First Community Corporation, the holding company for First Community Bank, reported net income for the third quarter of 2018 of $2.833 million as compared to $1.893 million in the third quarter of 2017, a 49.7% increase.  Diluted earnings per common share were $0.37 for the third quarter of 2018 compared to $0.28 in the third quarter of 2017, an increase of 32.1%. Year-to-date 2018 net income is $8.543 million, a 60.8% increase over the $5.313 million earned in the first nine months of 2017.   Year-to-date diluted earnings per share are $1.11 compared to $0.78 during the same time period in 2017, a 42.3% increase.  First Community President and CEO Mike Crapps commented, "Earnings continue to be strong and we are pleased with the annualized growth rates for both loans and deposits.  Credit quality continues to be excellent with low NPAs and past dues and another quarter of net loan recovery." 

Cash Dividend and Capital

The Board of Directors approved a cash dividend for the third quarter of 2018.  The company will pay a $0.10 per share dividend to holders of the company's common stock.  This dividend is payable November 13, 2018 to shareholders of record as of October 30, 2018.  Mr. Crapps commented, "Our entire board is pleased that our performance enables the company to continue its cash dividend for the 67^th consecutive quarter." 

Each of the regulatory capital ratios (Leverage, Tier I Risk Based and Total Risk Based) exceed the well capitalized minimum levels currently required by regulatory statute.  At September 30, 2018, the company's regulatory capital ratios (Leverage, Tier I Risk Based and Total Risk Based) were 10.32%, 13.76%, and 14.54 %, respectively.  This compares to the same ratios as of September 30, 2017, of 10.55%, 14.73%, and 15.60 %, respectively.  Additionally, the regulatory capital ratios for the company's wholly owned subsidiary, First Community Bank, were 9.84%, 13.85%, and 13.96% respectively as of September 30, 2018.  Further, the company's ratio of tangible common equity to tangible assets was 8.51% as of September 30, 2018.  Also, as of September 30, 2018, the Common Equity Tier One ratio for the company and the bank were 11.91% and 13.18%, respectively.

Asset Quality

The non-performing assets ratio for the third quarter of 2018 was 0.45% of total assets with a nominal level of non-performing assets of $4.854 million.  Trouble debt restructurings, that are still accruing interest, were $1.256 million at the end of the third quarter of 2018.    

There was a net loan recovery for the quarter of $118 thousand with a year-to-date net loan recovery of $236 thousand.  The ratio of classified loans plus OREO now stands at 6.91% of total bank regulatory risk-based capital as of September 30, 2018. 

Mr. Crapps commented, "Strong commercial loan production continued this quarter with $34.9 million in new production bringing our total for the year to $105.8 million.  This resulted in growth in the loan portfolio of $12.2 million in the quarter, which is an annualized growth rate of 10.2%.  In addition, our deposit franchise remains strong, although we are seeing pressure on the cost of deposits in this rising interest rate environment. "

Revenue

Net Interest Income/Net Interest Margin

Net interest income was $8.883 million for the third quarter of 2018, relatively flat on a linked quarter basis.  Net interest margin, on a taxable equivalent basis, was 3.60%, down 11 basis points on a linked quarter basis.  This decline in net interest margin is primarily attributable to rising costs of funds.  Crapps commented, "Given our strong liquidity, we have been able to limit the impact of rising interest rates on our overall cost of funds.  This quarter reflects some pricing adjustments needed in order to remain competitive and defend our core banking relationships.  Also impacting the net interest margin was pressure on the loan portfolio yield driven primarily by the flat yield curve, decreased interest income accretion from non-accrual loan payoffs, and the mix of new loans produced during the quarter.  The securities portfolio yield was negatively impacted by elevated prepayments of certain floating rate SBA pool securities which accelerated the premium amortization.  It should be noted that since the third quarter of 2016, our total cost of deposits have increased by just 10 basis points from 25 basis points to 35 basis points while average earning asset yields have increased by 44 basis points during that same period of time."

Non-Interest Income

Non-interest income was $2.842 million for the third quarter.  Revenues in the mortgage line of business were $1.159 million in the third quarter of 2018 up 12.3% year-over-year.  This increase was driven by a similar percentage of increase in mortgage loan production. The investment advisory line of business revenue for the third quarter was $423 thousand, an increase of 25.9% year-over-year and 5.5% on a linked quarter basis.  Notably, assets under management in this line of business are now $306.8 million, which is a 20.9% increase in the last twelve months.  Deposit fees generated in the commercial and retail banking line of business increased 14.5% year-over-year and 2.6% on a linked quarter basis.  Mr. Crapps commented, "Our strategy of generating revenue streams from multiple lines of business continues to serve us well.  We continue to work to leverage each of our lines of business." 

Non-Interest Expense

Non-interest expense was $8.134 million for the quarter a slight decrease of 1.1% over the second quarter non-interest expense of 8.225 million.  Other non-interest expense decreased by $306 thousand, primarily attributable to non-recurring expenses related to the purchase of a South Carolina Rehabilitation Tax Credit during the second quarter and the reimbursement during the third quarter of previously paid costs associated with a renegotiated contract within the financial planning line of business.  This decrease was partially offset by higher salaries and benefit expenses of $198 thousand in the third quarter, the majority of this increase being higher mortgage expenses.

Other

During the third quarter, the Company began renovations on a downtown banking office in Greenville, South Carolina and began construction on a new banking office facility in Evans, Georgia.  These new banking offices are scheduled to open in early and mid 2019, respectively.