Southcoast Financial Corporation Announces Nine Months Earnings

MT. PLEASANT, S.C., Oct. 8, 2013 (GLOBE NEWSWIRE) -- Southcoast Financial Corporation (Nasdaq:SOCB) announced that it had unaudited net income of $8,735,000, or $1.23 per basic share, for the nine months ended September 30, 2013. This compares to unaudited net income of $2,590,000, or $0.37 per basic share, for the nine months ended September 30, 2012. The September 30, 2013 income per share is based on 7,074,183 basic average shares compared to 7,044,365 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 impact of the DTA valuation allowance reversal, coupled with operating earnings, increased the Company's book value to $5.97 per share as of September 30, 2013, compared to $4.76 per share as of September 30, 2012.

For the nine months ended September 30, 2013, net interest income increased $510,000 from $9,880,000 for the nine months of 2012 to $10,390,000 for the nine months ended September 30, 2012. 

Noninterest income decreased to $1,840,000 for the first nine months of 2013 from $2,550,000 for the first nine months of 2012, primarily due to $626,000 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 and $28,000 of gains on sales of fixed assets in the 2013 period.

Noninterest expense levels increased to $9,858,000 for the nine months ended September 30, 2013 from $8,957,000 for the nine months ended September 30, 2012. The first nine months of 2012 included the benefit of $1,042,000 in net gains on sales of other real estate owned compared to only $314,000 for the nine months ended September 30, 2013. 

For the quarter ended September 30, 2013, the unaudited net income was $694,000, or $0.10 per basic share. This compares to an unaudited net income of $844,000, or $0.12 per basic share for the quarter ended September 30, 2012. The September 30, 2013 income per share is based on 7,077,878 basic average shares compared to 7,057,450 basic average shares for the quarter ended September 30, 2012. The third quarter of 2013 represents the seventh consecutive quarter of net income. The Company's annualized net interest margin improved by 8 basis points to 3.64% for the quarter ended September 30, 2013, compared to 3.56% for the quarter ended September 30, 2012.

Total assets as of September 30, 2013 were $441.2 million compared to $438.2 million as of December 31, 2012, an increase of 0.68%. Loans, excluding loans held for sale, increased to $328.6 million, from $327.5 million as of December 31, 2012. Deposits decreased by $6.4 million to $313.2 million at September 30, 2013, from $319.6 million at December 31, 2012.  This decrease was comprised of a $29.2 million decrease in time deposits between the two periods, partially offset by increases of $8.5 million and $14.3 million in noninterest bearing and interest bearing non-time deposits, respectively.

"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 3.78% as of September 30, 2013, compared to 5.08% as of September 30, 2012. The allowance for loan losses as a percentage of loans was 2.02% as of September 30, 2013, compared to 2.59% as of September 30, 2012. The allowance for loan losses as a percentage of total nonperforming loans totaled 58.99% as of September 30, 2013, compared to 62.01% as of September 30, 2012. The subsidiary bank's capital position as of September 30, 2013 remains in excess of regulatory well-capitalized requirements.

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
  Consolidated Balance Sheets
  (Dollars in thousands)
     
   September 30  December 31
  2013 2012
     
Assets    
Cash and cash equivalents $24,785 $21,984
Investments 43,963 48,367
Loans held for sale 925 1,789
Loans 328,567 327,469
Less: Allowance for loan losses 6,649 8,159
Net loans 321,918 319,310
Fixed assets 21,324 21,653
Other assets 28,288 25,118
Total Assets $441,203 $438,221
     
Liabilities & Shareholders' Equity    
Deposits:    
Noninterest bearing $47,343 $38,797
Interest bearing nontime 129,564 115,245
Time deposits 136,335 165,590
Total deposits 313,242 319,632
Other borrowings 70,833 69,949
Other liabilities 4,546 4,066
Junior subordinated debentures 10,310 10,310
Total liabilities 398,931 403,957
     
Shareholders' Equity    
Common Stock  54,519 54,437
Accumulated deficit  (10,266)  (19,002)
Accumulated other comprehensive loss  (1,981)  (1,171)
Total shareholders' equity 42,272 34,264
Total Liabilities and    
Shareholders' equity $441,203 $438,221
   
   Southcoast Financial Corporation
   Consolidated Income Statements
   (Dollars in thousands, except earnings per share)
         
   Nine Months Ended  Three Months Ended
  September 30, September 30, September 30, September 30,
  2013 2012 2013 2012
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest Income        
Interest and fees on loans $12,468 $12,632 $4,106 $4,255
Interest on investments 809 971 318 320
Interest on Fed funds sold 24 23 11 7
Total interest income 13,301 13,626 4,435 4,582
         
Interest expense 2,911 3,746 951 1,183
Net interest income 10,390 9,880 3,484 3,399
Provision for loan losses 0 880 0 450
Net interest income after provision 10,390 9,000 3,484 2,949
         
Noninterest income 1,840 2,550 560 1,070
Total operating income 12,230 11,550 4,044 4,019
         
Noninterest expense         
Salaries and benefits 5,260 4,870 1,705 1,639
Occupancy and equipment  2,221 2,132 763 707
Other expenses 2,377 1,955 882 865
         
Total noninterest expense 9,858 8,957 3,350 3,211
         
Income before taxes 2,372 2,593 694 808
         
Income tax expense -6,363 3  --   (36)
Net income $8,735 $2,590 $694 $844
Basic net income per share $1.23 $0.37 $0.10 $0.12
         
Diluted net income per share $1.23 $0.37 $0.10 $0.12
         
Average number of shares        
Basic 7,074,183 7,044,365 7,077,878 7,057,450
Diluted 7,074,183 7,044,365 7,077,878 7,057,450
         
     
Southcoast Financial Corporation    
SELECTED FINANCIAL DATA    
(dollars in thousands, except earnings per share)  
     
  Three Months Ended
   September 30, 2013  September 30, 2012
  (Unaudited) (Unaudited)
INCOME STATEMENT DATA    
Net interest income  $ 3,484  $ 3,399
Provision for loan losses  --  450
Noninterest income 560 1,070
Noninterest expenses 3,350 3,211
Net income  $ 694  $ 844
     
PER SHARE DATA     
Net income per share    
Basic  $ 0.10  $ 0.12
Diluted  $ 0.10  $ 0.12
     
BALANCE SHEET DATA    
Total assets  $ 441,203  $ 441,961
Total deposits 313,242 325,776
Total loans (net) 321,918 316,602
Investment securities 43,963 51,644
Other borrowings 70,833 62,681
Junior subordinated debentures 10,310 10,310
Shareholders' equity 42,272 33,593
     
Average shares outstanding 1    
Basic 7,077,878 7,057,450
Diluted 7,077,878 7,057,450
     
Book value per share 1 $5.97 $4.76
     
Key ratios     
Return on assets 2 0.64% 0.78%
Return on equity 2 7.22% 10.14%
Equity to asset ratio 9.58% 7.60%
Nonperforming assets to assets 3 3.83% 5.08%
Reserve to loans 2.02% 2.59%
Reserve to nonperforming loans 4 58.99% 62.01%
Net interest margin 2 3.64% 3.56%
     
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.
     
CONTACT: Southcoast Financial Corporation         William C. Heslop, Senior Vice President and         Chief Financial Officer, (843) 216-3019

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