Introduction
First Community Corporation (FCCO) is a well-established community bank headquartered in Lexington, South Carolina, serving the Midlands region of the state. The company's history can be traced back to its founding in 1995, when it was established as a state-chartered commercial bank focused on providing personalized banking services to local businesses, professionals, and individuals. Over the past two and a half decades, First Community has navigated the ever-changing banking landscape, adapting its strategies to meet the evolving needs of its customer base while maintaining a steadfast commitment to its community-centric approach.
Financial Snapshot
As of the latest reported financial period, First Community Corporation exhibited a well-capitalized balance sheet and stable financial performance. The company reported total assets of $1.94 billion as of September 30, 2024, reflecting a 6.3% increase from the prior year-end. This growth was primarily driven by an $77.6 million increase in interest-bearing bank balances and a $62.6 million expansion in the loan portfolio, excluding loans held-for-sale.
The company's net income for the nine months ended September 30, 2024 stood at $9.72 million, representing a 13.7% increase compared to the same period in the prior year. This solid earnings performance translated to a diluted earnings per share of $1.26 for the nine-month period, up from $1.12 in the corresponding period of 2023. The improvement in profitability was largely attributable to a $1.6 million increase in net interest income, driven by growth in average earning assets, as well as a $2.9 million increase in non-interest income, primarily from higher mortgage banking revenue and investment advisory fees.
For the most recent fiscal year (2023), First Community reported annual revenue of $54.52 million and annual net income of $11.84 million. The company's annual operating cash flow for 2023 was $12.23 million, with a free cash flow of $11.15 million. In the most recent quarter (Q3 2024), the company demonstrated strong growth, with quarterly revenue reaching $23.16 million, a 23.8% increase from $18.73 million in Q3 2023. This increase was primarily driven by a $3.48 million rise in interest income on loans. Quarterly net income for Q3 2024 was $3.86 million.
Diversified Business Model
First Community's business model is characterized by a diverse revenue stream, with a balanced contribution from traditional banking activities and fee-based services. The company operates through three main reportable segments: Commercial and Retail Banking, Mortgage Banking, and Investment Advisory and Non-Deposit.
The Commercial and Retail Banking segment forms the core of FCCO's operations, providing deposit and lending products and services to commercial and retail customers. This segment generates the largest portion of the company's interest income, fees, and non-interest income.
The Mortgage Banking segment offers mortgage origination services for loans sold to investors in the secondary market, as well as consumer mortgage loans and residential construction loans held on the company's balance sheet. This segment has been an important driver of non-interest income, although the company has recently increased its focus on originating adjustable-rate mortgages (ARMs) and construction loans for investment, which contributes to interest income but reduces gain-on-sale fee income.
The Investment Advisory and Non-Deposit segment provides investment advisory services and non-deposit products. This segment has shown significant growth, with investment advisory fees and non-deposit commissions increasing to $4.46 million for the nine months ended September 30, 2024, up from $3.33 million in the same period of the prior year. Assets under management in this segment reached $901.6 million as of September 30, 2024, compared to $755.4 million at the end of 2023.
First Community Bank, the primary subsidiary of First Community Corporation, opened its doors in 1996, quickly establishing itself as a trusted community bank. Over the next two decades, the company grew steadily through organic expansion and strategic acquisitions, building a network of banking offices throughout the Midlands region of South Carolina.
A key milestone in the company's history was the opening of its investment advisory and financial planning division in 2005. This strategic move allowed First Community to offer a broader range of services to its customers and diversify its revenue streams. The division has experienced significant growth since its inception, with assets under management reaching over $900 million by 2024.
During the financial crisis of the late 2000s, First Community faced challenges in its loan portfolio and profitability. However, the bank's conservative underwriting and strong risk management practices enabled it to successfully navigate the downturn. First Community emerged from the crisis well-capitalized and positioned for future growth, demonstrating the resilience of its business model and management team.
More recently, the company faced operational challenges during the COVID-19 pandemic in 2020-2021. First Community quickly adapted to the new environment by implementing remote work capabilities and enhancing its digital banking services to continue serving customers effectively. The bank's financial performance remained solid throughout this period, further highlighting its ability to navigate industry disruptions and economic cycles.
Prudent Risk Management and Credit Quality
First Community has maintained a strong credit quality profile, with non-performing assets accounting for just 0.04% of total assets as of September 30, 2024. The bank's allowance for credit losses stood at $12.93 million, or 1.08% of total loans held-for-investment, reflecting the company's proactive approach to risk management and conservative underwriting practices.
The company's loan portfolio is well-diversified, with commercial real estate loans representing the largest component at 65.7% of total loans, followed by construction and land development loans at 12.5%, and residential real estate loans at 10.1%. First Community closely monitors and manages its concentrations in commercial real estate and construction lending, with regular stress testing and reporting to its management and board of directors.
Liquidity and Capital Strength
First Community maintains a strong liquidity position, with cash and cash equivalents totaling $171.5 million as of September 30, 2024. The company has access to additional liquidity sources, including a $77.5 million federal funds purchased line of credit, a $10 million Federal Reserve Discount Window, and a $421.1 million line of credit with the Federal Home Loan Bank of Atlanta, subject to collateral requirements. In total, First Community has over $505 million in remaining credit availability.
In terms of capital, First Community remains well-capitalized, with a Common Equity Tier 1 capital ratio of 12.93% and a total risk-based capital ratio of 14.00% as of September 30, 2024, well above the regulatory "well-capitalized" thresholds. The company's capital position provides a solid foundation to support its ongoing growth initiatives and withstand potential economic headwinds.
Strategic Initiatives and Outlook
Over the years, First Community has demonstrated a proactive approach to adapting its business strategies to changing market conditions. The company's recent expansion into adjustable-rate mortgages and new construction residential real estate loans, as well as the continued growth of its investment advisory segment, reflect its ability to identify and capitalize on emerging opportunities.
Looking ahead, the company remains focused on executing its strategic priorities, which include continued organic loan and deposit growth, further diversification of its revenue streams, and the prudent management of interest rate risk and credit quality. Despite the challenges posed by the rising interest rate environment, First Community is well-positioned to navigate the evolving landscape and deliver long-term value to its shareholders.
Geographic Focus
First Community Corporation operates primarily in the Midlands region of South Carolina and does not have significant operations outside of this geographic area. This focused approach allows the company to maintain a deep understanding of its local markets and build strong relationships with customers and communities in its service area.
Conclusion
First Community Corporation is a well-established community bank with a proven track record of financial stability and prudent risk management. Its diversified business model, which encompasses traditional banking activities as well as fee-based services, has allowed the company to generate consistent earnings and navigate market cycles. With a strong capital position, ample liquidity, and a steadfast commitment to serving its local communities, First Community is poised to continue its growth trajectory and create value for its stakeholders in the years to come.
The company's recent financial performance, including the 23.8% increase in quarterly revenue and the growth in assets under management in its Investment Advisory segment, demonstrates its ability to adapt to changing market conditions and capitalize on new opportunities. As First Community continues to execute its strategic initiatives and leverage its strong market position in the Midlands region of South Carolina, it is well-positioned to drive sustainable growth and maintain its status as a trusted financial partner for its customers and communities.