First Community Corp presently engages in no business other than owning and managing the First Community Bank. The bank is engaged in a general commercial and retail banking business emphasizing the needs of small-to-medium sized businesses professional concerns and individuals primarily in Richland and Lexington counties of South Carolina and the surrounding area. First Community Corp. has a market cap of $25.6 million; its shares were traded at around $7.91 with and P/S ratio of 1.2. The dividend yield of First Community Corp. stocks is 4%. Highlight of Business Operations: · The Emergency Economic Stabilization Act of 2008 (the EESA), approved by Congress and signed by President Bush on October 3, 2008, which, among other provisions, allowed the Treasury Department to purchase troubled assets from banks, authorized the Securities and Exchange Commission to suspend the application of marked-to-market accounting, and temporarily raised the basic limit of Federal Deposit Insurance Corporation (the FDIC) deposit insurance from $100,000 to $250,000; the legislation contemplated a return to the $100,000 limit on December 31, 2009;
Our net income for the three months ended March 31, 2009 was $572,000, or $.13 diluted earnings per share, as compared to $1.1 million, or $.35 diluted earnings per share, for the three months ended March 31, 2008. The decrease in net income between the two periods is primarily due to an increase of $296,000 in the provision for loan losses, decreased deposit service charges of $108,000, write-downs related to other-than- temporary- impairments on several securities in the amount of $657,000 and an increase in non-interest expense of $328,000 . These were partially offset by an increase in net interest income of $323,000 and gains on the sale of securities in the amount of $354,000 during the quarter ended March 31, 2009 as compared to the same period in 2008. Average earning assets increased by $74.0 million in the first quarter of 2009 as compared to the same period in 2008. Average earning assets were $572.9 million during the three months ended March 31, 2009 as compared to $498.9 million during the three months ended March 31, 2008. The increase in average earning assets was primarily a result of the implementation of a leverage strategy whereby we acquired approximately $63.2 million in certain non-agency mortgage backed securities and collateralized mortgage obligations in the second quarter of 2008. The funding for this strategy was provided through Federal Home Loan Bank Advances in the amount of $36.0 million and brokered certificate of deposits in the amount of $23.0 million. The increase in average earning assets resulted in an increase in net interest income of $310,000 in the first three months of 2009 as compared to the first three months of 2008. Non-interest income decreased $374,000, or 26.3%, as a result of the write-down of securities in the amount of $657,000 and a decline in deposit service charges of $108,000. Non-interest expense increased by $377,000, or 10.3%, in the first quarter of 2009, as compared to the same period in 2008. Increases in salaries and benefits, FDIC insurance premiums, legal fees contributed significantly to the increase in non-interest expense.
Net interest income was $4.3 million for the three months ended March 31, 2009 as compared to $4.0 million for the three months ended March 31, 2008. This increase was primarily due to the increase in the level of earning assets. The net interest margin on a taxable equivalent basis decreased by 22 basis points from 3.30% at March 31, 2008 described above to 3.08% at March 31, 2009. Yields on earning assets decreased by72 basis points in the first quarter of 2009 as compared to the same period in 2008. The yield on earning assets for the three months ended March 31, 2009 and 2008 was 5.61% and 6.33%, respectively. The cost of interest-bearing liabilities during the first
At March 31, 2009, the allowance for loan losses was $4.0 million, or 1.22% of total loans, as compared to $4.6 million, or 1.38% of total loans, at December 31, 2008. Our provision for loan losses was $451,000 for the three months ended March 31, 2009, as compared to $155,000 for the three months ended March 31, 2008. This provision is made based on our assessment of general loan loss risk and asset quality. The allowance for loan losses represents an amount which we believe will be adequate to absorb probable losses on existing loans that may become uncollectible. Our judgment as to the adequacy of the allowance for loan losses is based on a number of assumptions about future events, which we believe to be reasonable, but which may or may not prove to be accurate. Our determination of the allowance for loan losses is based on evaluations of the collectibility of loans, including consideration of factors such as the balance of impaired loans, the quality, mix, and size of our overall loan portfolio, the experience ability and depth of lending personnel, economic conditions (local and national) that may affect the borrowers ability to repay, the amount and quality of collateral securing the loans, our historical loan loss experience, and a review of specific problem loans. We also consider subjective issues such as changes in the lending policies and procedures, changes in the local/national economy, changes in volume or type of credits, changes in volume/severity of problem loans, quality of loan review and board of director oversight, and concentrations of credit. Periodically, we adjust the amount of the allowance based on changing circumstances. We charge recognized losses to the allowance and add subsequent recoveries back to the allowance for loan losses.
The effects of the slowing economy have resulted in some deterioration of our loan portfolio in general as evidenced by the increase in non-performing assets from $2.5 million (39 basis points) at December 31, 2008 to $8.7 million (133 basis points) at March 31, 2009. While we believe these rates are favorable in comparison to current industry results, we will continue to be concerned about the impact of this economic environment on our customer base of local businesses and professionals. Of the loans included in non-performing status, two are A&D loans totaling $4.0 million previously identified as potential problem loans and that have subsequently been placed in non-accrual status. Both are located within the Midlands of South Carolina. One in the original amount of $3.2 million has been written down to a balance of $2.5 million at March 31, 2009, and we are currently in the process of obtaining and evaluating another appraisal and proceeding with the foreclosure process. The second loan is in the amount of $1.5 million and we also are proceeding through the foreclosure process. We do not currently anticipate any material loss associated with this specific loan.
At March 31, 2009, we had $457,000 in loans delinquent more than 90 days and still accruing interest, and loans totaling $2.3 million that were delinquent 30 days to 89 days. Due to the current loan-to-collateral values or other factors it is anticipated that all of the principal and interest will be collected on those loans greater than 90 days or more delinquent and still accruing interest. We had 33 loans in a nonaccrual status in the amount of $6.9 million at March 31, 2009. Our management continuously monitors non-performing, classified and past due loans, to identify deterioration regarding the condition of these loans. We identified 1 loan relationship in the amount of $246,000 that is current as to principal and interest and not included in non-performing assets that could represent potential problem loans.
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