Southern Community Financial Corporation (NASDAQ: SCMF) (NASDAQ:
SCMFO), the holding company for Southern Community Bank and Trust,
today reported second quarter 2009 results.
Financial Highlights
-- Net loss of $3.3 million or $0.20 per share
-- Net interest margin for second quarter 2009 increased four basis
points to 3.05% from 3.01% in first quarter 2009
-- Provision for loan losses of $6.0 million, an increase of $2.0
million, compared to $4.0 million in first quarter 2009
-- Net charge-offs were 1.85% of average loans, up from 1.09% in the
first quarter
-- Allowance for loan losses of $19.4 million or 1.55% of loans at June
30, 2009 compared to $19.3 million or 1.49% of loans at March 31, 2009.
Allowance coverage of nonperforming loans increased to 109% at June 30,
2009 compared to 95% at March 31, 2009.
-- Nonperforming loans decreased to $17.9 million or 1.43% of loans at
June 30, 2009 from $20.3 million or 1.56% of loans at March 31, 2009
-- Nonperforming assets increased to $35.7 million or 2.07% of total
assets at June 30, 2009 from $31.0 million or 1.73% of total assets at
March 31, 2009
-- Non-interest income increased $182 thousand or 6% on a linked quarter
basis, excluding $1.0 million Lehman write-off and $500 thousand gain on
sale of investment securities in second quarter and $404 thousand write-off
of our equity investment in Silverton Bank in the first quarter
Net loss after preferred dividends amounted to $3.3 million or
$0.20 per diluted common share in the second quarter of 2009 and
included an increased provision for loan losses ($6.0 million), a
$1.0 million write-off of collateral held by Lehman Brothers as the
counterparty in certain derivative contracts and $1.1 million
sequential increase in FDIC insurance premiums.
"The increases in our provision for loan losses and net
charge-offs for the second quarter were a direct result of our
aggressive efforts to work through and effectively resolve troubled
assets," said F. Scott Bauer, Chairman and Chief Executive Officer.
"This quarter's charge-off activity continues to be primarily
related to our residential construction and development loans which
remain adversely impacted by the persistently slow market for newly
constructed homes. We are encouraged by the recent trends in our
loan delinquencies, which have decreased over the past five months.
As a result our nonperforming loans have decreased to $17.9
million, or 1.43% of loans, at June 30, 2009 compared with $20.3
million, or 1.56% of loans, at March 31, 2009. As expected, our
second quarter results were impacted by this increased provision
for loan losses and the expenses associated with managing our loan
portfolio and foreclosed properties."
"Despite the difficult credit cycle Southern Community's core
bank continues to operate well. The company-wide focus on deposit
gathering and pricing discipline on loans contributed to the net
interest margin expansion of four basis points to 3.05%. For
example, we successfully increased lower cost non-interest bearing
deposits by 5% over the first quarter, and reduced higher cost CD
balances by 9% during the same time period."
"During the second half of 2009, we believe there will be more
opportunities to decrease our cost of funds, improve our net
interest margin and increase overall profitability. While loan
demand remains slow in this weakened economy, we believe that it is
likely to increase in the second half of 2009 based on recent
trends we are seeing across our markets. Southern Community remains
strong in terms of capital and liquidity and is well positioned to
weather this economic storm. Our Board and management team are
dedicated to working through these challenges and to capitalizing
on the outstanding opportunities that lie ahead."
Asset Quality
Nonperforming loans decreased to $17.9 million, or 1.43% of
total loans, at June 30, 2009 from $20.3 million, or 1.56% of total
loans, at March 31, 2009. Second quarter net charge-offs of $5.9
million, or 1.85% of average loans on an annualized basis,
increased from $3.5 million, or 1.09% of average loans annualized,
in the first quarter 2009. Nonperforming assets increased to $35.7
million, or 2.07% of total assets, at June 30, 2009 from $31.0
million, or 1.73% of total assets, at March 31, 2009 due to the
influx of foreclosed assets during the quarter. Nonperforming
loans, nonperforming assets and net charge-off activity continue to
be predominantly related to residential construction and
development lending as 72% of nonperforming loans, 76% of
nonperforming assets and 70% of net charge-offs originated from
this segment of the loan portfolio.
The provision for loan losses of $6.0 million for the second
quarter increased $2.0 million compared to the $4.0 million first
quarter 2009 provision and increased $2.5 million compared to $3.5
million provision for second quarter 2008.
Net Interest Income
Net interest income of $12.6 million for the second quarter 2009
increased by 1% compared with $12.5 million in the first quarter
2009; however, it increased 7% over the $11.8 million in the second
quarter 2008. The net interest margin of 3.05% for the second
quarter 2009 increased four basis points from 3.01% for the first
quarter 2009 and increased seven basis points from 2.98% in the
second quarter 2008. The sequential increase in net interest income
resulted from the impact of deposits and borrowings repricing lower
to a greater extent than interest earning assets. This favorable
rate variance was partially offset by a decrease of $26.9 million
in average earning assets during the second quarter 2009 compared
with the first quarter 2009. Quarter end loan balances decreased
$46.3 million, or 4%, from March 31, 2009. This decrease in loans
was due to a slowdown in loan demand as some of our primary
customers are deleveraging and taking a more conservative stance
toward borrowing during these difficult economic times.
Non-interest Income
Non-interest income of $2.7 million during the second quarter
2009 increased by $86 thousand or 3% compared with the first
quarter 2009 primarily resulting from increases in mortgage banking
income from increased refinance activity, gains on sales of
investment securities and service charge income. These increases
were partially offset by the $1.0 million write-off of the value of
collateral held by Lehman as the counterparty for certain
derivative contracts terminated in the third quarter 2008 as well
as decreases in wealth management income on lower transaction
activity and decreases in SBIC income. Excluding the $1.0 million
Lehman write-off (as disclosed under "gain (loss) and net cash
settlement on economic hedges" in attached summary income
statement), a $500 thousand gain on the sale of investment
securities in the second quarter, and a $404 thousand write-off of
an equity investment in Silverton Bank in the first quarter,
non-interest income increased $182 thousand or 6% compared with the
first quarter.
Non-interest Expenses
Non-interest expenses of $13.8 million during the second quarter
2009 increased $2.7 million, or 24%, on a linked quarter basis,
excluding the goodwill impairment charge of $49.5 million taken in
the first quarter 2009, and increased $3.1 million or 29%
year-over-year. The sequential increase in non-interest expenses
was primarily due to $1.1 million increase in FDIC deposit
insurance (approximately $800 thousand of which was the FDIC
special assessment), $472 thousand in prepayment penalties on early
extinguishment of FHLB advances, $347 thousand in OREO writedowns,
$370 thousand increase in buyer incentives to purchasers of
bank-financed builder housing inventory and increases in
commissions on increased mortgage activity. Staffing for our new
Asheville location and associated expenses for marketing efforts
focused on deposit gathering also contributed.
Balance Sheet
As of June 30, 2009, total assets amounted to $1.73 billion,
representing a decrease of $45.0 million, or 3% year-over-year;
however, excluding the $49.5 million goodwill impairment charge
taken in the first quarter 2009, total assets increased $4.4
million or 0.3% year-over-year. On a linked quarter basis, total
assets decreased $63.1 million or 4%. As mentioned above, the loan
portfolio decreased by $46.3 million or 4% sequentially during the
second quarter 2009 due to a slowdown in loan demand. Total
deposits of $1.25 billion at June 30, 2009 increased $36.5 million
or 3% year-over-year. During the second quarter 2009, deposits
decreased $74.3 million or 6% compared with the March 31, 2009
level. Time deposits decreased $68.9 million in the second quarter
as a result of active liability management through pricing with an
emphasis on improving our funding mix and lowering our funding
cost.
At June 30, 2009, stockholders' equity of $133.7 million
represented 7.74% of total assets. Stockholders' equity decreased
$4.5 million or 3% from $138.2 million at March 31, 2009.
Regulatory capital ratios remain in excess of the "well
capitalized" threshold.
Conference Call
Southern Community's executive management team will host a
conference call on July 24, 2009, at 9:30 AM Eastern Time to
discuss the quarter-end results. The call can be accessed by
dialing 1-877-440-5791 or 1-719-325-4846 and entering pass code
9324808. A replay of the conference call can be accessed until
11:59 pm on August 7, 2009, by calling 1-888-203-1112 or
1-719-457-0820 and entering pass code 9324808. You may access
additional presentation materials for this conference call in the
Investor Relations section of Southern Community's web site at
www.smallenoughtocare.com.
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.
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
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
Income Statement 2009 2009 2008 2008 2008
--------- --------- ---------- --------- ----------
Total Interest
Income $ 22,451 $ 22,744 $ 24,278 $ 24,412 $ 23,727
Total Interest
Expense 9,872 10,285 11,459 12,553 11,947
--------- --------- ---------- --------- ----------
Net Interest Income 12,579 12,459 12,819 11,859 11,780
Provision for Loan
Losses 6,000 4,000 2,360 1,350 3,530
Net Interest Income
after Provision for
Loan Losses 6,579 8,459 10,459 10,509 8,250
Non-Interest Income
Service Charges on
Deposit Accounts 1,543 1,444 1,487 1,491 1,475
Income from mortgage
banking activities 760 416 233 219 358
Investment brokerage
and trust fees 212 296 147 285 335
SBIC income (loss)
and management fees (43) 238 89 39 82
Gain (Loss) on Sale of
Investment Securities 500 1 98 - -
Gain (Loss) and Net
Cash Settlement on
Economic Hedges (912) (22) - (440) 330
Other Income 613 214 464 483 518
--------- --------- ---------- --------- ----------
Total Non-Interest
Income 2,673 2,587 2,518 2,077 3,098
Non-Interest Expense
Salaries and
Employee Benefits 5,897 5,530 5,088 5,535 5,621
Occupancy and
Equipment 1,990 2,034 1,930 1,854 1,931
Goodwill Impairment - 49,501 - - -
Other 5,897 3,519 3,635 2,815 3,120
--------- --------- ---------- --------- ----------
Total Non-Interest
Expense 13,784 60,584 10,653 10,204 10,672
Income (Loss) Before
Taxes (4,532) (49,538) 2,324 2,382 676
Provision for Income
Taxes (1,845) (214) 766 754 73
--------- --------- ---------- --------- ----------
Net Income (Loss) $ (2,687) $ (49,324) $ 1,558 $ 1,628 $ 603
========= ========= ========== ========= ==========
Effective dividend
on preferred stock 633 627 185 - -
--------- --------- ---------- --------- ----------
Net income (loss)
available to common
shareholders $ (3,320) $ (49,951) $ 1,373 $ 1,628 $ 603
========= ========= ========== ========= ==========
Net Income (Loss)
per Common Share
Basic $ (0.20) $ (2.98) $ 0.08 $ 0.09 $ 0.03
Diluted $ (0.20) $ (2.98) $ 0.08 $ 0.09 $ 0.03
========= ========= ========== ========= ==========
Six Months Ended
Jun 30, Jun 30,
Income Statement 2009 2008
--------- ---------
Total Interest
Income $ 45,195 $ 48,052
Total Interest
Expense 20,157 25,270
--------- ---------
Net Interest Income 25,038 22,782
Provision for Loan
Losses 10,000 4,455
Net Interest Income
after Provision for
Loan Losses 15,038 18,327
Non-Interest Income
Service Charges on
Deposit Accounts 2,987 2,881
Income from mortgage
banking activities 1,176 842
Investment brokerage
and trust fees 508 706
SBIC income (loss)
and management fees 195 (68)
Gain (Loss) on Sale of
Investment Securities 501 -
Gain (Loss) and Net
Cash Settlement on
Economic Hedges (934) 1,374
Other Income 827 952
--------- ---------
Total Non-Interest
Income 5,260 6,687
Non-Interest Expense
Salaries and
Employee Benefits 11,427 11,415
Occupancy and
Equipment 4,024 3,895
Goodwill Impairment 49,501 -
Other 9,416 5,922
--------- ---------
Total Non-Interest
Expense 74,368 21,232
Income (Loss) Before
Taxes (54,070) 3,782
Provision for Income
Taxes (2,059) 1,114
--------- ---------
Net Income (Loss) $ (52,011) $ 2,668
========= =========
Effective dividend
on preferred stock 1,260 -
--------- ---------
Net income (loss)
available to common
shareholders $ (53,271) $ 2,668
========= =========
Net Income (Loss)
per Common Share
Basic $ (3.17) $ 0.15
Diluted $ (3.17) $ 0.15
========= =========
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
Balance Sheet 2009 2009 2008 2008 2008
---------- ---------- ---------- ---------- ----------
Assets
Cash and due
from Banks $ 27,265 $ 28,268 $ 25,215 $ 27,453 $ 37,576
Federal Funds
Sold & Int
Bearing Balances 1,496 17,891 2,180 2,605 3,607
Investment
Securities 333,722 345,861 324,698 302,905 306,666
Federal Home Loan
Bank Stock 9,794 10,178 9,757 10,208 9,670
Loans held for
sale 8,068 6,044 316 920 2,106
Loans 1,251,200 1,297,489 1,314,811 1,323,360 1,285,014
Allowance for
Loan Losses (19,390) (19,314) (18,851) (17,929) (17,499)
---------- ---------- ---------- ---------- ----------
Net Loans 1,231,810 1,278,175 1,295,960 1,305,431 1,267,515
Bank Premises
and Equipment 42,006 40,622 40,030 39,264 39,672
Goodwill - - 49,501 49,792 49,792
Other Assets 72,548 62,695 56,121 59,283 55,101
---------- ---------- ---------- ---------- ----------
Total Assets $1,726,709 $1,789,734 $1,803,778 $1,797,861 $1,771,705
========== ========== ========== ========== ==========
Liabilities and
Stockholders'
Equity
Deposits
Non-Interest
Bearing $ 103,205 $ 98,618 $ 102,048 $ 104,988 $ 114,685
Money market,
savings and
NOW 469,799 479,797 475,772 523,949 560,094
Time 680,875 749,728 655,292 634,037 542,622
---------- ---------- ---------- ---------- ----------
Total Deposits 1,253,879 1,328,143 1,233,112 1,262,974 1,217,401
Borrowings 330,218 314,400 373,213 378,500 401,667
Accrued Expenses
and Other
Liabilities 8,913 8,982 9,743 13,549 10,747
---------- ---------- ---------- ---------- ----------
Total
Liabilities 1,593,010 1,651,525 1,616,068 1,655,023 1,629,815
Total
Stockholders'
Equity 133,699 138,209 187,710 142,838 141,890
---------- ---------- ---------- ---------- ----------
Total Liabilities
and
Stockholders'
Equity $1,726,709 $1,789,734 $1,803,778 $1,797,861 $1,771,705
========== ========== ========== ========== ==========
Tangible Book
Value per
Common Share $ 5.47 $ 5.74 $ 5.76 $ 5.29 $ 5.23
========== ========== ========== ========== ==========
As of or for the three months ended
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2009 2009 2008 2008 2008
---------- ---------- ---------- ---------- ----------
Per Common
Share Data:
Basic Earnings
per Share $ (0.20) $ (2.98) $ 0.08 $ 0.09 $ 0.03
Diluted Earnings
per Share $ (0.20) $ (2.98) $ 0.08 $ 0.09 $ 0.03
Tangible Book
Value per
Share $ 5.47 $ 5.74 $ 5.76 $ 5.29 $ 5.23
Cash dividends
paid $ - $ - $ 0.040 $ 0.040 $ 0.040
Selected
Performance
Ratios:
Return on
Average Assets
(annualized)
ROA -0.59% -10.90% 0.34% 0.36% 0.51%
Return on
Average Equity
(annualized)
ROE -5.80% -106.68% 4.01% 4.57% 5.84%
Return on Tangible
Equity
(annualized) -5.83% -145.53% 5.98% 7.13% 9.12%
Net Interest
Margin 3.05% 3.01% 3.10% 2.88% 2.98%
Net Interest
Spread 2.84% 2.78% 2.88% 2.67% 2.67%
Non-interest
Income as a %
of Revenue 17.53% 17.19% 16.42% 14.90% 24.60%
Non-interest
Income as a %
of Average
Assets 0.59% 0.57% 0.55% 0.45% 0.89%
Non-interest
Expense to
Average Assets 3.05% 13.39% 2.35% 2.27% 2.61%
Efficiency
Ratio 90.38% 402.66% 69.46% 73.22% 72.37%
Asset Quality:
Nonperforming
Loans $ 17,851 $ 20,251 $ 14,433 $ 12,007 $ 12,796
Nonperforming
Assets $ 35,732 $ 31,049 $ 20,178 $ 15,086 $ 14,210
Nonperforming
Loans to Total
Loans 1.43% 1.56% 1.10% 0.91% 1.00%
Nonperforming
Assets to
Total Assets 2.07% 1.73% 1.12% 0.84% 0.80%
Allowance for
Loan Losses to
Period-end
Loans 1.55% 1.49% 1.43% 1.35% 1.36%
Allowance for
Loan Losses to
Nonperforming
Loans (X) 1.09X 0.95X 1.31X 1.49X 1.37X
Net Charge-offs
to Average
Loans (annualized) 1.85% 1.09% 0.43% 0.28% 0.28%
Capital Ratios:
Equity to Total
Assets 7.74% 7.72% 10.41% 7.94% 8.01%
Tangible Equity
to Total Tangible
Assets (1) 5.32% 5.39% 5.51% 5.26% 5.28%
Average Balances:
Year to Date
Interest
Earning
Assets $1,665,784 $1,679,293 $1,588,542 $1,569,306 $1,535,388
Total Assets 1,800,376 1,834,575 1,738,868 1,717,357 1,680,842
Total Loans 1,295,913 1,310,679 1,279,041 1,264,744 1,238,843
Equity 162,126 187,512 145,754 142,800 143,282
Interest
Bearing
Liabilities 1,525,524 1,535,956 1,474,539 1,456,848 1,421,227
Quarterly
Interest
Earning
Assets $1,652,424 $1,679,293 $1,645,832 $1,636,404 $1,586,068
Total Assets 1,815,510 1,834,575 1,802,934 1,789,593 1,736,520
Gross Loans 1,281,309 1,310,679 1,321,621 1,315,983 1,257,886
Equity 185,976 187,512 154,552 141,846 144,374
Interest
Bearing
Liabilities 1,515,206 1,535,956 1,527,227 1,527,316 1,474,186
Weighted
Average Number
of Shares
Outstanding
Basic 16,791,340 16,780,058 17,369,765 17,369,925 17,354,298
Diluted 16,791,340 16,780,058 17,398,432 17,416,675 17,401,298
Period end
outstanding
shares 16,793,175 16,793,175 16,769,675 17,370,175 17,370,175
As of or for the
Six Months Ended
Jun 30, Jun 30,
2009 2008
---------- ----------
Per Common
Share Data:
Basic Earnings
per Share $ (3.17) $ 0.15
Diluted Earnings
per Share $ (3.17) $ 0.15
Tangible Book
Value per
Share $ 5.47 $ 8.17
Cash dividends
paid $ - $ 0.080
Selected
Performance
Ratios:
Return on
Average Assets
(annualized)
ROA -5.83% 0.32%
Return on
Average Equity
(annualized)
ROE -64.69% 3.75%
Return on Tangible
Equity
(annualized) -76.72% 5.82%
Net Interest
Margin 3.03% 2.98%
Net Interest
Spread 2.81% 2.72%
Non-interest
Income as a %
of Revenue 17.36% 22.69%
Non-interest
Income as a %
of Average
Assets 0.59% 0.80%
Non-interest
Expense to
Average Assets 8.33% 2.54%
Efficiency
Ratio 245.46% 72.05%
Asset Quality:
Nonperforming
Loans $ 17,851 $ 12,796
Nonperforming
Assets $ 35,732 $ 14,210
Nonperforming
Loans to Total
Loans 1.43% 100.00%
Nonperforming
Assets to
Total Assets 2.07% 0.80%
Allowance for
Loan Losses to
Period-end
Loans 1.55% 1.36%
Allowance for
Loan Losses to
Nonperforming
Loans (X) 1.09X 1.37X
Net Charge-offs
to Average Loans
(annualized) 1.47% 0.20%
Capital Ratios:
Equity to Total
Assets 7.74% 8.01%
Tangible Equity
to Total Tangible
Assets (1) 5.32% 5.28%
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 16,785,730 17,356,875
Diluted 16,785,730 17,401,444
Period end
outstanding
shares 16,793,175 17,370,175
(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
Hastings Executive Vice President/CFO (336) 768-8500
Capital Bank Financial Corp. - Southern Community Capital Trust II - % Cumulative Trust Preferred Securities (MM) (NASDAQ:SCMFO)
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Capital Bank Financial Corp. - Southern Community Capital Trust II - % Cumulative Trust Preferred Securities (MM) (NASDAQ:SCMFO)
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