LEXINGTON, S.C., Jan. 21 /PRNewswire-FirstCall/ -- Today First Community Corporation (Nasdaq: FCCO), the holding company for First Community Bank, reported financial results for the fourth quarter and year ended 2008. Net income (loss) for the fourth quarter of 2008 was ($488) thousand and diluted earnings (loss) per common share were $(.17). Operating earnings for the year of 2008 were $3.1 million or $.98 per common share as compared to $3.9 million or $1.20 per common share in 2007. The primary reasons for this decrease are the same as the contributors to the fourth quarter loss as discussed below. For the year, the company reported a net loss of $6.8 million. As discussed in previous releases, the U.S. Treasury Department announced their decision to place the Federal Home Loan Corporation (commonly known as Freddie Mac) into conservatorship and to suspend cash dividends paid on its preferred stock. Due to this action and as previously announced, the company experienced an "other than temporary impairment" (OTTI) charge during the year in a total pre-tax amount of $14.3 million, with the after tax impact being $9.5 million. This action eliminated any remaining exposure to government sponsored enterprise (GSE) preferred securities.

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Noteworthy in the fourth quarter were several items that contributed significantly to the loss. The company experienced an OTTI charge in the amount of $169 thousand. This charge was against a home equity mortgage backed security purchased in early 2005 and leaves the remaining value of the security in the portfolio at $536 thousand. The company also experienced a negative fair value adjustment of $788 thousand during the quarter. This reflects the adjustment in value of an interest rate swap executed early in the fourth quarter to reduce the company's exposure to increasing interest rates. During the quarter, interest rates declined, thereby resulting in the negative fair value adjustment. As the swap approaches the expiration date in 2013, or earlier if rates increase, the company will recognize a full recovery of this fair value adjustment.

Additionally, the provision for loan losses in the quarter was $1.4 million as compared to $359 thousand in the prior quarter and $132 thousand in the fourth quarter of 2007. This results in a loan loss reserve of $4.6 million, which as a ratio to total loans is 1.38%, an increase from the prior quarter's ratio of 1.13%. Mike Crapps, president and chief executive officer noted, "We are not immune to the effects of a slowing economy and see some deterioration of our loan portfolio in general as evidenced by the increase in non-performing assets (NPAs) from $1.2 million (22 basis points) at December 31, 2007 to $2.5 million (39 basis points) at December 31, 2008. While these rates are favorable in comparison to current industry results, which we believe are in excess of 150 basis points, we are concerned about the impact of this economic environment on our customer base of local businesses and professionals." During this economic cycle acquisition and development (A&D) loans have been a major concern for financial institutions. Currently, our company has $13.2 million of A&D loans in our portfolio which represents only 3.9% of our total loan portfolio. Of these, we have identified a specific loan located within the Midlands of South Carolina in the amount of $3.2 million as a potential problem loan, although the loan was not yet 30 days delinquent at December 31, 2008. While we continue to work with the borrower, if this loan goes into non-performing status we believe it is not unreasonable to assume that as much as twenty percent of the loan amount could be charged off. Currently, the company does not anticipate any loss associated with the remaining A&D portfolio other than the specific loan referenced above.

Another significant factor in the quarter is continued compression of the net-interest margin (NIM). The interest margin was 3.05% during the quarter which is twelve basis points less than the prior quarter and twenty three basis points less than the fourth quarter of 2007. This contraction is driven by the rapid decline in interest rates quickly affecting asset yields while market rates on deposits have remained disproportionately high. Additionally, the net-interest margin was also affected by the addition of loans on non- accrual status. The related adjustments due to this factor impacted the net- interest margin for the quarter by approximately five basis points.

Non-interest expense was $4.2 million during the fourth quarter which represents a 9.5% ($368 thousand) increase over the prior quarter. This increase is primarily attributable to salaries and benefits for the employees of the newly acquired financial planning/investment advisory practices, marketing costs related to an initiative to speak to customers about the current economic environment, losses due to debit card fraud, and expenses related to the additional loan workouts and other real estate owned (OREO) issues.

As previously announced, on November 21, 2008, the company completed the sale of $11.4 million in preferred shares to the U.S. Treasury as part of the Capital Purchase Program. Crapps noted, "While our company was well-capitalized prior to this transaction, this additional capital further strengthens our balance sheet and our capital structure. As of December 31, 2008, our Tier 1 capital ratio is 13.1%, over twice the regulatory guideline of 6.0% to be 'well capitalized', with $29.9 million in excess of the well capitalized regulatory requirement. The company's Total capital ratio of 14.3% also exceeded the regulatory requirement of 10% needed to be considered 'well capitalized' with $17 million in excess of the regulatory requirement. In addition, at 8.2% the company's Tier 1 leverage capital ratio was higher than the 5% required to be considered 'well capitalized' with $20.2 million in excess capital." Crapps remarked, "It is an understatement to say that 2008 was a very challenging year for the company as well as the entire industry. All indications are that there will not be a rapid economic recovery and as a result 2009 will present many challenges. With our capital strength, core deposit base, and overall loan portfolio quality, we are well positioned to meet these challenges and to take advantage of the opportunities we see in the market. In fact, it is interesting to note that the company experienced solid loan growth in the fourth quarter, increasing the portfolio at an annualized rate of 7.0%. We continue to aggressively seek sound lending opportunities with our many qualified borrowers. As we move through this economic cycle, our efforts and focus will be to position the company to prosper and continue our long term goal of being the premier community bank in the markets we serve."

In addition to releasing year-end and fourth quarter results, the company also announced that the board of directors had approved a cash dividend for the fourth quarter of 2008. The company again declared a $.08 per share dividend, payable February 17, 2009 to shareholders of record as of February 2, 2009.

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 December 31,
                                         2008      2007

      Total Assets                     $650,616  $565,613
      Investment Securities             238,449   175,258
      Loans                             332,964   310,028
      Allowance for Loan Losses           4,581     3,530
      Total Deposits                    423,798   405,854
      Other Borrowings                  152,454    89,630
      Shareholders' Equity               68,406    63,996

      Book Value Per Common Share        $17.83    $19.93
      Tangible Book Value Per
       Common Share                       $8.57    $10.67
      Equity to Assets                    10.51%    11.31%
      Loan to Deposit Ratio               78.56%    76.39%
      Allowance for Loan Losses/Loans      1.38%     1.14%



    Average Balances:
                              Three months ended                Year ended
                                 December 31,                  December 31,
                               2008      2007                2008      2007

      Average Total Assets   $641,696  $572,472            $619,984  $553,614
      Average Loans           327,559   307,414             318,954   296,991
      Average Earning Assets  563,336   496,394             543,678   476,079
      Average Deposits        427,688   405,633             422,736   404,361
      Average Other
       Borrowings             146,531    96,679             129,225    80,656
      Average Shareholders'
       Equity                  62,428    64,536              62,364    63,584

    Asset Quality
      Nonperforming Assets:
        Non-accrual loans      $1,757      $600              $1,757      $600
        Other real estate
         owned                    748       133                 748       133
        Accruing loans
         past due 90 days
         or more                   59       501                  59       501
            Total
             nonperforming
             assets            $2,564    $1,234              $2,564    $1,234

    Loans charged-off            $491      $231              $1,140      $483
    Overdrafts charged-off         41        30                 110       140
    Loan recoveries               (14)     (124)               (114)     (382)
    Overdraft recoveries          (28)       (9)                (58)      (64)
      Net Charge-offs            $490      $128              $1,078      $177
      Net Charge-offs to
       Average Loans             0.15%     0.04%               0.34%     0.06%



    FIRST COMMUNITY CORPORATION

    INCOME STATEMENT DATA
    (Dollars in thousands, except per share data)

                                      Three months ended        Year ended
                                         December 31,          December 31,
                                       2008       2007       2008       2007

      Interest Income                 $8,242     $8,120    $33,007    $30,956
      Interest Expense                 3,955      4,115     15,809     15,666
      Net Interest Income              4,287      4,005     17,198     15,290
      Provision for Loan Losses        1,407        132      2,129        492
      Net Interest Income After
       Provision                       2,880      3,873     15,069     14,798
      Non-interest Income:
        Deposit service charges          612        750      2,682      2,722
        Mortgage origination fees        119        149        579        407
        Commissions on sale non
         deposit products                 91        138        334        356
        Securities gains (loss)          -          (24)       (28)        49
        Other-than-temporary-
         impairment writedowns on
         securities                     (169)       -      (14,494)       -
        Fair value adjustment gain
         (loss)                         (788)       122       (623)       168
        Other                            367        276      1,466      1,315
      Total non-interest income          232      1,411    (10,084)     5,017
      Non-interest Expense:
        Salaries and employee
         benefits                      2,070      1,853      7,964      7,301
        Occupancy                        296        248      1,155      1,160
        Equipment                        333        321      1,289      1,270
        Marketing and public
         relations                       167         83        563        459
        Amortization of
         intangibles                     123        167        507        670
        Other                          1,250        841      4,061      3,265
      Total non-interest expense       4,239      3,513     15,539     14,125
      Income (loss) before taxes      (1,127)     1,771    (10,554)     5,690
      Income tax expense (benefit)      (639)       573     (3,761)     1,725
      Net income (loss)                $(488)    $1,198    $(6,793)    $3,965
    Preferred stock dividends             71        -           71
      Net income (loss) available
       to common shareholders          $(559)    $1,198    $(6,864)    $3,965

      Basic earnings (loss) per
       common share                   $(0.17)     $0.37     $(2.14)     $1.23
      Diluted earnings (loss) per
       common share                   $(0.17)     $0.37     $(2.14)     $1.21

      Average shares outstanding -
       basic                       3,224,246  3,215,447  3,208,451  3,234,309
      Average shares outstanding -
       diluted                     3,224,246  3,253,558  3,208,451  3,284,425

      Return on Average Assets
         GAAP earnings (loss)          -0.30%      0.83%     -1.10%      0.72%
         Operating earnings (loss)     -0.23%      0.84%      0.51%      0.71%
      Return on Average Common
       Equity
         GAAP earnings (loss)          -3.38%      7.36%    -10.89%      6.23%
         Operating earnings (loss)     -2.60%      7.57%      5.04%      6.19%
      Return on Average Common
       Tangible Equity
         GAAP earnings (loss)          -7.04%     13.69%    -21.60%     11.83%
         Operating earnings (loss)     -5.43%     13.88%     10.00%     11.74%

      Net Interest Margin               3.02%      3.20%      3.16%      3.21%
      Net Interest Margin (Tax
       Equivalent)                      3.05%      3.28%      3.21%      3.29%



    RECONCILIATION OF GAAP TO NON-GAAP MEASURE
     (OPERATING EARNINGS)
     (Dollars in thousands)

                                      Three months ended        Year ended
                                          December 31,          December 31,
                                        2008       2007       2008       2007
    Net Income (Loss), As Reported
     (GAAP)                            $(488)    $1,198    $(6,793)    $3,965
      Add: Income tax expense
       (benefit)                        (639)       573     (3,761)     1,725
                                      (1,127)     1,771    (10,554)     5,690
      Non-operating items:
        (Gain) loss on sale of
         securities                      -           24         28        (49)
        Other-than-temporary-
         impairment write-down on
         securities                      169        -       14,494        -
    Pre-tax operating earnings
     (loss)                             (958)     1,795      3,968      5,641
        Related income tax expense
         (benefit)                      (582)       581        825      1,708
    Operating earnings (loss),
     (net income, excluding non
     operating items)                  $(376)    $1,214     $3,143     $3,933

SOURCE First Community Corporation