WINSTON-SALEM, NC, Jan. 28, 2010 (Marketwire) --
WINSTON-SALEM, NC -- (Marketwire) -- 01/28/10 -- Southern Community Financial Corporation (NASDAQ: SCMF) (NASDAQ: SCMFO), the holding company for Southern Community Bank and Trust, today reported fourth quarter and full year 2009 results.
Fourth Quarter Financial Highlights:
-- Net interest margin grew to 3.28% for the fourth quarter 2009, an 18
basis point increase over fourth quarter 2008 and a two basis point
decrease compared to the third quarter 2009
-- Nonperforming loans were 3.07% of total loans at December 31, 2009
compared with 1.82% of total loans at September 30, 2009
-- Nonperforming assets were 3.32% of total assets at December 31, 2009
compared with 2.36% at September 30, 2009
-- Annualized fourth quarter 2009 net charge-offs increased to 2.92 % of
average loans compared with 1.45% for the third quarter 2009
-- Fourth quarter provision for loan losses of $18.0 million, an increase of
$12.0 million compared to $6.0 million in the third quarter 2009
-- Allowance for loan losses was 2.41% of total loans at December 31, 2009
compared to 1.67% at September 30, 2009 and 1.43% at year-end 2008
-- Fourth quarter 2009 net loss available to common shareholders of $11.34
million, or $0.68 per diluted share, compared with third quarter net loss
available to common shareholders of $1.05 million or $0.06 per diluted
common share
Full Year 2009 Financial Highlights:
-- Deposit growth of 10% year-over-year due to an increase of 28% in money
market and other transaction accounts and a 6% decrease in time deposits
-- Net loss available to common shareholders of $65.67 million for the full
year 2009, or $3.91 per diluted share, compared with net income available
to common shareholders of $5.67 million, or $0.33 per diluted share for the
full year 2008
-- Excluding the $49.50 million goodwill impairment charge recorded in the
first quarter of 2009, the net loss available to common shareholders was
$16.2 million or $0.96 per diluted share for the full year 2009
-- Provision for loan losses increased $25.84 million for the year ended
December 31, 2009, compared to the provision of $8.16 million for year
ended December 31, 2008
Southern Community Financial Corporation reported a net loss available to common shareholders of $11.34 million for the fourth quarter of 2009, compared with a net loss of $1.05 million for the third quarter of 2009 and net income of $1.37 million for the fourth quarter of 2008. The net loss per diluted common share in the fourth quarter 2009 and in the third quarter 2009 were $0.68 and $0.06, respectively, compared with earnings per diluted common share of $0.08 in the fourth quarter 2008.
For the year ended December 31, 2009, the net loss available to common shareholders was $65.67 million, or $3.91 per diluted share, compared to net income available to common shareholders of $5.67 million, or $0.33 per diluted share, for the prior year. Excluding the $49.5 million goodwill impairment charge recorded in the first quarter of 2009, the net loss available to common shareholders for the year ended December 31, 2009 was $16.2 million, or $0.96 per diluted share. The respective increases in the provision for loan losses of $12.0 million for the fourth quarter 2009 on a linked quarter basis and $25.84 million for the year ended December 31, 2009 contributed to the decrease in earnings for both periods.
"Our focus in 2009 was to proactively address problem assets in our loan portfolio with the objective of recognizing identified losses. While we remained diligent in monitoring our loan portfolio throughout the year, we conducted a more comprehensive review of our credit quality and risk grading process in the fourth quarter of 2009 as certain economic and portfolio conditions weakened, such as higher unemployment levels and continued declines in real estate values. In addition to the $12.0 million linked quarter increase in our provision for loan losses, this review also resulted in a $1.3 million write down on the carrying values on our foreclosed real estate, as announced in mid January. While the majority of the issues we faced in our loan portfolio for most of 2009 resulted from our residential construction portfolio, we are now seeing some stress in our commercial real estate portfolio as the difficult economic environment has persisted. Accordingly, the increase in reserves, charge offs and write downs on foreclosed real estate during the fourth quarter of 2009 better positions Southern Community for a return to profitability," said F. Scott Bauer, Chairman and Chief Executive Officer.
"Our core bank operations continued to improve, despite the challenges of the current economic environment. We substantially decreased our reliance on borrowings and outside funding through building local core deposits. At year-end 2009, our demand, NOW, savings and money market deposits comprised 54% of our total deposits, compared to 47% at year-end 2008. This growth in lower cost deposits contributed to improvement in our net interest margin by 18 basis points compared to 2008. In addition, our non-interest income for year-end 2009 increased by 14% compared to year-end 2008 primarily due to increased service charges resulting from our deposit growth as well as an increase in mortgage refinance activity. Our deposit growth and increased fee income improved core earnings during 2009, which have been obscured by the necessary increase in our loan loss provision. This bodes well for our future earnings as the economy improves and pressures on our asset quality subside."
"We remain well capitalized with ratios in excess of regulatory requirements. We are thankful for the hard work of our employees during these difficult times and for the continued support of our customers and shareholders."
Asset Quality
Nonperforming loans in the fourth quarter 2009 increased to $37.7 million, or 3.07% of total loans, from $22.7 million, or 1.82% of total loans, at September 30, 2009. Nonperforming assets increased to $57.4 million, or 3.32% of total assets, at December 31, 2009 from $40.8 million, or 2.36% of total assets, at September 30, 2009. Net charge-offs totaled $9.2 million during the fourth quarter 2009, or 2.92% of average loans on an annualized basis, compared to $4.6 million, or 1.45% of average loans on an annualized basis, in the third quarter 2009.
The provision for loan losses of $18.0 million for the fourth quarter increased $12.0 million compared to the third quarter provision and increased $15.6 million compared to the fourth quarter of 2008. The increase in the provision for loan losses is primarily in response to a higher level of nonperforming assets resulting from the persistently weak economic environment. The allowance for loan losses at December 31, 2009 of $29.6 million represented 2.41% of total loans and 79% of nonperforming loans, compared to $20.8 million or 1.67% of total loans and 92% of nonperforming loans at September 30, 2009.
Given the relative magnitudes of the provision for loan losses and the net charge-offs for the fourth quarter 2009 and the full year 2009 and their impact on deferred tax assets, the income tax benefit on operating losses during the fourth quarter 2009 was decreased by a $2.0 million valuation allowance on deferred tax assets due to realization considerations.
Net Interest Income
Net interest income of $13.39 million for the fourth quarter 2009 increased less than 1% compared with $13.32 million in the third quarter 2009 and increased 4% over the $12.82 million in the fourth quarter 2008. The net interest margin of 3.28% for the fourth quarter 2009 decreased two basis points compared with the third quarter of 2009, primarily due to the reversal of interest accruals related to the increase in nonperforming loans during the quarter. Compared to the fourth quarter of 2008, the net interest margin increased 18 basis points. The growth in net interest income in fourth quarter 2009 compared with fourth quarter 2008 resulted primarily from the impact of the Company's deposit and borrowing costs repricing lower to a greater extent than its asset yields due to the increased utilization of interest rate floors on a majority of its variable rate loans. Offsetting a portion of this favorable rate variance in comparing fourth quarter 2009 versus same quarter 2008, average loan balances decreased $75.4 million or 6% from fourth quarter 2008 to fourth quarter 2009 due to a slowdown in loan demand as some of our primary customers deleveraged and took a more conservative stance toward borrowing during these difficult economic times.
Non-interest Income
Non-interest income of $3.5 million during the fourth quarter 2009 decreased by $663 thousand or 16% compared with the third quarter 2009, primarily resulting from a $735 thousand reduction in gains on sales of investment securities and $389 thousand decrease in Small Business Investment Company (SBIC) income. This impact was partially offset by a $536 thousand net increase in gains in derivatives due primarily to market rate movement and its impact on fair value hedges. Non-interest income for the twelve months ended December 31, 2009 increased 14% over the same period in 2008 due to an $810 thousand increase in mortgage banking income, a $1.1 million increase in gains on sales of investment securities and a $387 thousand increase in deposit service charges. These increases were partially offset by a $700 thousand decrease in gains on derivative activity due to a net loss recognized in 2009 on 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 $13.6 million during the fourth quarter 2009 increased $957 thousand, or 8%, on a linked quarter basis, and increased $2.9 million, or 27%, year-over-year. The sequential increase in non-interest expenses was primarily due to the $1.3 million in write downs to reduce carrying values on foreclosed real estate. On a linked quarter basis, the Company had a $305 thousand reduction 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 due to lower mortgage origination volumes. These items partially reduced the impact of the foreclosed asset writedowns. Non-interest expenses for the twelve months ended December 31, 2009 increased $8.9 million, excluding the $49.5 million goodwill impairment charge, or 21%, primarily due to increases of $2.3 million in FDIC deposit insurance premiums, $3.1 million increase in OREO expenses (including foreclosed asset writedowns), $1.3 million in buyer incentives to purchasers of bank financed builder housing inventory, and $438 thousand increase in legal expenses, mostly related to problem loan resolutions.
Balance Sheet
As of December 31, 2009, total assets amounted to $1.73 billion, representing a decrease of $75.2 million or 4% year-over-year; however, excluding the $49.5 million goodwill impairment charge taken in the first quarter 2009, total assets decreased $25.7 million or 1% year-over-year. On a linked quarter basis, total assets decreased $3.3 million, or less than 1%. The loan portfolio decreased by $18.0 million, or 1%, sequentially during the fourth quarter 2009 and decreased by $84.5 million, or 6%, since December 31, 2008 due to a slowdown in loan demand. Total deposits of $1.35 billion at December 31, 2009 increased $120.3 million, or 10%, year-over-year. During the fourth quarter 2009, deposits increased $59.0 million, or 5%, compared with September 30, 2009. Time deposits decreased $29.4 million in the fourth quarter, while money market, savings and NOW deposits increased $88.3 million as a result of active liability management with an emphasis on improving the funding mix and lowering funding costs.
At December 31, 2009, stockholders' equity of $122.0 million represented 7.06% of total assets. Stockholders' equity decreased $12.1 million, or 9%, from $134.1 million at September 30, 2009 primarily due to the fourth quarter loss discussed above. 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 January 29, 2010, at 9:30 AM Eastern Time to discuss the quarter-end results. The call can be accessed by dialing 1-877-741-4248 or 1-719-325-4916 and entering pass code 9595684. A replay of the conference call can be accessed until Midnight on February 12, 2010, by calling 1-888-203-1112 or 1-719-457-0820 and entering pass code 9595684. 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 Year Ended
Income Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Dec 31, Dec 31,
Statement 2009 2009 2009 2009 2008 2009 2008
-------- ------- ------- -------- ------- -------- -------
Total
Interest
Income $ 22,092 $22,186 $22,451 $ 22,744 $24,278 $ 89,473 $96,742
Total
Interest
Expense 8,701 8,868 9,872 10,285 11,459 37,726 49,282
-------- ------- ------- -------- ------- -------- -------
Net
Interest
Income 13,391 13,318 12,579 12,459 12,819 51,747 47,460
Provision
for Loan
Losses 18,000 6,000 6,000 4,000 2,360 34,000 8,165
Net
Interest
Income
after
Provision
for Loan
Losses (4,609) 7,318 6,579 8,459 10,459 17,747 39,295
Non-Interest
Income
Service
Charges on
Deposit
Accounts 1,671 1,588 1,543 1,444 1,487 6,246 5,859
Income from
mortgage
banking
activities 416 512 760 416 233 2,104 1,294
Investment
brokerage
and trust
fees 292 359 212 296 147 1,159 1,138
SBIC income
(loss) and
management
fees (218) 171 (43) 238 89 148 60
Gain (Loss)
on Sale of
Investment
Securities - 735 500 1 98 1,236 98
Gain (Loss)
and Net
Cash
Settlement
on
Economic
Hedges 852 316 (912) (22) - 234 934
Other
Income 513 508 550 208 464 1,779 1,899
-------- ------- ------- -------- ------- -------- -------
Total
Non-
Interest
Income 3,526 4,189 2,610 2,581 2,518 12,906 11,282
Non-Interest
Expense
Salaries
and Employee
Benefits 5,385 5,690 5,897 5,530 5,088 22,502 22,038
Occupancy
and Equipment 1,882 1,997 1,990 2,034 1,930 7,903 7,679
Goodwill
Impairment - - - 49,501 - 49,501 -
Other 6,311 4,934 5,834 3,513 964 20,592 6,627
-------- ------- ------- -------- ------- -------- -------
Total
Non-
Interest
Expense 13,578 12,621 13,721 60,578 7,982 100,498 36,344
Income
(Loss)
Before
Taxes (14,661) (1,114) (4,532) (49,538) 2,324 (69,845) 14,233
Provision
for Income
Taxes (3,944) (683) (1,845) (214) 766 (6,686) 2,634
-------- ------- ------- -------- ------- -------- -------
Net Income
(Loss) $(10,717) $ (431) $(2,687) $(49,324) $ 1,558 $(63,159) $11,599
======== ======= ======= ======== ======= ======== =======
Effective
dividend
on preferred
stock 627 621 633 627 185 2,508 185
-------- ------- ------- -------- ------- -------- -------
Net income
(loss)
available
to common
share-
holders $(11,344) $(1,052) $(3,320) $(49,951) $ 1,373 $(65,667) $11,414
======== ======= ======= ======== ======= ======== =======
Net Income
(Loss) per
Common Share
Basic $ (0.68) $ (0.06) $ (0.20) $ (2.98) $ 0.08 $ (3.91) $ 0.33
Diluted $ (0.68) $ (0.06) $ (0.20) $ (2.98) $ 0.08 $ (3.91) $ 0.33
======== ======= ======= ======== ======= ======== =======
Balance Sheet Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2009 2009 2009 2009 2008
---------- ---------- ---------- ---------- ----------
Assets
Cash and due
from Banks $ 30,184 $ 22,953 $ 27,265 $ 28,268 $ 25,215
Federal Funds
Sold & Int
Bearing
Balances 31,269 21,792 1,496 17,891 2,180
Investment
Securities 323,700 323,800 333,722 345,861 324,698
Federal Home
Loan Bank
Stock 9,794 9,794 9,794 10,178 9,757
Loans held for
sale 3,025 2,559 8,068 6,044 316
Loans 1,230,275 1,248,249 1,251,200 1,297,489 1,314,811
Allowance for
Loan Losses (29,638) (20,807) (19,390) (19,314) (18,851)
---------- ---------- ---------- ---------- ----------
Net Loans 1,200,637 1,227,442 1,231,810 1,278,175 1,295,960
Bank Premises
and Equipment 42,630 42,590 42,006 40,622 40,030
Goodwill - - - - 49,501
Foreclosed
Assets 19,634 18,118 17,881 10,798 5,745
Other Assets 67,735 56,293 54,667 51,897 50,376
---------- ---------- ---------- ---------- ----------
Total Assets $1,728,608 $1,725,341 $1,726,709 $1,789,734 $1,803,778
========== ========== ========== ========== ==========
Liabilities and
Stockholders'
Equity
Deposits
Non-Interest
Bearing $ 118,372 $ 106,156 $ 103,205 $ 98,618 $ 102,048
Money market,
savings and
NOW 618,393 542,277 469,799 479,797 475,772
Time 616,671 646,039 680,875 749,728 655,292
---------- ---------- ---------- ---------- ----------
Total
Deposits 1,353,436 1,294,472 1,253,879 1,328,143 1,233,112
Borrowings 245,214 288,585 330,218 314,400 373,213
Accrued
Expenses and
Other Liabilities 7,961 8,222 8,913 8,982 9,743
---------- ---------- ---------- ---------- ----------
Total
Liabilities 1,606,611 1,591,279 1,593,010 1,651,525 1,616,068
Total Stockholders'
Equity 121,997 134,062 133,699 138,209 187,710
---------- ---------- ---------- ---------- ----------
Total Liabilities
and Stockholders'
Equity $1,728,608 $1,725,341 $1,726,709 $1,789,734 $1,803,778
========== ========== ========== ========== ==========
Tangible Book
Value per
Common Share $ 4.77 $ 5.49 $ 5.47 $ 5.74 $ 5.76
========== ========== ========== ========== ==========
For the three months ended
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2009 2009 2009 2009 2008
---------- ---------- ---------- ---------- ----------
Per Common
Share Data:
Basic Earnings
per Share $ (0.68) $ (0.06) $ (0.20) $ (2.98) $ 0.08
Diluted
Earnings per
Share $ (0.68) $ (0.06) $ (0.20) $ (2.98) $ 0.08
Tangible Book
Value per
Share $ 4.77 $ 5.49 $ 5.47 $ 5.74 $ 5.76
Cash dividends
paid $ - $ - $ - $ - $ 0.040
Selected
Performance
Ratios:
Return on
Average Assets
(annualized)
ROA -2.44% -0.10% -0.61% -10.90% 0.34%
Return on
Average Equity
(annualized)
ROE -31.92% -1.28% -7.87% -106.68% 4.01%
Return on
Tangible
Equity
(annualized) -32.14% -1.29% -7.93% -145.53% 5.98%
Net Interest
Margin 3.28% 3.30% 3.05% 3.01% 3.10%
Net Interest
Spread 3.08% 3.10% 2.84% 2.78% 2.88%
Non-interest
Income as a %
of Revenue 20.84% 23.93% 17.18% 17.16% 16.42%
Non-interest
Income as a %
of Average
Assets 0.80% 0.96% 0.59% 0.57% 0.55%
Non-interest
Expense to
Average Assets 3.09% 2.91% 3.12% 13.39% 2.35%
Efficiency
Ratio 80.26% 72.09% 90.34% 402.78% 69.46%
Asset Quality:
Nonperforming
Loans $ 37,732 $ 22,697 $ 17,851 $ 20,251 $ 14,433
Nonperforming
Assets $ 57,366 $ 40,766 $ 35,732 $ 31,049 $ 20,178
Nonperforming
Loans to Total
Loans 3.07% 1.82% 1.43% 1.56% 1.10%
Nonperforming
Assets to
Total Assets 3.32% 2.36% 2.07% 1.73% 1.12%
Allowance for
Loan Losses to
Period-end
Loans 2.41% 1.67% 1.55% 1.49% 1.43%
Allowance for
Loan Losses to
Nonperforming
Loans (X) 0.79X 0.92X 1.09X 0.95X 1.31X
Net Charge-offs
to Average
Loans
(annualized) 2.92% 1.45% 1.85% 1.09% 0.43%
Capital Ratios:
Equity to Total
Assets 7.06% 7.77% 7.74% 7.72% 10.41%
Tangible Equity
to Total
Tangible
Assets (1) 4.63% 5.34% 5.32% 5.39% 5.51%
Average
Balances:
Year to Date
Interest
Earning
Assets $1,638,171 $1,643,945 $1,665,784 $1,679,293 $1,588,542
Total Assets 1,767,047 1,774,376 1,800,376 1,834,575 1,738,868
Total Loans 1,272,087 1,280,803 1,295,913 1,310,679 1,279,041
Equity 147,652 155,522 162,126 187,512 145,754
Interest
Bearing
Liabilities 1,501,705 1,506,867 1,525,524 1,535,956 1,474,539
Quarterly
Interest
Earning
Assets $1,621,037 $1,600,979 $1,652,424 $1,679,293 $1,645,832
Total Assets 1,745,299 1,723,224 1,766,553 1,834,575 1,802,934
Gross Loans 1,246,223 1,251,076 1,281,309 1,310,679 1,321,621
Equity 133,201 133,627 137,019 187,512 154,552
Interest
Bearing
Liabilities 1,486,386 1,470,162 1,515,206 1,535,956 1,527,227
Weighted
Average Number
of Shares
Outstanding
Basic 16,789,045 16,791,175 16,791,340 16,780,058 17,369,765
Diluted 16,789,045 16,791,175 16,791,340 16,780,058 17,398,432
Period end
outstanding
shares 16,787,675 16,791,175 16,793,175 16,793,175 16,769,675
Year Ended
Dec 31, Dec 31,
2009 2008
---------- ----------
Per Common
Share Data:
Basic Earnings
per Share $ (3.91) $ 0.33
Diluted
Earnings per
Share $ (3.91) $ 0.33
Tangible Book
Value per
Share $ 4.77 $ 5.76
Cash dividends
paid $ 0.040 $ 0.160
Selected
Performance
Ratios:
Return on
Average Assets
(annualized)
ROA -3.57% 0.34%
Return on
Average Equity
(annualized)
ROE -42.78% 4.02%
Return on
Tangible
Equity
(annualized) -46.93% 6.18%
Net Interest
Margin 3.16% 2.99%
Net Interest
Spread 2.95% 2.75%
Non-interest
Income as a %
of Revenue 19.96% 19.21%
Non-interest
Income as a %
of Average
Assets 0.73% 0.65%
Non-interest
Expense to
Average Assets 5.69% 2.42%
Efficiency
Ratio 155.44% 61.87%
Asset Quality:
Nonperforming
Loans $ 37,732 $ 14,433
Nonperforming
Assets $ 57,366 $ 20,178
Nonperforming
Loans to Total
Loans 3.07% 1.10%
Nonperforming
Assets to
Total Assets 3.32% 1.12%
Allowance for
Loan Losses to
Period-end
Loans 2.41% 1.43%
Allowance for
Loan Losses to
Nonperforming
Loans (X) 0.79X 1.31X
Net Charge-offs
to Average
Loans
(annualized) 1.82% 0.28%
Capital Ratios:
Equity to Total
Assets 7.06% 10.41%
Tangible Equity
to Total
Tangible
Assets (1) 4.63% 5.51%
Weighted
Average Number
of Shares
Outstanding
Basic 16,787,938 17,363,395
Diluted 16,787,938 17,398,318
Period end
outstanding
shares 16,787,675 16,769,675
(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
