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WINSTON-SALEM, NC -- (MARKET WIRE) -- 01/31/07 -- Southern Community Financial Corporation (NASDAQ: SCMF) (NASDAQ: SCMFO) (the "Company"), the holding company for Southern Community Bank and Trust, reported operating results for the three and twelve month periods ended December 31, 2006. For the fourth quarter ended December 31, 2006, the Company reported net income of $1.94 million, a 2.2% increase from $1.90 million for the same period one year ago. Earnings per diluted share were $0.11 in the fourth quarter of 2006, a 10% increase from $0.10 per share reported in the fourth quarter of 2005. As for the year ended December 31, 2006, net income totaled $4.2 million, or $0.24 per share, a decrease from the $7.7 million, or $0.42 per share, earned for the same period in 2005. The decrease is due primarily to the major initiative undertaken by Southern Community to restructure its balance sheet, which resulted in a one time after tax charge of $2.7 million in the second quarter of 2006.
Significant milestones achieved during 2006:
-- Celebrated 10 year anniversary on November 18, 2006;
-- Achieved strong year-over-year growth in both loans and deposits of
18.9% and 8.8%, respectively;
-- Continued to maintain strong credit quality;
-- Achieved solid year-over-year growth in interest-bearing non-maturity
deposits of $78.0 million, or 24.8%;
-- Increased service charge income on deposit accounts by 15.0% in 2006;
-- Opened new regional offices in the growth markets of Asheville and
Mooresville, North Carolina;
-- After only 10 years of operations, advanced into third position in
deposit market share in our home base of Forsyth County and fifth in the
Triad;
-- Opened a state-of-the-art Operations Center to support future growth.
Net interest income of $10.4 million for the fourth quarter of 2006
represented a 7.5% increase compared with $9.7 million reported in the same
quarter a year ago. For the year, net interest income increased to $40.7
million from $37.0 million for the year ended December 31, 2005, a rise of
10.2%. The growth in net interest income resulted from the growth in the
Company's loan portfolio coupled with expansion of the net interest margin.
Average loans increased 14.4% to $958.0 million in 2006 from $837.5 million
in 2005. Compared to the year ended December 31, 2005, the net interest
margin rose 10 basis points from 3.20% to 3.30% in the current year,
primarily due to an increase in average loans and increases in lower cost
non-maturity deposits. On a linked quarter basis, the net interest margin
decreased seven basis points from 3.29% to 3.22% as a result of the
repricing of maturing time deposits at higher rates and the impact of the
inverted yield curve. The 2006 provision for loan losses of $2.5 million
was $1.56 million greater than 2005. The 2005 provision for loan losses
benefited from the successful resolution of certain credits for which
losses had been previously provided.
The Company Continues To Generate Solid Fee Income
Growth in service charges on deposit accounts resulted in a 14.0% rise in
non-interest income over the fourth quarter of 2005. Non-interest income
totaled $2.3 million in the fourth quarter compared to $2.0 million in the
prior year period. During the fourth quarter of 2006 service charges on
deposit accounts grew by 6.8% to $1.1 million from $1.0 million in the
fourth quarter of 2005. For the year ended December 31, 2006, non-interest
income was $3.7 million compared to the $7.1 million reported in 2005. The
decline in non-interest income from 2005 is primarily due to the $4.2
million pre-tax loss on the sale of investment securities recorded in the
second quarter of 2006 related to our balance sheet restructuring. For the
year ended December 31, 2006, service charges on deposit accounts grew by
15.0% to $4.3 million from $3.8 million for 2005. Other income, excluding
sales of investment securities and gains and losses on derivative
transactions, at $4.3 million for the 2006 year was consistent with the
2005 period.
Non-interest expense for the quarter increased by 12.4% over the fourth
quarter of 2005 and totaled $9.6 million compared to $8.5 million in the
year ago period, reflecting costs associated with offices opened during
2006 in Mooresville, Asheville and additional staffing for Raleigh. For
the year, non-interest expenses grew 14.3% to $35.8 million in 2006 from
$31.3 million for 2005 as we continued the expansion of our franchise into
new markets 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 $1.4 Billion -- Up 11.6% for the Year
As of December 31, 2006, the Company reported total assets of $1.4 billion,
representing a year-over-year increase of $148.9 million, or 11.6% driven
primarily by increases in the loan portfolio.
Loans and Deposits Exceed $1.0 Billion
At year-end 2006, the loan portfolio totaled $1.03 billion, an increase of
$164.6 million, or 18.9% from December 31, 2005 and $17.4 million or 1.7%
over September 30, 2006.
Total deposits grew to $1.02 billion at December 31, 2006, an increase of
$82.6 million or 8.8% from December 31, 2005 and $3.7 million or 0.4% over
September 30, 2006.
The Company continues to focus on attracting non-maturity deposits to
improve the funding mix and reduce funding costs. Those efforts are
reflected in a $78.0 million or 24.8% increase year-over-year in money
market, savings and NOW account deposits which ended the year at $393.2
million. On a linked-quarter basis, demand deposits increased to $109.0
million at December 31, 2006, an increase of 8.7% from September 30, 2006
and money market, savings and NOW account balances increased 9.1% from
September 30, 2006.
Asset Quality
The Company's allowance for loan losses equaled $13.0 million, or 1.26% of
total loans and 495% of non-performing loans at December 31, 2006. Credit
quality metrics remained strong as non-performing loans totaled $2.6
million or 0.26% of total loans at quarter-end, a decrease from the $3.0
million or 0.30% of total loans as reported for September 30, 2006. Net
charge-offs as a percentage of average loans were 0.13% for 2006, down
slightly from 0.14% for the prior year.
At December 31, 2006, stockholders' equity totaled $136.2 million and
represented 9.48% 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 in
which we took the necessary steps to prepare Southern Community for the
next ten years. In 2006 we made strategic decisions to protect our margins
and balance sheet in this very tough interest rate environment. Our people
did a great job in producing quality loan and core deposit growth while
providing superior service to our customers. We are well positioned for
the future in the fastest growing markets in North Carolina and have an
exciting future ahead. Our entire team thanks our customers and
shareholders for their 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-one 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 February 1, 2007 at 10:00 AM Eastern Time to discuss the year-end
results. The call can be accessed by dialing 888-858-4756.
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
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
Income Statement 2006 2006 2006 2006 2005
-------- --------- -------- -------- --------
Total Interest
Income $ 23,233 $ 22,151 $ 20,862 $ 19,274 $ 18,669
Total Interest
Expense 12,807 11,936 10,830 9,225 8,974
-------- --------- -------- -------- --------
Net Interest
Income 10,426 10,215 10,032 10,049 9,695
Provision for Loan
Losses 600 730 705 475 380
Net Interest Income
after Provision for
Loan Losses 9,826 9,485 9,327 9,574 9,315
Non-Interest Income
Service Charges on
Deposit Accounts 1,109 1,076 1,098 1,035 1,038
Gain (Loss) on Sale
of Investment
Securities 44 30 (4,230) - (322)
Gain (Loss) and Net
Cash Settlement on
Economic Hedges (25) 296 (582) (486) (243)
Other Income 1,209 1,287 1,029 788 1,576
-------- --------- -------- -------- --------
Total Non-Interest
Income 2,337 2,689 (2,685) 1,337 2,049
Non-Interest Expense
Salaries and
Employee Benefits 4,936 4,776 4,630 4,484 4,389
Occupancy and
Equipment 1,819 1,728 1,680 1,608 1,614
Other 2,834 2,425 2,542 2,340 2,530
-------- --------- -------- -------- --------
Total Non-Interest
Expense 9,589 8,929 8,852 8,432 8,533
Income Before Taxes 2,574 3,245 (2,210) 2,479 2,831
Provision for Income
Taxes 632 1,163 (780) 875 931
-------- --------- -------- -------- --------
Net Income $ 1,942 $ 2,082 $ (1,430) $ 1,604 $ 1,900
======== ========= ======== ======== ========
Net Income per Share
Basic $ 0.11 $ 0.12 $ (0.08) $ 0.09 $ 0.11
Diluted $ 0.11 $ 0.12 $ (0.08) $ 0.09 $ 0.10
======== ========= ======== ======== ========
For the year ended
Dec 31, Dec 31,
Income Statement 2006 2005
-------- --------
Total Interest
Income $ 85,520 $ 68,097
Total Interest
Expense 44,798 31,128
-------- --------
Net Interest
Income 40,722 36,969
Provision for Loan
Losses 2,510 950
Net Interest Income
after Provision for
Loan Losses 38,212 36,019
Non-Interest Income
Service Charges on
Deposit Accounts 4,318 3,755
Gain (Loss) on Sale
of Investment
Securities (4,156) (266)
Gain (Loss) and Net
Cash Settlement on
Economic Hedges (797) (664)
Other Income 4,313 4,309
-------- --------
Total Non-Interest
Income 3,678 7,134
Non-Interest Expense
Salaries and
Employee Benefits 18,826 16,042
Occupancy and
Equipment 6,835 5,786
Other 10,141 9,491
-------- --------
Total Non-Interest
Expense 35,802 31,319
Income Before Taxes 6,088 11,834
Provision for Income
Taxes 1,890 4,161
-------- --------
Net Income $ 4,198 $ 7,673
======== ========
Net Income per Share
Basic $ 0.24 $ 0.43
Diluted $ 0.24 $ 0.42
======== ========
Balance Sheet Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2006 2006 2006 2006 2005
---------- ---------- ---------- ---------- ----------
Assets
Cash and due from
Banks $ 29,160 $ 26,390 $ 30,304 $ 25,807 $ 24,606
Federal Funds Sold
& Int Bearing
Balances 783 887 1,010 596 648
Investment
Securities 255,496 256,091 249,496 290,616 291,916
Loans 1,033,411 1,015,984 959,085 921,195 868,827
Allowance for Loan
Losses (13,040) (12,990) (12,626) (12,211) (11,785)
---------- ---------- ---------- ---------- ----------
Net Loans 1,020,371 1,002,994 946,459 908,984 857,042
Bank Premises and
Equipment 40,492 40,604 36,753 36,226 31,259
Goodwill 49,792 49,792 49,792 49,792 49,792
Other Assets 40,371 40,709 39,190 32,795 32,350
---------- ---------- ---------- ---------- ----------
Total Assets $1,436,465 $1,417,467 $1,353,004 $1,344,816 $1,287,613
========== ========== ========== ========== ==========
Liabilities and
Stockholders'
Equity
Deposits
Non-Interest
Bearing $ 108,950 $ 100,257 $ 106,605 $ 112,341 $ 111,226
Money market,
savings and NOW 393,152 360,459 326,626 347,034 315,112
Time 522,480 560,140 545,316 538,720 515,611
---------- ---------- ---------- ---------- ----------
Total Deposits 1,024,582 1,020,856 978,547 998,095 941,949
Borrowings 265,297 251,105 230,213 200,986 201,737
Accrued Expenses and
Other Liabilities 10,361 10,031 10,120 10,138 9,042
---------- ---------- ---------- ---------- ----------
Total Liabilities 1,300,240 1,281,992 1,218,880 1,209,219 1,152,728
Total Stockholders'
Equity 136,225 135,475 134,124 135,597 134,885
---------- ---------- ---------- ---------- ----------
Total Liabilities
and Stockholders'
Equity $1,436,465 $1,417,467 $1,353,004 $1,344,816 $1,287,613
========== ========== ========== ========== ==========
Book Value per
Share $ 7.83 $ 7.75 $ 7.61 $ 7.67 $ 7.66
========== ========== ========== ========== ==========
As of or for the three months ended
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2006 2006 2006 2006 2005
---------- ---------- ---------- ---------- ----------
Per Share Data:
Basic Earnings
per Share $ 0.11 $ 0.12 $ (0.08) $ 0.09 $ 0.11
Diluted
Earnings per
Share $ 0.11 $ 0.12 $ (0.08) $ 0.09 $ 0.10
Book Value per
Share $ 7.83 $ 7.75 $ 7.61 $ 7.67 $ 7.66
Cash dividends
paid (1) $ 0.035 $ 0.035 $ 0.035 $ 0.030 $ 0.030
Selected
Performance
Ratios:
Return on
Average Assets
(annualized)
ROA 0.54% 0.60% -0.42% 0.50% 0.58%
Return on
Average Equity
(annualized)
ROE 5.70% 6.15% -4.24% 4.83% 5.56%
Return on
Tangible
Equity
(annualized) 9.22% 9.99% -6.86% 7.85% 8.99%
Net Interest
Margin 3.22% 3.29% 3.27% 3.44% 3.28%
Net Interest
Spread 2.84% 2.92% 2.90% 3.06% 2.91%
Non-interest
Income as a %
of Revenue 18.31% 20.84% -36.54% 11.74% 17.44%
Non-interest
Income as a %
of Average
Assets 0.65% 0.78% -0.79% 0.41% 0.62%
Non-interest
Expense to
Average Assets 2.67% 2.59% 2.60% 2.61% 2.59%
Efficiency
Ratio 75.13% 69.20% 120.48% 74.06% 72.66%
Asset Quality:
Nonperforming
Loans $ 2,636 $ 3,011 $ 2,148 $ 2,058 $ 1,408
Nonperforming
Assets $ 3,531 $ 3,536 $ 2,233 $ 2,187 $ 1,688
Nonperforming
Loans to Total
Loans 0.26% 0.30% 0.22% 0.22% 0.16%
Nonperforming
Assets to
Total Assets 0.25% 0.25% 0.17% 0.16% 0.13%
Allowance for
Loan Losses to
Period-end
Loans 1.26% 1.28% 1.32% 1.33% 1.36%
Allowance for
Loan Losses to
Nonperforming
Loans (X) 4.95 4.31 5.88 5.93 8.37
Net Charge-offs
to Average
Loans
(annualized) 0.21% 0.15% 0.12% 0.02% 0.17%
Capital Ratios:
Equity to Total
Assets 9.48% 9.56% 9.91% 10.08% 10.48%
Tangible Equity
to Total
Tangible
Assets (2) 6.12% 6.14% 6.33% 6.48% 6.72%
Average
Balances:
Year to Date
Interest
Earning
Assets $1,232,305 $1,215,079 $1,207,209 $1,184,008 $1,156,418
Total Assets 1,368,223 1,349,093 1,338,308 1,309,224 1,281,283
Total Loans 958,001 935,923 913,028 887,704 837,467
Equity 134,886 134,806 135,059 134,718 135,342
Interest
Bearing
Liabilities 1,115,747 1,097,199 1,084,807 1,055,889 1,029,089
Quarterly
Interest
Earning
Assets $1,283,422 $1,230,562 $1,230,155 $1,184,008 $1,173,485
Total Assets 1,424,990 1,370,311 1,367,073 1,309,224 1,308,496
Gross Loans 1,023,515 980,966 938,074 887,704 863,047
Equity 135,123 134,308 135,396 134,718 135,686
Interest
Bearing
Liabilities 1,170,786 1,121,579 1,113,408 1,055,889 1,046,617
Weighted
Average Number
of Shares
Outstanding
Basic 17,431,542 17,571,030 17,640,808 17,624,034 17,676,048
Diluted 17,611,284 17,738,817 17,640,808 17,857,395 17,944,031
Period end
outstanding
shares 17,405,940 17,487,801 17,615,355 17,673,077 17,612,472
As of or for the
year ended
Dec 31, Dec 31,
2006 2005
----------- -----------
Per Share Data:
Basic Earnings
per Share $ 0.24 $ 0.43
Diluted
Earnings per
Share $ 0.24 $ 0.42
Book Value per
Share $ 7.83 $ 7.66
Cash dividends
paid (1) $ 0.135 $ 0.210
Selected
Performance
Ratios:
Return on
Average Assets
(annualized)
ROA 0.31% 0.60%
Return on
Average Equity
(annualized)
ROE 3.11% 5.67%
Return on
Tangible
Equity
(annualized) 5.05% 9.21%
Net Interest
Margin 3.30% 3.20%
Net Interest
Spread 2.92% 2.86%
Non-interest
Income as a %
of Revenue 8.28% 16.18%
Non-interest
Income as a %
of Average
Assets 0.27% 0.56%
Non-interest
Expense to
Average Assets 2.62% 2.44%
Efficiency
Ratio 80.64% 71.01%
Asset Quality:
Nonperforming
Loans $ 2,636 $ 1,408
Nonperforming
Assets $ 3,531 $ 1,688
Nonperforming
Loans to Total
Loans 0.26% 0.16%
Nonperforming
Assets to
Total Assets 0.25% 0.13%
Allowance for
Loan Losses to
Period-end
Loans 1.26% 1.36%
Allowance for
Loan Losses to
Nonperforming
Loans (X) 4.95 8.37
Net Charge-offs
to Average
Loans
(annualized) 0.13% 0.14%
Capital Ratios:
Equity to Total
Assets 9.48% 10.48%
Tangible Equity
to Total
Tangible
Assets (2) 6.12% 6.72%
Weighted
Average Number
of Shares
Outstanding
Basic 17,566,315 17,825,152
Diluted 17,758,629 18,133,859
Period end
outstanding
shares 17,405,940 17,612,472
(1) - Cash dividends paid for the twelve months ended December 31, 2005
represented an annual dividend of $0.12 and three quarterly dividends of
$0.03 each.
(2) - 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 (2) to provide
readers with the impact of purchase accounting on this key financial ratio.
For additional information:
F. Scott Bauer
Chairman/CEO
David W. Hinshaw
CFO
(336) 768-8500