First Community Financial Partners Inc (FCMP)

[56Chevy]

Awaiting 10-K financials until then this is the last 10-Q from Sept. 2013.

https://www.snl.com/Cache/20808013.pdf?IID=4142262&FID=20808013&O=3&OSID=9

New O/S count is: There were outstanding 16,221,413 shares of the Registrant’s common stock as of November 12, 2013.

Book Value $5.34

Note 7. Subordinated Debt

In May 2009, the Company completed a private placement offering to individual accredited investors of (i) $5.0 million in common stock at $4.63 per share and (ii) $4.1 million of 8% Series A noncumulative convertible preferred stock (the “Series A Preferred Stock”) with a purchase price and liquidation preference of $1,000 per share. The Series A Preferred Stock was convertible to common stock at $10.00 per share on or after five years. On July 9, 2009, each share of Series A Preferred Stock was, automatically and without any action on the part of the holder thereof, exchanged for Company subordinated notes in the same face amount as the shares for which they were exchanged. The holders of the notes are entitled to interest at 8% payable annually, and the notes will mature on the tenth anniversary from the date of issuance. The notes are redeemable by the Company on or after five years of the date of issuance, in whole or in part, at a price equal to 100% of the outstanding principal amount of such note redeemed. The notes are convertible to common stock at $10.00 per share on or after five years. The subordinated debt qualifies for regulatory capital treatment subject to certain limits as total capital of the Company at September 30, 2013. The outstanding balance at September 30, 2013 and December 31, 2012 was $4.1 million.

On March 12, 2013, the Company completed a private placement offering of $10.0 million of subordinated indebtedness coupled with warrants to purchase in the aggregate 250,000 shares of Company common stock at a price of $4.00 per share. These securities were offered in denominations of $10,000 per note evidencing the subordinated indebtedness along with a warrant to purchase 250 shares of Company common stock at $4.00 per share. The subordinated indebtedness bears interest at an annual rate of 9.0% and will mature on the tenth anniversary from the date of issuance. Interest on the subordinated indebtedness has been accruing from the date of issuance and is payable semi-annually, in arrears. The warrants will remain outstanding following any such redemption of the subordinated indebtedness, and will have a term of ten years from the date of issuance, whereafter they will expire. The notes are redeemable by the Company on or after two years from the date of issuance, in whole or in part, at a price equal to 100% of the outstanding principal amount of such note redeemed. Proceeds from the private placement were allocated to the two instruments based on the relative fair values of the subordinated indebtedness without the warrants and of the warrants themselves at time of issuance. The portion of the proceeds allocated to the warrants was approximately $277,000 and was accounted for as paid-in capital at estimated fair value. The remainder of the discount was allocated to the subordinated indebtedness as part of the transaction. The discount will be accreted over the term of the warrants using the interest method. The outstanding balance net of the associated discount was $9.7 million at September 30, 2013.

On September 30, 2013, the Company completed a private placement offering of $5.5 million of subordinated indebtedness. These securities were offered in denominations of $1,000 per note. The subordinated notes will mature on the eighth anniversary of the issuance of the notes. The Company will have the option to redeem the notes in whole or part, upon the occurrence of certain events affecting the regulatory capital or tax treatment of the notes prior to the fifth anniversary of the issuance. The holders of the notes are entitled to interest at 8.625% payable in arrears, on March 31, June 30, September 30, and December 31 of each year, beginning December 31, 2013, and at maturity. On or after the fifth anniversary of the effective date of the subordinated notes, the Company may redeem the notes, in whole or in part, upon giving notice to the holders. The outstanding balance was $5.5 million at September 30, 2013.

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Net deferred tax asset $ 16,603 MM

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Note 15. Preferred Stock

In December 2009, as part of the Troubled Asset Relief Program (“TARP”) Capital Purchase Program of the United States Treasury (“Treasury”), the Company entered into a Letter Agreement and Securities Purchase Agreement (collectively, the “Purchase Agreement”) with Treasury, pursuant to which the Company (i) sold to Treasury 22,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B (“Series B Preferred Stock”), at $1,000 per share, or $22 million in the aggregate, and (ii) issued to Treasury warrants to purchase Fixed Rate Cumulative Perpetual Preferred Stock, Series C (“Series C Preferred Stock”), with a liquidation amount equal to 5% of the Treasury’s investment in Series B Preferred Stock or $1.1 million. The warrants were immediately exercised for 1,100 shares of Series C Preferred Stock and are being accreted over an estimated life of five years. The Series B Preferred Stock and the Series C Preferred Stock qualify as Tier 1 capital.

On July 23, 2012, Treasury announced its intentions to auction the Series B Preferred Stock and Series C Preferred Stock. On July 26, 2012, Treasury announced that all of First Community’s 1,100 shares of Series C Preferred Stock were priced and sold to one or more third parties at $661.50 per share, for an aggregate total of $727,650. Treasury did not proceed with the sale of Series B Preferred Stock in First Community due to the fact that Treasury did not receive sufficient bids above the minimum bid price in accordance with the auction procedures. The book value of the Series C Preferred Stock was $837,000 at September 30, 2013 and dividends are paid quarterly at an annual rate of 9.0%.

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On September 10, 2012, Treasury announced its intentions to again auction the Series B Preferred Stock. On September 13, 2012, Treasury announced that all 22,000 shares of Series B Preferred Stock were priced and sold to one or more third parties at $652.50 per share, for an aggregate total of $14.4 million. Dividends are paid quarterly at an annual rate of 5.0% until February 15, 2015, at which time the annual rate will increase to 9.0%. None of the remaining shares of outstanding Series B Preferred Stock or Series C Preferred Stock are held by Treasury.

On November 8, 2012, First Community entered into a TARP Securities Purchase Option Agreement with certain of the current holders of the Series B Preferred Stock and Series C Preferred Stock. Pursuant to the TARP Securities Purchase Option Agreement, First Community has the option, but is not required, to repurchase from such certain holders their shares of Series B Preferred Stock at a discount. $16,824,000 face amount, or 16,824 shares, of Series B preferred stock are subject to the discount option. The TARP Securities Purchase Option Agreement provides that First Community can achieve a discount upon repurchase between 18.5% and 31% from the $1,000 per share face value of the Series B Preferred Stock if such shares are repurchased, in whole or in part, before September 13, 2014. The available percentage discount is 31% through March 13, 2013, 27.139% from March 14, 2013 through September 12, 2013, 23% from September 13, 2013 through March 13, 2014, and 18.5% from March 14, 2014 through September 13, 2014. If any shares subject to the TARP Securities Purchase Option Agreement are repurchased following September 13, 2014, the agreement does not provide for a discount.

The Series C Preferred Stock may not be redeemed until all Series B Preferred Stock has been redeemed, repurchased or otherwise acquired by the Company. All redemptions are subject to the approval of the Company’s federal banking regulatory agency.
On March 12, 2013, pursuant to the terms of the TARP Securities Purchase Option Agreement the Company repurchased 9,500 shares, or $9.5 million, of its Series B Preferred Stock at $690.00 per share. The total cost of repurchasing these shares was approximately $6.6 million which included accrued and unpaid dividends earned on the shares through the date of repurchase. A gain on retirement of preferred stock of $2.9 million was recorded through accumulated deficit.

On September 30, 2013, pursuant to the terms of the TARP Securities Purchase Option Agreement the Company repurchased 7,324shares, or $7.3 million, of its Series B Preferred Stock at $728.61 per share. The total cost of repurchasing these shares was $5.3 million which included accrued and unpaid dividends earned on the shares through the date of repurchase. A gain on retirement of preferred stock of $2.0 million was recorded through accumulated deficit.

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Results of Operations

Overview

Highlighted operational data includes:

• Net income available to common stockholders increased $14.8 million to $15.0 million for the three months ended September 30, 2013 compared to net income available to common stockholders
of $208,000 for the same period in 2012. In addition, net income available to common stockholders was $567,000 for the three months ended June 30, 2013. The increase in net income was
primarily due to an income tax benefit of $14.1 million resulting from the reversal of the previously established valuation allowance on the Company’s deferred tax asset.

• First Community repurchased $7.3 million of its outstanding $12.5 million Series B Preferred Stock during the third quarter of 2013. The 7,324 preferred shares, with a liquidation preference of $1,000 per share, were repurchased at a cost of $5.3 million resulting in a gain attributable to common shareholders of $2.0 million.

• Book value per common share increased $1.04 to $5.34 at September 30, 2013, compared to $4.30 at June 30, 2013. Book value per common share increased $1.20 to $5.34 at September 30, 2013 from $4.14 at December 31, 2012.

• Investment securities increased by $27.8 million to $143.1 million at September 30, 2013 from June 30, 2013 as management deployed excess liquidity.

• Loans increased by $21.9 million during the nine months ended September 30, 2013 and $11.0 million during the third quarter of 2013. Commitments to extend credit also increased $25.1 million
during 2013 and $33.0 million during the third quarter of 2013.

• Non-performing loans decreased $7.6 million to $20.3 million or 3.08% of total loans at September 30, 2013, compared with $27.9 million or 4.39% of total loans at December 31, 2012. Nonperforming loans decreased $6.1 million during the third quarter of 2013.

• Net interest income decreased only $75,000 for the three months ended September 30, 2013 compared to $28,000 for the same time period ended September 30, 2012. Net interest income remained
stable during the third quarter of 2013 at $7.1 million for the three months ended September 30, 2013 compared to $7.0 million for the same time period ended June 30, 2013.

• Provision for loan losses decreased $300,000 to $1.2 million for the three months ended September 30, 2013 compared to $1.5 million for the three months ended June 30, 2013 as a result of the overall decrease in non-performing loans.

• Noninterest expenses continued to improve as a result of the 2013 merger of First Community's four bank subsidiaries and overall improved operating performance. Noninterest expense for the third quarter of 2013 was $5.1 million, which was an $209,000 improvement over the third quarter of 2012. Noninterest expense increased $357,000 to $5.1 million for the three months ended
September 30, 2013 compared to threemonths ended June 30, 2013. The increase was due to new hires in the Company’s residential mortgage loan operation along with the grant of restricted stock units that immediately vested.