Business & Finance
Business and Finance
Business and Finance
Wed, January 28, 2009Tue, January 27, 2009Mon, January 26, 2009Sat, January 24, 2009Fri, January 23, 2009Thu, January 22, 2009Wed, January 21, 2009Tue, January 20, 2009Mon, January 19, 2009Fri, January 16, 2009Southern Community Financial Corporation : Southern Community Financial Corporation Announces Results for the Fourth Quarter 20
Published in Business and Finance on Thursday, January 22nd 2009 at 14:08 GMT, Last Modified on 2009-01-22 14:13:36 by Market Wire
WINSTON-SALEM, NC--(Marketwire - January 22, 2009) - Southern Community Financial Corporation (
Financial Highlights
-- Net interest margin for the fourth quarter 2008 increased 22 basis points to 3.10% from 2.88% in the third quarter 2008 -- Nonperforming loans were 1.10% of total loans at December 31, 2008 compared with 0.91% of total loans at September 30, 2008 -- Nonperforming assets were 1.12% of total assets at December 31, 2008 compared with 0.84% at September 30, 2008 -- Annualized fourth quarter 2008 net charge-offs increased to 0.43% of average loans compared with 0.28% for the third quarter 2008 -- Fourth quarter provision for loan losses of $2.36 million, an increase of $1.01 million compared to $1.35 million in the third quarter 2008 -- Allowance for loan losses was 1.43% of total loans at December 31, 2008 compared to 1.35% at September 30, 2008 and 1.20% at year-end 2007 -- Loan and deposit growth for 2008 was excellent at 10.6% and 18.0%, respectively -- Received $42.75 million in new capital under the Treasury's Capital Purchase Program -- Fourth quarter 2008 net income of $1.56 million, or $0.08 diluted earnings per common share, in line with third quarter 2008 earnings of $1.63 million, or $0.09 diluted earnings per common share, despite an increase in provision for loan losses of $1.0 million -- 2008 earnings of $5.85 million, or $0.33 diluted earnings per common share, decreased 22% from $7.55 million, or $0.43 diluted earnings per common share, for 2007; however 2008 earnings included an increase in the provision for loan losses of $5.39 million over 2007 provision -- Declared cash dividend of $0.04 per share for fourth quarter
Southern Community Financial Corporation (
Asset Quality
During the fourth quarter of 2008, nonperforming loans increased to $14.4 million (or 1.10% of total loans) from $12.0 million (or 0.91% of total loans) at September 30, 2008. Nonperforming assets increased to $20.2 million (or 1.12% of total assets) at December 31, 2008 from $15.1 million (or 0.84% of total assets) at September 30, 2008. Net charge-offs totaled $1.5 million during the fourth quarter, or 0.43% of average loans on an annualized basis, a 60% increase compared to $920 thousand (or 0.28% of average loans, annualized) in third quarter 2008. Nonperforming loans, nonperforming assets and net charge-offs activity continue to be predominantly related to residential construction and development lending as 82% of nonperforming loans, 87% of nonperforming assets and 81% of net charge-offs originated from this segment of the loan portfolio.
The provision for loan losses of $2.36 million for the fourth quarter increased $1.01 million compared to the third quarter 2008 provision and increased $1.61 million compared to the fourth quarter 2007 provision. The allowance for loan losses at December 31, 2008 of $18.9 million represented 1.43% of total loans and 1.31 times nonperforming loans compared with 1.35% of total loans and 1.49 times nonperforming loans at September 30, 2008.
"As this challenging economic environment became more severe during the fourth quarter and is expected to persist through 2009, we are continuing to work with our customers to resolve problem credits," said F. Scott Bauer, Chairman and Chief Executive Officer. "Through the efforts of our lending officers, credit administrators and executive management who monitor our delinquent and problem credits constantly, we successfully managed to hold the increase in nonperforming loans during the quarter to only $2.4 million. We prudently increased our allowance for loan losses to a level that better handles the increased risk in our loan portfolio due to the growth in charge-offs and nonperforming loans. As a result of this action, I believe we will be better positioned for the first quarter of 2009, at which time we expect nonperforming assets to increase from current levels. While this level of nonperforming assets is higher than our historical average, we believe it is manageable and continues to reflect the difficult housing market conditions that persist across our footprint.
While managing the challenges of this current credit environment is our top priority, we are also focused on margin improvement through pricing discipline and expense control as well as profitable and prudent growth. We are pleased that our underlying earnings and core business remain strong which positions us well for the future.
We intend to leverage our new capital in a responsible manner and promote customer initiatives to foster improvement in the financial well-being of our customers and the economies within our local communities. Following the recent $42.75 million investment under the Treasury's Capital Purchase Program, we believe we have sufficient capital and liquidity to weather the current economic environment and our regulatory capital ratios remain at levels that continue to be considered 'well capitalized'," Bauer said.
Financial Performance
Net interest income of $12.82 million for the fourth quarter 2008 increased by 8% compared with $11.86 million in the third quarter 2008, and 14.1% over the $11.24 million in the fourth quarter 2007. Net interest margin of 3.10% for the fourth quarter 2008 increased 22 basis points from 2.88% compared with the linked quarter and declined 5 basis points from 3.15% for the fourth quarter 2007. Growth in net interest income in the fourth quarter 2008 was significantly influenced by the impact of the 175 basis point reduction in the Federal Reserve's target funds rate on market interest rates. The Company's deposit and borrowing costs repriced downward to a greater extent than its asset yields due to the institution of interest rate floors on a majority of its variable rate loans.
Non-interest income of $2.52 million during the fourth quarter increased by $441 thousand or 21.2% compared with the third quarter 2008 primarily due to the $440 thousand nonrecurring loss on certain terminated derivative contracts during third quarter 2008. Also affecting fourth quarter non-interest income was a $138 thousand decrease in wealth management income on a sequential basis attributable to lower transaction volumes and overall market conditions. This impact was offset by $98 thousand in gains on sales of investment securities and $50 thousand increase in income from SBIC activities. Non-interest income for the twelve months ended December 31, 2008 remained relatively flat compared to the same period in 2007 as increases in service charge income, gains on derivatives and wealth management income were offset by $2.04 million decrease in SBIC income.
Non-interest expenses of $10.7 million for the fourth quarter 2008 increased $449 thousand or 4% on a linked quarter basis and $166 thousand or 1.6% year-over-year. On a linked quarter basis, the increase in non-interest expenses included a $360 thousand increase in legal and professional services expense, a $291 thousand write-off of goodwill related to prior acquisition of a mortgage company and $99 thousand in writedowns of foreclosed properties. Increased problem loan workout activity was the primary reason for the increased legal and professional services for the fourth quarter. As an annualized percentage of average assets, the expense load represented 2.35% of average assets for the fourth quarter 2008 and 2.42% of average assets for the twelve months ended December 31, 2008.
As of December 31, 2008, total assets amounted to $1.80 billion, representing an increase of $234.8 million, or 15% year-over-year driven by strong loan and deposit growth. On a linked quarter basis, asset growth for the fourth quarter 2008 was relatively flat. The loan portfolio decreased by $8.6 million or 1.0% sequentially during the fourth quarter due primarily to the payoff of one large commercial construction loan. Total deposits stood at $1.23 billion at December 31, 2008, an increase of $187.9 million or 18.0% year-over-year. During the fourth quarter 2008, deposits decreased $29.9 million or 2.4% from the September 30, 2008 level as depositors withdrew some liquidity from money market accounts for seasonal needs or in response to management's strategy to improve funding costs.
At December 31, 2008, stockholders' equity of $188.0 million represented 10.4% of total assets. Stockholders' equity increased $45.1 million or 32% from $142.8 million at September 30, 2008 primarily as a result of $42.75 million in preferred stock issued to the U.S. Treasury under its Capital Purchase Program. Regulatory capital ratios remain in excess of the "well capitalized" threshold.
Southern Community's executive management team will host a conference call on January 23, 2009, at 10:00 AM Eastern Time to discuss the quarter-end results. The call can be accessed by dialing 1-877-741-4239 or 1-719-325-4762 and entering pass code 4742889. A replay of the conference call can be accessed until 11:59 pm on February 6, 2009, by calling 1-888-203-1112 or 1-719-457-0820 and entering pass code 4742889. You may access additional presentation materials for this conference call in the Investor Relations section of Southern Community's web site at [ www.smallenoughtocare.com ].
Southern Community Financial Corporation is headquartered in Winston-Salem, North Carolina and is the holding company of Southern Community Bank and Trust, a community bank with twenty-two banking offices throughout North Carolina.
Southern Community Financial Corporation's common stock and trust preferred securities are listed on the NASDAQ Global Select Market under the trading symbols SCMF and SCMFO, respectively. Additional information about Southern Community Financial Corporation is available on its website at [ www.smallenoughtocare.com ] or by email at [ investor.relations@smallenoughtocare.com ].
This news release contains forward-looking statements. Such statements are subject to certain factors that may cause the Company's results to vary from those expected. These factors include changing economic and financial market conditions, competition, ability to execute our business plan, items already mentioned in this press release, and other factors described in our filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's judgment only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events and circumstances that arise after the date hereof.
Southern Community Financial Corporation (Dollars in thousands except per share data) (Unaudited) For the three months ended For the Year Ended Income Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Dec 31, Dec 31, Statement 2008 2008 2008 2008 2007 2008 2007 ---------------------------------------------- ----------------- Total Interest Income $ 24,278 $ 24,412 $ 23,727 $ 24,325 $ 25,370 $ 96,742 $ 98,908 Total Interest Expense 11,459 12,553 11,947 13,323 14,132 49,282 55,141 -------- -------- -------- -------- -------- -------- -------- Net Interest Income 12,819 11,859 11,780 11,002 11,238 47,460 43,767 Provision for Loan Losses 2,360 1,350 3,530 925 750 8,165 2,775 Net Interest Income after Provision for Loan Losses 10,459 10,509 8,250 10,077 10,488 39,295 40,992 Non-Interest Income Service Charges on Deposit Accounts 1,487 1,491 1,475 1,406 1,441 5,859 4,931 Income from mortgage banking activities 233 219 358 484 325 1,294 1,343 Investment brokerage and trust fees 147 285 335 371 289 1,138 915 SBIC income (loss) and management fees 89 39 82 (150) 394 60 2,103 Gain (Loss) and Net Cash Settlement on Economic Hedges - (440) 330 1,044 19 934 79 Other Income 464 483 518 434 372 1,899 1,960 -------- -------- -------- -------- -------- -------- -------- Total Non- Interest Income 2,518 2,077 3,098 3,589 2,840 11,282 11,331 Non-Interest Expense Salaries and Employee Benefits 5,088 5,535 5,621 5,794 5,467 22,038 21,218 Occupancy and Equipment 1,930 1,854 1,931 1,964 2,021 7,679 7,928 Other 3,635 2,815 3,120 2,802 2,999 12,372 11,754 -------- -------- -------- -------- -------- -------- -------- Total Non- Interest Expense 10,653 10,204 10,672 10,560 10,487 42,089 40,900 Income Before Taxes 2,324 2,382 676 3,106 2,841 8,488 11,423 Provision for Income Taxes 766 754 73 1,041 948 2,634 3,869 -------- -------- -------- -------- -------- -------- -------- Net Income $ 1,558 $ 1,628 $ 603 $ 2,065 $ 1,893 $ 5,854 $ 7,554 ======== ======== ======== ======== ======== ======== ======== Effective dividend on preferred stock 185 - - - - 185 - -------- -------- -------- -------- -------- -------- -------- Net income available to common share- holders $ 1,373 $ 1,628 $ 603 $ 2,065 $ 1,893 $ 5,669 $ 7,554 ======== ======== ======== ======== ======== ======== ======== Net Income per Common Share Basic $ 0.08 $ 0.09 $ 0.03 $ 0.12 $ 0.11 $ 0.33 $ 0.43 Diluted $ 0.08 $ 0.09 $ 0.03 $ 0.12 $ 0.11 $ 0.33 $ 0.43 ======== ======== ======== ======== ======== ======== ======== Balance Sheet Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, 2008 2008 2008 2008 2007 ----------- ----------- ----------- ----------- ----------- Assets Cash and due from Banks $ 25,215 $ 27,453 $ 37,576 $ 35,037 $ 31,905 Federal Funds Sold & Int Bearing Balances 2,180 2,605 3,607 4,752 2,250 Investment Securities 334,455 313,113 316,336 296,151 228,933 Loans held for sale 316 920 2,106 4,110 1,929 Loans 1,314,811 1,323,360 1,285,014 1,235,952 1,188,438 Allowance for Loan Losses (18,851) (17,929) (17,499) (14,853) (14,258) ----------- ----------- ----------- ----------- ----------- Net Loans 1,295,960 1,305,431 1,267,515 1,221,099 1,174,180 Bank Premises and Equipment 40,030 39,264 39,672 38,790 38,997 Goodwill 49,501 49,792 49,792 49,792 49,792 Other Assets 56,368 59,283 55,101 40,721 41,196 ----------- ----------- ----------- ----------- ----------- Total Assets $ 1,804,025 $ 1,797,861 $ 1,771,705 $ 1,690,452 $ 1,569,182 =========== =========== =========== =========== =========== Liabilities and Stock- holders' Equity Deposits Non- Interest Bearing $ 102,048 $ 104,988 $ 114,685 $ 109,534 $ 109,895 Money market, savings and NOW 475,772 523,949 560,094 507,105 495,448 Time 655,292 634,037 542,622 526,096 439,894 ----------- ----------- ----------- ----------- ----------- Total Deposits 1,233,112 1,262,974 1,217,401 1,142,735 1,045,237 Borrowings 373,213 378,500 401,667 393,306 372,405 Accrued Expenses and Other Liabil- ities 9,743 13,549 10,747 10,061 9,201 ----------- ----------- ----------- ----------- ----------- Total Liabil- ities 1,616,068 1,655,023 1,629,815 1,546,102 1,426,843 Total Stock- holders' Equity 187,957 142,838 141,890 144,350 142,339 ----------- ----------- ----------- ----------- ----------- Total Liabil- ities and Stock- holders' Equity $ 1,804,025 $ 1,797,861 $ 1,771,705 $ 1,690,452 $ 1,569,182 =========== =========== =========== =========== =========== Book Value per Common Share $ 8.78 $ 8.22 $ 8.17 $ 8.33 $ 8.18 =========== =========== =========== =========== ===========
As of or for the three months ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, 2008 2008 2008 2008 2007 ---------- ---------- ---------- ---------- ---------- Per Common Share Data: Basic Earnings per Share $ 0.08 $ 0.09 $ 0.03 $ 0.12 $ 0.11 Diluted Earnings per Share $ 0.08 $ 0.09 $ 0.03 $ 0.12 $ 0.11 Book Value per Share $ 8.78 $ 8.22 $ 8.17 $ 8.33 $ 8.18 Cash dividends paid $ 0.040 $ 0.040 $ 0.040 $ 0.040 $ 0.040 Selected Performance Ratios: Return on Average Assets (annualized) ROA 0.34% 0.36% 0.14% 0.51% 0.48% Return on Average Equity (annualized) ROE 4.01% 4.57% 1.68% 5.84% 5.35% Return on Tangible Equity (annualized) 5.98% 7.13% 2.60% 9.12% 8.42% Net Interest Margin 3.10% 2.88% 2.99% 2.98% 3.15% Net Interest Spread 2.88% 2.67% 2.76% 2.67% 2.77% Non-interest Income as a % of Revenue 16.42% 14.90% 20.82% 24.60% 20.17% Non-interest Income as a % of Average Assets 0.56% 0.45% 0.71% 0.89% 0.72% Non-interest Expense to Average Assets 2.35% 2.27% 2.47% 2.61% 2.67% Efficiency Ratio 69.46% 73.22% 71.73% 72.37% 74.49% Asset Quality: Nonperforming Loans $ 14,433 $ 12,007 $ 12,796 $ 7,012 $ 2,052 Nonperforming Assets $ 20,178 $ 15,086 $ 14,210 $ 8,042 $ 2,827 Nonperforming Loans to Total Loans 1.10% 0.91% 1.00% 0.57% 0.17% Nonperforming Assets to Total Assets 1.12% 0.84% 0.80% 0.48% 0.18% Allowance for Loan Losses to Period-end Loans 1.43% 1.35% 1.36% 1.20% 1.20% Allowance for Loan Losses to Nonperforming Loans (X) 1.31X 1.49X 1.37X 2.12X 6.95X Net Charge-offs to Average Loans (annualized) 0.43% 0.28% 0.28% 0.11% 0.23% Capital Ratios: Equity to Total Assets 10.42% 7.94% 8.01% 8.54% 9.07% Tangible Equity to Total Tangible Assets (1) 5.51% 5.26% 5.28% 5.69% 6.00% Average Balances: Year to Date Interest Earning Assets $1,588,542 $1,569,306 $1,535,388 $1,485,037 $1,370,413 Total Assets 1,738,868 1,717,357 1,680,842 1,625,164 1,513,619 Total Loans 1,279,041 1,264,744 1,238,843 1,219,800 1,114,677 Equity 145,754 142,800 143,282 142,190 138,693 Interest Bearing Liabilities 1,474,539 1,456,848 1,421,227 1,368,420 1,250,986 Quarterly Interest Earning Assets $1,645,832 $1,636,404 $1,586,068 $1,485,037 $1,416,061 Total Assets 1,802,934 1,789,593 1,736,520 1,625,164 1,559,047 Gross Loans 1,321,621 1,315,983 1,257,886 1,219,800 1,176,945 Equity 154,552 141,846 144,374 142,190 140,470 Interest Bearing Liabilities 1,527,227 1,527,316 1,474,186 1,368,420 1,291,307 Weighted Average Number of Shares Outstanding Basic 17,369,765 17,369,925 17,354,298 17,359,452 17,449,203 Diluted 17,398,432 17,416,675 17,401,298 17,401,589 17,466,703 Period end outstanding shares 16,769,675 17,370,175 17,370,175 17,319,351 17,399,882 As of or For the Year Ended Dec 31, Dec 31, 2008 2007 ---------- ---------- Per Common Share Data: Basic Earnings per Share $ 0.33 $ 0.43 Diluted Earnings per Share $ 0.33 $ 0.43 Book Value per Share $ 8.78 $ 8.18 Cash dividends paid $ 0.160 $ 0.155 Selected Performance Ratios: Return on Average Assets (annualized) ROA 0.34% 0.50% Return on Average Equity (annualized) ROE 4.02% 5.45% Return on Tangible Equity (annualized) 6.18% 8.64% Net Interest Margin 2.99% 3.19% Net Interest Spread 2.75% 2.81% Non-interest Income as a % of Revenue 19.21% 20.57% Non-interest Income as a % of Average Assets 0.65% 0.75% Non-interest Expense to Average Assets 2.42% 2.70% Efficiency Ratio 71.65% 74.23% Asset Quality: Nonperforming Loans $ 14,433 $ 2,052 Nonperforming Assets $ 20,178 $ 2,827 Nonperforming Loans to Total Loans 1.10% 0.17% Nonperforming Assets to Total Assets 1.12% 0.18% Allowance for Loan Losses to Period-end Loans 1.43% 1.20% Allowance for Loan Losses to Nonperforming Loans (X) 1.31X 6.95X Net Charge-offs to Average Loans (annualized) 0.28% 0.14% Capital Ratios: Equity to Total Assets 10.42% 9.07% Tangible Equity to Total Tangible Assets (1) 5.51% 6.00% Average Balances: Year to Date Interest Earning Assets Total Assets Total Loans Equity Interest Bearing Liabilities Quarterly Interest Earning Assets Total Assets Gross Loans Equity Interest Bearing Liabilities Weighted Average Number of Shares Outstanding Basic 17,363,395 17,559,352 Diluted 17,398,318 17,624,399 Period end outstanding shares 16,769,675 17,399,882 (1) - Tangible Equity to Total Tangible Assets is period-ending equity less intangibles, divided by period-ending assets less intangibles. Management provides the above non-GAAP measure, footnote (1) to provide readers with the impact of purchase accounting on this key financial ratio.
