Southcoast Announces Year End Earnings

MT. PLEASANT, S.C., Jan. 17, 2013 (GLOBE NEWSWIRE) -- Southcoast Financial Corporation (Nasdaq:SOCB) announced unaudited net income of $3,519,000, or $.57 per basic share, for the year ended December 31, 2012. This compares to an unaudited net loss of $16,480,000, or $2.71 per basic share, for the year ended December 31, 2011. The basic average shares totaled 6,125,535 and 6,080,066 for the years ended December 31, 2012 and 2011, respectively.

For the quarter ended December 31, 2012, net income was $929,000, or $.15 per basic share. This compares to a net loss of $4,803,000, or $.79 per basic share, for the quarter ended December 31, 2011. The net income (loss) per share is based on 6,143,820 basic average shares for the quarter ended December 31, 2012, compared to 6,102,461 basic average shares for the same period of 2011. The shares for all periods have been adjusted to reflect a stock dividend of 15% paid to shareholders of record as of December 31, 2012.

The ratio of nonperforming assets to total assets improved from 7.16% as of December 31, 2011 to 4.41% as of December 31, 2012. The allowance for loan losses as a percentage of loans was 2.49% as of December 31, 2012, compared to 3.34% as of December 31, 2011. The allowance for loan losses as a percentage of total non-performing loans totaled 83.99% as of December 31, 2012, compared to 50.27% as of December 31, 2011.

"The improvement in 2012 earnings as compared to 2011 was primarily the result of lower nonperforming assets, which led to reductions in our loan loss provision and expenses associated with other real estate owned. Additionally, our Company achieved improvement in our net interest margin due to a lower cost of funds resulting from the downward repricing of our interest bearing liabilities," said L. Wayne Pearson, Chairman and Chief Executive Officer.

The year ended December 31, 2011 loss included a $10,023,000 provision for loan losses and $4,575,000 of income tax expense related to a full write-off of the Company's deferred tax asset. The provision for loan losses for the year ended December 31, 2012 was $880,000. Income tax expense for the year ended December 31, 2012 totaled $137,000, which represented the Company's state income tax expense. The Company continues to maintain a full reserve against its deferred tax asset, which totaled approximately $8.0 million at December 31, 2012.

Net interest income for the year ended December 31, 2012 increased $1,119,000 to $13,377,000 from $12,258,000 for the same period of 2011. This increase was due to a $1,788,000 decrease in interest expense which overcame a $669,000 decrease in interest income. The Company's net interest margin improved by 43 basis points to 3.55% for the twelve months of 2012 from 3.12% for the same period of 2011, due to the significant reduction in its cost of funds, primarily as a result of the repricing of time deposits and other borrowings.

Noninterest income increased $479,000 to $3,277,000 for the year ended December 31, 2012, from $2,798,000 for the year ended December 31, 2011, primarily due to increases of $234,000 in fees on loans sold and $151,000 in fees on deposits.

Noninterest expenses decreased by $4,820,000 to $12,118,000 for the year ended December 31, 2012, from $16,938,000 for the year ended December 31, 2011. Impairment expense and operating expenses related to other real estate owned decreased by a combined $3,630,000 between the two periods, accounting for a large portion of the overall noninterest expense decrease. Additionally, rental income and net gains from the sale of other real estate owned, which are accounted for as a reduction of noninterest expense, contributed to an increased reduction of $791,000 in noninterest expense between the two periods. Other noninterest expense reductions included foreclosure expenses and unfunded commitments expense, which had decreases of $135,000 and $150,000, respectively.

Total assets as of December 31, 2012 were $438.2 million compared to $427.5 million as of December 31, 2011, an increase of 2.5%. Loans, excluding loans held for sale, increased to $327.5 million, up 2.4% from $319.7 million as of December 31, 2011. Deposits at December 31, 2012 increased 1.1% to $319.6 million. Brokered and wholesale certificates of deposit at December 31, 2012 totaled $13,583,000, down 68.3% 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 December 31, 2012 remains in excess of the well-capitalized requirements under the regulatory framework for prompt corrective action, with a tier 1 capital to average assets ratio of 9.94%. "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.