First Community Corporation Announces Third Quarter Results and Cash Dividend

• Press Release
• Source: First Community Corporation
• On 4:00 pm EDT, Wednesday October 21, 2009

LEXINGTON, S.C., Oct. 21 /PRNewswire-FirstCall/ -- Today, First Community Corporation (Nasdaq: FCCO - News), the holding company for First Community Bank, reported operating income for the third quarter of 2009 and for year-to-date 2009. Operating income available to common shareholders for the third quarter was $511,000, as compared to $249,000 in the second quarter of 2009. Operating diluted earnings per share available to common shareholders were $0.16 in the third quarter, as compared to $0.08 in the second quarter.

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Operating income for the nine months ended September 30, 2009 was $1.2 million or $0.36 per diluted share.

The Company also announced today a non-cash goodwill impairment charge of $27.8 million or $8.51 per diluted share that represents the complete write-off of the Company's unamortized intangibles. Goodwill arises from business acquisitions and represents the value attributable to unidentifiable intangible elements in the business acquired. In accordance with accounting guidance (FAS 142), management regularly conducts a test to assess fair value in the current economic environment, as compared to the value determined at the time of acquisition.

The third quarter 2009 analysis and valuation process resulted in management's determination that goodwill was impaired. This determination is reflective of the impact of the current economic environment and its affect on the banking industry and our Company. The calculation of fair value as part of the goodwill impairment test is subject to significant management judgment and estimates. Industry-wide, market capitalization and acquisition multiples have significantly declined since 2004 and 2006, which are the dates of the acquisition of Dutchfork Bankshares and DeKalb Bancshares, respectively. The Company has experienced the same trend, with a decline in its market price per share and an extended period of time trading at a discount to book value and tangible book value. This non-cash charge is the accounting recognition of these events. Given the non-cash nature of a goodwill charge, this non-interest expense item has no adverse impact upon the Company's capital, liquidity position, operating performance or the Company's prospects for future earnings. This charge results in a reported loss of $27.3 million or $8.35 per diluted share for the quarter.

Capital and Cash Dividend

At the end of the third quarter, the Company's regulatory capital ratios (Leverage, Tier 1 Risk Based and Total Risk Based) were 8.19%, 11.74%, and 12.78% respectively. This compares to the same ratios at the end of the second quarter of 8.16%, 11.90%, and 12.87% respectively. Additionally, it should be noted that these ratios are all well above the required minimums of 5%, 6%, and 10% respectively, to be deemed a "well capitalized" financial institution. Further, the Company's ratio of tangible common equity to tangible assets improved from 4.33% at June 30, 2009 to 4.69% at September 30, 2009.

The Corporation also announced that the Board of Directors has approved a cash dividend for the third quarter of 2009. The Company will pay a $0.04 per share dividend to holders of the Company's common stock. This dividend is payable November 16, 2009 to shareholders of record as of November 2, 2009.

Asset Quality

Asset quality remained a real strength of the Company. Non-performing assets at September 30, 2009 were $7.6 million, which represents 1.21% of total assets. The Company believes that this ratio compares very favorably to its peer group, which has a ratio in excess of 2.50%. Additionally, net loan charge offs during the third quarter were $242,000, which represents a decrease from $809,000 in the prior quarter. With a loan loss provision during the quarter of $665,000, which exceeded net loan charge offs, the allowance for loan and lease losses grew to $4.6 million, which is 1.32% of total loans.

Balance Sheet

The total assets of the Company declined by $18.6 million (2.86%) on a linked quarter basis. This decrease is due to the previously mentioned goodwill impairment. It should be noted that the loan portfolio grew by $13.6 million (4.4%) during the quarter. This growth was primarily funded by growth in core deposits of $11.0 million (3.3%). The Company also slightly reduced its Federal Funds Sold position and purchased investment securities (primarily GNMAs and SBAs) during the quarter to take advantage of the steep yield curve. Mike Crapps, President and CEO, noted, "We are pleased with the improved mix on both sides of the balance sheet. At a time when many financial institutions are constrained by credit quality and capital concerns, we continue to focus on assisting our customers with financial solutions to their highest priorities and greatest opportunities."

Net Interest Income/Net Interest Margin

Net interest income increased by $159,000 (3.7%) on a linked quarter basis, driven primarily by the above-mentioned asset mix improvement. The net interest margin also improved on a linked quarter basis from 3.04% to 3.11%. Crapps commented, "The improvement in net interest margin is significant for our Company and we are pleased to have some forward momentum in this metric as we move into the fourth quarter."

Non-Interest Income

Non-interest income for the third quarter was negatively impacted by a fair value adjustment and an Other Than Temporary Impairment (OTTI) write-down. The fair value adjustment reflects the change in value of an interest rate swap purchased in October 2008 to protect against the impact of rising interest rates. Rates declined at the end of the third quarter, benefiting the Company in other ways but negatively impacting the value of this swap. The OTTI was related to certain securities purchased in 2007 and early 2008, and reflects the stress on the mortgage backed security market. The determination of an OTTI charge is based on models that project future cash flows, which are discounted to a present value and then compared to book value.

Non-interest income for the quarter also included the gain on sale of securities, deposit service charges, residential mortgage origination fees, and financial planning/investment advisory fees.

Non-Interest Expense

Non-interest expense, excluding the goodwill impairment, decreased from the prior quarter by $270,000. This is attributable to the FDIC insurance special assessment charged to all banks in the second quarter, which impacted the Company by $300,000.

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 operates eleven banking offices located in Lexington, Forest Acres, Irmo, Gilbert, Cayce - West Columbia, Chapin, Northeast Columbia, Newberry, Prosperity, Red Bank and Camden.

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 and expectations, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties, and other factors, such as a downturn in the economy, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.

Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, 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.

    FIRST COMMUNITY CORPORATION
    ---------------------------
    BALANCE SHEET DATA
    (Dollars in thousand, except per share data)

                                          At September 30,     December 31,
                                         2009         2008        2008
                                         ----         ----        ----

      Total Assets                     $632,120    $633,865     $650,233
      Investment Securities             221,088     221,853      235,075
      Loans                             345,428     324,333      332,964
      Allowance for Loan Losses           4,558       3,664        4,581
      Total Deposits                    447,280     433,318      423,798
      Securities Sold Under
       Agreements to Repurchase          19,269      27,352       28,151
      Federal Home Loan Bank Advances   102,023      92,689      108,536
      Junior Subordinated Debt           15,464      15,464       15,464
      Shareholders' Equity               42,165      57,015       68,156

      Book Value Per Common Share         $9.62      $17.70       $17.76
      Tangible Book Value Per
       Common Share                       $9.12       $8.33        $8.50
      Equity to Assets                     6.67%       9.00%       10.48%
      Tangible common equity to
       tangible assets                     4.69%       4.44%        4.42%
      Loan to Deposit Ratio               77.23%      74.85%       78.57%
      Allowance for Loan Losses/Loans      1.32%       1.13%        1.38%

      Regulatory Ratios:
       Leverage Ratio                      8.19%       6.74%        8.28%
       Tier 1 Capital Ratio               11.74%      10.74%       12.58%
       Total Capital Ratio                12.78%      11.70%       13.73%


    Average Balances:
                                Three months ended   Nine months ended
                                   September 30,       September 30,
                                  2009      2008      2009      2008
                                  ----      ----      ----      ----

      Average Total Assets      $654,227  $635,539  $653,839  $612,684
      Average Loans              340,451   321,601   334,991   316,064
      Average Earning Assets     577,610   560,191   575,253   537,077
      Average Deposits           440,157   432,725   434,968   421,074
      Average Other Borrowings   139,649   138,027   144,259   123,414
      Average Shareholders'
       Equity                     67,812    59,098    68,242    62,332

    Asset Quality
      Nonperforming Assets:
       Non-accrual loans          $5,919    $1,732    $5,919    $1,732
       Other real estate owned     1,681       180     1,681       180
       Accruing loans past due 90
        days or more                  17       132        17       132
                                      --       ---        --       ---
          Total nonperforming
           assets                 $7,617    $2,044    $7,617    $2,044
                                  ======    ======    ======    ======

    Loans charged-off               $281      $443    $2,142      $650
    Overdrafts charged-off            16        19        52        69
    Loan recoveries                  (39)      (14)      (89)     (100)
    Overdraft recoveries              (4)       (9)      (25)      (30)
                                      --        --       ---       ---
      Net Charge-offs               $254      $439    $2,080      $589
                                    ====      ====    ======      ====
      Net Charge-offs to Average
       Loans                        0.07%     0.14%     0.62%     0.19%
                                    ----      ----      ----      ----


    FIRST COMMUNITY CORPORATION
    ---------------------------
    INCOME STATEMENT DATA
    (Dollars in thousands, except per share data)

                                  Three months ended    Three months ended
                                      September 30,           June 30,
                                    2009       2008       2009       2008
                                    ----       ----       ----       ----

      Interest Income              $7,714     $8,427     $7,662     $8,484
      Interest Expense              3,233      3,990      3,340      3,997
                                    -----      -----      -----      -----
      Net Interest Income           4,481      4,437      4,322      4,487
      Provision for Loan Losses       665        359        941        209
                                      ---        ---        ---        ---
      Net Interest Income After
       Provision                    3,816      4,078      3,381      4,278
                                    -----      -----      -----      -----
      Non-interest Income:
        Deposit service charges       599        750        576        657
        Mortgage origination fees     159        130        246        145
        Investment advisory fees and
         non-deposit commissions       85         85        103         70
        Gain (loss) on sale of
         securities                   291        (28)         9          -
        Fair value gain (loss)
         adjustment                  (185)        (8)       230         24
        Other-than-temporary-
         impairment write-down on
         securities                  (179)    (8,163)       (85)    (6,162)
        Other                         390        396        423        365
                                      ---        ---        ---        ---
      Total non-interest income     1,160     (6,838)     1,502     (4,901)
                                    -----     ------      -----     ------
      Non-interest Expense:
        Salaries and employee
         benefits                   2,112      1,987      2,127      2,006
        Occupancy                     307        298        289        281
        Equipment                     321        314        304        317
        Marketing and public
         relations                     99         94         55         98
        FDIC assessment               215         56        566         56
        Amortization of
         Intangibles                  156        123        155        123
        Impairment of goodwill     27,761          -          -          -
        Other                         949        999        933        899
                                      ---        ---        ---        ---
      Total non-interest expense   31,920      3,871      4,429      3,780
                                   ------      -----      -----      -----
      Income (loss) before taxes  (26,944)    (6,631)       454     (4,403)
      Income tax expense (benefit)    141     (2,686)        40       (921)
                                      ---     ------         --       ----
      Net Income (loss)           (27,085)   $(3,945)       414    $(3,482)
                                  -------    -------        ---    -------
      Preferred stock dividends       165          -        165          -
                                      ---        ---        ---        ---
      Net income available to
       common shareholders       $(27,250)   $(3,945)      $249    $(3,482)
                                 ========    =======       ====    =======

      Per share data:
         Net income (loss),
          basic                    $(8.35)    $(1.23)     $0.08     $(1.09)
         Net income (loss),
          diluted                  $(8.35)    $(1.23)     $0.08     $(1.09)

      Average number of shares
       outstanding - basic      3,261,631  3,205,148  3,239,863  3,198,598
      Average number of shares
       outstanding - diluted    3,261,631  3,205,148  3,239,863  3,198,598

      Net Interest Margin
      (non taxable equivalent)       3.08%      3.15%      3.02%      3.26%
      Net Interest Margin
      (taxable equivalent)           3.11%      3.18%      3.04%      3.33%


    Reconciliation of GAAP
     Net Income available to
     common shareholders to
     operating earnings available
     to common shareholders:(1)

    Net income available to
     common shareholders (GAAP)   (27,250)    (3,945)       249     (3,482)
         Goodwill impairment       27,761          -          -          -
                                   ------        ---        ---        ---
      Operating earnings
       available to common
       shareholders                  $511    $(3,945)      $249    $(3,482)
                                     ====    =======       ====    =======

       Per share data:
       Net income (loss) diluted
        (GAAP)                     $(8.35)    $(1.23)     $0.08     $(1.09)
         Goodwill impairment         8.51         -          -          -
                                     ----       ---        ---        ---
       Net income (loss) diluted
        - operating earnings        $0.16    $(1.23)     $0.08     $(1.09)
                                    =====    ======      =====     ======




                                  Three months ended     Nine months ended
                                       March 31,           September 30,
                                    2009       2008       2009       2008
                                    ----       ----       ----       ----

      Interest Income              $7,919     $7,854    $23,295    $24,764
      Interest Expense              3,609      3,866     10,182     11,854
                                    -----      -----     ------     ------
      Net Interest Income           4,310      3,988     13,113     12,910
      Provision for Loan Losses       451        155      2,057        723
                                      ---        ---      -----        ---
      Net Interest Income After
       Provision                    3,859      3,833     11,056     12,187
                                    -----      -----     ------     ------
      Non-interest Income:
        Deposit service charges       556        664      1,731      2,071
        Mortgage origination fees     217        186        622        459
        Investment advisory fees
         and non-deposit commissions  149         88        337        243
        Gain (loss) on sale of
         securities                   354        (29)       654        (28)
        Fair value gain (loss)
         adjustment                    21          -         66        165
        Other-than-temporary-
         impairment write-down on
         securities                  (657)       149       (921)   (14,325)
        Other                         408        364      1,221      1,098
                                      ---        ---      -----      -----
      Total non-interest income     1,048      1,422      3,710    (10,317)
                                    -----      -----      -----    -------
      Non-interest Expense:
        Salaries and employee
     benefits                       2,013      1,901      6,252      5,894
        Occupancy                    300        279        896        858
        Equipment                    319        325        944        956
        Marketing and public
         relations                   107        203        261        395
        FDIC assessment              121         54        902        166
        Amortization of
         intangibles                 155        138        466        384
        Impairment of goodwill         -          -     27,761          -
        Other                      1,009        748      2,891      2,645
                                   -----        ---      -----      -----
      Total non-interest expense   4,024      3,648     40,373     11,298
                                   -----      -----     ------     ------
      Income (loss) before taxes     883      1,607    (25,607)    (9,428)
      Income tax expense (benefit)   311        484        492     (3,123)
                                     ---        ---        ---     ------
      Net Income (loss)              $572     $1,123   $(26,099)   $(6,305)
                                     ----     ------   --------    -------
      Preferred stock dividends      164          -        493          -
                                     ---          -        ---          -
      Net income available to
       common shareholders          $408     $1,123   $(26,592)   $(6,305)
                                    ====     ======   ========    =======

      Per share data:
         Net income (loss),
          basic                    $0.13      $0.35     $(8.17)    $(1.97)
         Net income (loss),
          diluted                  $0.13      $0.35     $(8.17)    $(1.97)

      Average number of shares
       outstanding - basic     3,231,411  3,205,676  3,255,020  3,203,148
      Average number of shares
       outstanding - diluted   3,231,411  3,240,530  3,255,020  3,203,148

      Net Interest Margin (non
       taxable equivalent)          3.05%      3.21%      3.05%      3.21%
      Net Interest Margin
      (taxable equivalent)          3.08%      3.30%      3.07%      3.27%


     Reconciliation of GAAP
     Net Income available to
     common shareholders to
     operating earnings available
     to common shareholders:(1)

     Net income available to
      common shareholders (GAAP)      408     1,123    (26,592)    (6,305)
         Goodwill impairment            -         -     27,761          -
                                      ---       ---     ------        ---
      Operating earnings available
       to common shareholders        $408    $1,123     $1,169    $(6,305)
                                     ====    ======     ======    =======

       Per share data:
       Net income (loss) diluted
        (GAAP)                      $0.13     $0.35     $(8.17)    $(1.97)
         Goodwill impairment            -         -       8.53          -
                                      ---       ---       ----        ---
       Net income (loss) diluted
        - operating earnings        $0.13     $0.35      $0.36     $(1.97)
                                    =====     =====      =====     ======


       (1) Operating earnings equals GAAP net loss plus one time
           impairment of goodwill

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