First munity (FCCO) - 2019 Q2 - Quarterly Report

Financial Performance - Net income for the six months ended June 30, 2019 was $5.4 million, a decrease from $5.7 million for the same period in 2018, resulting in diluted earnings per share of $0.70 compared to $0.74[159]. - Total net income for the three months ended June 30, 2019, was $2.9 million, or $0.37 diluted earnings per share, compared to $3.0 million, or $0.39 diluted earnings per share for the same period in 2018[179]. - Net interest income increased by $663 thousand to $18.1 million for the six months ended June 30, 2019, driven by an increase in average earning assets of $31.4 million[162]. - Net interest income increased by $177 thousand for the three months ended June 30, 2019, with net interest income totaling $9.1 million compared to $8.9 million in the same period in 2018[182]. - Non-interest income for the second quarter of 2019 was $3.2 million, an increase from $2.9 million in the same period in 2018, driven by a $222 thousand increase in mortgage banking income[183]. Asset and Loan Management - Average loans outstanding increased to $726.4 million for the six months ended June 30, 2019, from $667.9 million for the same period in 2018[170]. - Total loan production for the first half of 2019 was $64.4 million, while deposits increased by $11.9 million to $937.4 million at June 30, 2019[187]. - Loans increased by approximately $8.2 million during the six months ended June 30, 2019, totaling $726.7 million compared to $718.5 million at December 31, 2018[187]. - Total gross loans increased to $726.7 million as of June 30, 2019, compared to $718.5 million at December 31, 2018, with a net loan amount of $720.3 million[188]. Interest and Yield Metrics - The yield on the loan portfolio increased by 9 basis points to 4.83% for the six months ended June 30, 2019, compared to 4.74% for the same period in 2018[162]. - The yield on loans was 4.83% for the six months ended June 30, 2019, compared to 4.74% for the same period in 2018[217]. - The net interest margin improved by 2 basis points to 3.66% for the six months ended June 30, 2019, compared to 3.64% for the same period in 2018[162]. - The net interest spread was 3.43% for the six months ended June 30, 2019, compared to 3.52% for the same period in 2018[217]. Allowance for Loan Losses - The allowance for loan losses is considered a critical accounting policy, requiring significant judgment and estimates regarding creditworthiness and collateral value[150]. - The company maintains an allowance for loan losses to absorb probable losses on existing loans, impacting operating earnings[145]. - The allowance for loan losses was $6.4 million, or 0.88% of total loans, as of June 30, 2019, compared to $6.3 million, or 0.87% of total loans, at December 31, 2018[163]. - The provision for loan losses was $114 thousand for the six months ended June 30, 2019, down from $231 thousand for the same period in 2018[163]. - The unallocated portion of the allowance for loan losses has declined over the last several years, indicating a potential risk associated throughout a full economic cycle[164]. Capital and Equity - The bank's total equity was 10.5% of total assets at June 30, 2019, indicating a strong capital position[202]. - The bank's risk-based capital ratios at June 30, 2019, were 10.2% for the leverage ratio, 13.5% for Tier 1, and 14.2% for total capital, compared to 10.0%, 13.2%, and 14.0% respectively at December 31, 2018[210]. - The bank's Common Equity Tier 1 ratio remained stable at 13.5% as of June 30, 2019, compared to 13.2% at December 31, 2018[210]. - Shareholders' equity increased to $117,255,000, up from $106,032,000, indicating a growth of 11.5% year-over-year[219]. Tax and Regulatory Considerations - The effective tax rate was 20.4% in the first half of 2019, expected to remain between 20.5% and 21.0% for the remainder of the year[178]. - The bank holding company's ability to declare and pay dividends is subject to federal and state regulatory considerations, including the Federal Reserve's guidelines[211]. - The South Carolina-chartered bank can generally pay cash dividends of up to 100% of net income in any calendar year without prior approval from the South Carolina Board of Financial Institutions[212]. Operational Developments - The company opened two new full-service offices in the first half of 2019, contributing to increased staffing and occupancy expenses[176]. - The bank's liquidity position is supported by interest-bearing bank balances, federal funds sold, and investment securities, which represent 22.4% of total assets as of June 30, 2019[199]. - The company has adopted various accounting policies that significantly impact the carrying value of assets and liabilities[149].