Southern Community Financial Corporation (NASDAQ: SCMF) (NASDAQ:
SCMFO), the holding company for Southern Community Bank and Trust,
today reported first quarter 2011 results.
Financial Highlights:
-- Net income before the accrual for preferred dividend of $151 thousand;
-- After preferred dividend accrual, net loss available to common
shareholders of $488 thousand, or $0.03 per diluted share;
-- Net interest margin increased 28 basis points to 3.42% on a linked
quarter basis;
-- Provision for loan losses of $4.1 million decreased $2.4 million
compared to fourth quarter of 2010;
-- Nonperforming loans decreased 20% to $73.8 million, or 6.80% of loans,
at March 31, 2011 from $91.8 million, or 8.08% of loans, at December
31, 2010;
-- Nonperforming assets decreased 11% to $96.8 million, or 6.04% of total
assets, from $109.1 million, or 6.60% of total assets, at December 31,
2010;
-- Net charge-offs of $6.0 million, or 2.19% of average loans
(annualized), down from $12.0 million, or 4.10% of average loans
(annualized), in the fourth quarter of 2010; and
-- Allowance for loan losses decreased $1.9 million to $27.7 million, or
2.55% of total loans.
Southern Community Financial reported a net loss available to
common shareholders of $488 thousand for the first quarter 2011,
compared with a net loss of $11.5 million for the fourth quarter of
2010 and net loss of $5.2 million for the first quarter 2010. The
net loss per diluted common share in the first quarter 2011
decreased to $0.03, compared to $0.68 and $0.31 for the fourth
quarter 2010 and first quarter 2010, respectively.
"We are pleased to report a profit before preferred dividend for
the first quarter of 2011. We also are very encouraged by the 20%
reduction in our nonperforming loans during the first quarter of
2011 and by continued positive trends in our impaired loans," said
F. Scott Bauer, Chairman and Chief Executive Officer. "The first
quarter of 2011 marked the fourth consecutive quarter in which our
loan delinquencies have decreased. Impaired loans requiring
specific reserves dropped $14.5 million, or 52%, compared to the
fourth quarter of 2010. We are continuing to make progress in the
resolution of the formerly collateral dependent loans that were
added to nonaccrual status during the third quarter of 2010. Given
these developments, we are optimistic that our nonperforming loans
will continue to decrease in the second quarter of 2011,
particularly as we anticipate additional formerly collateral
dependent loans to be returned to accruing status. As a result, we
continue to expect opportunities for net interest margin
improvement in the second quarter of 2011.
While we are optimistic about the positive trends we are seeing
in our asset quality, we continue to anticipate shrinkage in our
overall loan portfolio and balance sheet as loan demand remains
weak due to the prolonged economic downturn. However, this
shrinkage will allow us to better manage our capital during the
current economic cycle.
Our employees continue to exceed my expectations for their
exemplary commitment to providing our customers with the highest
level of service possible. Southern Community remains well funded
with regulatory capital ratios in excess of the well-capitalized
requirements at the consolidated Company level and with a Tier 1
leverage ratio in excess of 8% and a total risk-based capital ratio
above 12% at the Bank level."
Asset Quality
Nonperforming loans decreased $18.0 million to $73.8 million, or
6.80% of total loans, at March 31, 2011 from $91.8 million, or
8.08% of total loans, at December 31, 2010. Included in the $18.0
million net reduction in nonperforming loans, there are $11.0
million in formerly collateral dependent loans that were restored
to an accruing status during first quarter of 2011 as a result of
consistent payment performance on these loans over a reasonable
period subsequent to the addition of principal curtailments to the
borrowers' scheduled loan payments. Loans delinquent 30-89 days
declined to $3.4 million at March 31, 2011 from $5.5 million at
December 31, 2010, and from $8.9 million at September 31, 2010.
Nonperforming assets decreased to $96.8 million, or 6.04% of total
assets, at March 31, 2011 from $109.1 million, or 6.60% of total
assets, at December 31, 2010.
The provision for loan losses of $4.1 million in the first
quarter of 2011 decreased $2.4 million from $6.5 million in the
fourth quarter 2010. The allowance for loan losses (ALLL) decreased
$1.9 million to $27.7 million, or 2.55% of total loans, from $29.6
million, or 2.60% of total loans, at December 31, 2010. Net
charge-offs decreased sequentially to $6.0 million, or 2.19% of
average loans on an annualized basis, from $12.0 million, or 4.10%
of average loans on an annualized basis, for the fourth quarter
2010. As the overall ALLL decreased sequentially during the first
quarter of 2011, the specific allowance for impaired loans
decreased by $2.3 million to $2.8 million on a linked quarter basis
as the volume of impaired loans requiring a specific allowance
decreased to $15.9 million at March 31, 2011 from $28.2 million at
December 31, 2010.
Net Interest Income
Net interest income of $12.8 million in the first quarter of
2011 increased $426 thousand, or 3%, compared to $12.4 million in
the fourth quarter of 2010 and the net interest margin increased 28
basis points to 3.42% compared with 3.14% in the fourth quarter of
2010. The sequential increase in net interest income and the net
interest margin resulted from the impact of $11.0 million in
formerly collateral dependent loans that were reinstated to accrual
status as well as the continued downward repricing of deposits.
These positive factors were partially offset by a $44.4 million
decrease in the average balance of earning assets, driven by a
$50.7 million decrease in average loan balances.
On a year-over-year basis, net interest income decreased $416
thousand, or 3%, and the net interest margin increased by one basis
point from 3.41% in the first quarter of 2010. The decrease in net
interest income year-over-year was due primarily to a $52.6 million
decrease in the average balance of earning assets partially offset
by the favorable impact of the cost of interest-bearing liabilities
repricing downward to a greater extent than the yield on earning
assets.
Non-interest Income
Non-interest income decreased by $1.3 million, or 31%, to $2.9
million during the first quarter of 2011 compared with the fourth
quarter of 2010. The sequential decrease in non-interest income was
attributable primarily to a $526 thousand decrease in the fair
value of derivatives, a $451 thousand decrease in mortgage banking
income, a $129 thousand decrease in service charge income and a
$118 thousand decrease in investment brokerage fee income. These
sequential decreases in non-interest income were slightly offset by
a $116 thousand improvement in Small Business Investment Company
(SBIC) income.
Compared to the first quarter of 2010, non-interest income
decreased by $1.1 million, or 27%. The year-over-year decrease was
primarily related to a $574 thousand decrease in the fair value of
derivatives and a $410 thousand decrease in gains on investment
security sales.
Non-interest Expenses
Non-interest expenses of $11.5 million during the first quarter
of 2011 decreased $1.1 million, or 9%, on a linked quarter basis.
The sequential reduction in non-interest expenses was attributable
to a decrease in writedowns on foreclosed property of $1.3 million,
a $199 thousand decrease in other expenses related to foreclosed
real estate and a $357 thousand decrease in salaries and employee
benefits. Offsetting a portion of these sequential decreases, there
were sequential increases in other non-interest expense categories
of $711 thousand in total, the largest of which was a $598 thousand
increase in FDIC insurance premiums.
Compared to the first quarter of 2010, non-interest expenses
decreased $360 thousand, or 3%. This year-over-year decrease was
due primarily to a $723 thousand decrease in salaries and employee
benefits, and a $132 thousand decrease in occupancy and equipment
expenses. These expense reductions more than offset a $456 thousand
increase in other non-interest expenses, the largest of which was a
$586 thousand increase in FDIC insurance premiums.
Balance Sheet
As of March 31, 2011, total assets amounted to $1.6 billion,
representing a decrease of $49.5 million, or 3%, compared to
December 31, 2010. Total assets decreased $103.3 million, or 6%, on
a year-over-year basis. The loan portfolio decreased by $46.6
million, or 4%, sequentially, and decreased by $125.0 million, or
10%, since March 31, 2010 due to decreased loan demand resulting
from the prolonged weak economic conditions. Total deposits of $1.3
billion at March 31, 2011 decreased $69.2 million, or 5%,
sequentially due to an $85.5 million decrease in interest bearing
deposits offset by a $16.3 million increase in demand deposits.
At March 31, 2011, stockholders' equity of $91.9 million
represented 5.73% of total assets. Stockholders' equity decreased
$487 thousand, or less than one percent, to $91.9 million from
$92.3 million at December 31, 2010. The regulatory capital ratios
at the Bank at March 31, 2011 were in excess of the levels required
under the Consent Order with a Tier 1 leverage ratio of 8.10% and a
total risk-based capital ratio of 12.05%.
Conference Call
Southern Community's executive management team will host a
conference call on April 29, 2011, at 8:30 am Eastern Time to
discuss the quarter-end results. The call can be accessed by
dialing 1-877-640-9867 or 1-914-495-8546 and entering pass code
62939149. 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.
About Southern Community Financial Corporation
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 our
website at www.smallenoughtocare.com or by email at
investor.relations@smallenoughtocare.com.
Forward-Looking Statements
Certain statements in this news release contain "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995, such as statements relating to future plans and
expectations, and are thus prospective. Such forward-looking
statements include but are not limited to (1) statements regarding
potential future economic recovery, (2) statements with respect to
our plans, objectives, expectations, intentions and other
statements that are not historical facts, and (3) other statements
identified by words such as "believes," "expects," "anticipates,"
"estimates," "intends," "plans," "targets" and "projects," as well
as similar expressions. Such statements are subject to risks,
uncertainties and other factors which could cause actual results to
differ materially from future results expressed or implied by such
forward-looking statements. Although we believe that the
assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could prove to be inaccurate.
Therefore, we can give no assurance that the results contemplated
in the forward-looking statements will be realized. The inclusion
of this forward-looking information should not be construed as a
representation by our Company or any person that the future events,
plans or expectations contemplated by our Company will be
achieved.
The following factors, among others, could cause actual results
to differ materially from the anticipated results or other
expectations expressed in the forward-looking statements: (1) the
rate of delinquencies and amounts of charge-offs, the level of
allowance for loan losses, the rates of loan growth or shrinkage,
or adverse changes in asset quality in our loan portfolio, which
may result in increased credit risk-related losses and expenses;
(2) competitive pressures among depository and other financial
institutions may increase significantly and have an effect on
pricing, spending, third party relationships and revenues; (3) the
strength of the United States economy in general and the strength
of the local economies in which we conduct operations may be
different than expected resulting in, among other things, a
deterioration in the credit quality or a reduced demand for credit,
including the resultant effect on the Company's loan portfolio and
allowance for loan losses; (4) the risk that the preliminary
financial information reported herein and our current preliminary
analysis will be different when our review is finalized; (5)
changes in deposit rates, the net interest margin and funding
sources; (6) changes in the U.S. legal and regulatory framework,
including the effect of recent financial reform legislation on the
banking industry; and (7) adverse conditions in the stock market,
the public debt market and other capital markets (including changes
in interest rate conditions) could have a negative impact on the
Company. Additional factors that could cause our results to differ
materially from those described in the forward-looking statements
can be found in our reports (such as Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K)
filed with the SEC and available at the SEC's website
(http://www.sec.gov). All subsequent written and oral
forward-looking statements concerning the Company or any person
acting on its behalf is expressly qualified in its entirety by the
cautionary statements above. We do not undertake any obligation to
update any forward-looking statement to reflect circumstances or
events that occur after the date the forward-looking statements are
made.
Southern Community Financial Corporation
(Dollars in thousands except per share data)
(Unaudited)
For the three months ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
Income Statement 2011 2010 2010 2010 2010
--------- --------- --------- --------- ---------
Interest Income $ 18,699 $ 19,164 $ 20,049 $ 20,439 $ 20,986
Interest Expense 5,868 6,759 6,773 7,007 7,739
--------- --------- --------- --------- ---------
Net Interest
Income 12,831 12,405 13,276 13,432 13,247
Provision for Loan
Losses 4,100 6,500 17,000 5,500 10,000
Net Interest Income
after Provision for
Loan Losses 8,731 5,905 (3,724) 7,932 3,247
Non-Interest Income
Service Charges and
Fees on Deposit
Accounts 1,488 1,617 1,640 1,719 1,557
Income from mortgage
banking activities 263 714 751 359 358
Investment brokerage
and trust fees 188 306 424 509 235
SBIC income (loss)
and management fees 122 6 126 323 176
Gain (Loss) on Sale
of Investment
Securities 944 1,135 24 1,018 1,354
Gain (Loss) and Net
Cash Settlement on
Economic Hedges (605) (79) (384) (38) (31)
Other-than-temporary
impairment - - - - (186)
Other Income 503 501 479 502 490
--------- --------- --------- --------- ---------
Total Non-Interest
Income 2,903 4,200 3,060 4,392 3,953
Non-Interest Expense
Salaries and
Employee Benefits 4,746 5,103 5,033 5,321 5,469
Occupancy and
Equipment 1,784 1,778 1,839 1,895 1,916
Expenses of Managing
Foreclosed Assets 270 469 405 588 360
Writedowns of
Foreclosed Assets 609 1,895 123 591 483
Other 4,074 3,363 3,584 3,938 3,615
--------- --------- --------- --------- ---------
Total Non-Interest
Expense 11,483 12,608 10,984 12,333 11,843
Income (Loss) Before
Taxes 151 (2,503) (11,648) (9) (4,643)
Provision for Income
Taxes - 8,318 (3,698) (270) (32)
--------- --------- --------- --------- ---------
Net Income (Loss) $ 151 $ (10,821) $ (7,950) $ 261 $ (4,611)
========= ========= ========= ========= =========
Effective dividend
on preferred stock 639 633 633 632 633
--------- --------- --------- --------- ---------
Net Income (loss)
available to common
shareholders $ (488) $ (11,454) $ (8,583) $ (371) $ (5,244)
========= ========= ========= ========= =========
Net Income (Loss)
per Common Share
Basic $ (0.03) $ (0.68) $ (0.51) $ (0.02) $ (0.31)
Diluted $ (0.03) $ (0.68) $ (0.51) $ (0.02) $ (0.31)
========= ========= ========= ========= =========
Balance Sheet Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2011 2010 2010 2010 2010
---------- ---------- ---------- ---------- ----------
Assets
Cash and due
from Banks $ 28,096 $ 16,584 $ 44,612 $ 35,757 $ 33,885
Federal Funds
Sold and
Overnight
Deposits 34,615 49,587 1,646 1,358 22,352
Investment
Securities 350,962 352,873 322,431 307,595 335,519
Federal Home
Loan Bank
Stock 8,750 8,750 9,092 9,794 9,794
Loans held for
sale 597 5,991 7,161 6,582 2,984
Loans 1,083,468 1,130,076 1,183,753 1,198,565 1,208,454
Allowance for
Loan Losses (27,664) (29,580) (35,100) (29,609) (36,007)
---------- ---------- ---------- ---------- ----------
Net Loans 1,055,804 1,100,496 1,148,653 1,168,956 1,172,447
Bank Premises
and Equipment 39,878 40,550 40,718 41,535 42,058
Foreclosed
Assets 23,060 17,314 19,385 18,781 20,285
Other Assets 62,118 61,253 69,088 69,757 67,856
---------- ---------- ---------- ---------- ----------
Total Assets $1,603,880 $1,653,398 $1,662,786 $1,660,115 $1,707,180
========== ========== ========== ========== ==========
Liabilities and
Stockholders'
Equity
Deposits
Non-Interest
Bearing $ 126,393 $ 110,114 $ 119,249 $ 123,573 $ 113,292
Money market,
savings and
NOW 521,577 582,878 599,978 623,854 620,433
Time 631,240 655,427 598,383 545,420 573,229
---------- ---------- ---------- ---------- ----------
Total
Deposits 1,279,210 1,348,419 1,317,610 1,292,847 1,306,954
Borrowings 224,608 204,784 228,343 242,303 275,831
Accrued
Expenses and
Other
Liabilities 8,208 7,854 7,739 7,981 7,513
---------- ---------- ---------- ---------- ----------
Total
Liabilities 1,512,026 1,561,057 1,553,692 1,543,131 1,590,298
Total Stockholders'
Equity 91,854 92,341 109,094 116,984 116,882
---------- ---------- ---------- ---------- ----------
Total Liabilities
and Stockholders'
Equity $1,603,880 $1,653,398 $1,662,786 $1,660,115 $1,707,180
========== ========== ========== ========== ==========
Tangible Book
Value per
Common Share $ 2.95 $ 2.99 $ 3.99 $ 4.46 $ 4.45
========== ========== ========== ========== ==========
For the three months ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2011 2010 2010 2010 2010
---------- ---------- ---------- ---------- ----------
Per Common
Share Data:
Basic
Earnings
(loss)
per
Share $ (0.03) $ (0.68) $ (0.51) $ (0.02) $ (0.31)
Diluted
Earnings
(loss)
per
Share $ (0.03) $ (0.68) $ (0.51) $ (0.02) $ (0.31)
Tangible
Book
Value
per
Share $ 2.95 $ 2.99 $ 3.99 $ 4.46 $ 4.45
Selected
Performance
Ratios:
Return on
Average
Assets
(annualized)
ROA 0.04% -2.55% -1.91% 0.06% -1.10%
Return on
Average
Equity
(annualized)
ROE 0.67% -39.43% -27.07% 0.90% -15.34%
Return on
Tangible
Equity
(annualized) 0.67% -39.68% -27.25% 0.90% -15.44%
Net Interest
Margin 3.42% 3.14% 3.39% 3.46% 3.41%
Net Interest
Spread 3.30% 2.99% 3.20% 3.32% 3.26%
Non-interest
Income as
a % of
Revenue 18.45% 25.29% 18.73% 24.64% 22.98%
Non-interest
Income
as a %
of Average
Assets 0.72% 0.99% 0.73% 1.04% 0.94%
Non-interest
Expense to
Average
Assets 2.86% 2.97% 2.64% 2.93% 2.82%
Efficiency
Ratio 72.98% 75.93% 67.24% 69.19% 68.85%
Asset Quality:
Nonperforming
Loans $ 73,741 $ 91,777 $ 98,709 $ 55,477 $ 50,608
Nonperforming
Assets $ 96,801 $ 109,091 $ 118,094 $ 74,258 $ 70,893
Nonperforming
Loans to
Total
Loans 6.80% 8.08% 8.29% 4.60% 4.18%
Nonperforming
Assets to
Total
Assets 6.04% 6.60% 7.10% 4.47% 4.15%
Allowance
for Loan
Losses to
Period-end
Loans 2.55% 2.60% 2.95% 2.46% 2.97%
Allowance for
Loan Losses to
Nonperforming
Loans (X) 0.38X 0.32X 0.36X 0.53X 0.71X
Net Charge-
offs to
Average
Loans
(annualized) 2.19% 4.10% 3.78% 3.95% 1.20%
Capital Ratios:
Equity to
Total
Assets 5.73% 5.58% 6.56% 7.05% 6.85%
Tangible
Common
Equity
to Total
Tangible
Assets (1) 3.10% 3.04% 4.03% 4.52% 4.39%
Average Balances:
Year to Date
Interest
Earning
Assets $1,520,664 $1,562,393 $1,561,504 $1,564,646 $1,573,247
Total
Assets 1,630,975 1,681,068 1,680,902 1,695,640 1,704,190
Total
Loans 1,111,697 1,200,609 1,213,497 1,215,776 1,222,594
Equity 91,958 115,962 118,352 119,293 121,944
Interest
Bearing
Liabil-
ities 1,407,978 1,436,443 1,435,705 1,451,099 1,459,636
Quarterly
Interest
Earning
Assets $1,520,664 $1,565,031 $1,555,323 $1,556,140 $1,573,247
Total
Assets 1,630,975 1,681,561 1,651,907 1,687,184 1,704,190
Total
Loans 1,111,697 1,162,365 1,209,013 1,209,033 1,222,594
Equity 91,958 108,870 116,501 116,671 121,944
Interest
Bearing
Liabil-
ities 1,407,978 1,438,633 1,405,419 1,442,655 1,459,636
Weighted
Average
Number of
Shares
Outstanding
Basic 16,824,008 16,812,380 16,812,625 16,814,378 16,806,292
Diluted 16,824,008 16,812,380 16,812,625 16,814,378 16,806,292
Period end
outstanding
shares 16,838,125 16,812,625 16,812,625 16,812,625 16,818,125
(1) - Tangible Common Equity to Total Tangible Assets is period-ending
common 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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