SouthCrest Financial Group Reports Preliminary 2Q14 Financial Results

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| Source: SouthCrest Financial Group, Inc.

PEACHTREE CITY, Ga., July 30, 2014 (GLOBE NEWSWIRE) -- Kenneth H. Maloy, President and CEO of SouthCrest Financial Group, Inc. (OTCBB:SCSG) announced today that the company reported preliminary results for the second quarter of 2014 and the completion of a significant post charter consolidation restructuring.

During the quarter the Company produced a net loss of $939,000, inclusive of $484,000 of restructuring expenses and $221,000 of securities gains. Excluding these one-time items, the net loss would have been $676,000, an improvement from the $958,000 loss in 1Q14. "As part of the final back office consolidation that was completed on July 12th, we finished our internal restructuring that included the reduction of 10% of our workforce in June and early July which will begin to benefit expense levels in August, and the realignment of our formerly four banks into two divisions, Community and Metro. We have also optimized our benefits package to save approximately 20% of our total benefit cost per year starting in August. Finally, we closed one branch in Chickamauga and the lobby of the downtown Cedartown branch during the past 45 days. When combined with year over year loan growth of 10% and the resulting 14% growth in net interest income, we are now more confident that SouthCrest will produce positive income during the second half of 2014. As we said in our first quarter earnings release, we are fully committed to returning SouthCrest to peer-level profitability through better efficiencies and higher revenues."

The Company's balance sheet improvement continued with $15.7 million of loan growth (24.5% annualized from 1Q14) while core deposits were effectively level with the first quarter. Total deposits fell $4.0 million, or 4% annualized while total assets fell 2% annualized. "We are expecting to maintain high single to low double digit growth during the third quarter. We are also reasonably satisfied with the deposit metrics given the number of disruptions that have occurred in the past six months."

The estimated Tier 1 Leverage ratio at the end of the quarter was 10.80%, down slightly from 10.97% at the end of 1Q14. On a fully converted basis (including the conversion of all Series AAA Preferred and Series C Convertible Preferred equity) TBV/share ended the quarter at $5.73 per share. The current fully converted share count at the end of the quarter is 8.380 million shares. In addition, the company still retains a deferred tax asset valuation allowance that totaled $10.7 million ($1.28/fully converted share).

SouthCrest has a loss sharing agreement, related to the purchase of a small failed bank in 2010, which expires in March, 2015. Based on the current internal analysis and external reviews, SouthCrest's accounting for the indemnification asset should align closely with related income over the remaining life of the loss share agreement which expires in March 2015, and should not cause any one time material impact in the financial reports. The indemnification asset is now down to $3.1 million from $4.6 million at the end of 1Q14.

Asset quality remained effectively flat as the Company continues to work through the last few remaining troubled assets. The non-performing assets/total assets ratio moved from 1.84% to 1.90% while the allowance for loan losses fell to 1.51% of loans.   

SouthCrest Financial Group, Inc. is a $560 million asset bank holding company headquartered in Peachtree City, Georgia. The company operates a 12 branch network throughout Georgia and Alabama through its subsidiary bank, SouthCrest Bank, N.A. The bank provides retail and commercial banking services, mortgage banking, investment management, and online banking services. 

This presentation may contain certain "forward-looking statements" that are subject to risks, uncertainties, and other factors that could cause actual results and shareholder values to differ materially from those projected. Factors that could cause or contribute to such differences include economic conditions, government regulation and legislation, changes in interest rates, credit quality, competition, and other risk factors.

Statement of Operations ($000s) 2013 2014
  Q2 Q3 Q4 Q1 Q2
 Interest Income           
 Loans           
 Construction and Development  $199 $213 $186 $215 $231
 Commercial Real Estate  1,012 1,004 1,058 1,081 1,173
 Commercial Loans  151 156 175 185 162
 Multi Family  16 19 14 17 13
 Residential Mortgage  1,432 1,426 1,408 1,430 1,573
 Consumer Loans  458 471 436 384 343
 County/Municipal Loans  100 84 72 31 32
 Loss Share Loans  313 299 288 310 236
 Investment Securities           
 Federal Funds/Overnight Funds  $80 $74 $59 $66 $44
 Bank Owned CDs  13 13 14 8 7
 Investment Securities  604 665 686 767 1,022
 Total Interest Income  $4,377 $4,425 $4,396 $4,494 $4,836
           
 Total Interest Expense  $436 $397 $357 $327 $334
 Net Interest Income  $3,941 $4,028 $4,039 $4,167 $4,502
 Provision for Loan Losses   --   --   --   --   -- 
 Net Interest Income after Loan Losses  $3,941 $4,028 $4,039 $4,167 $4,502
 Other Income          
 Service Charges on Deposits  $112 $112 $109 $108 $105
 NSF/Overdraft Fees  571 611 587 526 575
 Other Service Charges  104 94 88 89 91
 ATM/Billpay/DR Card Income  362 354 369 394 414
 Gain on Sale of loans  322 159 295 364 581
 Other Income  699 1,032 851 1,676 2,004
 Total Other Income  $2,170 $2,362 $2,299 $3,157 $3,770
 Non-Interest Expense           
 Salaries, Other Comp (+ FAS123R)  $2,560 $2,838 $3,061 $2,865 $2,756
 Employee Benefits  524 574 628 658 719
 Occupancy & FF& E Expense  760 757 852 857 888
 Professional Fees  587 524 757 333 469
 Data Processing  398 291 292 247 301
 OREO and Credit related Exp.  178 293 276 295 223
 Other Expense  1,886 2,052 2,746 2,962 3,687
 Total Noninterest Expenses  $6,893 $7,329 $8,612 $8,282 $9,211
 Pre-Tax Income (Loss)  $(782) $(939) $(2,274) $(958) $(939)
 Income Taxes   --  --  --  --  --
 Net Loss  $(782) $(939) $(2,274) $(958) $(939)
           
Balance Sheet ($000s) 2013 2014
Assets Q2 Q3 Q4 Q1 Q2
Current Assets          
Cash & Due from Bank $15,412 $29,665 $24,467 $27,766 $26,083
Federal Funds/Overnight Funds 114,068 92,064 99,080 75,795 31,083
Bank Owned CDs 6,888 5,914 3,247 3,762 2,965
Investment Securities 113,784 122,132 123,685 143,221 166,182
Mortgage Loans Held for Sale 3,713 2,803 4,642 7,548 13,343
Total Current Assets $253,865 $252,578 $255,121 $258,092 $239,656
Loans          
Construction and Development $12,696 $13,424 14,404 $17,344 $16,791
Commercial Real Estate 76,646 76,705 82,492 85,158 96,664
Commercial Loans 9,566 8,985 9,977 9,352 14,573
Multi Family 2,216 2,278 2,155 2,112 1,142
Residential Mortgage 102,786 104,186 105,496 107,654 109,916
Consumer Loans 19,916 20,464 19,352 17,283 16,125
County/Municipal Loans 9,410 11,665 3,845 3,684 4,190
Loss Share Loans 14,372 13,622 13,426 13,957 12,844
Total Loans $247,608 $251,329 $251,147 $256,544 $272,245
Allowance for Loss (4,745) (4,444) (4,443) (4,294) (3,914)
Net Loans $242,863 $246,885 $246,704 $252,250 $268,331
Core Loans $233,236 $237,707 $237,721 $242,587 $259,401
OREO $11,441 $9,966 5,283 4,763 4,932
FDIC Indemnification 7,688 7,266 6,374 4,642 3,139
BOLI 18,886 19,021 19,156 19,283 19,442
Fixed Assets, net 17,200 18,742 18,617 19,314 19,509
           
Intangible Assets 1,080 1,002 920 838 747
           
Other Assets 6,440 6,405 7,141 6,979 6,926
Total Assets $559,463 $561,865 $559,316 $566,161 $562,682
Liabilities & Stockholders' Equity          
Liabilities          
Deposits          
DDAs $119,096 $115,614 127,477 $126,454 $123,672
Interest Bearing Demand 50,914 50,218 48,950 52,320 51,018
Rewards Checking 32,981 32,352 32,596 33,292 34,977
Money Market Accts 58,500 57,197 54,704 53,658 57,056
Savings 64,823 63,820 61,960 65,174 64,134
CDs Less Than $100k 116,326 112,421 107,989 104,808 102,512
CDs Greater than $100k 56,191 53,389 50,623 57,230 55,634
Total Deposits $498,831 $485,011 $484,299 $492,936 $489,003
           
Other Liabilities 10,053 $10,289 11,576 10,585 11,263
Net Borrowings (Wholesale Funding)  --  330  --   --  900
Total Liabilities $508,884 $495,630 $495,875 $503,521 $501,166
Total Equity 50,579 66,235 63,441 62,640 61,516
Total Liabilities & Stockholders' Equity $559,463 $561,865 $559,316 $566,161 $562,682
       
Ratios      
   2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014
ROAA -0.56% -0.67% -1.62% -0.68% -0.67%
ROAE -6.08% -6.80% -14.02% -6.09% -6.00%
NPAs/Assets (Core) 2.27% 2.31% 1.64% 1.84% 1.90%
Tier 1 Leverage  8.67% 11.67% 11.02% 10.97% 10.80%
Total Common Equiv. Shares 4,914,991 8,380,337 8,380,337 8,380,337 8,380,337
NIM 3.23% 3.38% 3.36% 3.42% 3.67%
Cost of Funds 0.35% 0.32% 0.29% 0.27% 0.27%
Loan/Deposit 49.6% 51.8% 51.9% 52.0% 55.7%
Andy Borrmann, 678-734-3505
Chief Strategy Officer, SouthCrest Financial Group