LEXINGTON, S.C., Jan. 16, 2019 /PRNewswire/ --

Highlights

• Net income of $11.2 million in 2018 and $2.7 million for the fourth quarter
• Increased cash dividend to $0.11 per common share, the 68^th consecutive quarter of cash dividends paid to common shareholders, highest dividend ever paid by the company
• Loan growth of $71.7 million during the year, an 11.1% growth rate
• Pure deposit growth, including customer cash management accounts, of $56.4 million, a 7.5% growth rate
• Key credit quality metrics continue to be excellent with a year-to-date net loan recovery of $215 thousand and non-performing assets of 0.37% and past dues of 0.26% at year end

Today, First Community Corporation (Nasdaq: FCCO), the holding company for First Community Bank, reported net income for the fourth quarter and year end of 2018.  For the year ended December 31, 2018 net income was $11.2 million an increase of 93.1% over 2017.  Diluted earnings per share for 2018 were $1.45 an increase of 74.7% over 2017.  Net income for the fourth quarter of 2018 was $2.7 million.  Diluted earnings per share were $0.35 for the fourth quarter of 2018.  For comparison purposes, it should be noted that the year of 2017 was negatively impacted by expenses associated with the conversion to a new operating system in the amount of approximately $300 thousand, the Cornerstone National Bank acquisition in the amount of $945 thousand and an adjustment to the deferred tax asset of $1.2 million related to the Tax Cuts and Jobs Act. 

First Community President and CEO Michael Crapps commented, "We are extremely pleased to report record earnings for our company for the year of 2018.  Through the efforts of our talented team of bankers we experienced significant loan and pure deposit growth, along with growth in our residential mortgage and financial planning lines of business.  In 2018, we also benefitted from loan portfolio activities such as credit mark recaptures, nonaccrual loan interest income recoveries and other related benefits."  

Cash Dividend and Capital
The Board of Directors has approved an increase in the cash dividend for the fourth quarter of 2018 to $0.11 per common share.  This dividend is payable on February 15, 2019 to shareholders of record of the company's common stock as of January 31, 2019.  Mr. Crapps commented, "The entire board is pleased that our company's strong financial performance enables us to increase the cash dividend to the highest level ever paid by the company.  We are also proud that dividend payments have continued uninterrupted for 68 consecutive quarters." 

Each of the regulatory capital ratios (Leverage, Tier I Risk Based and Total Risk Based) exceeds the well capitalized minimum levels currently required by regulatory statute.  At December 31, 2018, the company's regulatory capital ratios (Leverage, Tier I Risk Based and Total Risk Based) were 10.47%, 13.83%, and 14.60%, respectively.  This compares to the same ratios as of December 31, 2017 of 10.35%, 14.25%, and 15.05%, respectively.  Additionally, the regulatory capital ratios for the company's wholly owned subsidiary, First Community Bank, were 9.97%, 13.17%, and 13.94% respectively as of December 31, 2018.  Further, the company's ratio of tangible common equity to tangible assets indicates a high quality of capital with a ratio of 8.92% as of December 31, 2018.  The common equity tier one ratio for the company and the bank was 12.06% and 13.17%, respectively, at December 31, 2018. 

Asset Quality
The company's asset quality remains excellent.  The non-performing assets ratio decreased on a linked quarter basis to 0.37% of total assets at December 31, 2018, as compared to the ratio of 0.45% at the end of the third quarter of 2018 and down from 0.51% at December 31, 2017.  The nominal level of non-performing assets was $4.0 million at year end 2018 down 16.8% from $4.9 million at the end of the third quarter of 2018 and down 24.0% from $5.3 million at the end of 2017.  The past due ratio for all loans was 0.26% at year-end 2018 down from 0.38% at the end of third quarter 2018 and 0.33% at year-end 2017. 

During the fourth quarter the bank experienced net loan charge offs of $21 thousand, but overall net loan recoveries for the year of 2018 were $215 thousand.   The ratio of classified loans plus OREO now stands at 5.07% of total bank regulatory risk-based capital as of December 31, 2018. 

Balance Sheet
(Numbers in millions)

Mr. Crapps commented, "A highlight of the year was exceptional loan and pure deposit growth, including cash management accounts, of $71.7 million and $56.4 million, respectively, which represents annual growth rates of 11.1% for loans and 7.5% for deposits.  We ended the year strong with loan growth of $22 million in the fourth quarter, a 12.6% annualized growth rate.  The quality of our loan portfolio is evident in the excellent credit metrics.  In addition, our deposit franchise lead by pure deposits and customer cash management accounts continues to be a strength even as we battle the headwinds of a rising rate environment." 

Revenue
Net Interest Income/Net Interest Margin
Net interest income increased $6.4 million year-over-year to $35.8 million in 2018, an increase of 21.6%.  On a linked quarter basis net interest income increased $509 thousand, a 5.7% increase.  The net interest margin, on a taxable equivalent basis, increased to 3.79% for the fourth quarter of 2018 up from 3.60% in the third quarter of the year.  During the fourth quarter, the company experienced a credit mark and nonaccrual interest recovery of $228 thousand related to one loan that positively impacted net interest margin, on a tax equivalent basis, by 9 basis points.  Excluding this, the net interest margin, on a tax equivalent basis, for the fourth quarter would have been 3.70%.  In addition, the bank recovered or was able to recognize $72 thousand in expenses or income related to this same loan.  Mr. Crapps commented, "We are pleased with this increase in our net interest margin on a linked quarter basis which is improved even excluding the benefit of the credit mark and nonaccrual interest recovery.  Prior to the third quarter the company had experienced eight consecutive quarters of net interest margin expansion."  Crapps continued, "We continue to benefit from our strong deposit franchise with total deposit costs increasing only 4 basis points in the quarter to 39 basis points. This is a 16% deposit beta for the quarter and only an 8% deposit beta for this cycle of rising rates beginning with the third quarter of 2016." 

Non-Interest Income
Non-interest income for the year, adjusted for securities gains/(losses) and losses on the early extinguishment of debt increased year-over-year to $11.0 million in 2018 compared to $9.7 million in 2017, an increase of 13.4%.  Revenues in the mortgage line of business for the year increased year-over-year to $3.9 million in 2018 from $3.8 million in 2017, an increase of 2.6% with mortgage production year-over-year increasing 10.3% to $119.8 million in 2018 from $108.6 million in 2017.  During the fourth quarter, mortgage production increased slightly as compared to the fourth quarter of 2017; however fee revenue declined due to a decrease in the gain-on-sale margin, which was driven by a difference in product mix.  Revenue in the investment advisory line of business increased year-over-year to $1.7 million in 2018 from $1.3 million in 2017 and on a linked quarter basis to $476 thousand in the fourth quarter of 2018 compared to $423 thousand in the third quarter.  Mr. Crapps noted, "Our strategy of generating revenue streams from multiple lines of business continues to serve us well and we are focused on continuing to leverage each of our lines of business."

Non-Interest Expense
Non-interest expense was $8.170 million in the fourth quarter of 2018 compared to $8.134 million in the third quarter, an increase of just $36 thousand on a linked quarter basis.  Marketing and public relations expenses were up as planned in the fourth quarter with costs related to the production of new advertising campaign creative material, and the FDIC insurance assessment expense was up as well, while other expense categories experienced decreases on a linked quarter comparison. 

Other
As previously announced, the company has planned expansion in its Upstate and Augusta market regions during 2019 with the opening of new full service facilities scheduled for February of this year in downtown Greenville and Evans, Georgia mid-year.  Mr. Crapps noted, "While these new banking offices will have a negative impact on earnings in the short term, we are excited about the long term benefit that these new initiatives will provide our company."

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

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.  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 resulting in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on the company's loan portfolio and allowance for loan losses; (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 the U.S. legal and regulatory framework; (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.

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

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," "return on average tangible common equity" and "tangible common shareholders' equity to tangible assets." "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. 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.

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SOURCE First Community Corporation