Two locally based community banks posted solid first-quarter profits this week, more evidence of the recovery within the lending industry.

Bellwether banks

JPMorgan Chase and Wells Fargo, bellwethers for the banking industry, reported record earnings Friday, but those numbers masked troubling declines in revenue.

Revenue fell slightly at both banks, and the earnings gains came largely from slashing expenses and related measures. JPMorgan socked away less to cover potential lawsuits and released some of the money it set aside for bad loans.

San Francisco-based Wells Fargo, the largest bank in the Charleston region, cut back on office space across its naitonal footrpint.

The results show that in an era of sluggish loan demand and increased government regulations, banks must stay lean if they want to boost earnings. The industry has come a long way since the panic of the 2008 financial crisis, but the pattern it’s settled into is one of cutting expenses and maintaining revenue rather than turbocharged growth.

Staff and wire reports

The Bank of South Carolina Corp. and Southcoast Financial Corp. both started off the year with earnings near or slightly above the $1 million mark.

Charleston-based Bank of South Carolina, which averted most of the problem loans that have dogged many of its rivals, said it earned $998,805, or 22 cents a share, for the January-March period. That’s up 12 percent from the first three months of 2012.

Fleetwood S. Hassell, president and CEO, said the four-branch bank was pleased with the improved results.

“The ongoing contribution of our mortgage operation, coupled with excellent control of our noninterest expenses, continues to drive our numbers,” Hassell said in statememnt. “Bank lending remains flat, yet our new account activity and deposit growth is strong. We are off to a good start for 2013.”

Southcoast had first-quarter net income of slightly more than $1 million, or 16 cents a share, It marked the fifth consecutive profitable quarter for the Mount Pleasant-based company, which owns the nine-branch Southcoast Community Bank.

Earnings were down 19 percent from 2012. CEO Wayne Pearson attributed the difference to $736,000 in onetime property sale gains from early last year that skewed the comparisons.

Hobbled for several years by soured real estate loans, Southcoast has sharply reduced its foreclosures and other “nonperforming” holdings to 3.9 percent of its total assets at the end of March, down from 6.71 percent at that time in 2012.

Pearson said he’s optimistic about the bank’s improved core operations and the outlook for the local economy, though he agreed with Hassell’s comment about flat loan growth.

“That seem to be the recurring theme,” Pearson said this week.

One reason is that refinancings are starting to slow, he said. Another is that more lenders have entered the Charleston market in the past year or two, giving local borrowers more options.

Contact John McDermott at 937-5572.