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WINSTON-SALEM, NC -- (MARKET WIRE) -- 01/23/08 -- Southern Community Financial Corporation (NASDAQ: SCMF) (NASDAQ: SCMFO) (the "Company"), the holding company for Southern Community Bank and Trust, reported operating results for the three and twelve month periods ended December 31, 2007. For the fourth quarter, the Company reported net income of $1.9 million, matching the amount earned for the same period one year ago. Earnings per diluted share were $0.11 in the fourth quarter of both 2007 and 2006. For the year ended December 31, 2007, net income totaled $7.6 million ($0.43 per diluted share), an increase from the $4.2 million ($0.24 per diluted share) earned during 2006. The increase in 2007 is due primarily to the strong growth in non-interest income combined with the absence of the losses from the restructuring of the Company's balance sheet that were recorded in the second quarter of 2006.
Financial Highlights for 2007:
-- Continued to maintain strong credit quality with an adequate allowance
for loan losses -- Non-performing loans are 0.17% of total loans --
Allowance is 1.20% of total loans;
-- Achieved strong year-over-year growth in loans of 15.3% with deposit
growth of 2.0%;
-- Achieved solid year-over-year growth in interest-bearing non-maturity
deposits of $102.3 million, or 26.0%;
-- Increased service charge income on deposit accounts by 14.2% in 2007;
-- After 11 years of operations, advanced into third position in deposit
market share in our home base of Forsyth County and fifth in the Winston-
Salem, Greensboro, High Point metropolitan area.
Net interest income after the provision for loan losses of $10.5 million
for the fourth quarter of 2007 represented a 6.7% increase compared with
the $9.8 million reported in the same quarter a year ago. For the year,
net interest income increased 7.3% to $41.0 million from the $38.2 million
earned for the year ended December 31, 2006. The growth in net interest
income resulted primarily from the expansion of the Company's loan
portfolio. Average loans increased 16.4% to $1.1 billion in 2007 from
$958.0 million in 2006. Compared to the year ended December 31, 2006, the
net interest margin fell 11 basis points from 3.30% to 3.19%, due
principally to the maturity of longer term lower cost certificates of
deposit. On a linked quarter basis, the net interest margin decreased one
basis point from 3.16% to 3.15% as our liability sensitive position became
more apparent.
The 2007 provision for loan losses of $2.8 million was $265 thousand
greater than the 2006 provision. The allowance for loan losses stands at
1.20% of total loans and our nonperforming loans represent 0.17% of total
loans.
The Company Continues To Generate Solid Fee Income
Growth in service charges on deposit accounts and in revenue from the
Company's investment in Salem Capital Partners, a small business investment
company (SBIC) resulted in a 19.1% rise in non-interest income over the
fourth quarter of 2006. Non-interest income totaled $2.8 million in the
fourth quarter compared to $2.3 million in the prior year period. During
the fourth quarter of 2007 service charges on deposit accounts grew by
30.0% to $1.4 million from $1.1 million in the fourth quarter of 2006 and
revenue from Salem Capital Partners grew from $294 thousand in the fourth
quarter of 2006 to $394 thousand in the fourth quarter of 2007 or 34.2%
growth. For the year ended December 31, 2007, non-interest income was
$11.3 million compared to the $3.7 million reported in 2006. The increase
in non-interest income from 2006 is primarily due to the increases in
service charges on deposit accounts, earnings from SBIC activities and
increases in revenue from our mortgage and wealth divisions. Additionally,
the 2006 results included losses from the sale of investment securities of
$4.2 million that resulted from the aforementioned restructuring of our
balance sheet. For the year ended December 31, 2007, service charges on
deposit accounts grew by 14.2% to $4.9 million from $4.3 million for 2006,
revenue from the Mortgage division increased 11.5% to $1.3 million, revenue
from our Wealth Management division increased 46.3% to $1.1 million and
revenue from Salem Capital increased 165.5% to $2.1 million.
Non-interest expense for the quarter increased by 7.9% over the fourth
quarter of 2006 and totaled $10.3 million for the year compared to the $9.6
million in the year ago period, reflecting costs associated with the
continued growth in all of our markets. For the year, non-interest
expenses grew 13.8% to $40.8 million in 2007 from $35.8 million for 2006.
Part of the increase in expenses during 2007 was due to an increase in our
FDIC assessment of $318 thousand and the incurrence of a full year of
expenses on our operations center in 2007 compared to a partial year in
2006. We funded the continued growth of our franchise in North Carolina
and invested in our infrastructure through the addition of people and
technology to support our growing customer base.
Total Assets Increase to $1.6 Billion -- Up 9.2% for the Year
As of December 31, 2007, the Company reported total assets of $1.6 billion,
representing a year-over-year increase of $132.7 million, or 9.2% driven by
increases in the loan portfolio. Investment securities declined 10.4% and
stand at $228.9 million or 14.6% of total assets.
Loans and Deposits Continue Steady Growth
At year-end 2007, the loan portfolio totaled $1.2 billion, an increase of
$157.7 million, or 15.3% from December 31, 2006 and $32.9 million or 2.8%
over September 30, 2007.
Total deposits grew to $1.0 billion at December 31, 2007, an increase of
$20.7 million or 2.0% from December 31, 2006 and $11.5 million or 1.1% over
September 30, 2007.
The Company continues to focus on attracting non-maturity deposits to
improve the funding mix and reduce overall funding costs. Those efforts
are reflected in a $102.3 million or 26.0% increase year-over-year in money
market, savings and NOW account deposits which ended the year at $495.5
million. Non-interest bearing deposits increased $945 thousand or 0.9% for
the year. On a linked-quarter basis, demand deposits declined to $109.9
million at December 31, 2007, a decrease of 0.7% from September 30, 2007
and money market, savings and NOW account balances increased 3.3% from
September 30, 2007.
Asset Quality
The Company's allowance for loan losses equaled $14.3 million, or 1.20% of
total loans and 6.95 times non-performing loans at December 31, 2007.
Credit quality metrics remained strong as non-performing loans totaled $2.1
million or 0.17% of total loans at quarter-end, a decrease from the $2.2
million or 0.19% of total loans as reported for September 30, 2007. Net
charge-offs as a percentage of average loans for the fourth quarter of 2007
were 0.23%, up slightly from 0.21% for the same period in the prior year.
For the entire year, net charge-offs were $1.6 million or 0.14% of average
loans.
At December 31, 2007, stockholders' equity totaled $142.4 million and
represented 9.1% of total assets. Regulatory capital ratios remain strong
and are all in excess of the "well-capitalized" threshold.
Southern Community Financial Corporation Chairman and Chief Executive
Officer F. Scott Bauer commented, "This was a difficult earnings year for
the industry as a whole. We continue to strengthen our infrastructure and
prepare Southern Community for the next ten years. Our people did a great
job in producing quality loan and core deposit growth while providing
superior service to our customers. We are proud that we have been able to
maintain excellent credit quality. This is essential, especially in the
current environment. We are well positioned for the future in the fastest
growing markets in North Carolina. Our entire team thanks our customers
and shareholders for their ongoing support."
Southern Community Financial is headquartered in Winston-Salem, North
Carolina and is the holding company of Southern Community Bank and Trust, a
community bank with twenty-two branches 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 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 January 24, 2008 at 10:00 AM Eastern Time to discuss the year-end
results. The call can be accessed by dialing 1-866-542-4241 or
1-416-641-6139 and asking for the Southern Community Financial Corporation
call. A replay of the conference call can be accessed until 11:59 pm on
February 29, 2008 by calling 1-800-408-3053 or 1-416-695-5800 and entering
pass code 3248063.
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
Income Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
Statement 2007 2007 2007 2007 2006
---------- ---------- ---------- ---------- ----------
Total Interest
Income $ 25,370 $ 25,339 $ 24,626 $ 23,573 $ 23,233
Total Interest
Expense 14,132 14,350 13,607 13,052 12,807
---------- ---------- ---------- ---------- ----------
Net Interest
Income 11,238 10,989 11,019 10,521 10,426
Provision for
Loan Losses 750 575 600 850 600
Net Interest
Income after
Provision for
Loan Losses 10,488 10,414 10,419 9,671 9,826
Non-Interest
Income
Service Charges
on Deposit
Accounts 1,441 1,266 1,173 1,051 1,109
Gain (Loss) on
Sale of
Investment
Securities - - - - 44
Gain (Loss) and
Net Cash
Settlement on
Economic
Hedges 19 69 (4) (5) (25)
Other Income 1,322 1,211 1,644 2,086 1,209
---------- ---------- ---------- ---------- ----------
Total
Non-Interest
Income 2,782 2,546 2,813 3,132 2,337
Non-Interest
Expense
Salaries and
Employee
Benefits 5,475 5,267 5,341 5,143 4,936
Occupancy and
Equipment 2,021 2,116 1,888 1,903 1,819
Other 2,848 2,966 3,076 2,713 2,834
---------- ---------- ---------- ---------- ----------
Total
Non-Interest
Expense 10,344 10,349 10,305 9,759 9,589
Income Before
Taxes 2,926 2,611 2,927 3,044 2,574
Provision for
Income Taxes 1,019 890 996 1,035 632
---------- ---------- ---------- ---------- ----------
Net Income $ 1,907 $ 1,721 $ 1,931 $ 2,009 $ 1,942
========== ========== ========== ========== ==========
Net Income per
Share
Basic $ 0.11 $ 0.10 $ 0.11 $ 0.12 $ 0.11
Diluted $ 0.11 $ 0.10 $ 0.11 $ 0.11 $ 0.11
========== ========== ========== ========== ==========
For the Year Ended
Income Dec 31, Dec 31,
Statement 2007 2006
---------- ----------
Total Interest
Income $ 98,908 $ 85,520
Total Interest
Expense 55,141 44,798
---------- ----------
Net Interest
Income 43,767 40,722
Provision for
Loan Losses 2,775 2,510
Net Interest
Income after
Provision for
Loan Losses 40,992 38,212
Non-Interest
Income
Service Charges
on Deposit
Accounts 4,931 4,318
Gain (Loss) on
Sale of
Investment
Securities - (4,156)
Gain (Loss) and
Net Cash
Settlement on
Economic
Hedges 79 (797)
Other Income 6,263 4,313
---------- ----------
Total
Non-Interest
Income 11,273 3,678
Non-Interest
Expense
Salaries and
Employee
Benefits 21,226 18,826
Occupancy and
Equipment 7,928 6,835
Other 11,603 10,141
---------- ----------
Total
Non-Interest
Expense 40,757 35,802
Income Before
Taxes 11,508 6,088
Provision for
Income Taxes 3,940 1,890
---------- ----------
Net Income $ 7,568 $ 4,198
========== ==========
Net Income per
Share
Basic $ 0.43 $ 0.24
Diluted $ 0.43 $ 0.24
========== ==========
Balance Sheet Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2007 2007 2007 2007 2006
---------- ---------- ---------- ---------- ----------
Assets
Cash and due
from Banks $ 31,905 $ 24,227 $ 32,742 $ 28,014 $ 29,160
Federal Funds
Sold & Int
Bearing
Balances 2,250 420 8,563 14,945 783
Investment
Securities 228,933 247,088 250,211 261,734 255,496
Loans 1,191,062 1,158,168 1,109,442 1,085,479 1,033,411
Allowance for
Loan Losses (14,258) (14,197) (13,677) (13,417) (13,040)
---------- ---------- ---------- ---------- ----------
Net Loans 1,176,804 1,143,971 1,095,765 1,072,062 1,020,371
Bank Premises
and Equipment 38,997 38,881 39,587 39,984 40,492
Goodwill 49,792 49,792 49,792 49,792 49,792
Other Assets 40,522 44,352 43,580 43,536 40,371
---------- ---------- ---------- ---------- ----------
Total Assets $1,569,203 $1,548,731 $1,520,240 $1,510,067 $1,436,465
========== ========== ========== ========== ==========
Liabilities and
Stockholders'
Equity
Deposits
Non-Interest
Bearing $ 109,895 $ 110,718 $ 112,142 $ 113,011 $ 108,950
Money market,
savings and
NOW 495,448 479,595 413,533 448,849 393,152
Time 439,894 443,405 472,504 516,921 522,480
---------- ---------- ---------- ---------- ----------
Total
Deposits 1,045,237 1,033,718 998,179 1,078,781 1,024,582
Borrowings 372,405 360,309 371,024 281,157 265,297
Accrued
Expenses and
Other
Liabilities 9,208 13,868 11,988 12,083 10,361
---------- ---------- ---------- ---------- ----------
Total
Liabilities 1,426,850 1,407,895 1,381,191 1,372,021 1,300,240
Total
Stockholders'
Equity 142,353 140,836 139,049 138,046 136,225
---------- ---------- ---------- ---------- ----------
Total
Liabilities
and
Stockholders'
Equity $1,569,203 $1,548,731 $1,520,240 $1,510,067 $1,436,465
========== ========== ========== ========== ==========
Book Value per
Share $ 8.18 $ 8.04 $ 7.89 $ 7.93 $ 7.83
========== ========== ========== ========== ==========
As of or for the three months ended
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2007 2007 2007 2007 2006
---------- ---------- ---------- ---------- ----------
Per Share Data:
Basic Earnings
per Share $ 0.11 $ 0.10 $ 0.11 $ 0.12 $ 0.11
Diluted
Earnings per
Share $ 0.11 $ 0.10 $ 0.11 $ 0.11 $ 0.11
Book Value per
Share $ 8.18 $ 8.04 $ 7.89 $ 7.93 $ 7.83
Cash dividends
paid $ 0.040 $ 0.040 $ 0.040 $ 0.035 $ 0.035
Selected
Performance
Ratios:
Return on
Average Assets
(annualized)
ROA 0.49% 0.45% 0.52% 0.56% 0.54%
Return on
Average Equity
(annualized)
ROE 5.39% 4.92% 5.58% 5.96% 5.70%
Return on
Tangible
Equity
(annualized) 8.48% 7.80% 8.86% 9.56% 9.22%
Net Interest
Margin 3.15% 3.16% 3.25% 3.22% 3.22%
Net Interest
Spread 2.77% 2.75% 2.87% 2.85% 2.84%
Non-interest
Income as a %
of Revenue 19.84% 18.81% 20.34% 22.94% 18.31%
Non-interest
Income as a %
of Average
Assets 0.71% 0.66% 0.75% 0.87% 0.65%
Non-interest
Expense to
Average Assets 2.63% 2.69% 2.75% 2.70% 2.67%
Efficiency
Ratio 73.78% 76.46% 74.50% 71.48% 75.13%
Asset Quality:
Nonperforming
Loans $ 2,052 $ 2,226 $ 983 $ 1,240 $ 2,636
Foreclosed
Assets $ 2,827 $ 3,165 $ 2,227 $ 2,659 $ 3,531
Nonperforming
Loans to Total
Loans 0.17% 0.19% 0.09% 0.11% 0.26%
Nonperforming
Assets to
Total Assets 0.18% 0.20% 0.15% 0.18% 0.25%
Allowance for
Loan Losses to
Period-end
Loans 1.20% 1.23% 1.23% 1.24% 1.26%
Allowance for
Loan Losses to
Nonperforming
Loans 6.95 X 6.38 X 13.91 X 10.82 X 4.95 X
Net Charge-offs
to Average
Loans
(annualized) 0.23% 0.02% 0.12% 0.18% 0.21%
Capital Ratios:
Equity to Total
Assets 9.07% 9.09% 9.15% 9.14% 9.48%
Tangible Equity
to Total
Tangible
Assets (1) 6.00% 5.98% 5.97% 5.94% 6.12%
Average
Balances:
Year to Date
Interest
Earning
Assets $1,370,413 $1,355,030 $1,341,688 $1,324,218 $1,232,305
Total Assets 1,513,619 1,498,310 1,485,292 1,467,296 1,368,223
Total Loans 1,114,677 1,093,693 1,074,700 1,054,315 958,001
Equity 138,693 138,094 137,716 136,623 134,886
Interest
Bearing
Liabilities 1,250,986 1,237,398 1,226,580 1,212,714 1,115,747
Quarterly
Interest
Earning
Assets $1,416,061 $1,381,279 $1,358,967 $1,324,218 $1,283,422
Total Assets 1,559,047 1,523,922 1,503,090 1,467,296 1,424,990
Gross Loans 1,176,945 1,131,060 1,094,861 1,054,315 1,023,515
Equity 140,470 138,838 138,797 136,623 135,123
Interest
Bearing
Liabilities 1,291,307 1,258,681 1,240,293 1,212,714 1,170,786
Weighted
Average Number
of Shares
Outstanding
Basic 17,449,203 17,584,565 17,574,100 17,423,824 17,431,542
Diluted 17,466,703 17,602,250 17,667,207 17,597,029 17,610,248
Period end
outstanding
shares 17,399,882 17,520,829 17,621,653 17,410,115 17,405,940
As of or for the
Year Ended
Dec 31, Dec 31,
2007 2006
---------- ----------
Per Share Data:
Basic Earnings
per Share $ 0.43 $ 0.24
Diluted
Earnings per
Share $ 0.43 $ 0.24
Book Value per
Share $ 8.18 $ 7.83
Cash dividends
paid $ 0.155 $ 0.135
Selected
Performance
Ratios:
Return on
Average Assets
(annualized)
ROA 0.50% 0.31%
Return on
Average Equity
(annualized)
ROE 5.46% 3.11%
Return on
Tangible
Equity
(annualized) 8.66% 5.05%
Net Interest
Margin 3.19% 3.30%
Net Interest
Spread 2.81% 2.92%
Non-interest
Income as a %
of Revenue 20.48% 8.28%
Non-interest
Income as a %
of Average
Assets 0.74% 0.27%
Non-interest
Expense to
Average Assets 2.69% 2.62%
Efficiency
Ratio 74.05% 80.64%
Asset Quality:
Nonperforming
Loans $ 2,052 $ 2,636
Foreclosed
Assets $ 2,827 $ 3,531
Nonperforming
Loans to Total
Loans 0.17% 0.26%
Nonperforming
Assets to
Total Assets 0.18% 0.25%
Allowance for
Loan Losses to
Period-end
Loans 1.20% 1.26%
Allowance for
Loan Losses to
Nonperforming
Loans 6.95 X 4.95 X
Net Charge-offs
to Average
Loans
(annualized) 0.14% 0.13%
Capital Ratios:
Equity to Total
Assets 9.07% 9.48%
Tangible Equity
to Total
Tangible
Assets (1) 6.00% 6.12%
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 17,559,352 17,566,315
Diluted 17,624,399 17,757,436
Period end
outstanding
shares 17,399,882 17,405,940
(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 C. Monroe, Jr.
Interim CFO
(336) 768-8500