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First Community Corporation Announces First Quarter Results and Cash Dividend

First Community Corporation Announces First Quarter Results and Cash Dividend
PR Newswire
LEXINGTON, S.C., April 20, 2022

LEXINGTON, S.C., April 20, 2022 /PRNewswire/ —

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First Community Corporation Announces First Quarter Results and Cash Dividend

PR Newswire

LEXINGTON, S.C., April 20, 2022 /PRNewswire/ --

Highlights for First Quarter 2022

  • Net income of $3.5 million
  • Pre-tax pre-provision earnings of $4.2 million
  • Diluted EPS of $0.46 per common share
  • Pure (non-CD) deposit growth, including customer cash management accounts, of $83.5 million during the quarter, a 25.9% annualized growth rate
  • Total loan growth of $12.1 million during the quarter. Loan growth, excluding Paycheck Protection Program (PPP) loans was $13.3 million, a 6.3% annualized growth rate
  • Key credit quality metrics continued to be strong during the quarter with net loan recoveries of $19 thousand, non-performing assets ratio of 0.09%, and past due loans of 0.07%
  • Investment advisory revenue of $1.2 million. Assets under management exceeded $632 million at March 31, 2022
  • Mortgage revenue of $839 thousand
  • Cash dividend of $0.13 per common share, the 81st consecutive quarter of cash dividends paid to common shareholders
  • Share Repurchase authorization of 375,000 shares
  • Announced expansion into York County with a loan production office in Rock Hill, South Carolina

Today, First Community Corporation (Nasdaq: FCCO), the holding company for First Community Bank, announced earnings and discussed the results of operations and the company's activities during the first quarter of 2022.

First Community reported net income for the first quarter of 2022 of $3.5 million with diluted earnings per common share of $0.46.  This compares to net income and diluted earnings per common share of $3.9 million and $0.52, respectively, on a linked quarter basis and $3.3 million and $0.43 year-over-year, respectively.  Pre-tax pre-provision earnings during the first quarter of 2022 were $4.2 million.  This compares to pre-tax pre-provision earnings of $4.9 million for fourth quarter of 2021 and pre-tax pre-provision earnings of $4.3 million for the first quarter of 2021.  For comparison purposes, it should be noted that fee accretion related to PPP loans was $44 thousand in the first quarter of 2022.  This compares to $241 thousand in the fourth quarter of 2021 and $542 thousand in the first quarter of 2021. 

Cash Dividend and Capital

The Board of Directors has approved a cash dividend for the first quarter of 2022 of $0.13 per common share.  This dividend is payable on May 17, 2022 to shareholders of record of the company's common stock as of May 3, 2022.  First Community President and CEO, Mike Crapps commented, "The entire board is pleased that our performance enables the company to continue its cash dividend for the 81st consecutive quarter." 

The Company's previously announced share repurchase plan expired at the market close on March 31, 2022 with no shares repurchased under the plan.  The Company's Board of Directors has approved a new share repurchase plan that provides for the repurchase of up to 375,000 shares of its common stock, which represents approximately 5% of the Company's 7,559,760 shares outstanding as of March 31, 2022.   This new share repurchase plan expires on March 31, 2024.  Under the repurchase plan, the Company may repurchase shares from time to time.  Crapps noted, "This approved share repurchase provides us with some flexibility in managing capital going forward."   

Each of the regulatory capital ratios for the bank exceed the well capitalized minimum levels currently required by regulatory statute.  At March 31, 2022, the bank's regulatory capital ratios, Leverage, Tier I Risk Based and Total Risk Based, were 8.43%, 14.14%, and 15.29%, respectively.  This compares to the same ratios as of March 31, 2021 of 8.73%, 13.20%, and 14.34%, respectively. As of March 31, 2022, the bank's Common Equity Tier One ratio was 14.14% compared to 13.20% at March 31, 2021.  The bank's Tangible Common Equity to Tangible Assets ratio (TCE ratio) was 7.36% at March 31, 2022.  Further, the Company's TCE ratio was 6.71% as of March 31, 2022 compared to 7.92% as of March 31, 2021.  Crapps commented, "While the bank's regulatory capital ratios have actually increased in some cases, the TCE ratio has declined.  This is primarily due to the rapid growth in the Company's balance sheet and the Accumulated Other Comprehensive Income (Loss) (AOCI) resulting from an increase in market interest rates which have negatively impacted the fair value of our investment portfolio."

Loan Portfolio Quality/Allowance for Loan Losses

The Company's asset quality metrics as of March 31, 2022 remained sound.  The non-performing asset ratio was 0.09% of total assets with $1.5 million in non-performing assets.  Loans past due 30 days or more represented only 0.07% of the loan portfolio.  The ratio of classified loans plus OREO is 6.13% of total bank regulatory risk-based capital at March 31, 2022.  During the first quarter, the bank had net loan recoveries of $19 thousand.  

The Company recorded a $125 thousand dollar credit in provision for loan losses during the quarter.  As a result, the Allowance for Loan Losses as a percentage of total loans decreased slightly to 1.26%. 

Balance Sheet

Total loans increased by $12.1 million during the first quarter of 2022, a 5.7% annualized growth rate.  Ted Nissen, First Community Bank President and Chief Banking Officer, noted, "We are pleased with our loan activity during the first quarter with production of $55.3 million and strong momentum going into the second quarter of the year."  Total loan growth during the quarter, excluding PPP loans, was $13.3 million, a 6.3% annualized growth rate.  Year-over-year, loan growth, excluding PPP loans and a related credit facility, increased $71.2 million, an 8.8% growth rate.  As of March 31, 2022, the Company had only $269 thousand in PPP loans remaining on the balance sheet. 

Total deposits were $1.43 billion at March 31, 2022 compared to $1.36 billion at December 31, 2021.  Pure deposits, which are defined as total deposits less certificates of deposits, increased $69.7 million during the first quarter, to $1.3 billion at March 31, 2022, a 22.5% annualized growth rate.  The bank had no brokered deposits and no listing services deposits at March 31, 2022.  Securities sold under agreements to repurchase, which are related to customer cash management accounts or business sweep accounts, were $68.1 million at March 31, 2022 compared to $54.2 million at December 31, 2021, an increase of 25.5%.  Costs of deposits decreased on a linked quarter basis to 0.10% in the first quarter of 2022 from 0.11% in the fourth quarter of 2021.  Cost of funds also decreased on a linked quarter basis to 0.13% in the first quarter of 2022 from 0.14% in the fourth quarter of 2021.  Mr. Crapps commented, "A strength of our bank has been and continues to be our low-cost deposit base and the strong momentum in deposit growth has continued into 2022.  While our cost of deposits and cost of funds decreased again in the first quarter of 2022, in this rising rate market that trend will reverse and we are very focused on continuing to manage these expenses."   

Net Interest Income/Net Interest Margin

Net interest income was $10.7 million in the first quarter of 2022 compared to $11.2 million in the fourth quarter of 2021 and $10.6 million in the first quarter of 2021.  The net interest margin, on a taxable equivalent basis, was 2.91% for the first quarter of 2022 compared to 3.01% in the fourth quarter of the 2021 and 3.23% in the first quarter of 2021. 

Non-Interest Income

Non-interest income for the first quarter of 2022 was $3.4 million, compared to $3.6 million in the fourth quarter of 2021 and $3.3 million in the first quarter of 2021.  The mortgage line of business had fee revenue of $839 thousand in the first quarter of 2022 on production of $30.0 million.  This compares to fee revenue and production year-over-year of $990 thousand and $42.7 million, respectively.  With the headwinds of low housing inventories and a rising interest rate market, the Company is exploring additional mortgage products to help offset anticipated production challenges.

Revenue from the financial planning and investment advisory line of business increased 6.9% on a linked quarter basis to $1.2 million for the first quarter of 2022 compared to $1.1 million in the fourth quarter of 2021.  Year over year, revenue increased 36.6% from $877 thousand in the first quarter of 2021.  Assets Under Management (AUM) were $632.8 million at March 31, 2022 compared to $650.9 million at December 31, 2021, and $519.3 million at March 31, 2021. 

Non-Interest Expense

Non-interest expense increased $76 thousand on a linked quarter basis to $9.954 million in the first quarter of 2022 from $9.878 million in the fourth quarter of 2021.  On a related note, the effective income tax rate for the first quarter of 2022 was 18.44% compared to 21.16% in the fourth quarter of 2021 and 21.49% in the first quarter of 2021.  The reduction in the effective tax rate this quarter was due to a non-recurring tax adjustment of $153 thousand.

Other

On March 1, 2022, the Company announced plans to enter the Piedmont Region of South Carolina with the addition of a loan production office in York County staffed with a team of veteran local bankers.  The Company plans to follow with a full-service banking office in the future.   During the first quarter of 2022, the Company experienced one month of impact to non-interest expense for this new initiative.

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 is a full-service commercial bank offering deposit and loan products and services, residential mortgage lending and financial planning/investment advisory services for businesses and consumers.  First Community serves customers in the Midlands, Aiken, Upstate and Piedmont Regions of South Carolina as well as Augusta, Georgia.  For more information, visit www.firstcommunitysc.com.

FORWARD-LOOKING STATEMENTS

This news release and certain statements by our management may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans, goals, projections and expectations, and are thus prospective. Forward looking statements can be identified by words such as "anticipate", "expects", "intends", "believes", "may", "likely", "will", "plans" or other statements that indicate future periods.  Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.  Such risks, uncertainties and other factors, include, among others, the following: (1) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (2) the strength of the United States economy in general and the strength of the local economies in which we conduct operations may be different than expected including, but not limited to, due to the negative impacts and disruptions resulting from the outbreak of the novel coronavirus, or COVID-19, on the economies and communities we serve, which has had and may continue to have an adverse impact on our business, operations, and performance, and could continue to have a negative impact on our credit portfolio, share price, borrowers, and on the economy as a whole both domestically and globally; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for loan loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (4) changes in legislation, regulation, policies or administrative practices, whether by judicial, governmental, or legislative action, (5) adverse conditions in the stock market, the public debt markets and other capital markets (including changes in interest rate conditions) could have a negative impact on the company; (6) technology and cybersecurity risks, including potential business disruptions, reputational risks, and financial losses, associated with potential attacks on or failures by our computer systems and computer systems of our vendors and other third parties; and (7) risks, uncertainties and other factors disclosed in our most recent Annual Report on Form 10-K filed with the SEC, or in any of our Quarterly Reports on Form 10-Q or Current Reports on Form 8-K filed with the SEC since the end of the fiscal year covered by our most recently filed Annual Report on Form 10-K, which are available at the SEC's Internet site (http://www.sec.gov).

Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. 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, except as required by law.

 


FIRST COMMUNITY CORPORATION 








BALANCE SHEET DATA








(Dollars in thousands, except per share data)









As of




March 31,

December 31,

September 30,

June 30,

March 31,




2022

2021

2021

2021

2021










  Total Assets


$    1,652,279

$    1,584,508

$    1,560,326

$    1,514,973

$    1,492,494


  Other Short-term Investments and CD's1

68,169

47,049

55,259

52,316

88,389


  Investment Securities


579,699

566,624

515,260

470,669

407,547


  Loans Held for Sale


12,095

7,120

6,213

11,416

23,481


  Loans








     Paycheck Protection Program (PPP) Loans

269

1,467

9,109

47,229

61,836


     Non-PPP Loans


875,528

862,235

872,411

831,089

807,230


  Total Loans


875,797

863,702

881,520

878,318

869,066


  Allowance for Loan Losses


11,063

11,179

11,025

10,638

10,563


  Goodwill


14,637

14,637

14,637

14,637

14,637


  Other Intangibles


879

919

959

1,011

1,063


  Total Deposits


1,430,748

1,361,291

1,333,568

1,289,883

1,271,440


  Securities Sold Under Agreements to Repurchase

68,060

54,216

59,821

60,487

60,319


  Federal Home Loan Bank Advances


-

-

-

-

-


  Junior Subordinated Debt


14,964

14,964

14,964

14,964

14,964


  Shareholders' Equity


125,380

140,998

139,113

137,927

132,687










  Book Value Per Common Share


$           16.59

$           18.68

$           18.44

$           18.29

$           17.63


  Tangible Book Value Per Common Share 

$           14.53

$           16.62

$           16.37

$           16.22

$           15.55


  Equity to Assets


7.59%

8.90%

8.92%

9.10%

8.89%


  Tangible Common Equity to Tangible Assets

6.71%

8.00%

8.00%

8.16%

7.92%


  Loan to Deposit Ratio (Includes Loans Held for Sale)

62.06%

63.97%

66.57%

68.98%

70.20%


  Loan to Deposit Ratio (Excludes Loans Held for Sale)

61.21%

63.45%

66.10%

68.09%

68.35%


  Allowance for Loan Losses/Loans


1.26%

1.29%

1.25%

1.21%

1.22%










Regulatory Capital Ratios (Bank):








  Leverage Ratio


8.43%

8.45%

8.56%

8.48%

8.73%


  Tier 1 Capital Ratio


14.14%

13.97%

13.58%

13.52%

13.20%


  Total Capital Ratio


15.29%

15.15%

14.74%

14.66%

14.34%


  Common Equity Tier 1 Capital Ratio


14.14%

13.97%

13.58%

13.52%

13.20%


  Tier 1 Regulatory Capital


$       135,555

$       132,918

$       129,741

$       125,732

$       122,854


  Total Regulatory Capital


$       146,618

$       144,097

$       140,766

$       136,370

$       133,417


  Common Equity Tier 1 Capital


$       135,555

$       132,918

$       129,741

$       125,732

$       122,854










1 Includes federal funds sold, securities sold under agreement to resell and interest-bearing deposits












Average Balances:



Three Months Ended






March 31,

December 31,

March 31,






2022

2021

2021











  Average Total Assets



$    1,622,265

$    1,593,657

$    1,435,259



  Average Loans (Includes Loans Held for Sale)


876,349

880,026

886,379



  Average Earning Assets



1,515,374

1,490,507

1,339,053



  Average Deposits



1,374,813

1,363,235

1,208,081



  Average Other Borrowings



97,517

77,098

78,266



  Average Shareholders' Equity



137,245

140,180

135,580











Asset Quality:


 As of 




March 31,

December 31,

September 30,

June 30,

March 30,




2022

2021

2021

2021

2021


Loan Risk Rating by Category (End of Period)







  Special Mention


$           1,668

$           1,626

$           2,851

$           3,085

$           3,507


  Substandard


7,849

7,872

7,992

11,707

12,136


  Doubtful


-

-

-

-

-


  Pass


866,280

854,204

870,677

863,526

853,423


  Total Loans


$       875,797

$       863,702

$       881,520

$       878,318

$       869,066


Nonperforming Assets








  Non-accrual Loans


$              148

$              250

$              359

$           3,986

$           4,521


  Other Real Estate Owned and Repossessed Assets

1,146

1,165

1,165

1,182

1,076


  Accruing Loans Past Due 90 Days or More

174

-

-

4,165

-


Total Nonperforming Assets


$           1,468

$           1,415

$           1,524

$           9,333

$           5,597


Accruing Trouble Debt Restructurings


$           1,393

$           1,444

$           1,474

$           1,510

$           1,515













Three Months Ended






March 31,

December 31,

March 31,






2022

2021

2021



  Loans Charged-off



$                 1

$                 5

$                16



  Overdrafts Charged-off



14

10

8



  Loan Recoveries



(20)

(224)

(8)



  Overdraft Recoveries



(3)

(4)

(14)



     Net Charge-offs (Recoveries)



$                (8)

$            (213)

$                 2



Net Charge-offs / (Recoveries) to Average Loans2


0.00%

-0.10%

0.00%



2 Annualized

















 


FIRST COMMUNITY CORPORATION







INCOME STATEMENT DATA







(Dollars in thousands, except per share data)








Three months ended





March 31,

December 31,

March 31,





2022

2021

2021










  Interest income


$        11,195

$        11,656

$        11,218



  Interest expense


462

492

651



  Net interest income


10,733

11,164

10,567



  Provision for loan losses


(125)

(59)

177



  Net interest income after provision


10,858

11,223

10,390



  Non-interest income







    Deposit service charges


265

262

246



    Mortgage banking income


839

1,039

990



    Investment advisory fees and non-deposit commissions

1,198

1,121

877



    Gain (loss) on sale of securities


-

-

-



    Gain (loss) on sale of other assets


-

103

77



    Other non-recurring income


4

24

100



    Other


1,068

1,077

1,006



  Total non-interest income


3,374

3,626

3,296



  Non-interest expense







    Salaries and employee benefits


6,119

6,188

5,964



    Occupancy


705

740

730



    Equipment


332

347

275



    Marketing and public relations


361

324

396



    FDIC assessment 


130

114

169



    Other real estate expenses


47

(37)

29



    Amortization of intangibles


39

40

57



    Other


2,221

2,162

1,920



  Total non-interest expense


9,954

9,878

9,540



  Income before taxes


4,278

4,971

4,146



  Income tax expense


789

1,052

891



  Net income


$          3,489

$          3,919

$          3,255










  Per share data







     Net income, basic 


$            0.46

$            0.52

$            0.44



     Net income, diluted 


$            0.46

$            0.52

$            0.43










  Average number of shares outstanding - basic

7,518,375

7,503,835

7,475,522



  Average number of shares outstanding - diluted

7,594,840

7,564,909

7,522,568



  Shares outstanding period end


7,559,760

7,548,638

7,524,944










  Return on average assets


0.87%

0.98%

0.92%



  Return on average common equity


10.31%

11.09%

9.74%



  Return on average tangible common equity

11.63%

12.48%

11.01%



  Net interest margin (non taxable equivalent) 

2.87%

2.97%

3.20%



  Net interest margin (taxable equivalent)


2.91%

3.01%

3.23%



  Efficiency ratio1


69.93%

66.74%

69.16%



1 Calculated by dividing non-interest expense by net interest income on tax equivalent basis and non interest income, excluding gain on sale of other assets and other non-recurring noninterest income.










 

FIRST COMMUNITY CORPORATION

Yields on Average Earning Assets and  

Rates on Average Interest-Bearing Liabilities











Three months ended March 31, 2022


Three months ended March 31, 2021



Average

Interest 

Yield/


Average

Interest 

Yield/



Balance

Earned/Paid

Rate


Balance

Earned/Paid

Rate


Assets









Earning assets









  Loans









     PPP loans

$               609

$            45

29.97%


$          55,540

$          684

4.99%


     Non-PPP loans

875,740

8,958

4.15%


830,839

8,767

4.28%


  Total loans

876,349

9,003

4.17%


886,379

9,451

4.32%


  Securities

571,831

2,159

1.53%


373,340

1,734

1.88%


  Other short-term investments and CD's

67,194

33

0.20%


79,334

33

0.17%


Total earning assets

1,515,374

11,195

3.00%


1,339,053

11,218

3.40%


Cash and due from banks

28,511




18,429




Premises and equipment

32,722




34,351




Goodwill and other intangibles

15,536




15,726




Other assets

41,348




38,124




Allowance for loan losses

(11,226)




(10,424)




Total assets

$     1,622,265




$     1,435,259













Liabilities









Interest-bearing liabilities









  Interest-bearing transaction accounts

$        331,772

$            45

0.06%


$        277,476

$            58

0.08%


  Money market accounts

295,536

112

0.15%


254,412

141

0.22%


  Savings deposits

145,340

20

0.06%


125,981

19

0.06%


  Time deposits

152,884

156

0.41%


160,321

301

0.76%


  Other borrowings

97,517

129

0.54%


78,266

132

0.68%


Total interest-bearing liabilities

1,023,049

462

0.18%


896,456

651

0.29%


Demand deposits

449,281




389,891




Other liabilities

12,690




13,332




Shareholders' equity

137,245




135,580




Total liabilities and shareholders' equity

$     1,622,265




$     1,435,259













Cost of deposits, including demand deposits



0.10%




0.17%


Cost of funds, including demand deposits



0.13%




0.21%


Net interest spread 



2.82%




3.11%


Net interest income/margin - excluding PPP loans


$      10,688

2.86%



$        9,883

3.12%


Net interest income/margin - including PPP loans


$      10,733

2.87%



$      10,567

3.20%


Net interest income/margin (tax equivalent) - excl. PPP loans

$      10,819

2.90%



$        9,991

3.16%


Net interest income/margin (tax equivalent) - incl. PPP loans

$      10,864

2.91%



$      10,675

3.23%


 

The tables below provide a reconciliation of non‑GAAP measures to GAAP for the periods indicated: 





















 

March

 31,



 

December
31,



September

 30,



June

 30,



March

 31,


Tangible book value per common share



2022



2021



2021



2021



2021


Tangible common equity per common share (nonGAAP)


$

14.53


$

16.62


$

16.37


$

16.22


$

15.55


Effect to adjust for intangible assets



2.06



2.06



2.07



2.07



2.08


Book value per common share (GAAP)


$

16.59


$

18.68


$

18.44


$

18.29


$

17.63


Tangible common shareholders' equity to tangible assets

















Tangible common equity to tangible assets (nonGAAP)



6.71

%


8.00

%


8.00

%


8.16

%


7.92

%

Effect to adjust for intangible assets



0.88

%


0.90

%


0.92

%


0.94

%


0.97

%

Common equity to assets (GAAP)



7.59

%


8.90

%


8.92

%


9.10

%


8.89

%

                                                                                               


Three months ended

Return on average tangible common equity

March
31,

December
31,

March
31,


2022

2021

2021

Return on average common tangible equity (non-GAAP)

11.63

%

12.48

%

11.01

%

Effect to adjust for intangible assets

(1.32)

%

(1.39)

%

(1.27)

%

Return on average common equity (GAAP)

10.31

%

11.09

%

9.74

%

 


Three months ended


March

31,


December

31,

March

31,

Pre-tax, pre-provision earnings


2022



2021



2021

Pre-tax, pre-provision earnings (non‑GAAP)

$

4,153


$

4,912


$

4,323

Effect to adjust for pre-tax, pre-provision earnings


(664)



(993)



(1,068)

Net Income (GAAP)

$

3,489


$

3,919


$

3,255

 




Three months ended




March 31,

Net interest margin excluding PPP Loans



2022



2021


Net interest margin excluding PPP loans (non-GAAP)



2.86%



3.12%


Effect to adjust for PPP loans



0.01



0.08


Net interest margin (GAAP)



2.87%



3.20%












 




Three months ended




March 31,

Net interest margin on a tax-equivalent basis excluding PPP Loans



2022



2021


Net interest margin on a tax-equivalent basis excluding PPP loans (non-GAAP)



2.90%



3.16%


Effect to adjust for PPP loans



0.01



0.07


Net interest margin on a tax equivalent basis (GAAP)



2.91%



3.23%












 


















 

March 31,



December 31,



Growth


Annualized
Growth

Loans and loan growth



2022



2021



Dollars


Rate

Non-PPP Loans and Related Credit Facilities (non-GAAP)


$

875,528



862,235



13,293



6.3

%

PPP Related Credit Facilities



0



0



0



0

%

Non-PPP Loans (nonGAAP)


$

875,528


$

862,235


$

13,293



6.3

%

PPP Loans



269



1,467



(1,198)



(331.2)

%

Total Loans (GAAP)


$

875,797


$

863,702


$

12,095



5.7

%
















 


















 

March 31,



March 31,



Growth


Annualized
Growth

Loans and loan growth



2022



2021



Dollars


Rate

Non-PPP Loans and Related Credit Facilities (non-GAAP)


$

875,528



804,377



71,151



8.8

%

PPP Related Credit Facilities



0



2,853



(2,853)



(100.0)

%

Non-PPP Loans (nonGAAP)


$

875,528


$

807,230


$

68,298



8.5

%

PPP Loans



269



61,836



(61,567)



(99.6)

%

Total Loans (GAAP)


$

875,797


$

869,066


$

6,731



0.8

%
















Certain financial information presented above is determined by methods other than in accordance with generally accepted accounting principles ("GAAP"). These non-GAAP financial measures include "Tangible book value per common share," "Tangible common shareholders' equity to tangible assets," "Return on average tangible common equity," "Pre-tax, pre-provision earnings," "Net interest margin excluding PPP Loans," "Net interest margin on a tax-equivalent basis excluding PPP Loans," "Non-PPP Loans and Related Credit Facilities," and "Non-PPP Loans." 

  • "Tangible book value per common share" is defined as total equity reduced by recorded intangible assets divided by total common shares outstanding.
  • "Tangible common shareholders' equity to tangible assets" is defined as total common equity reduced by recorded intangible assets divided by total assets reduced by recorded intangible assets.
  • "Return on average tangible common equity" is defined as net income on an annualized basis divided by average total equity reduced by average recorded intangible assets.  
  • "Pre-tax, pre-provision earnings" is defined as net interest income plus non-interest income, reduced by non-interest expense.
  • "Net interest margin excluding PPP Loans" is defined as annualized net interest income less annualized interest income on PPP Loans divided by average earning assets less the average balance of PPP Loans. 
  • "Net interest margin on a tax-equivalent basis excluding PPP Loans" is defined as annualized net interest income on a tax-equivalent basis less annualized interest income on PPP Loans divided by average earning assets less the average balance of PPP Loans. 
  • "Non-PPP Loans and Related Credit Facilities" is defined as Total Loans less PPP Related Credit Facilities and PPP Loans.
  • "Non-PPP Loans" is defined as Total Loans less PPP Loans.
  • "Non-PPP Loans and Related Credit Facilities Growth - Dollars" is calculated by taking the difference between two time periods compared for Total Loans less PPP Loans and PPP Related Credit Facilities.  "Non-PPP Loans and Related Credit Facilities – Annualized Growth Rate" is calculated by (i) dividing "Non-PPP Loans and Related Credit Facilities Loan Growth - Dollars" by the number of days between the two time periods compared (ii) times the number of days in the year (iii) divided by the prior time period Non-PPP Loans and Related Credit Facilities balance.  
  • "Non-PPP Loans Growth - Dollars" is calculated by taking the difference between two time periods compared for Total Loans less PPP Loans.  "Non-PPP Loans – Annualized Growth Rate" is calculated by (i) dividing "Non-PPP Loans Loan Growth - Dollars" by the number of days between the two time periods compared (ii) times the number of days in the year (iii) divided by the prior time period Non-PPP Loans balance. 

Our management believes that these non-GAAP measures are useful because they enhance the ability of investors and management to evaluate and compare our operating results from period-to-period in a meaningful manner. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results as reported under GAAP.

 

 

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Bougie Broke The Financial Reality Behind The Facade

Social media users claiming to be Bougie Broke share pictures of their fancy cars, high-fashion clothing, and selfies in exotic locations and expensive…

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Social media users claiming to be Bougie Broke share pictures of their fancy cars, high-fashion clothing, and selfies in exotic locations and expensive restaurants. Yet they complain about living paycheck to paycheck and lacking the means to support their lifestyle.

Bougie broke is like “keeping up with the Joneses,” spending beyond one’s means to impress others.

Bougie Broke gives us a glimpse into the financial condition of a growing number of consumers. Since personal consumption represents about two-thirds of economic activity, it’s worth diving into the Bougie Broke fad to appreciate if a large subset of the population can continue to consume at current rates.

The Wealth Divide Disclaimer

Forecasting personal consumption is always tricky, but it has become even more challenging in the post-pandemic era. To appreciate why we share a joke told by Mike Green.

Bill Gates and I walk into the bar…

Bartender: “Wow… a couple of billionaires on average!”

Bill Gates, Jeff Bezos, Elon Musk, Mark Zuckerberg, and other billionaires make us all much richer, on average. Unfortunately, we can’t use the average to pay our bills.

According to Wikipedia, Bill Gates is one of 756 billionaires living in the United States. Many of these billionaires became much wealthier due to the pandemic as their investment fortunes proliferated.

To appreciate the wealth divide, consider the graph below courtesy of Statista. 1% of the U.S. population holds 30% of the wealth. The wealthiest 10% of households have two-thirds of the wealth. The bottom half of the population accounts for less than 3% of the wealth.

the wealth divide

The uber-wealthy grossly distorts consumption and savings data. And, with the sharp increase in their wealth over the past few years, the consumption and savings data are more distorted.

Furthermore, and critical to appreciate, the spending by the wealthy doesn’t fluctuate with the economy. Therefore, the spending of the lower wealth classes drives marginal changes in consumption. As such, the condition of the not-so-wealthy is most important for forecasting changes in consumption. 

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Revenge Spending

Deciphering personal data has also become more difficult because our spending habits have changed due to the pandemic.

A great example is revenge spending. Per the New York Times:

Ola Majekodunmi, the founder of All Things Money, a finance site for young adults, explained revenge spending as expenditures meant to make up for “lost time” after an event like the pandemic.

So, between the growing wealth divide and irregular spending habits, let’s quantify personal savings, debt usage, and real wages to appreciate better if Bougie Broke is a mass movement or a silly meme.

The Means To Consume 

Savings, debt, and wages are the three primary sources that give consumers the ability to consume.

Savings

The graph below shows the rollercoaster on which personal savings have been since the pandemic. The savings rate is hovering at the lowest rate since those seen before the 2008 recession. The total amount of personal savings is back to 2017 levels. But, on an inflation-adjusted basis, it’s at 10-year lows. On average, most consumers are drawing down their savings or less. Given that wages are increasing and unemployment is historically low, they must be consuming more.

Now, strip out the savings of the uber-wealthy, and it’s probable that the amount of personal savings for much of the population is negligible. A survey by Payroll.org estimates that 78% of Americans live paycheck to paycheck.

personal savings

More on Insufficient Savings

The Fed’s latest, albeit old, Report on the Economic Well-Being of U.S. Households from June 2023 claims that over a third of households do not have enough savings to cover an unexpected $400 expense. We venture to guess that number has grown since then. To wit, the number of households with essentially no savings rose 5% from their prior report a year earlier.  

Relatively small, unexpected expenses, such as a car repair or a modest medical bill, can be a hardship for many families. When faced with a hypothetical expense of $400, 63 percent of all adults in 2022 said they would have covered it exclusively using cash, savings, or a credit card paid off at the next statement (referred to, altogether, as “cash or its equivalent”). The remainder said they would have paid by borrowing or selling something or said they would not have been able to cover the expense.

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Debt

After periods where consumers drained their existing savings and/or devoted less of their paychecks to savings, they either slowed their consumption patterns or borrowed to keep them up. Currently, it seems like many are choosing the latter option. Consumer borrowing is accelerating at a quicker pace than it was before the pandemic. 

The first graph below shows outstanding credit card debt fell during the pandemic as the economy cratered. However, after multiple stimulus checks and broad-based economic recovery, consumer confidence rose, and with it, credit card balances surged.

The current trend is steeper than the pre-pandemic trend. Some may be a catch-up, but the current rate is unsustainable. Consequently, borrowing will likely slow down to its pre-pandemic trend or even below it as consumers deal with higher credit card balances and 20+% interest rates on the debt.

credit card debt

The second graph shows that since 2022, credit card balances have grown faster than our incomes. Like the first graph, the credit usage versus income trend is unsustainable, especially with current interest rates.

consumer loans credit cards and wages

With many consumers maxing out their credit cards, is it any wonder buy-now-pay-later loans (BNPL) are increasing rapidly?

Insider Intelligence believes that 79 million Americans, or a quarter of those over 18 years old, use BNPL. Lending Tree claims that “nearly 1 in 3 consumers (31%) say they’re at least considering using a buy now, pay later (BNPL) loan this month.”More telling, according to their survey, only 52% of those asked are confident they can pay off their BNPL loan without missing a payment!

Wage Growth

Wages have been growing above trend since the pandemic. Since 2022, the average annual growth in compensation has been 6.28%. Higher incomes support more consumption, but higher prices reduce the amount of goods or services one can buy. Over the same period, real compensation has grown by less than half a percent annually. The average real compensation growth was 2.30% during the three years before the pandemic.

In other words, compensation is just keeping up with inflation instead of outpacing it and providing consumers with the ability to consume, save, or pay down debt.

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It’s All About Employment

The unemployment rate is 3.9%, up slightly from recent lows but still among the lowest rates in the last seventy-five years.

the unemployment rate

The uptick in credit card usage, decline in savings, and the savings rate argue that consumers are slowly running out of room to keep consuming at their current pace.

However, the most significant means by which we consume is income. If the unemployment rate stays low, consumption may moderate. But, if the recent uptick in unemployment continues, a recession is extremely likely, as we have seen every time it turned higher.

It’s not just those losing jobs that consume less. Of greater impact is a loss of confidence by those employed when they see friends or neighbors being laid off.   

Accordingly, the labor market is probably the most important leading indicator of consumption and of the ability of the Bougie Broke to continue to be Bougie instead of flat-out broke!

Summary

There are always consumers living above their means. This is often harmless until their means decline or disappear. The Bougie Broke meme and the ability social media gives consumers to flaunt their “wealth” is a new medium for an age-old message.

Diving into the data, it argues that consumption will likely slow in the coming months. Such would allow some consumers to save and whittle down their debt. That situation would be healthy and unlikely to cause a recession.

The potential for the unemployment rate to continue higher is of much greater concern. The combination of a higher unemployment rate and strapped consumers could accentuate a recession.

The post Bougie Broke The Financial Reality Behind The Facade appeared first on RIA.

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Analyst reviews Apple stock price target amid challenges

Here’s what could happen to Apple shares next.

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They said it was bound to happen.

It was Jan. 11, 2024 when software giant Microsoft  (MSFT)  briefly passed Apple  (AAPL)  as the most valuable company in the world.

Microsoft's stock closed 0.5% higher, giving it a market valuation of $2.859 trillion. 

It rose as much as 2% during the session and the company was briefly worth $2.903 trillion. Apple closed 0.3% lower, giving the company a market capitalization of $2.886 trillion. 

"It was inevitable that Microsoft would overtake Apple since Microsoft is growing faster and has more to benefit from the generative AI revolution," D.A. Davidson analyst Gil Luria said at the time, according to Reuters.

The two tech titans have jostled for top spot over the years and Microsoft was ahead at last check, with a market cap of $3.085 trillion, compared with Apple's value of $2.684 trillion.

Analysts noted that Apple had been dealing with weakening demand, including for the iPhone, the company’s main source of revenue. 

Demand in China, a major market, has slumped as the country's economy makes a slow recovery from the pandemic and competition from Huawei.

Sales in China of Apple's iPhone fell by 24% in the first six weeks of 2024 compared with a year earlier, according to research firm Counterpoint, as the company contended with stiff competition from a resurgent Huawei "while getting squeezed in the middle on aggressive pricing from the likes of OPPO, vivo and Xiaomi," said senior Analyst Mengmeng Zhang.

“Although the iPhone 15 is a great device, it has no significant upgrades from the previous version, so consumers feel fine holding on to the older-generation iPhones for now," he said.

A man scrolling through Netflix on an Apple iPad Pro. Photo by Phil Barker/Future Publishing via Getty Images.

Future Publishing/Getty Images

Big plans for China

Counterpoint said that the first six weeks of 2023 saw abnormally high numbers with significant unit sales being deferred from December 2022 due to production issues.

Apple is planning to open its eighth store in Shanghai – and its 47th across China – on March 21.

Related: Tech News Now: OpenAI says Musk contract 'never existed', Xiaomi's EV, and more

The company also plans to expand its research centre in Shanghai to support all of its product lines and open a new lab in southern tech hub Shenzhen later this year, according to the South China Morning Post.

Meanwhile, over in Europe, Apple announced changes to comply with the European Union's Digital Markets Act (DMA), which went into effect last week, Reuters reported on March 12.

Beginning this spring, software developers operating in Europe will be able to distribute apps to EU customers directly from their own websites instead of through the App Store.

"To reflect the DMA’s changes, users in the EU can install apps from alternative app marketplaces in iOS 17.4 and later," Apple said on its website, referring to the software platform that runs iPhones and iPads. 

"Users will be able to download an alternative marketplace app from the marketplace developer’s website," the company said.

Apple has also said it will appeal a $2 billion EU antitrust fine for thwarting competition from Spotify  (SPOT)  and other music streaming rivals via restrictions on the App Store.

The company's shares have suffered amid all this upheaval, but some analysts still see good things in Apple's future.

Bank of America Securities confirmed its positive stance on Apple, maintaining a buy rating with a steady price target of $225, according to Investing.com

The firm's analysis highlighted Apple's pricing strategy evolution since the introduction of the first iPhone in 2007, with initial prices set at $499 for the 4GB model and $599 for the 8GB model.

BofA said that Apple has consistently launched new iPhone models, including the Pro/Pro Max versions, to target the premium market. 

Analyst says Apple selloff 'overdone'

Concurrently, prices for previous models are typically reduced by about $100 with each new release. 

This strategy, coupled with installment plans from Apple and carriers, has contributed to the iPhone's installed base reaching a record 1.2 billion in 2023, the firm said.

More Tech Stocks:

Apple has effectively shifted its sales mix toward higher-value units despite experiencing slower unit sales, BofA said.

This trend is expected to persist and could help mitigate potential unit sales weaknesses, particularly in China. 

BofA also noted Apple's dominance in the high-end market, maintaining a market share of over 90% in the $1,000 and above price band for the past three years.

The firm also cited the anticipation of a multi-year iPhone cycle propelled by next-generation AI technology, robust services growth, and the potential for margin expansion.

On Monday, Evercore ISI analysts said they believed that the sell-off in the iPhone maker’s shares may be “overdone.”

The firm said that investors' growing preference for AI-focused stocks like Nvidia  (NVDA)  has led to a reallocation of funds away from Apple. 

In addition, Evercore said concerns over weakening demand in China, where Apple may be losing market share in the smartphone segment, have affected investor sentiment.

And then ongoing regulatory issues continue to have an impact on investor confidence in the world's second-biggest company.

“We think the sell-off is rather overdone, while we suspect there is strong valuation support at current levels to down 10%, there are three distinct drivers that could unlock upside on the stock from here – a) Cap allocation, b) AI inferencing, and c) Risk-off/defensive shift," the firm said in a research note.

Related: Veteran fund manager picks favorite stocks for 2024

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Major typhoid fever surveillance study in sub-Saharan Africa indicates need for the introduction of typhoid conjugate vaccines in endemic countries

There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high…

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There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high burden combined with the threat of typhoid strains resistant to antibiotic treatment calls for stronger prevention strategies, including the use and implementation of typhoid conjugate vaccines (TCVs) in endemic settings along with improvements in access to safe water, sanitation, and hygiene.

Credit: IVI

There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high burden combined with the threat of typhoid strains resistant to antibiotic treatment calls for stronger prevention strategies, including the use and implementation of typhoid conjugate vaccines (TCVs) in endemic settings along with improvements in access to safe water, sanitation, and hygiene.

 

The findings from this 4-year study, the Severe Typhoid in Africa (SETA) program, offers new typhoid fever burden estimates from six countries: Burkina Faso, Democratic Republic of the Congo (DRC), Ethiopia, Ghana, Madagascar, and Nigeria, with four countries recording more than 100 cases for every 100,000 person-years of observation, which is considered a high burden. The highest incidence of typhoid was found in DRC with 315 cases per 100,000 people while children between 2-14 years of age were shown to be at highest risk across all 25 study sites.

 

There are an estimated 12.5 to 16.3 million cases of typhoid every year with 140,000 deaths. However, with generic symptoms such as fever, fatigue, and abdominal pain, and the need for blood culture sampling to make a definitive diagnosis, it is difficult for governments to capture the true burden of typhoid in their countries.

 

“Our goal through SETA was to address these gaps in typhoid disease burden data,” said lead author Dr. Florian Marks, Deputy Director General of the International Vaccine Institute (IVI). “Our estimates indicate that introduction of TCV in endemic settings would go to lengths in protecting communities, especially school-aged children, against this potentially deadly—but preventable—disease.”

 

In addition to disease incidence, this study also showed that the emergence of antimicrobial resistance (AMR) in Salmonella Typhi, the bacteria that causes typhoid fever, has led to more reliance beyond the traditional first line of antibiotic treatment. If left untreated, severe cases of the disease can lead to intestinal perforation and even death. This suggests that prevention through vaccination may play a critical role in not only protecting against typhoid fever but reducing the spread of drug-resistant strains of the bacteria.

 

There are two TCVs prequalified by the World Health Organization (WHO) and available through Gavi, the Vaccine Alliance. In February 2024, IVI and SK bioscience announced that a third TCV, SKYTyphoid™, also achieved WHO PQ, paving the way for public procurement and increasing the global supply.

 

Alongside the SETA disease burden study, IVI has been working with colleagues in three African countries to show the real-world impact of TCV vaccination. These studies include a cluster-randomized trial in Agogo, Ghana and two effectiveness studies following mass vaccination in Kisantu, DRC and Imerintsiatosika, Madagascar.

 

Dr. Birkneh Tilahun Tadesse, Associate Director General at IVI and Head of the Real-World Evidence Department, explains, “Through these vaccine effectiveness studies, we aim to show the full public health value of TCV in settings that are directly impacted by a high burden of typhoid fever.” He adds, “Our final objective of course is to eliminate typhoid or to at least reduce the burden to low incidence levels, and that’s what we are attempting in Fiji with an island-wide vaccination campaign.”

 

As more countries in typhoid endemic countries, namely in sub-Saharan Africa and South Asia, consider TCV in national immunization programs, these data will help inform evidence-based policy decisions around typhoid prevention and control.

 

###

 

About the International Vaccine Institute (IVI)
The International Vaccine Institute (IVI) is a non-profit international organization established in 1997 at the initiative of the United Nations Development Programme with a mission to discover, develop, and deliver safe, effective, and affordable vaccines for global health.

IVI’s current portfolio includes vaccines at all stages of pre-clinical and clinical development for infectious diseases that disproportionately affect low- and middle-income countries, such as cholera, typhoid, chikungunya, shigella, salmonella, schistosomiasis, hepatitis E, HPV, COVID-19, and more. IVI developed the world’s first low-cost oral cholera vaccine, pre-qualified by the World Health Organization (WHO) and developed a new-generation typhoid conjugate vaccine that is recently pre-qualified by WHO.

IVI is headquartered in Seoul, Republic of Korea with a Europe Regional Office in Sweden, a Country Office in Austria, and Collaborating Centers in Ghana, Ethiopia, and Madagascar. 39 countries and the WHO are members of IVI, and the governments of the Republic of Korea, Sweden, India, Finland, and Thailand provide state funding. For more information, please visit https://www.ivi.int.

 

CONTACT

Aerie Em, Global Communications & Advocacy Manager
+82 2 881 1386 | aerie.em@ivi.int


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