Southcoast Announces Second Quarter Earnings


MT. PLEASANT, S.C., July 13, 2007 (PRIME NEWSWIRE) -- Southcoast Financial Corporation (Nasdaq:SOCB) announced that it had unaudited pre-tax income of $2,565,000 and unaudited net income of $1,695,000, or unaudited net income of $.30 per basic share, for the six months ended June 30, 2007. This compares to unaudited pre-tax income of $4,560,000 and unaudited net income of $2,816,000, or unaudited net income of $0.47 per basic share for the six months ended June 30, 2006. The June 30, 2007 earnings per share are based on 5,725,460 basic average shares outstanding compared to 5,997,310 basic average shares outstanding for the six months ended June 30, 2006. This decrease in outstanding shares is the result of a stock repurchase initiative commenced in January 2007. The Company's Board of Directors authorized the repurchase of up to 547,194 shares, or 10% of the Company's outstanding shares as of January 23, 2007. During the first six months of 2007, the Company repurchased 544,465 shares for a total of $11,079,592.

Chairman and Chief Executive Officer, L. Wayne Pearson said, "While we experienced a drop in net income compared to the same period of 2006, we continue to see a positive trend in our branch activity. The decline in net income is due primarily to an expected decrease in non-recurring income from real estate sales. We also experienced increases in occupancy costs to support the growth of our branch network."

For the quarter ending June 30, 2007, pre-tax income was $1,290,000 and net income was $864,000 or net income of $0.15 per share. This compares to pre-tax income of $2,473,000 and net income of $1,479,000, or net income of $0.25 per share, for the quarter ending June 30, 2006. The 2007 earnings per share are based on 5,603,193 basic average shares outstanding compared to 5,998,400 basic average shares outstanding for the quarter ending June 30, 2006.

Total assets as of June 30, 2007 were $487.7 million compared to $481.9 million as of December 31, 2006, an increase of 1.2%. Loans, excluding loans held for sale, increased to $372.3 million, up 1.3% from $367.6 million as of December 31, 2006. Deposits during the same period declined 0.7% to $308.7 million. The decline in deposits is directly related to our decision in the third quarter of 2006 to reduce our wholesale lending operations and our related brokered and wholesale deposit base. As of June 30, 2007, the ratio of non-performing assets to total assets was 0.38% and the allowance for loan losses as a percentage of loans was 1.16%.

The Corporation currently has ten branches. The ninth branch at 1654 Sam Rittenberg Boulevard in West Ashley opened in January 2007. The tenth branch at the intersection of Highway 17N at Park West and South Morgans Point Road in Mt. Pleasant, South Carolina, opened in May 2007. "As our branches continue to mature we should see the bank's core business continue to increase," said Pearson.

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. Southcoast Financial Corporation's common stock is traded on the NASDAQ Global Market under the symbol SOCB.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our expectations or forecasts of future events. Any or all of our forward-looking statements here or in other publications may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining our actual future results. Consequently, no forward looking-statements can be guaranteed. Our actual results may vary materially, and there are no guarantees about the performance of our stock. We undertake no obligation to correct or update any forward-looking statements, whether as a result of new information, future results or otherwise. You are advised, however, to consult any future disclosures we make on related subjects in our reports to the SEC.



 Southcoast Financial Corporation
 SELECTED FINANCIAL DATA
 (dollars in thousands, except earnings per share)

                                                   Six Months Ended
                                                June 2007    June 2006
                                               (Unaudited)  (Unaudited)
 INCOME STATEMENT DATA
    Net interest income                            $7,365       $8,245
    Provision for loan losses                           0          624
    Noninterest income                              1,164        2,576
    Noninterest expenses                            5,964        5,637
    Net income                                      1,695        2,816

 PER SHARE DATA(a)
  Net income per share
     Basic                                          $0.30        $0.47
     Diluted                                        $0.30        $0.47

 BALANCE SHEET DATA
   Total assets                                  $487,704     $514,583
   Total deposits                                 308,652      339,817
   Total loans (net)                              368,025      386,539
   Investment securities                           59,785       70,109
   Total earning assets                           433,116      480,780
   Advances from FHLB                              75,500       67,000
   Junior subordinated debentures                  21,655       21,655
   Shareholders' equity                            68,945       75,884

 Average shares outstanding

   Basic                                        5,725,460    5,997,310
   Diluted                                      5,731,162    6,003,125

 Key ratios(b)
   Return on assets                                 0.72%        1.19%
   Return on equity                                 4.63%        7.61%
   Equity to asset ratio                           14.14%       14.75%
   Non-performing assets to assets                  0.38%        0.43%
   Reserve to loans                                 1.16%        1.23%
   Net interest margin                              3.44%        3.77%

   Employees                                          118           97
   # of accounts                                   11,516       11,109
   # of offices open                                   10            8
   # of offices under construction                      0            1
   # of office sites purchased                          2            1
   ATM stand alone                                      1            1



                   Year       Year       Year       Year       Year
                   Ended      Ended      Ended      Ended      Ended
                 Dec. 2006  Dec. 2005  Dec. 2004  Dec. 2003  Dec. 2002

 INCOME
  STATEMENT DATA
   Net interest
    income         $16,145    $13,914    $10,692     $7,858     $5,458
   Provision
    for loan
    losses             723        865      1,146        735        480
   Noninterest
    income           3,837      2,725      2,700      1,711      1,767
   Noninterest
    expenses        11,542      9,243      7,966      6,171      4,866
   Net income        4,839      4,189      2,982      1,704      1,147

 PER SHARE DATA(a)
  Net income
   per share
     Basic           $0.81      $0.97      $0.76      $0.69      $0.52
     Diluted         $0.81      $0.97      $0.75      $0.67      $0.50

 BALANCE SHEET
   DATA
  Total assets    $481,856   $476,599   $366,103   $253,217   $181,513
  Total
   deposits        310,893    311,554    258,153    166,213    132,655
  Total loans
   (net)           363,247    371,656    293,207    199,732    134,729
  Investment
   securities       46,460     35,203     24,831     22,049      7,608
  Total earning
   assets          445,129    440,942    344,482    238,009    168,225
  Advances from
   FHLB             66,000     67,000     58,000     41,100     23,500
  Junior
   subordinated
   debentures       21,655     21,655     11,345     11,345     11,345
  Shareholders'
   equity           78,803     73,315     36,571     33,410     12,709

 Average
  shares
  outstanding

  Basic          6,007,137  4,335,319  3,945,175  2,471,038  2,223,220
  Diluted        6,012,445  4,340,470  4,001,380  2,529,743  2,312,627

 Key ratios(b)
  Return on
   assets             1.00%      1.04%      0.98%      0.79%      0.78%
  Return on
   equity             6.22%      9.28%      8.56%     10.43%      9.45%
  Equity to
   asset ratio       16.35%     15.38%      9.99%     13.19%      7.01%
  Non-performing
   assets to
   assets             0.18%      0.11%      0.27%      0.04%      0.06%
  Reserve to
   loans              1.19%      1.14%      1.15%      1.18%      1.21%
  Net interest
   margin             3.64%      3.69%      3.78%      3.90%      4.02%

  Employees            110         91         77         68         61
  # of accounts     10,778     10,728      9,391      7,814      6,899
  # of offices
   open                  8          8          7          5          5
  # of offices
   under
    construction         2          1          0          2          0
  # of office
   sites
   purchased             2          0          2          1          2
  ATM stand
   alone                 1          1          1          0          0



 (a) Share and per share data has been adjusted for 10% stock
     dividends in 2007, 2006, 2005, 2004, and dividends totaling 15%
     in 2003.

 (b) Ratios for three months are annualized.



                   Southcoast Financial Corporation
                      Consolidated Balance Sheets

                 June 30     June 30    Dec. 31   Dec. 31    Dec. 31
                   2007        2006       2006     2005        2004
               (Unaudited) (Unaudited) (Audited) (Audited)  (Audited)
 Assets
 Cash and due
  from banks     $  8,816   $ 14,149   $  7,008   $ 14,378   $ 11,853
 Federal Funds
  sold              1,162     11,682     31,204     16,964      4,236
 Investments       59,785     70,109     46,460     35,203     24,831
 Loans held
  for sale            347      1,665        140      9,275     12,010
 Loans            372,340    391,369    367,611    375,926    296,611
 Less:
  Allowance for
  loan losses       4,315      4,830      4,364      4,270      3,404
                 --------   --------   --------   --------   --------
 Net loans        368,025    386,539    363,247    371,656    293,207
 Fixed assets      25,653     21,183     25,126     19,898     14,844
 Other assets      23,916      9,256      8,671      9,225      5,122
                 --------   --------   --------   --------   --------
   Total Assets  $487,704   $514,583   $481,856   $476,599   $366,103
                 ========   ========   ========   ========   ========
 Liabilities &
  Shareholders'
  Equity
 Deposits:
  Non-interest
   bearing       $ 36,625   $ 39,923   $ 34,694   $ 38,754   $ 27,955
  Interest
   bearing        272,027    299,894    276,199    272,800    230,198
                 --------   --------   --------   --------   --------
   Total
    deposits      308,652    339,817    310,893    311,554    258,153
 Other
  borrowings       85,924     74,602     67,841     67,000     58,000
 Other
  liabilities       2,528      2,625      2,664      3,075      2,034
 Junior
  subordinated
  debentures       21,655     21,655     21,655     21,655     11,345
                 --------   --------   --------   --------   --------
   Total
    liabilities   418,759    438,699    403,053    403,284    329,532

 Shareholders'
  Equity
  Common Stock     68,635     75,249     75,316     70,268     34,081
  Retained
   Earnings and
   Accumulated
   Other
   Comprehensive
   Income or
   Loss               310        635      3,487      3,047      2,490
                 --------   --------   --------   --------   --------
   Total
    shareholders'
    equity         68,945     75,884     78,803     73,315     36,571
                 --------   --------   --------   --------   --------
   Total
    Liabilities
    and
    Shareholders'
    equity       $487,704   $514,583   $481,856   $476,599   $366,103
                 ========   ========   ========   ========   ========

 Book Value Per
  Share (a)      $  12.59   $  12.62   $  13.10   $  12.23   $   9.25
 Reserve to
  Loans Ratio        1.16%      1.23%      1.19%      1.14%      1.15%

 (a) Adjusted for a 10% stock dividend in 2007, 2006, and 2005.


                  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,
                            2007        2006       2007         2006
                        (Unaudited) (Unaudited) (Unaudited) (Unaudited)
 Interest Income

  Interest and fees
   on loans                 $14,223    $13,752     $7,249      $7,018
  Interest on
   investments                1,206      1,195        604         755
  Interest on Fed
   funds sold                   297        263         80         158
                             ------     ------     ------      ------
    Total interest
      income                 15,726     15,210      7,933       7,931

 Interest expense             8,361      6,965      4,209       3,712
                             ------     ------     ------      ------
    Net interest
     income                   7,365      8,245      3,724       4,219
 Provision for loan
   losses                         0        624          0         305
                             ------     ------     ------      ------
    Net interest
     income after
     provision                7,365      7,621      3,724       3,914

 Noninterest income           1,164      2,576        561       1,790
                             ------     ------     ------      ------
    Total operating
     income                   8,529     10,197      4,285       5,704

 Noninterest expense

  Salaries and
   benefits                   3,423      3,423      1,695       1,946
  Occupancy and
   equipment                  1,105        892        560         504
  Other expenses              1,436      1,322        740         781
                             ------     ------     ------      ------

    Total noninterest
     expense                  5,964      5,637      2,995       3,231

 Income before taxes          2,565      4,560      1,290       2,473

 Income tax expense             870      1,744        426         994
                             ------     ------     ------      ------
 Net income                  $1,695     $2,816       $864      $1,479
                             ======     ======     ======      ======
 Basic net income
   per share                  $0.30      $0.47      $0.15       $0.25

 Diluted net income
  per share                   $0.30      $0.47      $0.15       $0.25

 Average number
  of shares
     Basic                5,725,460  5,997,310  5,603,193   5,998,400
     Diluted              5,731,162  6,003,125  5,609,052   6,004,231


            

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