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WINSTON-SALEM, NC -- (MARKET WIRE) -- 10/18/07 -- Southern Community Financial Corporation (NASDAQ: SCMF) (NASDAQ: SCMFO) (the "Company"), the holding company for Southern Community Bank and Trust, reported operating results for the third quarter of 2007. For the three month period ended September 30, 2007, net income was $1.7 million or $0.10 per diluted share versus net income of $2.1 million or $0.12 per diluted share for the same period in 2006. For the first nine months of 2007, earnings were $5.7 million or $0.32 per diluted share, versus $2.3 million or $0.13 earned in the first nine months of 2006. The 2006 results included an after tax charge of $3.8 million in the second quarter related to a balance sheet restructuring and a change in accounting for certain derivative transactions.
Financial Highlights:
-- Achieved year-over-year net loan growth of $141 million or 14.1% and
deposit growth of $12.9 million or 1.3%;
-- Achieved third quarter net loan growth of $48.2 million or 4.4%;
-- Achieved non-maturity account deposit growth of $64.6 million or 12.3%
in the third quarter;
-- Improved the non-interest expense to average asset ratio to 2.69% from
2.75% in the second quarter of 2007;
-- Continued to maintain strong asset quality with non-performing loans
to total loans at 0.19%. The allowance for loan losses was 1.23% of gross
loans and quarter-end net charge-offs to average loans decreased by ten
basis points over second quarter 2007 to 0.02%;
-- Paid a quarterly dividend of $0.04 per share on September 1, 2007.
Net interest income for the third quarter of $11.0 million was up 7.6%,
compared with $10.2 million reported in the comparable quarter of 2006.
Third quarter 2007 net interest margin was 3.16% as compared to the 3.25%
for the second quarter of 2007. For the first nine months of 2007, the net
interest margin was 3.21% compared to 3.33% for the first nine months of
2006. The decline in margin is the result of relatively flat asset yields
and increases in funding costs resulting from the maturity of lower rate,
long term wholesale funding transactions.
Non-interest income was $2.5 million during the third quarter of 2007,
compared to the $2.8 million reported in the second quarter of 2007. The
second quarter results included a one time gain of $154,000 on a sale of
property. An increase in service charge income was offset by slight
declines in mortgage fees and trust fees. The Company recorded non-interest
expense of $10.3 million in the current quarter, equivalent to the expenses
reported in the second quarter.
As of September 30, 2007, the Company reported total assets of $1.55
billion, representing an increase of $131.3 million, or 9.3% year-over-year
driven by increases in the loan portfolio. The net loan portfolio rose to
$1.14 billion, an increase of $141 million, or 14.1% over the amount
reported on September 30, 2006. Additionally, loans during the third
quarter grew by $48.2 million or 4.4% over the level on June 30, 2007.
Total deposits stood at $1.03 billion at September 30, 2007, an increase of
$35.5 million from the prior quarter. The Company has seen good growth in
our Money Market Account balances, stability in our non-interest bearing
deposits and continues to allow the typically higher priced, longer term
certificates of deposit to mature without matching higher market rates.
Deposits increased $12.9 million from same period in 2006.
The Company continues to maintain strong credit standards, which are
reflected in solid credit quality metrics. Non-performing loans rose to
$2.2 million or 0.19% of total loans at quarter-end, in comparison with
$983 thousand or 0.09% of total loans as reported for June 30, 2007. At the
end of the third quarter of 2006, non-performing loans stood at $3 million
or 0.30% of total loans. Non-performing assets remained unchanged at $3.2
million or 0.20% of assets at September 30, 2007 compared to $3.2 million
or 0.21% of assets at June 30, 2007. Net charge-offs as a percentage of
average loans were 0.02% for the quarter ended September 30, 2007, ten
basis points lower than the 0.12% reported in the prior quarter. The
provision for loan losses of $575 thousand was lower than the $600 thousand
added in the second quarter of 2007. The Company's allowance for loan
losses equaled $14.2 million, or 1.23% of total loans at September 30,
2007. The Company is not in the sub-prime lending business.
At September 30, 2007 stockholders' equity totaled $140.8 million and
represented 9.1% of total assets. Stockholders' equity increased $5.4
million or 4% from $135.5 million for the year ago period. Regulatory
capital ratios are all well in excess of the "well-capitalized" threshold.
During the second quarter, the company issued $10 million in subordinated
debentures as a part of a pooled trust preferred security.
Southern Community Financial Corporation Chairman and Chief Executive
Officer F. Scott Bauer commented, "Earnings were slightly below
expectations due to the small margin decline in the third quarter. We are
very pleased with our non-maturity deposit growth and the efforts of our
people in that regard. This is a key strategy to reducing funding costs and
improving margins."
"Our credit quality remains excellent and we continue to generate solid
internal growth in earning assets. Our focus will remain on increasing
profitability through margin expansion, increasing non-interest income and
expense control."
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 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 Friday, October 19, 2007, at 10:00 AM Eastern Time to discuss the
quarter-end results. The call can be accessed by dialing (866) 542-4236,
conference ID 3238421.
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
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
Income Statement 2007 2007 2007 2006 2006
--------- -------- -------- -------- ---------
Total Interest Income $ 25,339 $ 24,626 $ 23,573 $ 23,233 $ 22,151
Total Interest Expense 14,350 13,607 13,052 12,807 11,936
--------- -------- -------- -------- ---------
Net Interest Income 10,989 11,019 10,521 10,426 10,215
Provision for Loan Losses 575 600 850 600 730
Net Interest Income after
Provision for Loan Losses 10,414 10,419 9,671 9,826 9,485
Non-Interest Income
Service Charges on
Deposit Accounts 1,266 1,173 1,051 1,109 1,076
Gain (Loss) on Sale of
Investment Securities - - - 44 30
Gain (Loss) and Net Cash
Settlement on Economic
Hedges 69 (4) (5) (25) 296
Other Income 1,211 1,644 2,086 1,209 1,287
--------- -------- -------- -------- ---------
Total Non-Interest
Income 2,546 2,813 3,132 2,337 2,689
Non-Interest Expense
Salaries and Employee
Benefits 5,267 5,341 5,143 4,936 4,776
Occupancy and Equipment 2,116 1,888 1,903 1,819 1,728
Other 2,966 3,076 2,713 2,834 2,425
--------- -------- -------- -------- ---------
Total Non-Interest
Expense 10,349 10,305 9,759 9,589 8,929
Income Before Taxes 2,611 2,927 3,044 2,574 3,245
Provision for Income Taxes 890 996 1,035 632 1,163
--------- -------- -------- -------- ---------
Net Income $ 1,721 $ 1,931 $ 2,009 $ 1,942 $ 2,082
========= ======== ======== ======== =========
Net Income per Share
Basic $ 0.10 $ 0.11 $ 0.12 $ 0.11 $ 0.12
Diluted $ 0.10 $ 0.11 $ 0.11 $ 0.11 $ 0.12
========= ======== ======== ======== =========
Nine Months Ended
Sep 30, Sep 30,
Income Statement 2007 2006
--------- --------
Total Interest Income $ 73,538 $ 62,287
Total Interest Expense 41,009 31,991
--------- --------
Net Interest Income 32,529 30,296
Provision for Loan Losses 2,025 1,910
Net Interest Income after
Provision for Loan Losses 30,504 28,386
Non-Interest Income
Service Charges on Deposit Accounts 3,490 3,209
Gain (Loss) on Sale of Investment
Securities - (4,200)
Gain (Loss) and Net Cash
Settlement on Economic Hedges 60 (772)
Other Income 4,941 3,104
--------- --------
Total Non-Interest
Income 8,491 1,341
Non-Interest Expense
Salaries and Employee Benefits 15,751 13,890
Occupancy and Equipment 5,907 5,016
Other 8,755 7,307
--------- --------
Total Non-Interest Expense 30,413 26,213
Income Before Taxes 8,582 3,514
Provision for Income Taxes 2,921 1,258
--------- --------
Net Income $ 5,661 $ 2,256
========= ========
Net Income per Share
Basic $ 0.32 $ 0.13
Diluted $ 0.32 $ 0.13
========= ========
Balance Sheet Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2007 2007 2007 2006 2006
---------- ---------- ---------- ---------- ----------
Assets
Cash and due
from Banks $ 24,227 $ 32,742 $ 28,014 $ 29,160 $ 26,390
Federal Funds
Sold & Int
Bearing Balances 420 8,563 14,945 783 887
Investment
Securities 247,088 250,211 261,734 255,496 256,091
Loans 1,158,168 1,109,442 1,085,479 1,033,411 1,015,984
Allowance for
Loan Losses (14,197) (13,677) (13,417) (13,040) (12,990)
---------- ---------- ---------- ---------- ----------
Net Loans 1,143,971 1,095,765 1,072,062 1,020,371 1,002,994
Bank Premises
and Equipment 38,881 39,587 39,984 40,492 40,604
Goodwill 49,792 49,792 49,792 49,792 49,792
Other Assets 44,352 43,580 43,536 40,371 40,709
---------- ---------- ---------- ---------- ----------
Total Assets $1,548,731 $1,520,240 $1,510,067 $1,436,465 $1,417,467
========== ========== ========== ========== ==========
Liabilities and
Stockholders' Equity
Deposits
Non-Interest
Bearing $ 110,718 $ 112,142 $ 113,011 $ 108,950 $ 100,257
Money market,
savings and NOW 479,595 413,533 448,849 393,152 360,459
Time 443,405 472,504 516,921 522,480 560,140
---------- ---------- ---------- ---------- ----------
Total Deposits 1,033,718 998,179 1,078,781 1,024,582 1,020,856
Borrowings 360,309 371,024 281,157 265,297 251,105
Accrued Expenses
and Other
Liabilities 13,868 11,988 12,083 10,361 10,031
---------- ---------- ---------- ---------- ----------
Total
Liabilities 1,407,895 1,381,191 1,372,021 1,300,240 1,281,992
Total Stockholders'
Equity 140,836 139,049 138,046 136,225 135,475
---------- ---------- ---------- ---------- ----------
Total Liabilities
and Stockholders'
Equity $1,548,731 $1,520,240 $1,510,067 $1,436,465 $1,417,467
========== ========== ========== ========== ==========
Book Value per
Share $ 8.04 $ 7.89 $ 7.93 $ 7.83 $ 7.75
========== ========== ========== ========== ==========
As of or for the three months ended
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2007 2007 2007 2006 2006
---------- ---------- ---------- ---------- ----------
Per Share Data:
Basic Earnings
per Share $ 0.10 $ 0.11 $ 0.12 $ 0.11 $ 0.12
Diluted Earnings
per Share $ 0.10 $ 0.11 $ 0.11 $ 0.11 $ 0.12
Book Value per
Share $ 8.04 $ 7.89 $ 7.93 $ 7.83 $ 7.75
Cash dividends
paid $ 0.040 $ 0.040 $ 0.035 $ 0.035 $ 0.035
Selected
Performance
Ratios:
Return on Average
Assets (annualized)
ROA 0.45% 0.52% 0.56% 0.54% 0.60%
Return on Average
Equity (annualized)
ROE 4.92% 5.58% 5.96% 5.70% 6.15%
Return on Tangible
Equity (annualized) 7.80% 8.86% 9.56% 9.22% 9.99%
Net Interest Margin 3.16% 3.25% 3.22% 3.22% 3.29%
Net Interest Spread 2.75% 2.87% 2.85% 2.84% 2.92%
Non-interest Income
as a % of Revenue 18.81% 20.34% 22.94% 18.31% 20.84%
Non-interest Income
as a % of Average
Assets 0.66% 0.75% 0.87% 0.65% 0.78%
Non-interest
Expense to
Average Assets 2.69% 2.75% 2.70% 2.67% 2.59%
Efficiency Ratio 76.46% 74.50% 71.48% 75.13% 69.20%
Asset Quality:
Nonperforming
Loans $ 2,226 $ 983 $ 1,240 $ 2,636 $ 3,011
Nonperforming
Assets $ 939 $ 2,227 $ 2,659 $ 3,531 $ 3,536
Nonperforming
Loans to Total
Loans 0.19% 0.09% 0.11% 0.26% 0.30%
Nonperforming
Assets to
Total Assets 0.20% 0.21% 0.26% 0.43% 0.46%
Allowance for
Loan Losses to
Period-end
Loans 1.23% 1.23% 1.24% 1.26% 1.28%
Allowance for
Loan Losses to
Nonperforming
Loans 6.38 13.91 10.82 4.95 4.31
Net Charge-offs
to Average
Loans (annualized) 0.02% 0.12% 0.18% 0.21% 0.15%
Capital Ratios:
Equity to Total
Assets 9.09% 9.15% 9.14% 9.48% 9.56%
Tangible Equity
to Total
Tangible
Assets (1) 5.98% 5.97% 5.94% 6.12% 6.14%
Average Balances:
Year to Date
Interest
Earning
Assets $1,355,030 $1,341,688 $1,324,218 $1,232,305 $1,215,079
Total Assets 1,498,310 1,485,292 1,467,296 1,368,223 1,349,093
Total Loans 1,093,693 1,074,700 1,054,315 958,001 935,923
Equity 138,094 137,716 136,623 134,886 134,806
Interest
Bearing
Liabilities 1,237,398 1,226,580 1,212,714 1,115,747 1,097,199
Quarterly
Interest
Earning
Assets $1,381,279 $1,358,967 $1,324,218 $1,283,422 $1,230,562
Total Assets 1,523,922 1,503,090 1,467,296 1,424,990 1,370,311
Gross Loans 1,131,060 1,094,861 1,054,315 1,023,515 980,966
Equity 138,838 138,797 136,623 135,123 134,308
Interest
Bearing
Liabilities 1,258,681 1,240,293 1,212,714 1,170,786 1,121,579
Weighted
Average Number
of Shares
Outstanding
Basic 17,584,565 17,574,100 17,423,824 17,431,542 17,571,030
Diluted 17,585,543 17,667,207 17,597,029 17,610,248 17,738,817
Period end
outstanding
shares 17,520,829 17,621,653 17,410,115 17,405,940 17,487,801
As of or for the
Nine Months Ended
Sep 30, Sep 30,
2007 2006
----------- -----------
Per Share Data:
Basic Earnings per Share $ 0.32 $ 0.13
Diluted Earnings per Share $ 0.32 $ 0.13
Book Value per Share $ 8.04 $ 7.75
Cash dividends paid $ 0.115 $ 0.100
Selected Performance Ratios:
Return on Average Assets
(annualized) ROA 0.51% 0.22%
Return on Average Equity
(annualized) ROE 5.48% 2.24%
Return on Tangible Equity
(annualized) 8.73% 3.63%
Net Interest Margin 3.21% 3.33%
Net Interest Spread 2.82% 2.96%
Non-interest Income as a %
of Revenue 20.70% 4.24%
Non-interest Income as a %
of Average Assets 0.76% 0.13%
Non-interest Expense to
Average Assets 2.71% 2.60%
Efficiency Ratio 74.14% 82.85%
Asset Quality:
Nonperforming Loans $ 2,226 $ 3,011
Nonperforming Assets $ 939 $ 3,536
Nonperforming Loans to Total Loans 0.19% 0.30%
Nonperforming Assets to Total Assets 0.20% 0.46%
Allowance for Loan Losses to
Period-end Loans 1.23% 1.28%
Allowance for Loan Losses to
Nonperforming Loans 6.38 4.31
Net Charge-offs to Average
Loans (annualized) 0.11% 0.10%
Capital Ratios:
Equity to Total Assets 9.09% 9.91%
Tangible Equity to Total
Tangible Assets (1) 5.98% 6.33%
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 17,532,813 17,611,763
Diluted 17,603,525 17,806,387
Period end outstanding shares 17,520,829 17,487,801
(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.
Senior Vice President/Interim Chief Financial Officer
(336) 768-8500