Southcoast Announces Nine Months Earnings

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| Source: Southcoast Financial Corporation

MT. PLEASANT, S.C., Oct. 15, 2012 (GLOBE NEWSWIRE) -- Southcoast Financial Corporation (Nasdaq:SOCB) announced unaudited net income of $2,590,000, or $.49 per basic share, for the nine months ended September 30, 2012. This compares to an unaudited net loss of $11,678,000, or $2.21 per basic share, for the nine months ended September 30, 2011. The per share amounts are based on 5,326,552 basic average shares compared to 5,280,533 basic average shares for the nine months ended September 30, 2011.

The ratio of nonperforming assets to total assets improved from 7.40% as of December 31, 2011 to 5.08% as of September 30, 2012. The allowance for loan losses as a percentage of loans was 2.59% as of September 30, 2012, compared to 3.34% as of December 31, 2011. The allowance for loan losses as a percentage of total non-performing loans totaled 62.7% as of September 30, 2012, compared to 47.9% as of December 31, 2011.

"The 2012 results were benefited by the reduction in our loan loss provision and expenses associated with other real estate owned, both of which were the result of lower nonperforming assets as compared to the same period of 2011, and increases in the net interest margin and core earnings," said L. Wayne Pearson, Chairman and Chief Executive Officer. "While we continue to work diligently on our non-performing assets, we also continue to focus on improving our profitable core business and maintaining strong capital levels."

The nine months ended September 30, 2011 loss included a $6,623,000 provision for loan losses and $4,397,000 of income tax expense related to a write down of the Company's deferred tax asset. The provision for loan losses for the first nine months of 2012 was $880,000 and there was no deferred tax write-down.

Net interest income for the first nine months of 2012 increased $500,000 to $9,880,000 from $9,380,000 for the same period of 2011. The reduction in interest income, which was due to the decrease in average earning assets and the reduction of yield in those assets, was completely offset by the reduction of interest cost as existing liabilities were repriced. The Company's annualized net interest margin improved by 36 basis points to 3.51% for the nine months of 2012 from 3.15% for the same period of 2011, due to the significant reduction in our cost of funds.

Non-interest income increased to $2,550,000 for the first nine months of 2012 from $2,179,000 for the same period of 2011, primarily due to a $124,000 gain on the sale of fixed assets, increased deposit fees of $115,000, and $161,000 of increased fees on loans sold.

Non-interest expense levels decreased by $3,260,000 to $8,957,000 for the first nine months of 2012 from $12,217,000 for the same period of 2011. Reductions in other real estate related impairments and expenses net of rental income and gains on sale accounted for $2,861,000 of the decrease. Operating expenses associated with FDIC insurance, computer software and foreclosure expenses decreased another $199,000.

For the quarter ended September 30, 2012, net income was $844,000, or $.16 per basic share. This compares to a net loss of $2,971,000, or $.56 per basic share, for the quarter ended September 30, 2011. The net income/loss per share is based on 5,336,446 basic average shares for the quarter ended September 30, 2012, compared to 5,290,429 basic average shares for the same period 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.

Total assets as of September 30, 2012 were $442.0 million compared to $427.5 million as of December 31, 2011, an increase of 3.4%. Loans, excluding loans held for sale, increased to $325.0 million, up 1.7% from $319.7 million as of December 31, 2011. Deposits as of September 30, 2012 increased 3.1% to $325.8 million, brokered and wholesale certificates of deposit as of September 30, 2012 totaled $22,047,000, down 48.6% from the December 31, 2011 total of $42,898,000 as the Company continued to reduce non-core funding.

The subsidiary bank's capital position as of September 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 9.66%. "We continue to be encouraged by the future direction of our Company given our capital strength, the reduction in non-performing assets and our continued improvement in the net interest margin," 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
  Consolidated Balance Sheets
  (Dollars in thousands)
     
   September 30  December 31
  2012 2011
   (Unaudited)  (Unaudited)
Assets    
Cash and cash equivalents $26,875 $18,037
Investments 51,643 52,755
Loans held for sale 721 995
Loans 325,029 319,740
Less: Allowance for loan losses 8,427 10,692
     
Net loans 316,602 309,048
Fixed assets 21,838 21,977
Other assets 24,282 24,709
     
Total Assets $441,961 $427,521
     
Liabilities & Shareholders' Equity    
Deposits:    
Non-interest bearing $41,488 $34,120
Interest bearing 284,288 282,027
     
Total deposits 325,776 316,147
Other borrowings 68,535 66,850
Other liabilities 3,747 3,402
Junior subordinated debentures 10,310 10,310
     
Total liabilities 408,368 396,709
     
Shareholders' Equity    
Common Stock  54,437 54,382
Retained Deficit and Accumulated Other Comprehensive Loss   (20,844) (23,570)
     
Total shareholders' equity 33,593 30,812
     
Total Liabilities and Shareholders' equity $441,961 $427,521
   
   
   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,
  2012 2011 2012 2011
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest Income        
Interest and fees on loans $12,632 $12,983 $4,255 $4,018
Interest on investments 971 1,552 320 455
Interest on Fed funds sold 23 26 7 8
         
Total interest income 13,626 14,561 4,582 4,481
         
Interest expense 3,746 5,181 1,183 1,669
         
Net interest income 9,880 9,380 3,399 2,812
Provision for loan losses 880 6,623 450 2,980
         
Net interest income after provision 9,000 2,757 2,949  (168)
         
Noninterest income 2,550 2,179 1,019 524
         
Total operating income 11,550 4,936 3,968 356
         
Noninterest expense         
Salaries and benefits 4,870 5,044 1,639 1,665
Occupancy and equipment  2,132 2,094 656 696
Other expenses 1,955 5,079 865 1,380
         
         
Total noninterest expense 8,957 12,217 3,160 3,741
         
Income(loss) before taxes 2,593  (7,281) 808  (3,385)
         
Income tax expense(benefit)  3 4,397  (36) (414)
         
Net income(loss)  $2,590  (11,678) $844  (2,971)
         
Basic net income(loss) per share $0.49 ($2.21) $0.16 ($0.56)
         
Diluted net income(loss) per share $0.49 ($2.21) $0.16 ($0.56)
         
Average number of shares        
Basic 5,326,552 5,280,533 5,336,446 5,290,429
Diluted 5,326,552 5,280,533 5,336,446 5,290,429
     
     
Southcoast Financial Corporation    
SELECTED FINANCIAL DATA    
(dollars in thousands, except earnings per share)  
     
                            Three Months Ended
   September 2012  September 2011
                        (Unaudited)
INCOME STATEMENT DATA    
Net interest income $3,399 $2,812
Provision for loan losses 450 2,980
Noninterest income 1,019 524
Noninterest expenses 3,160 3,741
Net income(loss) 844 (2,971)
     
PER SHARE DATA     
Net income(loss) per share    
Basic  $ 0.16  $ (0.56)
Diluted  $ 0.16  $ (0.56)
     
BALANCE SHEET DATA    
Total assets $441,961  $ 444,414
Total deposits 325,776 330,279
Total loans (net) 316,602 315,514
Investment securities 51,643 66,143
Other borrowings 68,535 64,359
Junior subordinated debentures 10,310 10,310
Shareholders' equity 33,593 35,902
     
Average shares outstanding    
Basic 5,336,446 5,290,429
Diluted 5,336,446 5,290,429
     
Book value per share $6.30 $6.80
     
Key ratios     
     
Equity to asset ratio 7.60% 8.08%
Nonperforming assets to assets^ 5.08% 6.71%
Reserve to loans 2.59% 3.22%
Reserve to nonperforming loans 62.70% 45.34%
     
     
^ Includes nonaccrual loans, loans 90 days past due and still accruing interest, troubled debt restructurings, and other real estate owned.
William C. Heslop, Senior Vice President and
Chief Financial Officer, (843) 216-3019