Southern Community Financial Corporation (NASDAQ: SCMF) (NASDAQ:
SCMFO)
Third Quarter Highlights
-- Net income of $1.6 million, or diluted earnings per share of $0.09
-- Loan and deposit growth of 3.0% and 3.7%, respectively, for the third
quarter 2008 with excellent year-over-year growth of 14.6% for loans and
22.2% for deposits
-- Nonperforming loans at 0.91% of total loans compared with 1.00% of
total loans at June 30, 2008; nonperforming assets at 0.84% of total
assets compared with 0.80% at June 30, 2008
-- Net charge-offs stable at 0.28% (annualized) of average loans compared
with the second quarter 2008
-- Allowance for loan losses of 1.35% of loans compared to 1.36% in
second quarter 2008 and 1.23% in third quarter 2007
-- Net interest margin was 2.88% compared to 2.99% for second quarter
2008 and 3.16% for third quarter 2007
-- Planning to participate in recently announced Treasury Capital
Purchase Program
-- Declared cash dividend of $0.04 per share for third quarter
Southern Community Financial Corporation (NASDAQ: SCMF) (NASDAQ:
SCMFO), the holding company for Southern Community Bank and Trust,
reported net income of $1.63 million for the third quarter of 2008,
compared with $600 thousand in second quarter of 2008 and $1.72
million in the third quarter of 2007. Diluted earnings per share
were $0.09 for the third quarter 2008 compared with $0.03 in second
quarter and $0.10 in third quarter 2007. The Board of Directors
declared a quarterly dividend of $0.04 per share which is
consistent with the previous dividend.
Net income was impacted by a loss on derivatives of $437
thousand on an after-tax basis ($641 thousand on a pre-tax basis),
resulting from the bankruptcy of Lehman Brothers, the counterparty
for certain derivative contracts. Excluding this loss, diluted
earnings per share amounted to $0.12. On a pre-tax basis, $440
thousand was a nonrecurring loss on the derivative position, which
impacted non-interest income, and $201 thousand in interest income
was lost from the termination of certain derivative contracts.
Asset Quality
During the third quarter of 2008, nonperforming loans decreased
to $12.0 million (or 0.91% of total loans) from $12.8 million (or
1.00% of total loans). Nonperforming assets increased slightly to
$15.1 million (or 0.84% of total assets) from $14.2 million (or
0.80% of total assets) at June 30, 2008. Net charge-offs totaled
$920 thousand during the third quarter, or 0.28% of average loans
on an annualized basis, a modest increase compared to $884 thousand
(or 0.28% of average loans, annualized) in second quarter 2008.
Nonperforming loans, nonperforming assets and net charge-offs
activity continue to be predominantly related to residential
construction and development lending as 85% of nonperforming loans,
86% of nonperforming assets and 80% of net charge-offs originated
from this segment of the loan portfolio. The provision for loan
losses of $1.35 million for the third quarter decreased $2.18
million compared to the second quarter 2008 and increased $775
thousand compared to the third quarter 2007. The allowance for loan
losses at September 30, 2008 of $17.9 million represented 1.35% of
total loans and 1.49 times nonperforming loans compared with 1.36%
of loans and 1.37 times nonperforming loans at June 30, 2008.
"We continued to make progress in working with our customers to
resolve problem credits during the third quarter," said F. Scott
Bauer, Chairman and Chief Executive Officer. "While the economic
environment remains challenging, we expect our nonperforming assets
to increase slightly, yet remain manageable in the fourth quarter.
Reserves as a percentage of total loans are expected to remain at
current levels. Our executive management team continues to monitor
problem credits weekly. Our loan officers include individuals with
decades of experience in the construction industry, affording us a
unique perspective in working through the risks associated with
this segment of the loan portfolio.
While managing the challenges of the current credit environment
remains our top priority, we are also focused on profitable growth.
We expect to benefit from opportunities caused by recent market
disruption through the acquisition of new long-term customer
relationships from other banks. Loan and deposit pricing across our
markets is becoming more rational, which should help to offset the
effect of the most recent round of rate cuts on our net interest
margin during the fourth quarter of 2008. We are focused on core
deposit growth.
We remain well capitalized with good liquidity. We believe the
allowance for loan losses is adequate for losses inherent in the
loan portfolio at September 30, 2008. We are planning to
participate in the Treasury's Capital Purchase Program to provide
us with sufficient capital to take advantage of current and future
market opportunities."
Financial Performance
Net interest income of $11.9 million for the third quarter 2008
increased by 1% compared with $11.8 million in the second quarter
2008, and 8% over the $11.0 million in the third quarter 2007. Net
interest margin of 2.88% for the third quarter 2008 decreased 11
basis point from 2.99% compared with the linked quarter and
declined 28 basis points from 3.16% for the third quarter 2007.
Growth in net interest income was impacted by the $201 thousand
lost benefit from the terminated derivative contracts and an $80
thousand decrease in our quarterly dividend on Federal Home Loan
Bank stock compared with the second quarter. These factors combined
had an impact on net interest margin of nine basis points.
Non-interest income of $2.1 million during the third quarter
decreased by $1.0 million or 33% compared with the second quarter
2008 primarily due to the $440 thousand nonrecurring loss on
certain terminated derivative contracts compared with a $330
thousand gain on derivative activity during second quarter 2008.
Also affecting non-interest income was a $139 thousand decrease in
mortgage banking income and a $50 thousand decrease in wealth
management income on a sequential basis, both attributable to lower
transaction volumes. On a year-over-year basis, non-interest income
decreased by $469 thousand or 18%.
Non-interest expenses of $10.2 million for the third quarter
2008 decreased $468 thousand or 4% annualized on a linked quarter
basis and $145 thousand or 1% year over year. As an annualized
percentage of average assets, the expense load represented 2.27% of
average assets for the third quarter 2008, decreasing from 2.47%
for the second quarter 2008 and 2.69% for the third quarter
2007.
As of September 30, 2008, total assets amounted to $1.80
billion, representing an increase of $249.1 million, or 16%
year-over-year driven by strong loan growth. On a linked quarter
basis, asset growth slowed to $26.1 million or 1%. The loan
portfolio grew by $38.3 million or 3% sequentially during the third
quarter and $134.9 million or 11% for the first nine months of
2008. Total deposits stood at $1.3 billion at September 30, 2008,
an increase of $229.3 million or 22% year-over-year and an increase
of $45.6 million or 4% over the June 30, 2008 level.
At September 30, 2008, stockholders' equity of $142.8 million
represented 7.9% of total assets. Stockholders' equity increased
$948 thousand or 1% from $141.9 million at June 30, 2008 as a
result of a $1.6 million in earnings less $695 thousand in cash
dividends paid. Regulatory capital ratios remain in excess of the
"well capitalized" threshold.
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.
Southern Community's executive management team will host a
conference call on October 24, 2008, at 10:00 AM Eastern Time to
discuss the quarter-end results. The call can be accessed by
dialing 1-877-852-6573 or 1-719-325-4793 and entering pass code
9948995. A replay of the conference call can be accessed until
11:59 pm on November 7, 2008, by calling 1-888-203-1112 or
1-719-457-0820 and entering pass code 9948995. 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.
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)
Nine Months
For the three months ended Ended
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Sep 30, Sep 30,
Income Statement 2008 2008 2008 2007 2007 2008 2007
------- ------- ------- ------- ------- ------- -------
Total Interest
Income $24,412 $23,727 $24,325 $25,370 $25,339 $72,464 $73,538
Total Interest
Expense 12,553 11,947 13,323 14,132 14,350 37,823 41,009
------- ------- ------- ------- ------- ------- -------
Net Interest
Income 11,859 11,780 11,002 11,238 10,989 34,641 32,529
Provision for
Loan Losses 1,350 3,530 925 750 575 5,805 2,025
Net Interest
Income after
Provision for
Loan Losses 10,509 8,250 10,077 10,488 10,414 28,836 30,504
Non-Interest
Income
Service Charges
on Deposit
Accounts 1,491 1,475 1,406 1,441 1,266 4,372 3,490
Income from
mortgage
banking
activities 219 358 484 325 298 1,061 1,018
Investment
brokerage and
trust fees 285 335 371 289 334 991 852
SBIC income
(loss) and
management fees 39 82 (150) 394 167 (29) 1,709
Gain (Loss) and
Net Cash
Settlement on
Economic Hedges (440) 330 1,044 19 69 934 60
Other Income 483 518 434 372 412 1,435 1,362
------- ------- ------- ------- ------- ------- -------
Total
Non-Interest
Income 2,077 3,098 3,589 2,840 2,546 8,764 8,491
Non-Interest
Expense
Salaries and
Employee
Benefits 5,535 5,621 5,794 5,467 5,267 16,950 15,751
Occupancy and
Equipment 1,854 1,931 1,964 2,021 2,116 5,749 5,907
Other 2,815 3,120 2,802 2,999 2,966 8,737 8,755
------- ------- ------- ------- ------- ------- -------
Total
Non-Interest
Expense 10,204 10,672 10,560 10,487 10,349 31,436 30,413
Income Before
Taxes 2,382 676 3,106 2,841 2,611 6,164 8,582
Provision for
Income Taxes 754 73 1,041 948 890 1,868 2,921
------- ------- ------- ------- ------- ------- -------
Net Income $ 1,628 $ 603 $ 2,065 $ 1,893 $ 1,721 $ 4,296 $ 5,661
======= ======= ======= ======= ======= ======= =======
Net Income per
Share
Basic $ 0.09 $ 0.03 $ 0.12 $ 0.11 $ 0.10 $ 0.25 $ 0.32
Diluted $ 0.09 $ 0.03 $ 0.12 $ 0.11 $ 0.10 $ 0.25 $ 0.32
======= ======= ======= ======= ======= ======= =======
Balance Sheet Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2008 2008 2008 2007 2007
---------- ---------- ---------- ---------- ----------
Assets
Cash and due
from Banks $ 27,453 $ 37,576 $ 35,037 $ 31,905 $ 24,227
Federal Funds
Sold & Int
Bearing
Balances 2,605 3,607 4,752 2,250 420
Investment
Securities 313,113 316,336 296,151 228,933 247,088
Loans held for
sale 920 2,106 4,110 1,929 3,137
Loans 1,323,360 1,285,014 1,235,952 1,188,438 1,155,031
Allowance for
Loan Losses (17,929) (17,499) (14,853) (14,258) (14,197)
---------- ---------- ---------- ---------- ----------
Net Loans 1,305,431 1,267,515 1,221,099 1,174,180 1,140,834
Bank Premises
and Equipment 39,264 39,672 38,790 38,997 38,881
Goodwill 49,792 49,792 49,792 49,792 49,792
Other Assets 59,283 55,101 40,721 41,196 44,352
---------- ---------- ---------- ---------- ----------
Total Assets $1,797,861 $1,771,705 $1,690,452 $1,569,182 $1,548,731
========== ========== ========== ========== ==========
Liabilities and
Stockholders'
Equity
Deposits
Non-Interest
Bearing $ 104,988 $ 114,685 $ 109,534 $ 109,895 $ 110,718
Money market,
savings and
NOW 523,949 560,094 507,105 495,448 479,595
Time 634,037 542,622 526,096 439,894 443,405
---------- ---------- ---------- ---------- ----------
Total
Deposits 1,262,974 1,217,401 1,142,735 1,045,237 1,033,718
Borrowings 378,500 401,667 393,306 372,405 360,309
Accrued
Expenses and
Other
Liabilities 13,549 10,747 10,061 9,201 13,868
---------- ---------- ---------- ---------- ----------
Total
Liabilities 1,655,023 1,629,815 1,546,102 1,426,843 1,407,895
Total
Stockholders'
Equity 142,838 141,890 144,350 142,339 140,836
---------- ---------- ---------- ---------- ----------
Total
Liabilities
and
Stockholders'
Equity $1,797,861 $1,771,705 $1,690,452 $1,569,182 $1,548,731
========== ========== ========== ========== ==========
Book Value per
Share $ 8.22 $ 8.17 $ 8.33 $ 8.18 $ 8.04
========== ========== ========== ========== ==========
As of or for the three months ended
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2008 2008 2008 2007 2007
---------- ---------- ---------- ---------- ----------
Per Share Data:
Basic Earnings
per Share $ 0.09 $ 0.03 $ 0.12 $ 0.11 $ 0.10
Diluted
Earnings per
Share $ 0.09 $ 0.03 $ 0.12 $ 0.11 $ 0.10
Book Value per
Share $ 8.22 $ 8.17 $ 8.33 $ 8.18 $ 8.04
Cash dividends
paid $ 0.040 $ 0.040 $ 0.040 $ 0.040 $ 0.040
Selected
Performance
Ratios:
Return on
Average Assets
(annualized)
ROA 0.36% 0.14% 0.51% 0.48% 0.45%
Return on
Average Equity
(annualized)
ROE 4.57% 1.68% 5.84% 5.35% 4.92%
Return on
Tangible
Equity
(annualized) 7.13% 2.60% 9.12% 8.42% 7.80%
Net Interest
Margin 2.88% 2.99% 2.98% 3.15% 3.16%
Net Interest
Spread 2.67% 2.76% 2.67% 2.77% 2.75%
Non-interest
Income as a %
of Revenue 14.90% 20.82% 24.60% 20.17% 18.81%
Non-interest
Income as a %
of Average
Assets 0.45% 0.71% 0.89% 0.72% 0.66%
Non-interest
Expense to
Average Assets 2.27% 2.47% 2.61% 2.67% 2.69%
Efficiency
Ratio 73.22% 71.73% 72.37% 74.49% 76.46%
Asset Quality:
Nonperforming
Loans $ 12,007 $ 12,796 $ 7,012 $ 2,052 $ 2,226
Nonperforming
Assets $ 15,086 $ 14,210 $ 8,042 $ 2,827 $ 3,165
Nonperforming
Loans to Total
Loans 0.91% 1.00% 0.57% 0.17% 0.19%
Nonperforming
Assets to
Total Assets 0.84% 0.80% 0.48% 0.18% 0.20%
Allowance for
Loan Losses to
Period-end
Loans 1.35% 1.36% 1.20% 1.20% 1.23%
Allowance for
Loan Losses to
Nonperforming
Loans (X) 1.49X 1.37X 2.12X 6.95X 6.38X
Net Charge-offs
to Average
Loans
(annualized) 0.28% 0.28% 0.11% 0.23% 0.02%
Capital Ratios:
Equity to Total
Assets 7.94% 8.01% 8.54% 9.07% 9.09%
Tangible Equity
to Total
Tangible
Assets (1) 5.26% 5.28% 5.69% 6.00% 5.98%
Average
Balances:
Year to Date
Interest
Earning
Assets $1,569,306 $1,535,388 $1,485,037 $1,370,413 $1,355,030
Total Assets 1,717,357 1,680,842 1,625,164 1,513,619 1,498,310
Total Loans 1,264,744 1,238,843 1,219,800 1,114,677 1,093,693
Equity 142,800 143,282 142,190 138,693 138,094
Interest
Bearing
Liabilities 1,456,848 1,421,227 1,368,420 1,250,986 1,237,398
Quarterly
Interest
Earning
Assets $1,636,404 $1,586,068 $1,485,037 $1,416,061 $1,381,279
Total Assets 1,789,593 1,736,520 1,625,164 1,559,047 1,523,922
Gross Loans 1,315,983 1,257,886 1,219,800 1,176,945 1,131,060
Equity 141,846 144,374 142,190 140,470 138,838
Interest
Bearing
Liabilities 1,527,316 1,474,186 1,368,420 1,291,307 1,258,681
Weighted
Average Number
of Shares
Outstanding
Basic 17,369,925 17,354,298 17,359,452 17,449,203 17,584,565
Diluted 17,416,675 17,401,298 17,401,589 17,466,703 17,602,250
Period end
outstanding
shares 17,370,175 17,370,175 17,319,351 17,399,882 17,520,829
As of or for the
Nine Months Ended
Sep 30, Sep 30,
2008 2007
---------- ----------
Per Share Data:
Basic Earnings
per Share $ 0.25 $ 0.32
Diluted
Earnings per
Share $ 0.25 $ 0.32
Book Value per
Share $ 8.22 $ 8.04
Cash dividends
paid $ 0.120 $ 0.115
Selected
Performance
Ratios:
Return on
Average Assets
(annualized)
ROA 0.33% 0.51%
Return on
Average Equity
(annualized)
ROE 4.02% 5.48%
Return on
Tangible
Equity
(annualized) 6.26% 8.73%
Net Interest
Margin 2.95% 3.21%
Net Interest
Spread 2.70% 2.82%
Non-interest
Income as a %
of Revenue 20.19% 20.70%
Non-interest
Income as a %
of Average
Assets 0.68% 0.76%
Non-interest
Expense to
Average Assets 2.45% 2.71%
Efficiency
Ratio 72.42% 74.14%
Asset Quality:
Nonperforming
Loans $ 12,007 $ 2,226
Nonperforming
Assets $ 15,086 $ 939
Nonperforming
Loans to Total
Loans 0.91% 0.19%
Nonperforming
Assets to
Total Assets 0.84% 0.20%
Allowance for
Loan Losses to
Period-end
Loans 1.35% 1.23%
Allowance for
Loan Losses to
Nonperforming
Loans (X) 1.49X 6.38X
Net Charge-offs
to Average
Loans
(annualized) 0.23% 0.11%
Capital Ratios:
Equity to Total
Assets 7.94% 9.09%
Tangible Equity
to Total
Tangible
Assets (1) 5.26% 5.98%
Weighted
Average Number
of Shares
Outstanding
Basic 17,361,257 17,532,813
Diluted 17,406,558 17,603,525
Period end
outstanding
shares 17,370,175 17,520,829
(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.
For additional information: F. Scott Bauer Chairman/CEO James
Hastings Executive Vice President/CFO (336) 768-8500
Grafico Azioni Capital Bank Financial Corp. - Southern Community Capital Trust II - % Cumulative Trust Preferred Securities (MM) (NASDAQ:SCMFO)
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Grafico Azioni Capital Bank Financial Corp. - Southern Community Capital Trust II - % Cumulative Trust Preferred Securities (MM) (NASDAQ:SCMFO)
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