December 31, 2019 to 1.09% as of June 30, 2020. Mr. Crapps commented, “Our credit metrics continue to indicate the current strong quality of our loan portfolio. This combined with the significant reduction in loans with payments deferred is good news for our company. At the same time, there is much unknown about the economic impact of the pandemic; therefore, we continue to prepare our balance sheet and our resources for an uncertain future.”

 
 

Balance Sheet

 

Total loans increased during the second quarter by $67.843 million, which is an annualized growth rate of 36.4%. Total loans, excluding PPP loans, increased during the second quarter by $19.978 million which is an annualized growth rate of 10.7%. Non-PPP loan growth during the quarter was the result of increased production and lower payoffs/paydowns on a linked quarter. Commercial loan production was $39.3 million during the second quarter compared to $33.5 million in the first quarter of 2020. Early payoffs were less impactful, as evidenced by the ratio of loan portfolio growth to loan production at 50.8% compared to 37.3% on the linked quarter and the average of 31.8% in 2018 and 2019.

 

In addition to the strong non-PPP loan growth during the quarter, through July 17, 2020 the bank has helped facilitate $80.7 million in PPP loans to 896 customers through a combination of direct loans and referrals to an SBA partner. As of June 30, 2020, the bank had $47.9 million in PPP loans on the balance sheet. As of July 17, 2020, PPP loans on the balance sheet had increased to $49.7 million. Crapps noted, “As a community bank committed to the success of local businesses, we are pleased to be able to support our customers with access to the PPP funding.”

 

Total deposits were $1.119 billion at June 30, 2020 compared to $986.6 million at March 31, 2020. Pure deposits, which are defined as total deposits less certificates of deposits, increased $133.8 million or 15.7% to $983.8 million at June 30, 2020 from $850.0 million at March 31, 2020. This increase in deposits was partially due to the proceeds of PPP loans that were made during the quarter and stimulus funds. The bank had no brokered deposits and no listing services deposits at June 30, 2020. Securities sold under agreements to repurchase, which are related to customer cash management accounts or business sweep accounts, were relatively flat at $45.7 million at June 30, 2020 compared to 46.0 million at March 31, 2020. Costs of deposits decreased on a linked quarter basis to 0.28% in the second quarter of 2020 from 0.42 in the first quarter of the year. Cost of funds also decreased on a linked quarter basis to 0.33% in the second quarter of 2020 from 0.50 in the first quarter of the year.

 

Mr. Crapps commented, “Our low cost deposits; our ability to borrow against approved lines of credit (federal funds purchased) from correspondent banks; and our ability to obtain advances secured by certain securities and loans from the Federal Home Loan Bank provide ample liquidity as we continue to meet the needs of our customers and to manage through the COVID-19 pandemic.”

 

Revenue

 

Net Interest Income/Net Interest Margin

 

Net interest income increased $326 thousand or 3.5% to $9.743 million for the second quarter of 2020 compared to first quarter net interest income of $9.417 million. Year-over-year, net interest income increased $627 thousand or 6.9% from $9.116 million in the second quarter of 2019. Second quarter net interest margin, on a tax equivalent basis, was 3.38% compared to net interest margin of 3.55% in the first quarter. Second quarter net interest margin, excluding PPP loans, was 3.40%. The net interest margin has declined as a result of multiple factors, including the Federal Reserve reducing the target range for federal funds to near zero with two rate reductions in March of this year totaling 150 basis points; the modest yield earned on the PPP loans; and the excess liquidity on the bank’s balance sheet.

 
 

Non-Interest Income

 

Non-interest income increased 15.7% on a linked quarter basis to $3.387 million in the second quarter of 2020, an increase from $2.928 million in the first quarter of this year. Year-over-year, non-interest income, adjusted for securities gains and losses, increased 12.1% from $3.022 million in the second quarter of 2019. Revenues in the mortgage line of business increased 27.0% year-over-year to $1.572 million compared to $1.238 million in the second quarter of 2019. On a linked quarter basis, mortgage revenue increased 60.1% from $982 thousand in the first quarter. Mortgage loan production increased 46.1% year-over-year from $36.89 million in the second quarter of 2019 to $53.89 million in the second quarter of 2020. Revenue in the investment advisory line of business increased 5.8% on a linked quarter basis to $671 thousand in the second quarter of 2020 from $634 thousand in the first quarter and year-over-year increased 37.2% from $489 thousand in the second quarter of 2019. It is noteworthy that the assets under management (AUM), which was $369.7 million at December 31, 2019, declined to $319.7 million at March 31, 2020, bounced back to $390.7 million at June 30, 2020. Mr. Crapps commented, “Our strategy of multiple revenue streams continues to serve us well as we focus our efforts to accelerate growth in these lines of business. Our mortgage line of business had a record quarter and revenues in our investment advisory line of business continue to grow. We are pleased with the activity and momentum in each of our business units.”

 

Non-Interest Expense

 

Non-interest expense was $9.131 million in the second quarter of 2020, compared to $9.038 million in the first quarter of 2020. Salaries and benefits expense increased $187 thousand which was mainly related to increased commissions paid on higher production in the mortgage line of business and temporary help and overtime pay in the mortgage support areas. 

 

About First Community Corporation

 

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 series, residential mortgage lending and financial planning/investment advisory services for businesses and consumers. First Community serves customers in the Midlands, Aiken, and Greenville, South Carolina markets as well as Augusta, Georgia. For more information, visit www.firstcommunitysc.com.

 

FORWARD-LOOKING STATEMENTS

 

This news release and certain statements by our management may 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. Forward looking statements can be identified by words such as “anticipated’, “expects”, “intends”, “believes”, “may”, “likely”, “will” or other statements that indicate future periods. 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 including, but not limited to, due to the negative impacts and disruptions resulting from the recent outbreak of the novel coronavirus, or COVID-19, on the economies and communities we serve, which may have an adverse impact on our business, operations, and performance, and could have a negative impact on our credit portfolio, share price, borrowers, and on the economy as a whole both domestically and globally; (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 legislation, regulation, policies or administrative practices, whether by judicial, governmental, or legislative action, including, but not limited to, the Coronavirus Aid, Relief, and Economic Security Act, or the “CARES Act”; (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, except as required by law.

 

###

 
 

FIRST COMMUNITY CORPORATION            
BALANCE SHEET DATA            
(Dollars in thousands, except per share data)            
             
   As of 
   June 30,   December 31,   June 30, 
   2020   2019   2019 
             
Total Assets  $1,324,800   $1,170,279   $1,115,968 
Other Short-term Investments1   77,666    32,741    24,898 
Investment Securities   297,972    288,792    252,302 
Loans Held for Sale   33,496    11,155    8,730 
Loans               
Paycheck Protection Program (PPP) Loans   47,865         
Non-PPP Loans   769,507    737,028    726,707 
Total Loans   817,372    737,028    726,707 
Allowance for Loan Losses   8,936    6,627    6,362 
Goodwill   14,637    14,637    14,637 
Other Intangibles   1,283    1,483    1,742 
Total Deposits   1,118,872    988,201    937,391 
Securities Sold Under Agreements to Repurchase   45,651    33,296    33,889 
Federal Home Loan Bank Advances       211    221 
Junior Subordinated Debt   14,964    14,964    14,964 
Shareholders’ Equity   130,801    120,194    117,489 
                
Book Value Per Common Share  $17.47   $16.16   $15.64 
Tangible Book Value Per Common Share  $15.35   $13.99   $13.46 
Equity to Assets   9.87%   10.27%   10.53%
Tangible Common Equity to Tangible Assets   8.78%   9.02%   9.20%
Loan to Deposit Ratio (Includes Loans Held for Sale)   76.05%   75.71%   78.46%
Allowance for Loan Losses/Loans   1.09%   0.90%   0.88%
                
Regulatory Capital Ratios (Bank):               
Leverage Ratio   9.31%   9.97%   10.20%
Tier 1 Capital Ratio   13.02%   13.47%   13.47%
Total Capital Ratio   14.03%   14.26%   14.25%
Common Equity Tier 1 Capital Ratio   13.02%   13.47%   13.47%
Tier 1 Regulatory Capital  $115,788   $112,754   $110,756 
Total Regulatory Capital  $124,724   $119,381   $117,118 
Common Equity Tier 1 Capital  $115,788   $112,754   $110,756 

 

1 Includes federal funds sold, securities sold under agreement to resell and interest-bearing deposits

 

Average Balances:  Three months ended   Six months ended 
   June 30,   June 30, 
   2020   2019   2020   2019 
                 
Average Total Assets  $1,269,244   $1,103,347   $1,222,797   $1,096,371 
Average Loans (Includes Loans Held for Sale)   824,842    728,711    789,250    726,398 
Average Earning Assets   1,171,183    1,005,402    1,124,213    999,464 
Average Deposits   1,060,087    924,200    1,014,732    916,513 
Average Other Borrowings   68,913    50,012    69,623    53,290 
Average Shareholders’ Equity   126,916    117,255    125,190    115,529 

 

Asset Quality:  As of 
   June 30,   March 31,   December 31, 
   2020   2020   2019 
Loan Risk Rating by Category (End of Period)               
Special Mention  $2,849   $3,950   $4,936 
Substandard   5,300    4,467    4,691 
Doubtful            
Pass   809,223    741,112    727,401 
   $817,372   $749,529   $737,028 
Nonperforming Assets               
Non-accrual Loans  $1,806   $1,739   $2,329 
Other Real Estate Owned and Repossessed Assets   1,449    1,481    1,410 
Accruing Loans Past Due 90 Days or More       168     
Total Nonperforming Assets  $3,255   $3,388   $3,739 
Accruing Trouble Debt Restructurings  $1,613   $1,635   $1,669 

 

   Three months ended   Six months ended 
   June 30,   June 30, 
   2020   2019   2020   2019 
Loans Charged-off  $16   $13   $17   $23 
Overdrafts Charged-off   9    30    31    53 
Loan Recoveries   (11)   (32)   (20)   (44)
Overdraft Recoveries   (6)   (10)   (12)   (17)
Net Charge-offs (Recoveries)  $8   $1   $16   $15 
Net Charge-offs to Average Loans2   0.00%   0.00%   0.00%   0.00%

 

2 Annualized

 
 
FIRST COMMUNITY CORPORATION             
INCOME STATEMENT DATA                
(Dollars in thousands, except per share data)        
         
   Three months ended   Three months ended   Six months ended 
   June 30,   March 31,   June 30, 
   2020   2019   2020   2019   2020   2019 
                         
Interest income  $10,666   $10,606   $10,710   $10,374   $21,376   $20,980 
Interest expense   923    1,490    1,293    1,354    2,216    2,844 
Net interest income   9,743    9,116    9,417    9,020    19,160    18,136 
Provision for loan losses   1,250    9    1,075    105    2,325    114 
Net interest income after provision   8,493    9,107    8,342    8,915    16,835    18,022 
Non-interest income                              
Deposit service charges   210    380    399    411    609    791 
Mortgage banking income   1,572    1,238    982    844    2,554    2,082 
Investment advisory fees and non-deposit commissions   671    489    634    438    1,305    927 
Gain (loss) on sale of securities       164        (29)       135 
Gain (loss) on sale of other assets       (3)   6        6    (3)
    Other   934    918    907    845    1,841    1,763 
Total non-interest income   3,387    3,186    2,928    2,509    6,315    5,695 
Non-interest expense                              
Salaries and employee benefits   5,840    5,210    5,653    5,170    11,493    10,380 
Occupancy   679    647    643    655    1,322    1,302 
Equipment   298    389    318    386    616    775 
Marketing and public relations   247    430    354    175    601    605 
FDIC assessment   88    71    42    74    130    145 
Other real estate expenses   40    18    35    29    75    47 
Amortization of intangibles   95    132    105    132    200    264 
Other   1,844    1,743    1,888    1,702    3,732    3,445 
Total non-interest expense   9,131    8,640    9,038    8,323    18,169    16,963 
Income before taxes   2,749    3,653    2,232    3,101    4,981    6,754 
Income tax expense   532    772    438    606    970    1,378 
Net income  $2,217   $2,881   $1,794   $2,495   $4,011   $5,376 
                               
Per share data                              
Net income, basic  $0.30   $0.38   $0.24   $0.33   $0.54   $0.70 
Net income, diluted  $0.30   $0.37   $0.24   $0.32   $0.54   $0.70 
                               
Average number of shares outstanding - basic   7,435,933    7,626,559    7,427,257    7,633,908    7,431,595    7,628,868 
Average number of shares outstanding - diluted   7,465,212    7,704,221    7,472,956    7,724,780    7,467,755    7,708,267 
Shares outstanding period end   7,486,151    7,511,164    7,462,247    7,664,967    7,486,151    7,511,164 
                               
Return on average assets   0.70%   1.05%   0.61%   0.93%   0.66%   0.99%
Return on average common equity   7.03%   9.86%   5.84%   8.89%   6.44%   9.38%
Return on average common tangible equity   8.04%   11.46%   6.72%   10.41%   7.39%   10.95%
Net interest margin (non taxable equivalent)   3.35%   3.64%   3.52%   3.68%   3.43%   3.66%
Net interest margin (taxable equivalent)   3.38%   3.67%   3.55%   3.73%   3.46%   3.70%
Efficiency ratio1   69.00%   70.62%   72.79%   71.31%   70.83%   70.95%

 

1 Calculated by dividing non-interest expense by net interest income on tax equivalent basis and non interest income, excluding gains (losses) on sales of securities and other assets.

 
 

FIRST COMMUNITY CORPORATION
Yields on Average Earning Assets and Rates
on Average Interest-Bearing Liabilities
                         
   Three months ended June 30, 2020   Three months ended June 30, 2019 
   Average   Interest   Yield/   Average   Interest   Yield/ 
   Balance   Earned/Paid   Rate   Balance   Earned/Paid   Rate 
Assets                              
Earning assets                              
Loans                              
PPP loans  $31,816   $217    2.74%  $   $    NA 
Non-PPP loans   793,026    8,801    4.46%   728,711    8,792    4.84%
Total loans   824,842    9,018    4.40%   728,711    8,792    4.84%
Securities   294,915    1,611    2.20%   250,316    1,658    2.66%
Other short-term investments   51,426    37    0.29%   26,375    156    2.37%
Total earning assets   1,171,183    10,666    3.66%   1,005,402    10,606    4.23%
Cash and due from banks   14,820              13,998           
Premises and equipment   34,837              35,765           
Goodwill and other intangibles   15,967              16,443           
Other assets   40,489              38,094           
Allowance for loan losses   (8,052)             (6,355)          
Total Assets  $1,269,244             $1,103,347           
                               
Liabilities                              
Interest-bearing liabilities                              
Interest-bearing transaction accounts  $232,611   $59    0.10%  $202,096   $135    0.27%
Money market accounts   203,641    179    0.35%   177,039    481    1.09%
Savings deposits   108,608    17    0.06%   107,638    36    0.13%
Time deposits   165,995    481    1.17%   176,715    528    1.20%
Other borrowings   68,913    187    1.09%   50,012    310    2.49%
Total interest-bearing liabilities   779,768    923    0.48%   713,500    1,490    0.84%
Demand deposits   349,232              260,712           
Other liabilities   13,328              11,880           
Shareholders’ equity   126,916              117,255           
Total liabilities and shareholders’ equity  $1,269,244             $1,103,347           
                               
Cost of deposits, including demand deposits             0.28%             0.51%
Cost of funds, including demand deposits             0.33%             0.61%
Net interest spread             3.18%             3.39%
Net interest income margin - excluding PPP loans       $9,526    3.36%       $9,116    3.64%
Net interest income/margin - including PPP loans       $9,743    3.35%       $9,116    3.64%
Net interest income/margin (tax equivalent) - excl. PPP loans      $9,629    3.40%       $9,210    3.67%
Net interest income/margin (tax equivalent) - incl. PPP loans      $9,846    3.38%       $9,210     3.67%
 
 

FIRST COMMUNITY CORPORATION
Yields on Average Earning Assets and Rates
on Average Interest-Bearing Liabilities
                         
   Six months ended June 30, 2020   Six months ended June 30, 2019 
   Average   Interest   Yield/   Average   Interest   Yield/ 
   Balance   Earned/Paid   Rate   Balance   Earned/Paid   Rate 
Assets                              
Earning assets                              
Loans                              
PPP loans  $15,908   $217    2.74%  $   $    NA 
Non-PPP loans   773,342    17,628    4.58%   726,398    17,401    4.83%
Total loans   789,250    17,845    4.55%   726,398    17,401    4.83%
Securities   290,624    3,337    2.31%   251,114    3,315    2.66%
Other short-term investments   44,339    194    0.88%   21,952    264    2.43%
Total earning assets   1,124,213    21,376    3.82%   999,464    20,980    4.23%
Cash and due from banks   14,926              13,680           
Premises and equipment   34,920              35,645           
Goodwill and other intangibles   16,015              16,509           
Other assets   40,089              37,407           
Allowance for loan losses   (7,366)             (6,334)          
Total assets  $1,222,797             $1,096,371           
                               
Liabilities                              
Interest-bearing liabilities                              
Interest-bearing transaction accounts  $224,405    162    0.15%  $198,270    284    0.29%
Money market accounts   200,967    528    0.53%   178,201    822    0.93%
Savings deposits   106,191    46    0.09%   107,779    71    0.13%
Time deposits   167,696    1,019    1.22%   178,424    1,005    1.14%
Other borrowings   69,623    461    1.33%   53,290    662    2.51%
Total interest-bearing liabilities   768,882    2,216    0.58%   715,964    2,844    0.80%
Demand deposits   315,473              253,839           
Other liabilities   13,252              11,039           
Shareholders’ equity   125,190              115,529           
Total liabilities and shareholders’ equity  $1,222,797             $1,096,371           
                               
Cost of deposits, including demand deposits             0.35%             0.48%
Cost of funds, including demand deposits             0.41%             0.59%
Net interest spread             3.24%             3.43%
Net interest income margin - excluding PPP loans       $18,943    3.44%       $18,136    3.66%
Net interest income/margin - including PPP loans       $19,160    3.43%       $18,136    3.66%
Net interest income/margin (tax equivalent) - excl. PPP loans       $19,124    3.47%       $18,344    3.70%
Net interest income/margin (tax equivalent) - incl. PPP loans       $19,341    3.46%       $18,344    3.70%
 
 

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

             
   June 30,   December 31,   June 30, 
Tangible book value per common share  2020   2019   2019 
Tangible common equity per common share (non-GAAP)  $15.35   $13.99   $13.46 
Effect to adjust for intangible assets   2.12    2.17    2.18 
Book value per common share (GAAP)  $17.47   $16.16   $15.64 
Tangible common shareholders’ equity to tangible assets               
Tangible common equity to tangible assets (non-GAAP)   8.78%   9.02%   9.20%
Effect to adjust for intangible assets   1.09%   1.25%   1.33%
Common equity to assets (GAAP)   9.87%   10.27%   10.53%
                

Return on average tangible
common equity
  Three months ended
June 30,
   Three months ended
March 31,
   Six months ended
June 30,
 
   2020   2019   2020   2019   2020   2019 
Return on average common tangible equity (non-GAAP)   8.04%   11.46%   6.72%   10.41%   7.39%   10.95%
Effect to adjust for intangible assets   (1.01)%   (1.60)%   (0.88)%   (1.52)%   (0.95)%   (1.57)%
Return on average common equity (GAAP)   7.03%   9.86%   5.84%   8.89%   6.44%   9.38%

 

   Three months ended     Six months ended 
   June 30,   March 31,   June 30,   June 30, 
Pre-tax, pre-provision earnings  2020   2020   2019   2020   2019 
Pre-tax, pre-provision earnings (non-GAAP)  $3,999   $3,307   $3,662   $7,306   $6,686 
Effect to adjust for pre-tax, pre-provision earnings   (1,782)   (1,513)   (781)   (3,295)   (1,310)
Net Income (GAAP)  $2,217   $1,794   $2,881   $4,011   $5,376 
                          

   Three months ended   Six months ended 
   June 30,   June 30, 
Net interest margin excluding PPP Loans  2020   2019   2020   2019 
Net interest margin excluding PPP loans (non-GAAP)   3.36%   3.64%   3.44%   3.66%
Effect to adjust for PPP loans   (0.01)%   N/A    (0.01)%   N/A 
Net interest margin (GAAP)   3.35%   3.64%   3.43%   3.66%
                     

   Three months ended   Six months ended 
   June 30,   June 30, 
Net Interest Margin on a tax-equivalent basis excluding PPP Loans  2020   2019   2020   2019 
Net interest margin on a tax-equivalent basis excluding PPP loans (non-GAAP)   3.40%   3.67%   3.47%   3.70%
Effect to adjust for PPP loans   (0.02)%   N/A    (0.01)%   N/A 
Net interest margin on a tax equivalent basis (GAAP)   3.38%   3.67%   3.46%   3.70%

 
 

   June 30,   March 31,   Growth Rate   Annualized
Growth
 
Loans and loan growth  2020   2020   Dollars   Rate 
Non-PPP Loans (non-GAAP)  $769,507   $749,529   $19,978    10.7%
PPP Loans   47,865        47,865    N/A 
Total Loans (GAAP)  $817,372   $749,529   $67,843    36.4%
                     

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,” “tangible common shareholders’ equity to tangible assets,” “return on average tangible common equity,” “Pre-tax, pre-provision earnings,” “Net interest margin excluding PPP loans,” “Net interest margin on a tax-equivalent basis excluding PPP loans.”, and “Non-PPP Loans and loan growth,” “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. “Return on average tangible common equity is defined as net income on an annualized basis divided by average total equity reduced by average recorded intangible assets”. “Pre-tax, pre-provision earnings” is defined as net interest income plus non-interest income, reduced by non-interest expense. “Net interest margin excluding PPP loans” and “Net interest margin on a tax-equivalent basis excluding PPP loans” are calculated by determining the net interest income less PPP loan interest income divided by average earning assets less the average balance of PPP loans. “Non-PPP Loan growth - dollars” is calculated by taking the difference between two time periods compared for Total Loans less PPP Loans.  “Non-PPP Loans – annualized growth rate” is calculated by (i) dividing “Non-PPP Loans Loan Growth - dollars” by the number of days between the two time periods compared (ii) times the number of days in the year (iii) divided by the prior time period. 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.