Southcoast Financial Corp.

$SOCB - Nasdaq - Banks and Thrifts
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Southcoast Announces Year End Earnings

MT. PLEASANT, S.C., Jan. 17, 2013 (GLOBE NEWSWIRE) -- Southcoast Financial Corporation (Nasdaq:SOCB) announced unaudited net income of $3,519,000, or $. 57 per basic share, for the year ended December 31, 2012. This compares to an unaudited net loss of $16,480,000, or $2.71 per basic share, for the year ended December 31, 2011. The basic average shares totaled 6,125,535 and 6,080,066 for the years ended December 31, 2012 and 2011, respectively.

For the quarter ended December 31, 2012, net income was $929,000, or $. 15 per basic share. This compares to a net loss of $4,803,000, or $. 79 per basic share, for the quarter ended December 31, 2011. The net income (loss) per share is based on 6,143,820 basic average shares for the quarter ended December 31, 2012, compared to 6,102,461 basic average shares for the same period of 2011. The shares for all periods have been adjusted to reflect a stock dividend of 15% paid to shareholders of record as of December 31, 2012.

The ratio of nonperforming assets to total assets improved from 7.16% as of December 31, 2011 to 4.41% as of December 31, 2012. The allowance for loan losses as a percentage of loans was 2.49% as of December 31, 2012, compared to 3.34% as of December 31, 2011. The allowance for loan losses as a percentage of total non-performing loans totaled 83.99% as of December 31, 2012, compared to 50.27% as of December 31, 2011.

"The improvement in 2012 earnings as compared to 2011 was primarily the result of lower nonperforming assets, which led to reductions in our loan loss provision and expenses associated with other real estate owned. Additionally, our Company achieved improvement in our net interest margin due to a lower cost of funds resulting from the downward repricing of our interest bearing liabilities," said L. Wayne Pearson, Chairman and Chief Executive Officer.

The year ended December 31, 2011 loss included a $10,023,000 provision for loan losses and $4,575,000 of income tax expense related to a full write-off of the Company's deferred tax asset. The provision for loan losses for the year ended December 31, 2012 was $880,000. Income tax expense for the year ended December 31, 2012 totaled $137,000, which represented the Company's state income tax expense. The Company continues to maintain a full reserve against its deferred tax asset, which totaled approximately $8.0 million at December 31, 2012.

Net interest income for the year ended December 31, 2012 increased $1,119,000 to $13,377,000 from $12,258,000 for the same period of 2011. This increase was due to a $1,788,000 decrease in interest expense which overcame a $669,000 decrease in interest income. The Company's net interest margin improved by 43 basis points to 3.55% for the twelve months of 2012 from 3.12% for the same period of 2011, due to the significant reduction in its cost of funds, primarily as a result of the repricing of time deposits and other borrowings.

Noninterest income increased $479,000 to $3,277,000 for the year ended December 31, 2012, from $2,798,000 for the year ended December 31, 2011, primarily due to increases of $234,000 in fees on loans sold and $151,000 in fees on deposits.

Noninterest expenses decreased by $4,820,000 to $12,118,000 for the year ended December 31, 2012, from $16,938,000 for the year ended December 31, 2011. Impairment expense and operating expenses related to other real estate owned decreased by a combined $3,630,000 between the two periods, accounting for a large portion of the overall noninterest expense decrease. Additionally, rental income and net gains from the sale of other real estate owned, which are accounted for as a reduction of noninterest expense, contributed to an increased reduction of $791,000 in noninterest expense between the two periods. Other noninterest expense reductions included foreclosure expenses and unfunded commitments expense, which had decreases of $135,000 and $150,000, respectively.

Total assets as of December 31, 2012 were $438.2 million compared to $427.5 million as of December 31, 2011, an increase of 2.5%. Loans, excluding loans held for sale, increased to $327.5 million, up 2.4% from $319.7 million as of December 31, 2011. Deposits at December 31, 2012 increased 1.1% to $319.6 million. Brokered and wholesale certificates of deposit at December 31, 2012 totaled $13,583,000, down 68.3% from the December 31, 2011 total of $42,898,000 as the Company continued to reduce non-core funding.

The subsidiary bank's capital position as of December 31, 2012 remains in excess of the well-capitalized requirements under the regulatory framework for prompt corrective action, with a tier 1 capital to average assets ratio of 9.94%. "We continue to be encouraged by the future direction of our Company given our capital strength, the reduction in non-performing assets and our continued improvement in the net interest margin," concluded Pearson.

About Southcoast Financial Corporation

Southcoast Financial Corporation, headquartered in Mt. Pleasant, South Carolina, is the holding company of Southcoast Community Bank. The Bank, which opened for business July 20, 1998, is a state chartered commercial bank operating from its main office at 530 Johnnie Dodds Boulevard in Mt. Pleasant, South Carolina and nine branches in the Charleston, South Carolina area. Southcoast Financial Corporation's common stock is traded on the NASDAQ Global Market under the symbol SOCB.

Southcoast Financial Corporation    
SELECTED FINANCIAL DATA    
(dollars in thousands, except earnings per share)    
     
  Three Months Ended
   December 2012  December 2011
   (Unaudited)
INCOME STATEMENT DATA    
Net interest income  $3,497  $2,878
Provision for loan losses 0 3,400
Noninterest income 727 619
Noninterest expenses 3,161 4,721
Net income(loss) 929  (4,803)
     
PER SHARE DATA    
Net income(loss) per share    
Basic  $0.15  $(0.79)
Diluted  $0.15  $(0.79)
     
BALANCE SHEET DATA    
Total assets  $438,220  $427,521
Total deposits 319,632 316,147
Total loans (net) 319,310 309,048
Investment securities 48,367 52,755
Other borrowings 69,949 66,850
Junior subordinated debentures 10,310 10,310
Shareholders' equity 34,264 30,812
     
Average shares outstanding    
Basic 6,143,820 6,102,461
Diluted 6,143,820 6,102,461
     
Book value per share $5.58 $5.05
     
Key ratios    
     
Equity to asset ratio 7.82% 7.21%
Nonperforming assets to assets^ 4.41% 7.16%
Reserve to loans 2.49% 3.34%
Reserve to nonaccruing loans 83.99% 50.27%
     
     
^ Includes nonaccrual loans, loans 90 days past due and still accruing interest, and other real estate owned.
   
   
   
  Southcoast Financial Corporation
  Consolidated Balance Sheets
  (Dollars in thousands)
     
   December 31  December 31
  2012 2011
   (Unaudited)  
Assets    
Cash and cash equivalents $21,984 $18,037
Investments 48,367 52,755
Loans held for sale 1,789 995
Loans 327,469 319,740
Less: Allowance for loan losses 8,159 10,692
     
Net loans 319,310 309,048
Fixed assets 21,653 21,977
Other assets 25,117 24,709
     
Total Assets $438,220 $427,521
     
Liabilities & Shareholders' Equity    
Deposits:    
Non-interest bearing $38,797 $34,120
Interest bearing non-time 115,245 115,803
Time deposits 165,590 166,224
     
Total deposits 319,632 316,147
Other borrowings 69,949 66,850
Other liabilities 4,065 3,402
Junior subordinated debentures 10,310 10,310
     
Total liabilities 403,956 396,709
     
Shareholders' Equity    
Common Stock 54,437 54,382
Accumulated deficit  (19,002)  (22,520)
Accumulated other comprehensive loss  (1,171) (1,050)
     
Total shareholders' equity 34,264 30,812
     
Total Liabilities and Shareholders' equity $438,220 $427,521
     
   
   
   Southcoast Financial Corporation
   Consolidated Income Statements
   (Dollars in thousands, except earnings per share)
         
  Year Ended  Three Months Ended
  December 31, December 31, December 31, December 31,
  2012 2011 2012 2011
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest Income        
Interest and fees on loans $16,948 $17,017 $4,316 $4,034
Interest on investments 1,260 1,855 289 303
Interest on Fed funds sold 29 34 6 8
         
Total interest income 18,237 18,906 4,611 4,345
         
Interest expense 4,860 6,648 1,114 1,467
         
Net interest income 13,377 12,258 3,497 2,878
Provision for loan losses 880 10,023 0 3,400
         
Net interest income (loss) after provision 12,497 2,235 3,497 (522)
         
Noninterest income 3,277 2,798 727 619
         
Total operating income 15,774 5,033 4,224 97
         
Noninterest expense        
Salaries and benefits 6,487 6,668 1,617 1,624
Occupancy and equipment 2,904 2,868 810 774
Other expenses 2,727 7,402 734 2,323
         
         
Total noninterest expense 12,118 16,938 3,161 4,721
         
Income (Loss) before taxes 3,656 (11,905) 1,063 (4,624)
         
Income tax expense 137 4,575 134  179
         
Net income (loss) $3,519 ($16,480) $929 ($4,803)
         
         
Basic net income (loss) per share $0.57 ($2.71) $0.15 ($0.79)
         
Diluted net income (loss) per share $0.57 ($2.71) $0.15 ($0.79)
         
Average number of shares        
Basic 6,125,535 6,080,066 6,143,820 6,102,461
Diluted 6,125,535 6,080,066 6,143,820 6,102,461
CONTACT: William C. Heslop
         Senior Vice President and Chief Financial Officer
         (843) 216-3019
Source: Southcoast Financial Corporation
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