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WINSTON-SALEM, NC -- (MARKET WIRE) -- 01/31/06 -- Southern Community Financial Corporation (NASDAQ: SCMF) (NASDAQ: SCMFO) (the "Company"), the parent of Southern Community Bank and Trust, reported operating results for the fourth quarter and year ended December 31, 2005. For the year ended December 31, 2005, net income rose to $8.2 million representing an increase of 1.0% over the $8.1 million earned for the same period in 2004. Fully diluted earnings per share in 2005 of $0.45 was unchanged from a year ago. For the fourth quarter ended December 31, 2005, the Company reported net income of $2.0 million, or $0.11 per diluted share compared to net income of $2.4 million, or $0.13 per diluted share for the fourth quarter of 2004.
Significant milestones achieved during 2005:
-- Opened a regional banking office in Greensboro on December 19, 2005;
-- Expanded ATM network into eight new counties in North Carolina;
-- Began construction of a banking office in Mooresville, a rapidly growing community of the Charlotte region;
-- Announced the opening of a loan production office in Raleigh;
-- Achieved loan growth of $72.7 million or 9.1% for the year;
-- Maintained sound credit underwriting standards, and significantly improved credit quality measures;
-- Successfully executed programs to increase deposits, resulting in deposit growth of $95.4 million or 11.3% from December 31, 2004;
-- Repurchased a total of 460,800 shares under programs announced in March and September, which authorized the repurchase of up to 300,000 and 600,000 shares of common stock, respectively;
-- Paid an annual cash dividend of $0.12 per share on March 15, 2005, an increase of 9% over the prior year's dividend, and quarterly dividends of $0.03 per share each on June 1, September 1, and December 1, 2005.Net interest income for the fourth quarter of $9.7 million was up 6.7%, compared with $9.1 million reported in the comparable quarter of 2004. For the year ended December 31, 2005, net interest income increased to $37.1 million from $35.0 million, a rise of 6.1%. The increase in net interest income was driven by loan growth and by the decreased reliance on borrowings resulting from strong deposit growth. For the year, the net interest margin contracted 10 basis points, from 3.31% in 2004 to 3.21% in 2005. On a linked quarter basis, the net interest margin expanded by 16 basis points to 3.27% in the fourth quarter of 2005 versus the 3.11% reported in the third quarter. The expansion was due in part to the sale of lower yielding investment securities and strong deposit generation.
Toward the end of the fourth quarter of 2005, the Company sold approximately $11.7 million of securities with a weighted average yield of 2.59%, at a loss of $322 thousand, in order to improve yields by using the proceeds to fund loan growth. At this time, management estimates that it will recover the loss through increased earnings from improved yields over the next 8 to 12 months.
Non-interest income was $2.3 million during the fourth quarter of 2005, which represents an increase of 1.9% from non-interest income of $2.2 million reported in the comparable period in 2004. As for the twelve months ended December 31, 2005, non-interest income was $7.8 million as compared to the $7.4 million reported in the corresponding period of 2004, an increase of 5.3%. Growth in non-interest income during 2005 resulted principally from continued strength in deposit and other retail banking fees. Non-interest income for the fourth quarter was impacted positively from gains of $660 thousand from the company's investment in Salem Capital Partners the Company's affiliated Small Business Investment Company, offset somewhat by the $322 thousand loss on bond sales.
Non-interest expense for the year increased by 13.8% over the twelve months ended December 31, 2004 and totaled $31.3 million in 2005 compared to $27.5 million in the year ago period, reflecting continued growth and investment in the expansion of the franchise. Non-interest expenses were also impacted by a higher level of professional fees associated with the first year of compliance with Sarbanes-Oxley Section 404, and expenses incurred in the first quarter of 2005 related to the departure of two former members of senior management. The Company has undertaken initiatives in slowing the growth of non-interest expenses; however, non-interest expenses will be impacted in 2006 by increased occupancy and personnel costs from branch expansion in Greensboro, Raleigh and Mooresville, and a new operations facility to be acquired in the first half of the year.
As of December 31, 2005, the Company reported total assets of $1.3 billion, an increase of $63.2 million, or 5.2% year-over-year driven primarily by increases in the loan portfolio. The Bank's loan portfolio increased to $868.8 million, an increase of $72.7 million, or 9.1% over the amount reported on December 31, 2004. Total deposits grew to $940.6 million at December 31, 2005, an increase of $44.0 million over the prior quarter and an increase of $95.4 million from the year ago period.
The Company continued its history of solid loan growth, while maintaining sound credit quality standards as asset quality measures improved significantly from the same period one year ago as well as the previous quarter. Non-performing loans declined to $1.4 million or 0.16% of total loans at year end, in comparison with $3.8 million or 0.44% of total loans as reported for September 30, 2005, and $2.2 million or 0.27% of total loans at year end 2004. Net charge-offs as a percentage of average loans were 0.17% for the quarter ended December 31, 2005, improving 3 basis points compared with the 0.20% reported in the year ago period. The Company's allowance for loan losses equaled $11.8 million, or 1.36% of total loans and 837% of non-performing loans at December 31, 2005.
At December 31, 2005, stockholders' equity totaled $135.4 million and represented 10.53% of total assets. Stockholders' equity decreased $1.5 million or 1.1% from $136.9 million for the year ago period influenced primarily by the implementation of the Company's stock repurchase plans, an increase in unrealized losses on investment securities and the payment of cash dividends. Regulatory capital ratios are all well in excess of the "well-capitalized" threshold.
Southern Community Financial Corporation Chairman and Chief Executive Officer F. Scott Bauer commented, "Our 2005 financial results were dampened somewhat by the difficult interest rate environment and unusual expenses, and our balance sheet repositioning. We are pleased with the progress made this year in continuing to build a quality franchise for the future. We improved our already stellar credit quality and significantly strengthened risk management. Southern Community is a strong, sound, competitive institution well-positioned for the long term."
"As we enter 2006, the interest rate environment is expected to continue to be challenging. We have reduced the level of our investment portfolio, and are focused on managing our balance sheet and slowing the growth of non-interest expenses. Significant progress is being made with a focus on deposit generation to further reduce funding costs."
"Our entire team wishes to thank our customers and shareholders for their support. We have built a solid foundation for continued success and are excited about our future."
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 nineteen banking offices throughout the Piedmont Triad region of North Carolina.
Southern Community Financial Corporation's common stock and trust preferred securities are listed on the NASDAQ National 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.
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, Sept. 30, June 30, Mar. 31, Dec. 31, Income Statement 2005 2005 2005 2005 2004 ---------- ---------- ---------- ---------- ---------- Total Interest Income $ 18,669 $ 17,534 $ 16,554 $ 15,340 $ 14,744 Total Interest Expense 8,988 8,301 7,368 6,304 5,674 ---------- ---------- ---------- ---------- ---------- Net Interest Income 9,681 9,233 9,186 9,036 9,070 Provision for Loan Losses 380 (300) 475 395 350 Net Interest Income after Provision for Loan Losses 9,301 9,533 8,711 8,641 8,720 Non-Interest Income Service Charges on Deposit Accounts 1,038 970 908 839 1,109 Other Income 1,254 936 946 907 1,140 ---------- ---------- ---------- ---------- ---------- Total Non-Interest Income 2,292 1,906 1,854 1,746 2,249 Non-Interest Expense Salaries and Employee Benefits 4,389 3,794 3,881 3,978 3,297 Occupancy and Equipment 1,614 1,458 1,372 1,342 1,217 Other 2,530 2,294 2,090 2,577 2,633 ---------- ---------- ---------- ---------- ---------- Total Non-Interest Expense 8,533 7,546 7,343 7,897 7,147 Income Before Taxes 3,060 3,893 3,222 2,490 3,822 Provision for Income Taxes 1,019 1,421 1,152 890 1,469 ---------- ---------- ---------- ---------- ---------- Net Income $ 2,041 $ 2,472 $ 2,070 $ 1,600 $ 2,353 ========== ========== ========== ========== ========== Net Income per Share Basic $ 0.12 $ 0.14 $ 0.12 $ 0.09 $ 0.13 Diluted $ 0.11 $ 0.14 $ 0.11 $ 0.09 $ 0.13 ========== ========== ========== ========== ========== Twelve Months Ended Dec. 31, Dec. 31, Income Statement 2005 2004 ---------- ---------- Total Interest Income $ 68,097 $ 54,656 Total Interest Expense 30,961 19,657 ---------- ---------- Net Interest Income 37,136 34,999 Provision for Loan Losses 950 2,239 Net Interest Income after Provision for Loan Losses 36,186 32,760 Non-Interest Income Service Charges on Deposit Accounts 3,755 3,502 Other Income 4,043 3,904 ---------- ---------- Total Non-Interest Income 7,798 7,406 Non-Interest Expense Salaries and Employee Benefits 16,042 13,749 Occupancy and Equipment 5,786 4,352 Other 9,491 9,419 ---------- ---------- Total Non-Interest Expense 31,319 27,520 Income Before Taxes 12,665 12,646 Provision for Income Taxes 4,482 4,544 ---------- ---------- Net Income $ 8,183 $ 8,102 ========== ========== Net Income per Share Basic $ 0.46 $ 0.47 Diluted $ 0.45 $ 0.45 ========== ========== Balance Sheet December 31,September 30,June 30, March 31,December 31, 2005 2005 2005 2005 2004 ---------- ---------- ---------- ---------- ---------- Assets Cash and due from Banks $ 24,606 $ 22,449 $ 31,129 $ 19,560 $ 17,758 Federal Funds Sold & Int Bearing Balances 648 794 752 1,755 80 Investment Securities 291,916 315,493 328,802 315,627 312,909 Loans 868,827 856,839 845,847 809,733 796,103 Allowance for Loan Losses (11,785) (11,773) (12,365) (12,133) (12,537) ---------- ---------- ---------- ---------- ---------- Net Loans 857,042 845,066 833,482 797,600 783,566 Bank Premises and Equipment 31,259 30,283 28,943 28,138 28,325 Goodwill 49,792 49,603 49,603 49,603 50,135 Other Assets 30,261 34,383 32,976 31,640 29,588 ---------- ---------- ---------- ---------- ---------- Total Assets $1,285,524 $1,298,071 $1,305,687 $1,243,923 $1,222,361 ========== ========== ========== ========== ========== Liabilities and Stockholders' Equity Deposits Non-Interest Bearing 111,226 105,660 112,764 96,917 98,520 Money market, savings and NOW 315,112 272,546 247,149 252,744 236,121 Time 514,263 518,406 509,917 487,375 510,587 ---------- ---------- ---------- ---------- ---------- Total Deposits 940,601 896,612 869,830 837,036 845,228 Borrowings 201,737 253,096 290,113 263,622 233,141 Accrued Expenses and Other Liabilities 7,780 11,904 9,973 8,241 7,086 ---------- ---------- ---------- ---------- ---------- Total Liabilities 1,150,118 1,161,612 1,169,916 1,108,899 1,085,455 Total Stockholders' Equity 135,406 136,459 135,771 135,024 136,906 ---------- ---------- ---------- ---------- ---------- Total Liabilities and Stockholders' Equity $1,285,524 $1,298,071 $1,305,687 $1,243,923 $1,222,361 ========== ========== ========== ========== ========== Book Value per Share $ 7.69 $ 7.69 $ 7.61 $ 7.53 $ 7.68 ========== ========== ========== ========== ========== As of or for the three months ended December 31, September 30, June 30, 2005 2005 2005 ------------ ------------ ------------ Per Share Data: Basic Earnings per Share $ 0.12 $ 0.14 $ 0.12 Diluted Earnings per Share $ 0.11 $ 0.14 $ 0.11 Book Value per Share $ 7.69 $ 7.69 $ 7.61 Cash dividends paid $ 0.03 (2) $ 0.03 (2) $ 0.03 (2) Selected Performance Ratios: Return on Average Assets (annualized) ROA 0.62% 0.75% 0.65% Return on Average Equity (annualized) ROE 5.94% 7.21% 6.15% Return on Tangible Equity (annualized) 9.60% 11.63% 9.98% Net Interest Margin 3.27% 3.11% 3.20% Net Interest Spread 2.90% 2.76% 2.88% Non-interest Income as a % of Revenue 19.14% 17.11% 16.79% Non-interest Income as a % of Average Assets 0.71% 0.59% 0.59% Non-interest Expense to Average Assets 2.59% 2.29% 2.32% Efficiency Ratio 71.27% 67.74% 66.51% Asset Quality: Nonperforming Loans $ 1,408 $ 3,752 $ 6,969 Nonperforming Assets $ 1,688 $ 4,141 $ 7,284 Nonperforming Loans to Total Loans 0.16% 0.44% 0.82% Nonperforming Assets to Total Assets 0.13% 0.32% 0.56% Allowance for Loan Losses to Period-end Loans 1.36% 1.37% 1.46% Allowance for Loan Losses to Nonperforming Loans (X) 8.37 3.14 1.77 Net Charge-offs to Average Loans (annualized) 0.17% 0.14% 0.12% Capital Ratios: Equity to Total Assets 10.53% 10.51% 10.40% Tangible Equity to Total Tangible Assets (3) 6.77% 6.80% 6.69% Average Balances: Year to Date Interest Earning Assets $ 1,156,418 $ 1,150,666 $ 1,136,250 Total Assets 1,279,990 1,271,084 1,253,662 Gross Loans 837,467 828,846 816,161 Equity 135,728 135,567 135,290 Interest Bearing Liabilities 1,028,351 1,022,648 1,008,968 Quarterly Interest Earning Assets $ 1,173,485 $ 1,179,027 $ 1,151,807 Total Assets 1,306,416 1,305,360 1,270,228 Gross Loans 863,047 853,802 826,708 Equity 136,206 136,112 135,106 Interest Bearing Liabilities 1,045,272 1,049,562 1,024,895 Weighted Average Number of Shares Outstanding Basic 17,676,048 17,851,787 17,907,360 Diluted 17,944,031 18,139,930 18,202,763 Period end outstanding shares 17,612,472 17,746,480 17,837,150 As of or for the three months ended March 31, December 31, 2005 2004 ------------ ------------ Per Share Data: Basic Earnings per Share $ 0.09 $ 0.13 Diluted Earnings per Share $ 0.09 $ 0.13 Book Value per Share $ 7.53 $ 7.68 Cash dividends paid $ 0.12 (1) - Selected Performance Ratios: Return on Average Assets (annualized) ROA 0.52% 0.78% Return on Average Equity (annualized) ROE 4.79% 6.93% Return on Tangible Equity (annualized) 7.82% 11.35% Net Interest Margin 3.27% 3.29% Net Interest Spread 2.98% 3.03% Non-interest Income as a % of Revenue 16.19% 19.87% Non-interest Income as a % of Average Assets 0.57% 0.74% Non-interest Expense to Average Assets 2.59% 2.36% Efficiency Ratio 73.24% 63.14% Asset Quality: Nonperforming Loans $ 7,910 $ 2,174 Nonperforming Assets $ 8,795 $ 3,259 Nonperforming Loans to Total Loans 0.98% 0.27% Nonperforming Assets to Total Assets 0.71% 0.27% Allowance for Loan Losses to Period-end Loans 1.50% 1.57% Allowance for Loan Losses to Nonperforming Loans (X) 1.53 5.77 Net Charge-offs to Average Loans (annualized) 0.16% 0.20% Capital Ratios: Equity to Total Assets 10.85% 11.20% Tangible Equity to Total Tangible Assets (3) 6.97% 7.21% Average Balances: Year to Date Interest Earning Assets $ 1,120,520 $ 1,056,891 Total Assets 1,236,912 1,167,861 Gross Loans 805,497 742,433 Equity 135,476 130,656 Interest Bearing Liabilities 992,864 941,803 Quarterly Interest Earning Assets $ 1,120,520 $ 1,098,094 Total Assets 1,236,912 1,213,674 Gross Loans 805,497 789,741 Equity 135,476 135,734 Interest Bearing Liabilities 992,864 978,696 Weighted Average Number of Shares Outstanding Basic 17,867,222 17,809,365 Diluted 18,251,528 18,274,744 Period end outstanding shares 17,941,028 17,819,234 As of or for the twelve months ended December 31, December 31, 2005 2004 ------------ ------------ Per Share Data: Basic Earnings per Share $ 0.46 $ 0.47 Diluted Earnings per Share $ 0.45 $ 0.45 Book Value per Share $ 7.69 $ 7.68 Cash dividends paid $ 0.21 $ 0.11 Selected Performance Ratios: Return on Average Assets (annualized) ROA 0.64% 0.69% Return on Average Equity (annualized) ROE 6.03% 6.20% Return on Tangible Equity (annualized) 9.77% 10.37% Net Interest Margin 3.21% 3.31% Net Interest Spread 2.88% 3.08% Non-interest Income as a % of Revenue 17.35% 17.46% Non-interest Income as a % of Average Assets 0.61% 0.63% Non-interest Expense to Average Assets 2.45% 2.36% Efficiency Ratio 69.70% 64.90% Asset Quality: Nonperforming Loans $ 1,408 $ 2,174 Nonperforming Assets $ 1,688 $ 3,259 Nonperforming Loans to Total Loans 0.16% 0.27% Nonperforming Assets to Total Assets 0.13% 0.27% Allowance for Loan Losses to Period-end Loans 1.36% 1.57% Allowance for Loan Losses to Nonperforming Loans (X) 8.37 5.77 Net Charge-offs to Average Loans (annualized) 0.14% 0.19% Capital Ratios: Equity to Total Assets 10.53% 11.20% Tangible Equity to Total Tangible Assets (3) 6.77% 7.21% Average Balances: Year to Date Interest Earning Assets Total Assets Gross Loans Equity Interest Bearing Liabilities Quarterly Interest Earning Assets Total Assets Gross Loans Equity Interest Bearing Liabilities Weighted Average Number of Shares Outstanding Basic 17,825,152 17,298,285 Diluted 18,133,859 18,033,333 Period end outstanding shares (1) - March 31, 2005 represents an annual dividend. (2) - Represents a quarterly dividend. (3) - Tangible Equity to Total Tangible Assets is period-ending equity less intangibles, divided by period-ending assets less period end intangibles. Management provides the above non-GAAP measure, footnote (3) 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
