Southern Community Financial Corporation (NASDAQ: SCMF) (NASDAQ:
SCMFO), the holding company for Southern Community Bank and Trust,
today reported third quarter 2009 results.
Financial Highlights
-- Net loss after preferred dividends was $1.1 million or $0.06 per share
-- Net interest margin for third quarter 2009 increased 25 basis points
to 3.30% from 3.05% in second quarter 2009.
-- Provision for loan losses of $6.0 million consistent with second
quarter provision level
-- Net charge-offs were $4.6 million or 1.45% of average loans
(annualized), down from $5.9 million or 1.85% of average loans (annualized)
in the second quarter.
-- Allowance for loan losses increased to $20.8 million or 1.67% of loans
at September 30, 2009, compared to $19.4 million or 1.55% of loans at June
30, 2009. Allowance coverage of nonperforming loans decreased to 92% at
September 30, 2009 compared to 109% at June 30, 2009.
-- Nonperforming loans increased to $22.7 million or 1.82% of loans at
September 30, 2009 from $17.9 million or 1.43% of loans at June 30, 2009
-- Nonperforming assets increased to $40.8 million or 2.36% of total
assets at September 30, 2009 from $35.7 million or 2.07% of total assets
at June 30, 2009
Net loss after preferred dividends amounted to $1.1 million or
$0.06 per diluted common share in the third quarter of 2009 and
included a $6.0 million provision for loan losses, 25 basis point
improvement in net interest margin, and an 8% reduction in
non-interest expenses on a linked quarter basis.
"As anticipated, our third quarter continued to reflect
improvement in our core earnings and net interest margin. The level
of loan loss provisioning was the direct result of our proactive
efforts in recognizing loan loss exposure," said F. Scott Bauer,
Chairman and Chief Executive Officer. "Two residential construction
and development loans totaling $4.4 million were the primary reason
for the increase in nonperforming loans. The level of nonperforming
loans and nonperforming assets at quarter-end continued to be
predominantly related to the residential construction and
development portfolio. While nonperforming loans increased, our
delinquencies have been declining. We remain committed to working
through our troubled assets quickly and efficiently, and this
remains our top priority."
"During the third quarter, we continued to improve our net
interest margin. Through our active liability management process,
we successfully shifted our deposit mix towards lower cost
transaction accounts. Our demand, NOW, savings and money market
deposits increased $75.4 million compared to the second quarter,
and now comprise 50% of our total deposits, up from 46%; while time
deposits decreased $34.8 million to 50% of total deposits, down
from 54% during the same time period. The improvement in our
deposit mix was directly related to our calling efforts and
promotional campaigns focused on transaction accounts and money
market accounts. We were successful in attracting new deposit
balances from customers of large regional banks across our markets.
Due to our deposit acquisition efforts and repricing opportunities
we expect further improvement in our funding costs and net interest
margin during the remainder of 2009."
"We also initiated several expense reduction measures during the
third quarter which lowered our personnel expenses by approximately
4% on a sequential basis. These measures included a reduction in
executive salaries, company-wide salary freeze and a reduction in
the employer 401(k) match. We will continue to evaluate our
non-interest expenses for additional opportunities to reduce costs
and anticipate implementing additional cost saving measures during
the remainder of 2009."
"Lastly, Southern Community remains well capitalized and liquid.
This will enable us to take advantage of the attractive
opportunities that are currently available in this economic
environment."
Asset Quality
Nonperforming loans increased to $22.7 million, or 1.82% of
total loans, at September 30, 2009 from $17.9 million, or 1.43% of
total loans, at June 30, 2009. Third quarter net charge-offs of
$4.6 million, or 1.45% of average loans on an annualized basis,
decreased from $5.9 million, or 1.85% of average loans annualized,
in the second quarter 2009. Nonperforming assets increased to $40.8
million, or 2.36% of total assets, at September 30, 2009 from $35.7
million, or 2.07% of total assets, at June 30, 2009 due primarily
to the $4.8 million increase in nonaccrual loans during the
quarter. Nonperforming loans, nonperforming assets and net
charge-off activity continue to be predominantly related to
residential construction and development lending as 82% of
nonperforming loans, 89% of nonperforming assets and 62% of net
charge-offs originated from this segment of the loan portfolio.
The provision for loan losses for the third quarter of $6.0
million matched the level of the second quarter 2009 provision;
however, it increased $4.6 million compared to the $1.4 million
provision for the third quarter 2008.
Net Interest Income
Net interest income of $13.3 million for the third quarter 2009
increased by 6% compared with $12.6 million in the second quarter
2009 and increased 12% over the $11.9 million in the third quarter
2008. The net interest margin of 3.30% for the third quarter 2009
increased 25 basis points from 3.05% for the second quarter 2009
and increased 42 basis points from 2.88% in the third 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 $51.4 million in average
earning assets during the third quarter 2009 compared with the
second quarter 2009. Quarter end loan balances decreased $3.0
million from June 30, 2009. This decrease in loans was due to a
continued 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 $4.2 million during the third quarter
2009 increased by $1.6 million or 60% compared with the second
quarter 2009 primarily resulting from the net increase in gains
related to derivative activity discussed below and a $235 thousand
increase in gains on sales of investment securities. In addition,
we experienced an increase in wealth management income of $147
thousand on higher transaction activity, a $214 thousand increase
in SBIC income and an increase of $45 thousand in service charges
on deposits which were partially offset by a reduction of $248
thousand in mortgage banking income due to lower production and
loan sales volumes during the third quarter. During the third
quarter 2009, as it relates to derivative activity, we recovered
$408 thousand from the sale and assignment of our creditor claims
in the Lehman bankruptcy to a third party. During the second
quarter 2009, we recorded a $1.0 million write-off in the value of
collateral held by Lehman as the counterparty for certain
derivative contracts terminated in the third quarter 2008.
Non-interest Expenses
Non-interest expenses of $12.6 million during the third quarter
2009 decreased $1.1 million or 8% on a linked quarter basis and
increased $2.4 million or 24% year-over-year. The sequential
decrease in non-interest expenses was primarily due to $517
thousand net reduction in FDIC deposit insurance costs, $472
thousand in prepayment penalties on FHLB advances extinguished in
the second quarter, $207 thousand decrease in personnel expenses
(including a reduction in the employer 401(k) match initiated
during the third quarter, a company-wide salary freeze and lower
mortgage commissions) and a $169 thousand decrease in marketing
expenses. Partially offsetting these expense reductions were
increases in credit quality/asset resolution costs, including a $69
thousand increase in losses on sales of foreclosed properties, a
$264 thousand increase in expenses for acquiring, holding and
maintaining foreclosed properties (including foreclosed asset
writedowns) and a $47 thousand increase in legal expenses primarily
related to problem loan workouts. Of the $517 thousand net
reduction in FDIC deposit insurance, there was an $800 thousand
decrease related to the special assessment accrued in the second
quarter which was partially offset by a $283 thousand increase in
our quarterly FDIC deposit insurance premium for the third quarter
2009. The year-over-year increase of $2.4 million was primarily due
to $604 thousand increase in FDIC deposit insurance costs, $640
thousand increase in expenses for acquiring, holding and
maintaining foreclosed properties (including foreclosed asset
writedowns), $480 thousand in buyer incentives to purchasers of
bank financed builder housing inventory and $100 thousand increase
in legal expenses, mostly related to problem loan resolutions.
Balance Sheet
As of September 30, 2009, total assets amounted to $1.73
billion, representing a decrease of $72.5 million or 4%
year-over-year; however, excluding the $49.5 million goodwill
impairment charge taken in the first quarter 2009, total assets
decreased only $23.0 million or 1% year-over-year. On a linked
quarter basis, total assets decreased $1.4 million or less than 1%.
As mentioned above, the loan portfolio decreased by $3.0 million or
less than 1% sequentially during the third quarter 2009 and
decreased by $66.6 million or 5%, since December 31, 2008 due to a
slowdown in loan demand. Total deposits of $1.29 billion at
September 30, 2009 increased $31.5 million or 2% year-over-year.
During the third quarter 2009, deposits increased $40.6 million or
3% compared with the June 30, 2009 level. Time deposits decreased
$34.8 million in the third quarter, while money market, savings and
NOW deposits increased $72.5 million as a result of active
liability management through pricing with an emphasis on improving
our funding mix and lowering our funding cost.
At September 30, 2009, stockholders' equity of $134.1 million
represented 7.77% of total assets. Stockholders' equity increased
$363 thousand or less than 1% from $133.7 million at June 30, 2009
primarily due to an increase in unrealized appreciation in our
available-for-sale investment portfolio during the third quarter.
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 October 23, 2009, at 9:30 AM Eastern Time to
discuss the quarter-end results. The call can be accessed by
dialing 1-888-542-1101 or 1-719-457-2088 and entering pass code
4012023. A replay of the conference call can be accessed until
11:59 pm on November 6, 2009, by calling 1-888-203-1112 or
1-719-457-0820 and entering pass code 4012023. 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
Sept 30, Jun 30, Mar 31, Dec 31, Sept 30,
Income Statement 2009 2009 2009 2008 2008
-------- -------- --------- -------- --------
Total Interest Income $ 22,186 $ 22,451 $ 22,744 $ 24,278 $ 24,412
Total Interest Expense 8,868 9,872 10,285 11,459 12,553
-------- -------- --------- -------- --------
Net Interest Income 13,318 12,579 12,459 12,819 11,859
Provision for Loan Losses 6,000 6,000 4,000 2,360 1,350
Net Interest Income after
Provision for Loan
Losses 7,318 6,579 8,459 10,459 10,509
Non-Interest Income
Service Charges on
Deposit Accounts 1,588 1,543 1,444 1,487 1,491
Income from mortgage
banking activities 512 760 416 233 219
Investment brokerage and
trust fees 359 212 296 147 285
SBIC income (loss) and
management fees 171 (43) 238 89 39
Gain (Loss) on Sale of
Investment Securities 735 500 1 98 -
Gain (Loss) and Net Cash
Settlement on Economic
Hedges 316 (912) (22) - (440)
Other Income 508 550 208 464 482
-------- -------- --------- -------- --------
Total Non-Interest
Income 4,189 2,610 2,581 2,518 2,076
Non-Interest Expense
Salaries and Employee
Benefits 5,690 5,897 5,530 5,088 5,535
Occupancy and Equipment 1,997 1,990 2,034 1,930 1,854
Goodwill Impairment - - 49,501 - -
Other 4,934 5,834 3,513 3,635 2,814
-------- -------- --------- -------- --------
Total Non-Interest
Expense 12,621 13,721 60,578 10,653 10,203
Income (Loss) Before
Taxes (1,114) (4,532) (49,538) 2,324 2,382
Provision for Income
Taxes (683) (1,845) (214) 766 754
-------- -------- --------- -------- --------
Net Income (Loss) $ (431) $ (2,687) $ (49,324) $ 1,558 $ 1,628
======== ======== ========= ======== ========
Effective dividend on
preferred stock 621 633 627 185 -
-------- -------- --------- -------- --------
Net income (loss)
available to common
shareholders $ (1,052) $ (3,320) $ (49,951) $ 1,373 $ 1,628
======== ======== ========= ======== ========
Net Income (Loss) per
Common Share
Basic $ (0.06) $ (0.20) $ (2.98) $ 0.08 $ 0.09
Diluted $ (0.06) $ (0.20) $ (2.98) $ 0.08 $ 0.09
======== ======== ========= ======== ========
Nine Months Ended
Sept 30, Sept 30,
Income Statement 2009 2008
--------- --------
Total Interest Income $ 67,381 $ 72,464
Total Interest Expense 29,025 37,823
--------- --------
Net Interest Income 38,356 34,641
Provision for Loan Losses 16,000 5,805
Net Interest Income after
Provision for Loan
Losses 22,356 28,836
Non-Interest Income
Service Charges on
Deposit Accounts 4,575 4,372
Income from mortgage
banking activities 1,688 1,061
Investment brokerage and
trust fees 867 991
SBIC income (loss) and
management fees 366 (29)
Gain (Loss) on Sale of
Investment Securities 1,236 -
Gain (Loss) and Net Cash
Settlement on Economic
Hedges (618) 934
Other Income 1,266 1,388
--------- --------
Total Non-Interest
Income 9,380 8,717
Non-Interest Expense
Salaries and Employee
Benefits 17,117 16,950
Occupancy and Equipment 6,021 5,749
Goodwill Impairment 49,501 -
Other 14,281 8,690
--------- --------
Total Non-Interest
Expense 86,920 31,389
Income (Loss) Before
Taxes (55,184) 6,164
Provision for Income
Taxes (2,742) 1,868
--------- --------
Net Income (Loss) $ (52,442) $ 4,296
========= ========
Effective dividend on
preferred stock 1,881 -
--------- --------
Net income (loss)
available to common
shareholders $ (54,323) $ 4,296
========= ========
Net Income (Loss) per
Common Share
Basic $ (3.24) $ 0.25
Diluted $ (3.24) $ 0.25
========= ========
Sept 30, Jun 30, Mar 31, Dec 31, Sept 30,
Balance Sheet 2009 2009 2009 2008 2008
---------- ---------- ---------- ---------- ----------
Assets
Cash and due
from Banks $ 22,953 $ 27,265 $ 28,268 $ 25,215 $ 27,453
Federal Funds
Sold & Int
Bearing Balances 21,792 1,496 17,891 2,180 2,605
Investment
Securities 323,800 333,722 345,861 324,698 302,905
Federal Home
Loan Bank
Stock 9,794 9,794 10,178 9,757 10,208
Loans held for
sale 2,559 8,068 6,044 316 920
Loans 1,248,249 1,251,200 1,297,489 1,314,811 1,323,360
Allowance for
Loan Losses (20,807) (19,390) (19,314) (18,851) (17,929)
---------- ---------- ---------- ---------- ----------
Net Loans 1,227,442 1,231,810 1,278,175 1,295,960 1,305,431
Bank Premises
and Equipment 42,590 42,006 40,622 40,030 39,264
Goodwill - - - 49,501 49,792
Other Assets 74,411 72,548 62,695 56,121 59,283
---------- ---------- ---------- ---------- ----------
Total Assets $1,725,341 $1,726,709 $1,789,734 $1,803,778 $1,797,861
========== ========== ========== ========== ==========
Liabilities and
Stockholders'
Equity
Deposits
Non-Interest
Bearing $ 106,156 $ 103,205 $ 98,618 $ 102,048 $ 104,988
Money market,
savings and
NOW 542,277 469,799 479,797 475,772 523,949
Time 646,039 680,875 749,728 655,292 634,037
---------- ---------- ---------- ---------- ----------
Total Deposits 1,294,472 1,253,879 1,328,143 1,233,112 1,262,974
Borrowings 288,585 330,218 314,400 373,213 378,500
Accrued Expenses
and Other
Liabilities 8,222 8,913 8,982 9,743 13,549
---------- ---------- ---------- ---------- ----------
Total
Liabilities 1,591,279 1,593,010 1,651,525 1,616,068 1,655,023
Total
Stockholders'
Equity 134,062 133,699 138,209 187,710 142,838
---------- ---------- ---------- ---------- ----------
Total Liabilities
and Stockholders'
Equity $1,725,341 $1,726,709 $1,789,734 $1,803,778 $1,797,861
========== ========== ========== ========== ==========
Tangible Book
Value per
Common Share $ 5.49 $ 5.47 $ 5.74 $ 5.76 $ 5.29
========== ========== ========== ========== ==========
For the three months ended
Sept 30, Jun 30, Mar 31, Dec 31, Sept 30,
2009 2009 2009 2008 2008
---------- ---------- ---------- ---------- ----------
Per Common
Share Data:
Basic Earnings
per Share $ (0.06) $ (0.20) $ (2.98) $ 0.08 $ 0.09
Diluted Earnings
per Share $ (0.06) $ (0.20) $ (2.98) $ 0.08 $ 0.09
Tangible Book
Value per
Share $ 5.49 $ 5.47 $ 5.74 $ 5.76 $ 5.29
Cash dividends
paid $ - $ - $ - $ 0.040 $ 0.040
Selected
Performance
Ratios:
Return on Average
Assets
(annualized)
ROA -0.10% -0.61% -10.90% 0.34% 0.36%
Return on Average
Equity
(annualized)
ROE -1.28% -7.87% -106.68% 4.01% 4.57%
Return on
Tangible Equity
(annualized) -1.29% -7.93% -145.53% 5.98% 7.13%
Net Interest
Margin 3.30% 3.05% 3.01% 3.10% 2.88%
Net Interest
Spread 3.10% 2.84% 2.78% 2.88% 2.67%
Non-interest
Income as a %
of Revenue 23.93% 17.18% 17.16% 16.42% 14.90%
Non-interest
Income as a %
of Average
Assets 0.96% 0.59% 0.57% 0.55% 0.45%
Non-interest
Expense to
Average Assets 2.91% 3.12% 13.39% 2.35% 2.27%
Efficiency
Ratio 72.09% 90.34% 402.78% 69.46% 73.22%
Asset Quality:
Nonperforming
Loans $ 22,697 $ 17,851 $ 20,251 $ 14,433 $ 12,007
Nonperforming
Assets $ 40,766 $ 35,732 $ 31,049 $ 20,178 $ 15,086
Nonperforming
Loans to Total
Loans 1.82% 1.43% 1.56% 1.10% 0.91%
Nonperforming
Assets to
Total Assets 2.36% 2.07% 1.73% 1.12% 0.84%
Allowance for
Loan Losses to
Period-end
Loans 1.67% 1.55% 1.49% 1.43% 1.35%
Allowance for
Loan Losses to
Nonperforming
Loans (X) 0.92X 1.09X 0.95X 1.31X 1.49X
Net Charge-offs
to Average Loans
(annualized) 1.45% 1.85% 1.09% 0.43% 0.28%
Capital Ratios:
Equity to Total
Assets 7.77% 7.74% 7.72% 10.41% 7.94%
Tangible Equity
to Total Tangible
Assets (1) 5.34% 5.32% 5.39% 5.51% 5.26%
Average Balances:
Year to Date
Interest
Earning
Assets $1,643,945 $1,665,784 $1,679,293 $1,588,542 $1,569,306
Total Assets 1,774,376 1,800,376 1,834,575 1,738,868 1,717,357
Total Loans 1,280,803 1,295,913 1,310,679 1,279,041 1,264,744
Equity 155,522 162,126 187,512 145,754 142,800
Interest
Bearing
Liabilities 1,506,867 1,525,524 1,535,956 1,474,539 1,456,848
Quarterly
Interest
Earning
Assets $1,600,979 $1,652,424 $1,679,293 $1,645,832 $1,636,404
Total Assets 1,723,224 1,766,553 1,834,575 1,802,934 1,789,593
Gross Loans 1,251,076 1,281,309 1,310,679 1,321,621 1,315,983
Equity 133,627 137,019 187,512 154,552 141,846
Interest
Bearing
Liabilities 1,470,162 1,515,206 1,535,956 1,527,227 1,527,316
Weighted Average
Number of Shares
Outstanding
Basic 16,791,175 16,791,340 16,780,058 17,369,765 17,369,925
Diluted 16,791,175 16,791,340 16,780,058 17,398,432 17,416,675
Period end
outstanding
shares 16,791,175 16,793,175 16,793,175 16,769,675 17,370,175
Nine Months Ended
Sept 30, Sept 30,
2009 2008
---------- ----------
Per Common
Share Data:
Basic Earnings
per Share $ (3.24) $ 0.25
Diluted Earnings
per Share $ (3.24) $ 0.25
Tangible Book
Value per
Share $ 5.49 $ 8.22
Cash dividends
paid $ - $ 0.120
Selected
Performance
Ratios:
Return on Average
Assets
(annualized)
ROA -3.95% 0.33%
Return on Average
Equity
(annualized)
ROE -45.08% 4.02%
Return on Tangible
Equity
(annualized) -50.68% 6.26%
Net Interest
Margin 3.12% 2.95%
Net Interest
Spread 2.90% 2.70%
Non-interest
Income as a %
of Revenue 19.65% 20.10%
Non-interest
Income as a %
of Average
Assets 0.71% 0.68%
Non-interest
Expense to
Average Assets 6.55% 2.45%
Efficiency
Ratio 182.08% 72.39%
Asset Quality:
Nonperforming
Loans $ 22,697 $ 12,007
Nonperforming
Assets $ 40,766 $ 15,086
Nonperforming
Loans to Total
Loans 1.82% 0.91%
Nonperforming
Assets to
Total Assets 2.36% 0.84%
Allowance for
Loan Losses to
Period-end
Loans 1.67% 1.35%
Allowance for
Loan Losses to
Nonperforming
Loans (X) 0.92X 1.49X
Net Charge-offs
to Average
Loans
(annualized) 1.47% 0.23%
Capital Ratios:
Equity to Total
Assets 7.77% 7.94%
Tangible Equity
to Total Tangible
Assets (1) 5.34% 5.26%
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 16,787,565 17,361,257
Diluted 16,787,565 17,406,558
Period end
outstanding
shares 16,791,175 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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