8-K: First Community Corporation Reports Q1 2024 Results, Declares Dividend

First Community Corporation announced its first quarter 2024 financial results, including a net income of $2.597 million and a cash dividend of $0.14 per share.

Summary

• First Community Corporation reported a net income of $2.597 million for the first quarter of 2024, with diluted earnings per share of $0.34.
• This compares to a net income of $3.463 million and diluted EPS of $0.45 in the same quarter of the previous year, and $3.297 million and $0.43 respectively in the previous quarter.
• The company's board approved a cash dividend of $0.14 per share, payable on May 14, 2024, to shareholders of record as of April 30, 2024.
• Total deposits reached $1.578 billion, with customer deposits (excluding brokered CDs) at $1.518 billion.
• Customer deposits grew by $54.7 million during the quarter, representing a 15.0% annualized growth rate.
• Total loan growth was $23.3 million during the quarter, an 8.3% annualized growth rate.
• The company's assets under management (AUM) reached a record $832.9 million, a 10.3% increase from December 31, 2023.
• Key credit quality metrics remained strong, with net charge-offs of $22 thousand and non-performing assets at 0.04%.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While the company shows strong growth in deposits and AUM, the decrease in net income and net interest margin, along with increased expenses, temper the positive aspects. The company is facing headwinds from the current interest rate environment.

Positives

• Customer deposit growth was strong at 15.0% annualized.
• Total loan growth was solid at 8.3% annualized.
• Assets under management reached a record high of $832.9 million.
• Key credit quality metrics remain excellent with low net charge-offs and non-performing assets.
• The company continues to pay a cash dividend, marking the 89th consecutive quarter.
• Tangible book value per share increased during the quarter.
• The investment portfolio yield increased to 3.66%.

Negatives

• Net income decreased compared to both the previous quarter and the same quarter last year.
• The cost of deposits and cost of funds increased on a linked quarter basis.
• Non-interest expense increased by $1.125 million on a linked quarter basis.
• Net interest margin decreased to 2.79% from 2.89% in the previous quarter and 3.19% in the same quarter last year.

Risks

• Competitive pressures among financial institutions could impact pricing and revenues.
• Changes in the US and local economies could affect the company's performance.
• Adverse changes in asset quality could lead to increased credit risk-related losses.
• Changes in legislation, regulation, or policies could impact the company.
• Adverse conditions in the stock market and capital markets could negatively affect the company.
• Changes in interest rates could affect deposit and funding costs, net income, and asset values.
• Technology and cybersecurity risks could lead to business disruptions and financial losses.
• Elevated inflation could pose challenges to customers and the business.
• Increases in FDIC assessments could increase the cost of doing business.
• Events beyond the company's control, such as epidemics, war, or economic instability, could have a destabilizing effect.

Future Outlook

The company acknowledges the headwinds of a higher interest rate environment and low housing inventory but is encouraged by recent trends in the mortgage business. They also plan to continue to focus on their deposit franchise and manage interest rate pressures.

Management Comments

• First Community President and CEO, Mike Crapps, stated that the board is pleased that the company's performance enables it to continue its cash dividend for the 89th consecutive quarter.
• Mr. Crapps also commented that a strength of the bank has been and continues to be the value of its deposit franchise.
• Ted Nissen, First Community Bank President and Chief Banking Officer, noted that they are pleased with their loan activity during the first quarter and that the loan pipeline remains stable.
• Ted Nissen also commented on the decision to close the Augusta, Georgia location, stating they are excited to continue serving the businesses and professionals in the CSRA from other local banking offices and through mobile and online services.

Industry Context

The results reflect the challenges faced by many regional banks in the current environment, including increased deposit costs and pressure on net interest margins due to higher interest rates. However, the company's strong deposit growth and asset quality metrics are positive indicators.

Comparison to Industry Standards

• First Community's net interest margin of 2.79% is lower than the average for many regional banks, which have seen margins compress due to rising deposit costs and a flattening yield curve. For example, comparible banks such as South State Corporation (SSB) and United Community Banks (UCBI) have reported net interest margins closer to 3.0% in recent quarters.
• The company's loan growth of 8.3% annualized is solid, but some peers have seen higher growth rates, particularly in commercial lending. For example, Truist Financial Corporation (TFC) has reported higher loan growth in certain segments.
• First Community's asset quality metrics, with non-performing assets at 0.04%, are better than many of its peers, indicating a conservative approach to lending. Many banks are reporting non-performing asset ratios closer to 0.10% or higher.
• The company's AUM growth of 10.3% is strong, indicating success in its wealth management business. This is comparable to other banks with strong wealth management divisions, such as Raymond James Financial (RJF).
• The company's tangible common equity to tangible assets ratio of 6.32% is within the range of many regional banks, but some peers have higher ratios, indicating a stronger capital position. For example, Bank of America (BAC) has a higher TCE ratio.

Stakeholder Impact

• Shareholders will receive a cash dividend of $0.14 per share.
• Customers will continue to be served through other local banking offices and online services after the closure of the Augusta location.
• Employees may be affected by the closure of the Augusta office, but the company has not provided details on this.

Next Steps

• The company will pay a cash dividend on May 14, 2024.
• The company will close its banking office in downtown Augusta, Georgia on June 27, 2024.

Key Dates

Keywords

financial results, cash dividend, net income, earnings per share, deposits, loan growth, asset management, credit quality, interest rates, community bank