Southcoast Announces Six Months Earnings


MT. PLEASANT, S.C., July 12, 2012 (GLOBE NEWSWIRE) -- Southcoast Financial Corporation (Nasdaq:SOCB) announced unaudited net income of $1,746,000, or $.33 per basic share, for the six months ended June 30, 2012. This compares to an unaudited net loss of $8,707,000, or $1.65 per basic share, for the six months ended June 30, 2011. The June 30, 2012 per share is based on 5,321,578 basic average shares compared to 5,275,558 basic average shares for the first half of 2011.

"The 2012 results were positively impacted by gains on the sale of impaired assets, security gains, reduction in our loan loss provision and increased core earnings," said L. Wayne Pearson, Chairman and Chief Executive Officer. "While we continue to work diligently to reduce non-performing assets, we also continue to focus on producing profitable core business and maintaining strong capital levels."

For the quarter ended June 30, 2012, the unaudited net income was $503,000, or $.09 per basic share. This compares to an unaudited net loss of $8,128,000, or $1.54 per basic share, for the quarter ended June 30, 2011. The June 30, 2012 income per share is based on 5,326,577 basic average shares compared to 5,280,925 basic average shares for the second quarter of 2011. The additional provision for loan losses and the deferred tax write down in 2011 are the main reasons for the fluctuation in the earnings for the quarters.

The six months ended June 30, 2011 loss included a $3,643,000 provision for loan losses and $4,812,000 of income tax expense related to a write down of the Company's deferred tax asset. The provision for loan losses for the first half of 2012 was $430,000.

Net interest income for the first six months of 2012 decreased $87,000 when compared to the first six months of 2011, from $6,568,000 to $6,481,000. The reduction in interest income, primarily due to the decrease in average performing loans, was almost completely offset by the reduction of interest cost as existing liabilities were repriced. The Company's annualized net interest margin improved by 21 basis points to 3.48% for the first half of 2012 from 3.27% for the first half of 2011, due to the significant reduction in our cost of funds.

Non-interest income decreased to $1,531,000 for the first half of 2012 from $1,655,000 for the first half of 2011, primarily due to the recognition of only $215,000 in net gains on the sale of available for sale securities in the 2012 period compared to net gains of $819,000 in 2011. The first half of 2011 also included the effect of a $176,000 other-than-temporary impairment charge on an investment security. These decreases in securities gains were offset by increases in rental income on foreclosed property and other fee income.

Non-interest expense levels decreased to $5,797,000 for the first half of 2012 from $8,475,000 for the first half of 2011. The 2012 period included the benefit of $661,000 in gains net of impairments on the sale of other real estate owned compared to net impairments of $1,597,000 for the comparable 2011 period, a change of $2,258,000.

Total assets as of June 30, 2012 were $438.9 million compared to $427.5 million as of December 31, 2011, an increase of 2.6%. Loans, excluding loans held for sale, increased to $324.5 million, up 1.5% from $319.7 million as of December 31, 2011. Deposits as of June 30, 2012 increased 7.1% to $338.5 million, while other borrowings decreased 19.0% to $54.1 million, primarily due to maturing Federal Home Loan Bank advances. Brokered and Wholesale certificates of deposit as of June 30, 2012 totaled $34,365,000, down 19.9% from December 31, 2011 total of $42,898,000 as the Company continued to reduce non-core funding.

Our ratio of nonperforming assets to total assets improved from 7.40% as of December 31, 2011 to 6.12% as of June 30, 2012. Our allowance for loan losses as a percentage of loans was 2.66% as of June 30, 2012, compared to 3.34% as of December 31, 2011. Our allowance for loan losses as a percentage of total non-performing loans totaled 50.85% as of June 30, 2012, compared to 47.87% as of December 31, 2011.

The subsidiary bank's capital position as of June 30, 2012 remains in excess of the well-capitalized requirements under the regulatory framework for prompt corrective action, with tier 1 capital to average assets of 9.47%. "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 2012  June 2011
   (Unaudited)
INCOME STATEMENT DATA    
Net interest income $3,304 $3,335
Provision for loan losses 330 2,493
Noninterest income 625 1,313
Noninterest expenses 3,145 5,047
Net income(loss) 503  (8,128)
     
PER SHARE DATA     
Net income(loss) per share    
Basic  $ 0.09  $ (1.54)
Diluted  $ 0.09  $ (1.54)
     
BALANCE SHEET DATA    
Total assets $438,868 $462,041
Total deposits 338,477 342,058
Total loans (net) 315,858 320,440
Investment securities 54,701 67,648
Other borrowings 54,138 68,224
Junior subordinated debentures 10,310 10,310
Shareholders' equity 32,500 38,106
     
Average shares outstanding    
Basic 5,326,577 5,280,925
Diluted 5,326,577 5,280,925
     
Book value per share $6.10 $7.22
     
Key ratios     
     
 Equity to asset ratio 7.41% 8.25%
 Nonperforming assets to assets^ 6.12% 6.89%
 Reserve to loans 2.66% 3.06%
 Reserve to nonperforming loans 50.85% 47.26%

^ Includes nonaccrual loans, loans 90 days past due and still accruing interest, troubled debt restructurings, and other real estate owned.

  Southcoast Financial Corporation
  Consolidated Balance Sheets
  (Dollars in thousands)
     
   June 30  December 31
  2012 2011
   (Unaudited)  (Unaudited)
Assets    
Cash and cash equivalents $20,717 $18,037
Investments 54,701 52,755
Loans held for sale 378 995
Loans 324,489 319,740
Less: Allowance for loan losses 8,631 10,692
Net loans 315,858 309,048
Fixed assets 21,943 21,977
Other assets 25,271 24,709
Total Assets $438,868 $427,521
     
Liabilities & Shareholders' Equity    
Deposits:    
Non-interest bearing $46,503 $34,120
Interest bearing 291,974 282,027
     
Total deposits 338,477 316,147
Other borrowings 54,138 66,850
Other liabilities 3,443 3,402
Junior subordinated debentures 10,310 10,310
Total liabilities 406,368 396,709
     
Shareholders' Equity    
Common Stock  54,413 54,382
Retained Deficit and Accumulated Other Comprehensive Loss   (21,913) (23,570)
Total shareholders' equity 32,500 30,812
     
Total Liabilities and Shareholders' equity $438,868 $427,521
     
   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,
  2012 2011 2012 2011
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest Income        
Interest and fees on loans $8,377 $8,965 $4,222 $4,474
Interest on investments 651 1,098 347 586
Interest on Fed funds sold 16 17 10 10
Total interest income 9,044 10,080 4,579 5,070
         
Interest expense 2,563 3,512 1,275 1,735
Net interest income 6,481 6,568 3,304 3,335
Provision for loan losses 430 3,643 330 2,493
Net interest income after provision 6,051 2,925 2,974 842
         
Noninterest income 1,531 1,655 625 1,313
Total operating income 7,582 4,580 3,599 2,155
         
Noninterest expense         
Salaries and benefits 3,231 3,379 1,635 1,680
Occupancy and equipment  1,476 1,398 741 741
Other expenses 1,090 3,698 769 2,626
         
Total noninterest expense 5,797 8,475 3,145 5,047
         
Income(loss) before taxes 1,785  (3,895) 454  (2,892)
         
Income tax expense(benefit)  39 4,812  (49) 5,236
Net income(loss)  $1,746  (8,707) $503  (8,128)
Basic net income(loss) per share $0.33 ($1.65) $0.09 ($1.54)
         
Diluted net income(loss) per share $0.33 ($1.65) $0.09 ($1.54)
         
Average number of shares        
Basic 5,321,578 5,275,558 5,326,577 5,280,925
Diluted 5,321,578 5,275,558 5,326,577 5,280,925

            

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