MACON, Ga., Jan. 29, 2009 (GLOBE NEWSWIRE) -- Security Bank Corporation (Nasdaq:SBKC) today reported a preliminary net operating loss, before a goodwill impairment charge of $18.4 million and a $0.9 million gain on sales of securities, of $24.9 million for the fourth quarter ended December 31, 2008, compared with a net operating loss of $6.9 million for the fourth quarter of 2007. Diluted earnings per share before goodwill impairment and the gain on securities sale for the fourth quarter of 2008 reflected an operating loss of $1.07 per share compared to a loss of $0.36 per share for the comparable year ago period. The decrease in net operating income for the fourth quarter of 2008 was primarily driven by a 244 basis point decrease in the net interest margin due to increased costs associated with elevated levels of problem credits, a $9 million increase in the provision for loan losses and a $2 million increase in Other Real Estate Owned ("OREO") related expenses. For the year ended December 31, 2008, preliminary net operating income decreased to a loss of $88.4 million compared to income of $6.6 million a year ago and on a diluted per share basis decreased to a loss of $3.95 versus income of $0.34 for the comparable year ago period.
Security Bank Corporation currently has approximately $586 million of available liquidity in the form of cash and cash equivalents, unpledged securities and available secured fed funds lines. This represents approximately 20% of total assets as of December 31, 2008.
Tony E. Collins, Security Bank Corporation's President and CEO, commented, "With financial markets still in turmoil, we maintained our allowance for loan losses to 3.00% of loans in the fourth quarter, more than double the 1.45% of loans at the end of 2007. While we anticipated that nonperforming assets would remain elevated through the year, the significant decline in growth in the economy, and the residential real estate market in particular over this period, has made it difficult to sell OREO and reduce problem credits. Given these times of unprecedented challenges for financial institutions, we remain very focused on our previously stated objectives of preserving capital, maintaining liquidity, improving asset quality and reducing noninterest expenses. We greatly appreciate the continued support of our customers and our employees who remain committed to providing the highest level of customer service."
Asset Quality
Nonperforming assets (nonaccrual loans and OREO) at the end of fourth quarter 2008 were $327 million, or 11.3% of total assets compared to 9.8% at the end of the third quarter of 2008 and 2.8% at the end of the fourth quarter in 2007. While Security Bank Corporation sold $11 million of OREO during the fourth quarter of 2008, new properties totaling approximately $18 million were moved to OREO from nonaccrual loans. Approximately $84 million of loans were placed on nonaccrual status during the quarter. Security Bank Corporation charged-off approximately $30 million in loans resulting in net charge-offs to average loans of 5.9% annualized for the fourth quarter of 2008, an increase from 2.7% in net charge-offs to average loans annualized for the third quarter of 2008. Net charge-offs to average loans were 2.8% annualized for the fourth quarter of 2007. Security Bank Corporation increased its allowance for loan losses to 3.00% of loans receivable at December 31, 2008, or $59.4 million, up from 2.95% of loans or $60.4 million at September 30, 2008 and 1.45% of loans or $31.7 million at December 31, 2007.
Balance Sheet
Security Bank Corporation has continued to shrink its balance sheet. Loans receivable totaled $1.98 billion at December 31, 2008, down 9% from $2.18 billion at December 31, 2007. On a sequential basis, loans declined 13% annualized with a 6% annualized decline in the middle and coastal Georgia markets, a 25% annualized decline in the Atlanta market and a 26% annualized decline in Security Real Estate Services, Inc., a wholly owned subsidiary of Security Bank of Bibb County.
As of December 31, 2008, deferred tax assets were $43 million. Management has reviewed these assets for possible impairment; however, the unaudited financial statements for the quarter and year ended December 31, 2008 do not reflect any valuation allowance as management has insufficient information to make a final determination as to the amount of potential impairment. Management estimates a potential valuation allowance on these deferred tax assets in the range of $0 to $18 million as of December 31, 2008 and expects to make its final determination before filing its audited financial statements in its Annual Report on Form 10-K with the SEC.
Total deposits were $2.44 billion at December 31, 2008, an increase of 6% from $2.30 billion at December 31, 2007. Total assets increased 2% to $2.89 billion at December 31, 2008, compared to $2.83 billion at December 31, 2007.
Tangible shareholders' equity at December 31, 2008 declined by approximately $47 million to $129 million compared to December 31, 2007, reflecting net operating losses of $88 million and $2 million in dividends paid, which was partly offset by approximately $28 million in capital raised in a rights offering in the first quarter of 2008.
Net Interest Income
Net interest income for the fourth quarter of 2008 was $6.8 million, a decrease of 68% from $21.6 million when compared to the fourth quarter of 2007. The decrease is primarily the result of a decline in the net interest margin and a decline in Security Bank Corporation's loan portfolio. The net interest margin (on a fully tax-equivalent basis ("FTE")) was 1.02% for the quarter ended December 31, 2008, compared to 1.82% for the third quarter of 2008 and 3.46% for the comparable period one year ago. The decrease in the net interest margin in the fourth quarter of 2008 on a year-over-year and sequential quarterly basis was the result of costs associated with the current credit cycle including carrying costs and reversals of interest for nonaccruing loans, liquidity costs and the asset sensitive nature of the balance sheet. For the year ended December 31, 2008, the net interest margin (FTE) was 1.81% compared to 3.88% for the year ended December 31, 2007.
Noninterest Income and Expense
Noninterest income for the fourth quarter of 2008 decreased $1.9 million to $2.6 million compared to the fourth quarter of 2007 due primarily to a decrease in mortgage banking fees of $0.7 million and a decrease in other income of $0.9 million. During the fourth quarter, Security Bank Corporation outsourced its personal mortgage-lending department to a mortgage company out of Texas.
Noninterest expense for the fourth quarter of 2008 was $17.5 million, a decrease of $3.5 million, or 17% sequentially from the third quarter of 2008, and essentially flat with the fourth quarter 2007 level of $17.6 million. Excluding increased credit cycle costs and increases in foreclosure expenses, losses on sales of OREO and FDIC insurance premiums, noninterest expense was down $2.2 million or 15% over the fourth quarter 2007 level. For the year ended December 31, 2008, noninterest expense declined $5.7 million or 9% versus the comparable year ago period. The decline in controllable noninterest expense was primarily due to reduced salary and benefits expense and the elimination of directors' fees at the holding company and bank level.
This press release, including the attached selected unaudited financial tables, which are a part of this release, contains financial information determined by methods other than in accordance with generally accepted accounting principles ("GAAP"). These non-GAAP financial measures are "net operating income (loss)," "operating earnings," "tangible book value," "tangible equity to tangible assets" and "return on average tangible equity." Security Bank Corporation's management uses these non-GAAP measures in its analysis of Security Bank Corporation's performance.
Net operating income (loss) and operating earnings are defined as net income adjusted for significant, typically nonrecurring income and expenses. Security Bank Corporation's management includes these measures because it believes they are helpful in measuring the Company's performance from core operations absent the impact from the usually nonrecurring items such as asset impairments, goodwill impairment, gains/losses on investment sales and prepayments of borrowed money. Tangible book value is defined as total equity reduced by recorded intangible assets, net of related deferred tax benefits. Tangible book value per share is defined as tangible book value divided by total common shares outstanding. This measure is important to many investors in the marketplace who are interested in changes from period to period in book value per share exclusive of changes in intangible assets. Goodwill, an intangible asset that is recorded in a purchase business combination, has the effect of increasing total book value while not increasing the tangible assets of the company. For companies such as Security Bank Corporation that have engaged in multiple business combinations, purchase accounting requires the recording of significant amounts of goodwill related to such transactions. Tangible equity to tangible assets is the ratio of tangible equity defined as total equity reduced by recorded intangible assets, net of related deferred tax benefits, to tangible assets defined as total assets reduced by recorded intangible assets, net of related deferred tax benefits. Tangible equity to tangible assets is an important measure of Security Bank Corporation's capital strength without the effects of purchase accounting as noted above. Return on average tangible equity is defined as earnings for the period (annualized for the quarterly period or year-to-date period, as applicable) divided by average equity reduced by average goodwill and other intangible assets, net of related deferred tax benefits. Security Bank Corporation's management includes this measure because it believes that it is important when measuring Security Bank Corporation's performance exclusive of the effects of goodwill and other intangibles recorded in recent acquisitions, and many investors use this measure as part of their analysis of Security Bank Corporation.
These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Please refer to the "Reconciliation Table" in the attached schedules for a more detailed analysis of these non-GAAP measures and the most directly comparable GAAP measures.
About Security Bank Corporation
Based in Macon, Georgia, Security Bank Corporation is a multi-bank holding company with assets of $2.9 billion at December 31, 2008. Security Bank Corporation operates six community banks with banking offices located throughout middle Georgia, coastal Georgia and north metropolitan Atlanta.
Security Bank Corporation common stock is traded on the NASDAQ Global Select Market under the ticker symbol "SBKC." You may obtain copies of all documents that Security Bank Corporation files with the Securities and Exchange Commission, free of charge, at the SEC's website at www.sec.gov. In addition, copies of these documents may also be obtained from us without charge by directing a written request to Security Bank Corporation, 4219 Forsyth Road, Macon, Georgia 31210, Attention: Investor Relations.
Safe Harbor
This press release contains forward-looking statements as defined by federal securities laws, including statements about Security Bank Corporation's loan loss provisions, capital or liquidity adequacy, deferred tax asset and any potential impairment, net charge-offs, non-performing assets, net interest margin changes, the overall economic cycle and its impact on real estate values in Security Bank Corporation's markets, loan growth, and Security Bank Corporation's long-term prospects, among others. Statements contained in this press release that are not historical facts are forward-looking statements. Forward-looking statements may address issues involving significant risks, uncertainties, estimates and assumptions made by management. Security Bank Corporation's ability to accurately project results or predict the effects of future plans or strategies is inherently limited. Although Security Bank Corporation believes that the expectations and estimates reflected in its forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements. Please refer to Security Bank Corporation's public filings with the Securities and Exchange Commission for a summary of important factors that could affect Security Bank Corporation's financial results and operations and its forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements. Security Bank Corporation does not intend, and undertakes no responsibility to update or revise any forward-looking statement, whether as a result of difference in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.
Security Bank Corporation Selected Consolidated Financial Data (Dollars in Thousands, except Per Share Amounts) Unaudited Quarters Ended December 31, 2008 2007 % Change ---- ---- -------- OPERATING EARNINGS SUMMARY: Net interest income $ 6,823 $ 21,583 -68.4% Provision for loan losses 29,129 20,000 45.6% Noninterest income 2,620 4,539 -42.3% Foreclosed property expenses 2,202 1,339 64.5% Losses (gains) on sales of ORE 2,487 1,435 73.3% Other noninterest expense 12,815 14,809 -13.5% Income taxes (12,280) (4,588) 167.7% Net operating income (loss) (24,910) (6,873) 262.4% PER COMMON SHARE: Basic operating earnings (loss) $ (1.07)$ (0.36) 197.2% Diluted operating earnings (loss) (1.07) (0.36) 197.2% Cash dividends declared -- 0.088 -100.0% Book value 5.62 16.22 -65.3% Tangible book value 5.54 9.28 -40.3% KEY PERFORMANCE RATIOS (a): Return on average tangible equity, operating -70.32% -14.77% Return on average assets, operating -3.42% -0.99% Efficiency ratio 185.36% 67.31% Net interest margin (FTE) 1.02% 3.46% Net charge-offs to average loans 5.92% 2.79% BALANCE SHEET SUMMARY - END OF PERIOD Investment securities $ 407,343 $ 305,399 33.4% Loans Held for sale 1 7,605 -100.0% Loans receivable 1,981,476 2,182,313 -9.2% Allowance for loan losses 59,437 31,698 87.5% Total assets 2,892,229 2,833,071 2.1% Deposits 2,438,136 2,298,705 6.1% Other borrowed money 300,621 206,326 45.7% Shareholders' equity 130,883 306,693 -57.3% Tangible equity to tangible assets 4.46% 6.50% -31.3% ASSET QUALITY - END OF PERIOD Nonaccrual loans $ 232,436 $ 50,635 359.0% Loans 90 Days Past Due and Accruing 146 242 0.0% Other real estate owned 94,717 28,175 236.2% Total nonperforming assets 327,299 79,052 314.0% Allowance for loan losses/loans 3.00% 1.45% Year Ended December 31, 2008 2007 % Change ---- ---- -------- OPERATING EARNINGS SUMMARY: Net interest income $ 47,422 $ 90,524 -47.6% Provision for loan losses 128,070 32,660 292.1% Noninterest income 15,301 18,985 -19.4% Foreclosed property expenses 7,003 2,879 143.2% Losses (gains) on sales of ORE 8,235 1,944 323.6% Other noninterest expense 57,776 62,252 -7.2% Income taxes (49,997) 3,184 -1670.3% Net operating income (loss) (88,364) 6,590 -1440.9% PER COMMON SHARE: Basic operating earnings (loss) $ (3.95)$ 0.35 -1228.6% Diluted operating earnings (loss) (3.95) 0.34 -1261.8% Cash dividends declared 0.131 0.350 -62.6% Book value 5.62 16.22 -65.3% Tangible book value 5.54 9.28 -40.3% KEY PERFORMANCE RATIOS (a): Return on average tangible equity, operating -53.17% 3.63% Return on average assets, operating -3.08% 0.25% Efficiency ratio 116.41% 61.25% Net interest margin (FTE) 1.81% 3.88% Net charge-offs to average loans 4.73% 1.12% (a) Income annualized based on number of days in the period, except efficiency ratio NOTE: Refer to the attached GAAP to non-GAAP reconciliation for the calculation of operating earnings Security Bank Corporation Average Balance Sheet and Net Interest Income Analysis (Dollars in Thousands) Unaudited Quarter Ended December 31, 2008 Average Income/ Yield/ Balance Expense Rate ---------- ---------- ---------- ASSETS Earning assets: Interest-bearing deposits and fed funds sold $ 286,708 $ 310 0.43% Investment securities 362,556 3,978 4.36% Mortgage Loans Held for Sale 1,994 31 6.18% Loans 2,024,239 27,043 5.31% Other earning assets 1,238 20 6.43% Total earning assets 2,676,735 31,382 4.66% Non-earning assets 223,986 ---------- Total assets $2,900,721 ========== LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Savings and interest-bearing transaction $ 375,042 $ 1,801 1.91% Time deposits 1,897,718 19,578 4.10% Borrowings 302,898 3,165 4.16% Total interest-bearing liabilities 2,575,658 24,544 3.79% Noninterest-bearing liabilities: Noninterest bearing deposits 141,830 Other noninterest-bearing liabilities 22,044 Total liabilities $2,739,532 ---------- Shareholders' Equity 161,189 ---------- Total liabilities and shareholders' equity $2,900,721 ========== Interest rate spread 0.87% Net interest income $ 6,838 Net interest margin (FTE) 1.02% Year Ended December 31, 2008 Average Income/ Yield/ Balance Expense Rate ---------- ---------- ---------- ASSETS Earning assets: Interest-bearing deposits and fed funds sold $ 160,463 $ 2,060 1.28% Investment securities 338,437 15,161 4.48% Mortgage Loans Held for Sale 4,129 264 6.39% Loans 2,119,936 128,476 6.06% Other earning assets 1,238 81 6.54% Total earning assets 2,624,203 146,042 5.57% Non-earning assets 246,558 ---------- Total assets $2,870,761 ========== LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Savings and interest-bearing transaction $ 450,248 $ 10,364 2.30% Time deposits 1,762,888 77,553 4.40% Borrowings 237,306 10,609 4.47% Total interest-bearing liabilities 2,450,442 98,526 4.02% Noninterest-bearing liabilities: Noninterest bearing deposits 154,173 Other noninterest-bearing liabilities 25,086 Total liabilities $2,629,701 ---------- Shareholders' Equity 241,060 ---------- Total liabilities and shareholders' equity $2,870,761 ========== Interest rate spread 1.55% Net interest income $ 47,516 Net interest margin (FTE) 1.81% Security Bank Corporation (SBKC) Selected Financial Information (Amounts in thousands, except per share data) 2008 --------------------- -------------------------------- Dec. 31/ 4th 3rd 2nd 1st YTD Quarter Quarter Quarter Quarter --------------------- -------------------------------- Period-End Balance Sheet -------------- Total Assets $2,892,229 $2,892,229 $2,888,353 $2,877,383 $2,818,477 Total Securities 407,343 407,343 347,020 342,994 306,018 Mortgage Loans held for Sale 1 1 4,780 6,192 5,759 Loans: Commercial Real-Estate 906,909 906,909 942,075 983,733 963,384 Construction/ A&D (2) 652,806 652,806 715,631 772,179 862,532 Personal Real-Estate 157,405 157,405 152,604 160,878 157,040 Other 264,356 264,356 239,799 225,472 198,601 Total Loans 1,981,476 1,981,476 2,050,109 2,142,262 2,181,557 Allowance for loan losses 59,437 59,437 60,442 48,452 49,749 Other earning assets 278,710 278,710 15,794 95,903 26,704 Total Earning Assets 2,667,530 2,667,530 2,417,703 2,587,351 2,520,038 Other Real Estate 94,717 94,717 83,362 62,814 35,749 Intangibles: Goodwill -- -- 18,373 18,373 128,074 Core-Deposit 3,241 3,241 3,444 3,647 3,879 Deposits: Demand Deposits 153,006 153,006 145,416 172,610 164,842 Interest bearing deposits 2,285,130 2,285,130 2,257,138 2,283,016 2,144,829 Total Deposits 2,438,136 2,438,136 2,402,554 2,455,626 2,309,671 Fed Funds purchased & repo agreements 36,844 36,844 31,343 36,084 31,328 Other borrowed funds 263,777 263,777 266,558 180,340 138,738 Common Equity 130,883 130,883 166,662 183,285 309,876 ===================================================================== Average Balance Sheet --------------- Total Assets $2,870,761 $2,900,721 $2,863,228 $2,877,604 $2,818,622 Total Securities 338,437 362,556 345,775 348,677 296,395 Mortgage Loans held for Sale 4,129 1,994 3,869 4,782 5,896 Loans: Commercial Real-Estate 954,279 918,047 965,881 974,558 958,903 Construction/ A&D 777,000 688,792 742,968 802,453 875,131 Personal Real-Estate 157,160 154,547 158,421 157,616 158,069 Other 231,497 262,853 240,954 219,744 201,989 Total Loans 2,119,936 2,024,239 2,108,224 2,154,371 2,194,092 Other earning assets 161,701 287,946 170,505 100,342 55,246 Total Earning Assets 2,624,203 2,676,735 2,628,373 2,608,172 2,551,629 Other Real Estate 63,459 88,808 77,300 53,994 33,299 Deposits: Demand Deposits 154,173 141,830 157,289 162,222 155,389 Interest bearing deposits Savings 14,978 14,090 15,112 15,741 14,979 NOW 348,413 302,184 333,136 376,409 382,597 Money Market 86,857 58,768 81,446 96,607 110,976 Time deposits greater than $100,000 1,082,546 1,107,146 1,099,022 1,067,626 1,061,895 Time deposits less than $100,000 680,342 790,572 709,688 637,784 575,833 Total Deposits 2,367,309 2,414,590 2,395,693 2,356,389 2,301,669 Fed Funds purchased & repo agreements 37,535 37,697 32,168 39,601 44,745 Other borrowed funds 199,771 265,201 230,453 171,993 130,379 Common Equity 241,060 161,189 184,340 306,580 313,635 ===================================================================== Operating Earnings --------- Interest Income $ 145,948 $ 31,367 $ 36,150 $ 37,689 $ 40,742 Interest Expense 98,526 24,544 24,126 23,913 25,943 Net Interest Income 47,422 6,823 12,024 13,776 14,799 Loan loss provision 128,070 29,129 26,359 30,383 42,199 Service charges on deposit accounts 9,183 2,218 2,425 2,253 2,287 Mortgage banking revenues 2,726 275 650 799 1,002 Other income 3,392 127 689 2,037 539 Total noninterest income 15,301 2,620 3,764 5,089 3,828 Salaries and benefits 31,623 7,004 7,803 8,080 8,736 Occupancy and equipment 6,401 1,503 1,848 1,501 1,549 Foreclosed Property Expenses 7,003 2,202 2,104 1,324 1,373 Losses (Gains) on Sales of ORE 8,235 2,487 3,904 1,570 274 Other noninterest expense 19,752 4,308 5,391 5,078 4,975 Total noninterest expense 73,014 17,504 21,050 17,553 16,907 Pre-tax operating earnings (loss) (138,361) (37,190) (31,621) (29,071) (40,479) Income Taxes (49,997) (12,280) (11,472) (11,244) (15,001) Operating income (loss) $ (88,364)$ (24,910)$ (20,149)$ (17,827)$ (25,478) Operating earnings (loss) per share-basic $ (3.95)$ (1.07)$ (0.87)$ (0.77)$ (1.28) Operating earnings (loss) per share-diluted $ (3.95)$ (1.07)$ (0.87)$ (0.77) (1.28) End of period shares outstanding 23,274,639 23,274,639 23,259,539 23,248,585 23,233,634 Weighted average diluted shares o/s 22,387,908 23,265,091 23,247,824 23,235,668 19,810,520 Tax equivalent adjustment 94 15 15 15 50 Net interest income (FTE) 47,516 6,838 12,039 13,791 14,849 Effective Tax Rate 36.14% 33.02% 36.28% 38.68% 37.06% ===================================================================== Stock and related per share data: ------------ Book value $ 5.62 $ 5.62 $ 7.17 $ 7.88 $ 13.34 Tangible book value 5.54 5.54 6.28 7.00 7.72 Dividends declared per share 0.1313 -- -- 0.0438 0.0875 ===================================================================== Other Key Ratios/Data: ------------- Return on average tangible equity (1), (3) -53.17% -70.32% -48.95% -40.43% -56.13% Return on average assets (1), (3) -3.08% -3.42% -2.80% -2.49% -3.64% Net interest margin (FTE) (1) 1.81% 1.02% 1.82% 2.13% 2.34% Efficiency ratio (FTE) 116.23% 185.08% 133.21% 92.97% 90.52% Tangible Equity /Tangible Assets 4.46% 4.46% 5.10% 5.69% 6.67% ===================================================================== Loan Performance Data: ------------ Nonaccrual loans $ 232,436 $ 232,436 $ 199,907 $ 186,139 $ 186,520 Loans 90 Days Past Due and Accruing 146 146 -- -- 68 Other real estate (ORE) 94,717 94,717 83,362 62,814 35,749 Total nonperforming assets 327,299 327,299 283,269 248,953 222,337 Net charge-offs 100,331 30,134 14,369 31,680 24,148 Reversal of Interest 6,751 1,487 968 1,268 3,028 Forfeited Interest from NPA's 16,477 4,773 4,704 4,259 2,741 Allowance for loan losses/ loans 3.00% 3.00% 2.95% 2.26% 2.28% NPA's/Loans plus ORE 15.76% 15.76% 13.28% 11.29% 10.03% Nonperforming assets/total assets 11.32% 11.32% 9.81% 8.65% 7.89% Net charge-offs to average loans (1) 4.73% 5.92% 2.71% 5.91% 4.43% ===================================================================== 2007 -------------------------------------------------------- Dec. 31/ 4th 3rd 2nd 1st YTD Quarter Quarter Quarter Quarter -------------------------------------------------------- Period-End Balance Sheet -------------- Total Assets $2,833,071 $2,833,071 $2,723,986 $2,672,177 $2,541,603 Total Securities 305,399 305,399 227,694 219,185 191,945 Mortgage Loans held for Sale 7,605 7,605 8,867 9,052 8,341 Loans: Commercial Real-Estate 947,371 959,671 900,969 843,477 932,971 Construction/ A&D (2) 898,690 886,390 921,321 920,644 703,703 Personal Real-Estate 158,244 158,244 155,508 152,726 180,687 Other 178,008 178,008 187,414 177,407 199,636 Total Loans 2,182,313 2,182,313 2,165,212 2,094,254 2,016,997 Allowance for loan losses 31,698 31,698 27,132 24,108 23,336 Other earning assets 14,866 14,866 59,968 84,060 78,319 Total Earning Assets 2,510,183 2,510,183 2,461,741 2,406,551 2,295,602 Other Real Estate 28,175 28,175 23,891 19,229 3,403 Intangibles: Goodwill 128,571 128,571 128,571 128,601 128,553 Core-Deposit 4,125 4,125 4,371 4,617 4,863 Deposits: Demand Deposits 158,759 158,759 161,749 171,427 176,658 Interest bearing deposits 2,139,946 2,139,946 2,029,351 1,989,651 1,842,431 Total Deposits 2,298,705 2,298,705 2,191,100 2,161,078 2,019,089 Fed Funds purchased & repo agreements 68,417 68,417 81,995 58,985 59,065 Other borrowed funds 137,909 137,909 121,388 118,888 129,888 Common Equity 306,693 306,693 312,036 314,687 311,729 ===================================================================== Average Balance Sheet --------------- Total Assets $2,591,947 $2,745,087 $2,648,300 $2,529,142 $2,441,326 Total Securities 216,610 256,061 220,379 195,031 194,248 Mortgage Loans held for Sale 6,328 5,647 6,367 8,728 4,557 Loans: Commercial Real-Estate 907,729 939,330 863,915 890,191 937,948 Construction/ A&D 825,302 912,693 918,328 810,122 627,003 Personal Real-Estate 153,682 156,468 154,652 152,519 180,152 Other 195,286 189,580 186,717 199,441 205,761 Total Loans 2,081,999 2,198,071 2,123,612 2,052,273 1,950,864 Other earning assets 36,866 28,184 33,016 34,280 52,292 Total Earning Assets 2,341,803 2,487,963 2,383,374 2,290,312 2,201,961 Other Real Estate 15,970 25,502 27,061 8,081 Deposits: Demand Deposits 163,712 159,891 161,225 168,589 165,255 Interest bearing deposits Savings 16,005 15,104 15,513 16,810 16,612 NOW 373,522 373,274 377,448 375,605 367,657 Money Market 145,619 147,908 151,428 144,907 138,060 Time deposits greater than $100,000 892,248 1,003,681 949,323 833,758 779,136 Time deposits less than $100,000 521,923 531,107 523,421 516,844 516,137 Total Deposits 2,113,029 2,230,965 2,178,358 2,056,513 1,982,857 Fed Funds purchased & repo agreements 43,881 55,528 41,945 43,682 34,158 Other borrowed funds 100,430 125,342 92,383 92,277 91,436 Common Equity 313,504 315,791 316,060 313,877 308,691 ===================================================================== Operating Earnings --------- Interest Income $ 192,840 $ 48,989 $ 49,643 $ 48,175 $ 46,033 Interest Expense 102,316 27,406 26,862 24,792 23,256 Net Interest Income 90,524 21,583 22,781 23,383 22,777 Loan loss provision 32,660 20,000 9,400 2,000 1,260 Service charges on deposit accounts 9,363 2,533 2,356 2,376 2,098 Mortgage banking revenues 4,475 995 1,170 1,271 1,039 Other income 5,147 1,011 1,080 1,103 1,953 Total noninterest income 18,985 4,539 4,606 4,750 5,090 Salaries and benefits 35,061 7,564 8,852 9,094 9,551 Occupancy and equipment 6,189 1,595 1,559 1,547 1,488 Foreclosed Property Expenses 2,879 1,339 778 546 216 Losses (Gains) on Sales of ORE 1,944 1,435 375 164 (30) Other noninterest expense 21,002 5,650 5,496 5,193 4,663 Total noninterest expense 67,075 17,583 17,060 16,544 15,888 Pre-tax operating earnings (loss) 9,774 (11,461) 927 9,589 10,719 Income Taxes 3,184 (4,588) 349 3,489 3,934 Operating income (loss) $ 6,590 $ (6,873)$ 578 $ 6,100 $ 6,785 Operating earnings (loss) per share-basic $ 0.35 $ (0.36)$ 0.03 $ 0.32 $ 0.35 Operating earnings (loss) per share-diluted 0.34 (0.36) 0.03 0.31 0.35 End of period shares outstanding 18,912,264 18,912,264 18,889,227 19,212,139 19,181,241 Weighted average diluted shares o/s 19,225,069 18,958,448 19,184,272 19,463,979 19,456,857 Tax equivalent adjustment 445 112 110 112 111 Net interest income (FTE) 90,969 21,695 22,891 23,495 22,888 Effective Tax Rate 32.58% 40.03% 37.65% 36.39% 36.70% ===================================================================== Stock and related per share data: ------------ Book value $ 16.22 $ 16.22 $ 16.52 $ 16.38 $ 16.25 Tangible book value 9.28 9.28 9.57 9.54 9.39 Dividends declared per share 0.35 0.0875 0.0875 0.0875 0.0875 ===================================================================== Other Key Ratios/Data: ------------- Return on average tangible equity (1), (3) 3.63% -14.77% 1.24% 13.42% 15.78% Return on average assets (1), (3) 0.25% -0.99% 0.09% 0.97% 1.13% Net interest margin (FTE) (1) 3.88% 3.46% 3.81% 4.11% 4.22% Efficiency ratio (FTE) 61.00% 67.02% 62.04% 58.57% 56.79% Tangible Equity /Tangible Assets 6.50% 6.50% 6.97% 7.21% 7.48% ===================================================================== Loan Performance Data: ------------ Nonaccrual loans $ 50,635 $ 50,635 $ 41,492 $ 35,450 $ 39,139 Loans 90 Days Past Due and Accruing 242 242 -- -- -- Other real estate (ORE) 28,175 28,175 23,891 19,229 3,403 Total nonperforming assets 79,052 79,052 65,383 54,679 42,542 Net charge-offs 23,298 15,434 6,376 1,228 260 Reversal of Interest 1,874 796 915 268 (105) Forfeited Interest from NPA's 4,435 1,281 1,405 970 779 Allowance for loan losses/loans 1.45% 1.45% 1.25% 1.15% 1.16% NPA's/Loans plus ORE 3.58% 3.58% 2.99% 2.59% 2.11% Nonperforming assets/total assets 2.79% 2.79% 2.40% 2.05% 1.67% Net charge-offs to average loans (1) 1.12% 2.79% 1.19% 0.24% 0.05% ===================================================================== (1) The actual number of days in the period was used to annualize income (2) At December 31, 2008 approximately 60% of loans were residential and 40% of loans were commercial. (3) Calculated on an operating basis NOTE: Refer to the attached GAAP to non-GAAP reconciliation for the calculation of operating earnings Security Bank Corporation (SBKC) GAAP Reconciliation Table (Amounts in thousands, except per share data) 2008 ------------------------------------------------------ Dec 31/ 4th 3rd 2nd 1st YTD Quarter Quarter Quarter Quarter ------------------------------------------------------ Reconciliation Table- GAAP to non-GAAP: -------------- Book Value per share $ 5.62 $ 5.62 $ 7.17 $ 7.88 $ 13.34 Effect of intangible assets per share (0.08) (0.08) (0.89) (0.88) (5.62) ------------------------------------------------------ Tangible book value $ 5.54 $ 5.54 $ 6.28 $ 7.00 $ 7.72 Equity $ 130,883 $ 130,883 $ 166,662 $ 183,285 $ 309,876 Intangible assets 3,241 3,241 21,817 22,020 131,953 Less tax effect of Core-Deposit Intangible (38%) (1,232) (1,232) (1,309) (1,386) (1,474) ------------------------------------------------------ Tangible equity $ 128,874 $ 128,874 $ 146,154 $ 162,651 $ 179,397 Assets $2,892,229 $2,892,229 $2,888,353 $2,877,383 $2,818,477 Intangible assets 2,009 2,009 20,508 20,634 130,479 ------------------------------------------------------ Tangible assets $2,890,220 $2,890,220 $2,867,845 $2,856,749 $2,687,998 Equity/Assets 4.53% 4.53% 5.77% 6.37% 10.99% Effect of intangible assets -0.07% -0.07% -0.67% -0.68% -4.32% ------------------------------------------------------ Tangible Equity/ Tangible Assets 4.46% 4.46% 5.10% 5.69% 6.67% Average Equity $ 241,060 $ 161,189 $ 184,340 $ 306,580 $ 313,635 Average Intangible assets 76,263 21,540 21,944 130,657 132,599 Less tax effect of Core-Deposit Intangible (38%) (1,402) (1,279) (1,357) (1,440) (1,533) ------------------------------------------------------ Average tangible equity $ 166,199 $ 140,928 $ 163,753 $ 177,363 $ 182,569 Net operating Income (loss) $ (88,364)$ (24,910)$ (20,149)$ (17,827)$ (25,478) Return on average tangible equity, operating (a) -53.17% -70.32% -48.95% -40.43% -56.13% Diluted operating earnings (loss) per share $ (3.95)$ (1.07)$ (0.87)$ (0.77)$ (1.28) Effect of securities gains (losses), net of tax 0.10 0.04 -- -- 0.06 Effect of prepayment of FHLB advances, net of tax -- -- -- -- -- Goodwill impairment, net of tax (5.45) (0.79) -- (4.46) -- ------------------------------------------------------ Diluted earnings (loss) per share $ (9.30)$ (1.82)$ (0.87)$ (5.23)$ (1.22) Net operating income (loss) $ (88,364)$ (24,910)$ (20,149)$ (17,827)$ (25,478) Effect of securities gains (losses), net of tax 2,164 883 -- 1 1,280 Effect of prepayment of FHLB advances, net of tax -- -- -- -- -- Goodwill impairment, net of tax (121,992) (18,373) -- (103,619) -- ------------------------------------------------------ Net income (loss) $ (208,192)$ (42,400)$ (20,149)$ (121,445)$ (24,198) 2007 ------------------------------------------------------ Dec 31/ 4th 3rd 2nd 1st YTD Quarter Quarter Quarter Quarter ------------------------------------------------------ Reconciliation Table- GAAP to non-GAAP: -------------- Book Value per share $ 16.22 $ 16.22 $ 16.52 $ 16.38 $ 16.25 Effect of intangible assets per share (6.94) (6.94) (6.95) (6.84) (6.86) ------------------------------------------------------ Tangible book value $ 9.28 $ 9.28 $ 9.57 $ 9.54 $ 9.39 Equity $ 306,693 $ 306,693 $ 312,036 $ 314,687 $ 311,729 Intangible assets 132,696 132,696 132,942 133,218 133,416 Less tax effect of Core-Deposit Intangible (38%) (1,568) (1,568) (1,661) (1,754) (1,848) ------------------------------------------------------ Tangible equity $ 175,565 $ 175,565 $ 180,755 $ 183,223 $ 180,161 Assets $2,833,071 $2,833,071 $2,723,986 $2,672,177 $2,541,603 Intangible assets 131,129 131,129 131,281 131,464 131,568 ------------------------------------------------------ Tangible assets $2,701,942 $2,701,942 $2,592,705 $2,540,713 $2,410,035 Equity/Assets 10.83% 10.83% 11.46% 11.78% 12.27% Effect of intangible assets -4.33% -4.33% -4.49% -4.57% -4.79% ------------------------------------------------------ Tangible Equity /Tangible Assets 6.50% 6.50% 6.97% 7.21% 7.48% Average Equity $ 313,504 $ 315,791 $ 316,060 $ 313,877 $ 308,691 Average Intangible assets 133,878 132,849 133,117 133,363 136,228 Less tax effect of Core-Deposit Intangible (38%) (1,763) (1,626) (1,720) (1,813) (1,896) ------------------------------------------------------ Average tangible equity $ 181,389 $ 184,568 $ 184,663 $ 182,327 $ 174,359 Net operating Income (loss) $ 6,590 $ (6,873)$ 578 $ 6,100 $ 6,785 Return on average tangible equity, operating (a) 3.63% -14.77% 1.24% 13.42% 15.78% Diluted operating earnings (loss) per share $ 0.34 $ (0.36)$ 0.03 $ 0.31 $ 0.35 Effect of securities gains (losses), net of tax -- -- -- -- -- Effect of prepayment of FHLB advances, net of tax -- -- -- -- -- Goodwill impairment, net of tax -- -- -- -- -- ------------------------------------------------------ Diluted earnings (loss) per share $ 0.34 $ (0.36)$ 0.03 $ 0.31 $ 0.35 Net operating income (loss) $ 6,590 $ (6,873)$ 578 $ 6,100 $ 6,785 Effect of securities gains (losses), net of tax (2) -- (3) -- 1 Effect of prepayment of FHLB advances, net of tax -- -- -- -- -- Goodwill impairment, net of tax -- -- -- -- -- ------------------------------------------------------ Net income (loss) $ 6,588 $ (6,873)$ 575 $ 6,100 $ 6,786 (a) The actual number of days in the period were used to annualize income