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First Community Corp. Reports Operating Results (10-Q)

November 16, 2009 | About:
10qk

10qk

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First Community Corp. (FCCO) filed Quarterly Report for the period ended 2009-09-30.

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 $19.94 million; its shares were traded at around $6.15 with a P/E ratio of 20.5 and P/S ratio of 0.87. The dividend yield of First Community Corp. stocks is 2.6%.

Highlight of Business Operations:

The yield on average earning assets decreased to 5.30% in the third quarter of 2009 from 5.98% in the third quarter of 2008. The cost of interest bearing liabilities also decreased to 2.51% in the second quarter of 2009 as compared to 3.18% in the third quarter of 2008. On a fully taxable equivalent basis, we had a net interest margin of 3.11% and 3.18% for the three months ended September 30, 2009 and 2008, respectively.

31, 2008. The loan-to-deposit ratio at September 30, 2009 was 77.2% as compared to 78.6% at December 31, 2008. Investment securities decreased from $235.1 million at December 31, 2008 to $221.1 million at September 30, 2009. Short-term federal funds sold and interest-bearing bank balances increased from $3.6 million at December 31, 2008 to $17.6 million at September 30, 2009. Deposits increased by $23.5 million to $447.3 million at September 30, 2009 as compared to $423.8 million at December 31, 2008.

We also perform a valuation analysis projecting future cash flows from assets and liabilities to determine the Present Value of Equity (PVE) over a range of changes in market interest rates. The sensitivity of PVE to changes in interest rates is a measure of the sensitivity of earnings over a longer time horizon. At September 30, 2009, June 30, 2009, March 31, 2009 and December 31, 2008 the PVE exposure in a plus 200 basis point increase in market interest rates was estimated to be 46.8%, 21.7%, 29.7% and 30.2%, respectively. The significant increase in the exposure between the second and third quarter results from the goodwill impairment charge resulting in the net change being calculated on a lower denominator.

The Company has generally maintained a high level of liquidity and adequate capital, which along with continued retained earnings, we believe will be sufficient to fund the operations of the Bank for at least the next 12 months. The Company’s management anticipates that the Bank will remain a well capitalized institution for at least the next 12 months. Shareholders’ equity was 6.7% and 10.5% of total assets at September 30, 2009 and December 31, 2008, respectively. The decrease in this ratio during the nine months from December 31, 2008 to September 30, 2009 is a result of the impairment charge of the goodwill intangible discussed previously. The Bank maintains federal funds purchased lines, in the amount of $10.0 million each with two financial institutions, although these have not utilized in 2009. The FHLB Atlanta has approved a line of credit of up to 25% of the Bank’s assets, which would be collateralized by a pledge against specific investment securities and or eligible loans. We regularly review the liquidity position of the Company and have implemented internal policies establishing guidelines for sources of asset based liquidity and evaluate and monitor the total amount of purchased funds used to support the balance sheet and funding from non core sources. We believe that our existing stable base of core deposits along with continued growth in this deposit base will enable us to meet our long term liquidity needs successfully.

The Federal Reserve Board and bank regulatory agencies require bank holding companies and financial institutions to maintain capital at adequate levels based on a percentage of assets and off-balance sheet exposures, adjusted for risk weights ranging from 0% to 100%. Under the capital adequacy guidelines, regulatory capital is classified into two tiers. These guidelines require an institution to maintain a certain level of Tier 1 and Tier 2 capital to risk-weighted assets. Tier 1 capital consists of common shareholders’ equity, excluding the unrealized gain or loss on securities available for sale, minus certain intangible assets. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100% based on the risks believed to be inherent in the type of asset. Tier 2 capital consists of Tier 1 capital plus the general reserve for loan losses, subject to certain limitations. We are also required to maintain capital at a minimum level based on total average assets, which is known as the Tier 1 leverage ratio. At both the holding company and bank level, we are subject to various regulatory capital requirements administered by the federal banking agencies. To be considered “well-capitalized,” we must maintain total risk-based capital of at least 10%, Tier 1 capital of at least 6%, and a leverage ratio of at least 5%.

The Bank’s risk-based capital ratios of Tier 1, total capital and leverage ratio were 11.0%, 12.0% and 7.6%, respectively at September 30, 2009 as compared to 11.3%, 12.4% and 7.4%, respectively at December 31, 2008. The Company’s risk-based capital ratios of Tier 1, total capital and leverage ratio were 11.9%, 13.0% and 8.2%, respectively at September 30, 2009 as compared to 12.6%, 13.7% and 8.3%, respectively at December 31, 2008. These ratios compare to required OCC and Federal Reserve regulatory capital guidelines for Tier 1 capital, total capital and leverage capital ratios of 4.0%, 8.0% and 4.0%, respectively.

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