First Community Corp. Reports Operating Results (10-Q)
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 $23.2 million; its shares were traded at around $7.18 with and P/S ratio of 1. The dividend yield of First Community Corp. stocks is 2.2%. Highlight of Business Operations: 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 contemplates a return to the $100,000 limit on December 31, 2013;
Our net income for the six months ended June 30, 2009 was $986,000, or $.20 diluted earnings per common share, as compared to a loss of $2.4 million, or $0.74 diluted loss per common share, for the six months ended June 30, 2008. During the six months ended June 30, 2008 we recognized a other-than-temporary impairment (OTTI) charge in the amount of $6.2 million on an investment in a preferred stock issue of the Federal Home Loan Mortgage Corporation (Freddie Mac), a government sponsored enterprise (GSE) reflecting a write down of its carrying value from $14.3 million to $8.1 million. The OTTI write-down in the second quarter of 2008 is the primary reason for the increase in net income in the first six months of 2009 as compared to the net loss in the same period of 2008. During the six months ended June 30, 2009 we recognized OTTI on several securities in the aggregate amount of $742,000. Net interest income for the six months ended June 30, 2009 was $8.6 million as compared to $8.5 million for the same period in 2008. The increase in net interest income between the two periods is due to an increase in average earning assets by $47.5 million during the six months ended June 30, 2009 as compared to the same period in 2008. The impact of this increase in average earning assets was substantially offset by a decline in our taxable-equivalent net interest margin from 3.31% in the six month period ended June 30, 2008 to 3.06% in the comparable period in 2009. 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 provision for loan losses increased to $1.4 million for the six months ended June 30, 2009 as compared to $364,000 in the same period of 2008. Non-interest income, excluding the impact of other-than-temporary impairment charges, increased from $2.7 million in the first six months of 2008 to $3.3 million in the first six months of 2009. Non-interest expenses increased to $8.4 million in the first six months of 2009 from $7.4 million in the same period of 2008. Increases in FDIC insurance premiums, legal fees and expenses related to loan collections and workouts contributed significantly to the increase in non-interest expense.
Net interest income was $8.6 million for the six months ended June 30, 2009 as compared to $8.5 million for the six months ended June 30, 2008. This increase was primarily due to the increase in the level of earning assets. Net interest margin on a taxable equivalent basis decreased 25 basis points, from 3.31% at June 30, 2008 to 3.06% at June 30, 2009. Yield on earning assets decreased by 77 basis points in the first half of 2009 as compared to the same period in 2008. The yield on earning assets for the six months ended June 30, 2009 and 2008 was 5.48% and 6.25%, respectively. The cost of interest-bearing liabilities during the first six months of 2009 was 2.74% as compared to 3.45% in the same period of 2008, resulting in a 71 basis points decrease. As a result of the ongoing economic and credit crisis during the last quarter of 2007 and throughout 2008, interest rates decreased significantly. Four events/conditions have significantly impacted the level of our net interest income in the first half of 2009 as compared to the same period in 2008. First, with interest rates as low as they became in 2008, certain deposit products could not
At June 30, 2009, the allowance for loan losses was $4.1 million, or 1.25% 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 $1.4 million for the six months ended June 30, 2009, as compared to $364,000 for the six months ended June 30, 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.
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 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 June 30, 2009. 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 June 30, 2009, we had no loans delinquent more than 90 days and still accruing interest, and loans totaling $1.7 million that were delinquent 30 days to 89 days. We had 35 loans in a nonaccrual status in the amount of $6.4 million at June 30, 2009. Our management continuously monitors non-performing, classified and past due loans, to identify deterioration regarding the condition of these loans. We identified 4 loan relationships in the amount of $1.1 million that are current as to principal and interest and are not included in non-performing assets that could represent potential problem loans. One of these is a $2.2 million loan on a commercial building. Based on the collateral value of the real estate and additional liquid collateral securing the loan it is not anticipated that there would be a material loss in the event it does become a problem loan.
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