8-K: First Community Corporation Reports Solid 2023 Results, Announces Quarterly Dividend

First Community Corporation announced its fourth quarter and year-end 2023 financial results, highlighted by a net income of $3.297 million for the quarter and a $0.14 per share cash dividend.

Summary

• First Community Corporation reported a net income of $3.297 million for the fourth quarter of 2023, and $11.843 million for the full year.
• Diluted earnings per share were $0.43 for the quarter and $1.55 for the year.
• Total deposits increased by $125.6 million, or 9.1%, during 2023, and $19.0 million, or 1.3%, during the fourth quarter.
• Excluding brokered CDs, total deposit growth was $77.5 million for the year, a 5.6% growth rate.
• Total loan growth reached $153.2 million, or 15.6%, for the year and $42.4 million, or 3.9%, for the fourth quarter.
• The company's asset quality remained strong with net recoveries of $6 thousand for the year and non-performing assets at 0.05% of total assets.
• Investment advisory revenue was $1.176 million for the fourth quarter and $4.511 million for the year.
• Assets under management (AUM) grew to $755.4 million by the end of 2023.
• A cash dividend of $0.14 per common share was declared, marking the 88th consecutive quarter of dividends.
• The company sold $39.9 million of U.S. Treasuries in Q3 2023, resulting in a $1.2 million pre-tax loss but providing liquidity for loan growth.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to strong loan and deposit growth, good asset quality, and a consistent dividend. However, the decrease in net income and margin contraction temper the overall positive outlook.

Positives

• The company experienced strong loan growth of 15.6% for the year.
• Deposit growth was also robust, increasing by 9.1% for the year.
• Asset quality remains excellent with low non-performing assets and past due loans.
• The company has maintained a consistent dividend payout for 88 consecutive quarters.
• The sale of U.S. Treasuries improved the balance sheet and positions the company for higher future earnings.
• The company's regulatory capital ratios are above the required minimums.
• Tangible book value per share increased during the quarter from $14.25 to $15.23.
• The company has a diverse loan portfolio with no individual or industry concentrations.

Negatives

• Net income for the fourth quarter of 2023 was lower than the fourth quarter of 2022 ($3.297 million vs $4.043 million).
• Net income for the year 2023 was lower than 2022 ($11.843 million vs $14.613 million).
• The company experienced a $1.2 million pre-tax loss from the sale of U.S. Treasuries in Q3 2023.
• The cost of deposits and cost of funds increased on a linked quarter basis.
• Non-interest income for the year was lower than 2022 ($10.421 million vs $11.569 million).
• The net interest margin contracted slightly in the fourth quarter of 2023.

Risks

• Competitive pressures among financial institutions could impact pricing and revenues.
• Changes in the U.S. and local economies could affect the company's performance.
• Delinquencies, charge-offs, and changes in asset quality could increase credit risk.
• Changes in legislation, regulation, or policies could have adverse effects.
• Adverse conditions in the stock market and capital markets could negatively impact 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 pandemics or terrorist activities, could destabilize financial markets.

Future Outlook

The company anticipates higher earnings in the future due to a more efficient balance sheet and improved net interest margin. The company also expects to continue to experience pressure on interest rates for interest bearing deposits.

Management Comments

• First Community President and CEO, Mike Crapps commented, 'The entire board is pleased that our performance enables the company to continue our cash dividend uninterrupted for 88 consecutive quarters.'
• Mr. Crapps also noted, 'A strength of our bank has been and continues to be the value of our deposit franchise.'
• Mr. Crapps commented, 'We are extremely excited about the success in the growth of our loan portfolio during 2023.'
• First Community Bank President Ted Nissen noted, 'Loan growth was strong in 2023; a combination of loan production and advances of unfunded commercial loans available for draws in addition to lower loan payoffs and paydowns all contributed to this growth.'

Industry Context

This announcement reflects the challenges and opportunities faced by community banks in the current economic environment, including interest rate pressures and the need to balance deposit growth with profitability. The company's focus on local businesses and strong asset quality positions it well within the community banking sector.

Comparison to Industry Standards

• First Community Corporation's loan growth of 15.6% for the year is strong compared to the average growth rate of many regional banks, which have seen slower growth due to economic uncertainty.
• The company's net interest margin of 2.89% is within the range of many community banks, but the contraction of 7 basis points indicates the pressure on margins due to rising deposit costs.
• The non-performing asset ratio of 0.05% is significantly better than the industry average, indicating strong credit quality.
• The company's tangible common equity to tangible assets ratio of 6.39% is comparable to other well-capitalized community banks.
• The 88 consecutive quarters of cash dividends is a strong indicator of financial stability and commitment to shareholders, which is a positive differentiator compared to some peers.

Stakeholder Impact

• Shareholders will receive a cash dividend of $0.14 per share.
• Employees may see adjustments in incentive accruals due to lower than target performance results for the year.
• Customers will continue to have access to a range of deposit and loan products and services.
• The company's strong financial position should provide stability for suppliers and creditors.

Next Steps

• The company will pay a cash dividend of $0.14 per share on February 20, 2024.
• The company will continue to focus on loan growth and maintaining a strong deposit base.
• The company will monitor the interest rate environment and its impact on deposit costs.

Key Dates

Keywords

financial results, net income, earnings per share, loan growth, deposit growth, asset quality, cash dividend, investment advisory, community bank, regulatory capital