Southcoast Announces Six Months Earnings

MT. PLEASANT, S.C., July 17, 2013 (GLOBE NEWSWIRE) -- Southcoast Financial Corporation (Nasdaq:SOCB) announced that it had unaudited net income of $8,041,000, or $1.14 per basic share, for the six months ended June 30, 2013. This compares to unaudited net income of $1,746,000, or $0.25 per basic share, for the six months ended June 30, 2012. The June 30, 2013 income per share is based on 7,072,869 basic average shares compared to 7,037,787 basic average shares for 2012.

The year to date 2013 results include the reversal of the deferred tax asset (DTA) valuation allowance resulting in the recognition of a tax benefit of approximately $6,363,000, or $0.90 per share. The reversal was reflective of sustained profitability and improving credit quality that has led to significantly lower credit related costs supporting the anticipated capacity to utilize the DTA in future periods to reduce income tax payments. The second quarter of 2013 represents the sixth consecutive quarter of net income. The impact of the DTA valuation allowance reversal, coupled with operating earnings, increased the Company's book value to $5.85 per share as of June 30, 2013.

For the quarter ended June 30, 2013, the unaudited net income was $7,035,000, or $0.99 per basic share. This compares to an unaudited net income of $503,000, or $0.07 per basic share for the quarter ended June 30, 2012. The June 30, 2013 income per share is based on 7,074,123 basic average shares compared to 7,044,398 basic average shares for the quarter ended June 30, 2012. The DTA valuation allowance reversal contributed $6,418,000, or $0.91 per basic share, to net income for the quarter.

For the six months ended June 30, 2013, net interest income increased $425,000 from $6,481,000 for the six months of 2012 to $6,906,000 for the six months ended June 30, 2013. The Company's annualized net interest margin improved by 43 basis points to 3.85% for the first six months of 2013 from 3.42% for the first six months of 2012, due to the continued significant reduction in our cost of funds.

Noninterest income decreased to $1,280,000 for the first six months of 2013 from $1,531,000 for the first six months of 2012, primarily due to $215,000 of securities gains and $124,000 of gains on sales of fixed assets during the 2012 period, compared to only $105,000 of gains from sales of securities in the 2013 period. There were no gains on the sale of fixed assets during the first six months of 2013.

Noninterest expense levels increased to $6,508,000 for the six months ended June 30, 2013 from $5,797,000 for the six months ended June 30, 2012. The first six months of 2012 included the benefit of $964,000 in net gains on sales of other real estate owned compared to only $314,000 for the six months ended June 30, 2013.

Total assets as of June 30, 2013 were $444.3 million compared to $438.2 million as of December 31, 2012, an increase of 1.4%. Loans, excluding loans held for sale, increased to $328.8 million, or 0.4% from $327.5 million as of December 31, 2012. Deposits during the same period increased 1.6%, or $5.1 million, to $324.8 million. Brokered and wholesale time deposits totaled $1.2 million, a decrease of $12.3 million, while retail time deposits decreased by $4.9 million. Noninterest bearing demand deposits increased by $12.2 million, while all other interest bearing non time deposits increased by $10.1 million. Other borrowings decreased 9.4% to $63.4 million.

"The 2013 results reflect the continued improvement of our net interest margin, continued decreased levels of nonperforming assets, and an improved deposit mix. These items are helping us achieve our goals of increased core earnings and a strong capital base," said L. Wayne Pearson, Chairman and Chief Executive Officer.

The Company's ratio of nonperforming assets to total assets was 3.53% as of June 30, 2013, compared to 6.12% as of June 30, 2012. The allowance for loan losses as a percentage of loans was 2.26% as of June 30, 2013, compared to 2.66% as of June 30, 2012. The allowance for loan losses as a percentage of total nonperforming loans totaled 72.45% as of June 30, 2013, compared to 50.85% as of June 30, 2012.

The subsidiary bank's capital position as of June 30, 2013 remains substantially in excess of regulatory well-capitalized requirements, with Tier 1 capital to average assets of 10.46%. "We continue to be encouraged by the future direction of our Company given our capital strength and improvement in core operations," concluded Pearson.

About Southcoast Financial Corporation

Southcoast Financial Corporation, headquartered in Mt. Pleasant, South Carolina, is the holding company of Southcoast Community Bank. The Bank, which opened for business July 20, 1998, is a state chartered commercial bank operating from its main office at 530 Johnnie Dodds Boulevard in Mt. Pleasant, South Carolina and nine branches in the Charleston, South Carolina area. Southcoast Financial Corporation's common stock is traded on the NASDAQ Global Market under the symbol SOCB.
Southcoast Financial Corporation
SELECTED FINANCIAL DATA
(dollars in thousands, except earnings per share)
     
  Three Months Ended
   June 30, 2013  June 30, 2012
   (Unaudited)
INCOME STATEMENT DATA    
 Net interest income  $ 3,473  $ 3,304
 Provision for loan losses  --  330
 Noninterest income 691 625
 Noninterest expenses 3,547 3,145
 Net income  $ 7,035  $ 503
     
PER SHARE DATA     
 Net income per share    
 Basic  $ 0.99  $ 0.07
 Diluted  $ 0.99  $ 0.07
     
BALANCE SHEET DATA    
 Total assets  $ 444,344  $ 438,868
 Total deposits 324,786 338,477
 Total loans (net) 321,419 315,858
 Investment securities 40,953 54,701
 Other borrowings 63,364 54,138
 Junior subordinated debentures 10,310 10,310
 Shareholders' equity 41,412 32,500
     
Average shares outstanding1    
 Basic 7,074,123 7,044,398
 Diluted 7,074,123 7,044,398
     
Book value per share1 $5.85 $4.61
     
Key ratios     
 Return on assets2 6.47% 0.46%
 Return on equity2 67.69% 6.29%
 Equity to asset ratio 9.32% 7.41%
 Nonperforming assets to assets3 3.53% 6.12%
 Reserve to loans 2.26% 2.66%
 Reserve to nonperforming loans4 72.45% 50.85%
 Net interest margin2 3.85% 3.42%
     
1 Prior period per share amounts adjusted for 15% stock dividends paid during January 2013 and June 2013.
2 Ratios for three months are annualized.
3 Includes nonaccruing loans, loans 90 or more days past due still accruing interest, troubled debt restructures, and other real estate owned.
4 Includes nonaccruing loans, loans 90 or more days past due still accruing interest, and troubled debt restructures.
   
  Southcoast Financial Corporation
  Consolidated Balance Sheets
  (Dollars in thousands)
     
   June 30  December 31
  2013 2012
     
Assets    
Cash and cash equivalents $30,215 $21,984
Investments 40,953 48,367
Loans held for sale 2,303 1,789
Loans 328,846 327,469
Less: Allowance for loan losses 7,427 8,159
Net loans 321,419 319,310
Fixed assets 21,455 21,653
Other assets 27,999 25,118
 Total Assets $444,344 $438,221
Liabilities & Shareholders' Equity    
Deposits:    
 Noninterest bearing $50,973 $38,797
 Interest bearing nontime 125,389 115,245
 Time deposits 148,424 165,590
 Total deposits 324,786 319,632
Other borrowings 63,364 69,949
Other liabilities 4,472 4,066
Junior subordinated debentures 10,310 10,310
 Total liabilities 402,932 403,957
     
Shareholders' Equity    
 Common Stock  54,500 54,437
 Accumulated deficit  (10,960)  (19,002)
 Accumulated other comprehensive loss  (2,128)  (1,171)
 Total shareholders' equity 41,412 34,264
 Total Liabilities and Shareholders' equity $444,344 $438,221
   
   Southcoast Financial Corporation
   Consolidated Income Statements
   (Dollars in thousands, except earnings per share)
         
   Six Months Ended  Three Months Ended
  June 30, June 30, June 30, June 30,
  2013 2012 2013 2012
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest Income        
 Interest and fees on loans $8,362 $8,377 $4,161 $4,222
 Interest on investments 491 651 239 347
 Interest on Fed funds sold 13 16 7 10
 Total interest income 8,866 9,044 4,407 4,579
         
Interest expense 1,960 2,563 934 1,275
 Net interest income 6,906 6,481 3,473 3,304
Provision for loan losses 0 430  --  330
 Net interest income after provision 6,906 6,051 3,473 2,974
         
Noninterest income 1,280 1,531 691 625
 Total operating income 8,186 7,582 4,164 3,599
         
Noninterest expense         
 Salaries and benefits 3,555 3,231 1,876 1,635
 Occupancy and equipment  1,458 1,476 705 741
 Other expenses 1,495 1,090 966 769
         
 Total noninterest expense 6,508 5,797 3,547 3,145
         
Income before taxes 1,678 1,785 617 454
         
Income tax expense   (6,363) 39  (6,418)  (49)
Net income $8,041 $1,746 $7,035 $503
Basic net income per share $1.14 $0.25 $0.99 $0.07
         
Diluted net income per share $1.14 $0.25 $0.99 $0.07
         
Average number of shares        
 Basic 7,072,869 7,037,787 7,074,123 7,044,398
 Diluted 7,072,869 7,037,787 7,074,123 7,044,398
CONTACT: William C. Heslop, Senior Vice President and         Chief Financial Officer, (843) 216-3019

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