SOURCE: Southern Community Financial Corporation

April 24, 2008 16:05 ET

Southern Community Financial Corporation Announces First Quarter 2008 Results Continued Loan and Deposit Growth Diluted Earnings per Share of $0.12

WINSTON-SALEM, NC--(Marketwire - April 24, 2008) - Southern Community Financial Corporation (NASDAQ: SCMF) (NASDAQ: SCMFO) (the "Company"), the holding company for Southern Community Bank and Trust, reported operating results for the first quarter of 2008. For the three month period ended March 31, 2008, net income was $2.1 million or $0.12 per diluted share versus net income of $2.0 million or $0.11 per diluted share for the same period in 2007. For the fourth quarter of 2007, the Company had net income of $1.9 million with earnings per diluted share of $0.11.

    Financial Highlights:
    
--  Achieved year-over-year loan portfolio growth of $158.1 million or
    14.7% and deposit growth of $64.0 million or 5.9%;
--  Achieved first quarter loan portfolio growth of $47.5 million or 4.0%;
--  Achieved year-over-year core (non-time) deposit growth of $54.8
    million or 9.7% and $11.3 million or 1.9% in the first quarter;
--  Improved the non-interest expense to average asset ratio to 2.61% in
    the current quarter from 2.67% in the fourth quarter of 2007;
--  Paid a quarterly dividend of $0.04 per share on February 29, 2008;
--  Introduced ME Banking deposit product, exceeding our first year
    projected goals for new accounts in its first 90 days.
    

Net interest income for the first quarter of $11.0 million was up 4.6%, compared with $10.5 million reported in the comparable quarter of 2007 and down from the $11.2 million earned in the fourth quarter of 2007. The first quarter 2008 net interest margin was 2.98% compared to the 3.22% for the first quarter of 2007 and 3.15% in the fourth quarter of 2007 due to the impact of Federal Reserve rate cuts of 200 basis points during the first quarter 2008.

Non-interest income was $3.6 million during the first quarter of 2008, compared to the $2.8 million reported in the fourth quarter of 2007 and the $3.1 million reported in the first quarter of 2007. Service charges on deposits, mortgage banking income, and brokerage and trust income for the first quarter 2008 in the aggregate increased $720 thousand or 46.7% on a year-over-year basis. During the first quarter 2008, nonrecurring gains on derivative activity of $1.0 million resulted from interest rate hedging transactions called prior to their stated maturity. These gains nearly offset the $1.4 million decline in revenue from Salem Capital for the same period last year. The Company recorded non-interest expense of $10.6 million in the current quarter, compared to $10.5 million reported in the fourth quarter.

As of March 31, 2008, the Company reported total assets of $1.7 billion, representing an increase of $180.4 million, or 12% year-over-year driven primarily by increases in the loan portfolio. The loan portfolio rose to $1.2 billion, an increase of $158.1 million, or 14.7% over the amount reported on March 31, 2007. Additionally, loans during the first quarter of 2008 grew by $47.5 million or 4.0% over the level on December 31, 2007. Total deposits stood at $1.1 billion at March 31, 2008, an increase of $97.5 million or 9.3% from the prior quarter and $64.0 million or 5.9% year-over-year. The Company has seen good growth in core (non-time) deposit balances up $11.3 million or 1.9% since year-end 2007 and $54.8 million or 9.7% since the first quarter 2007.

Nonperforming loans rose to $7.0 million or 0.57% of total loans at quarter-end, in comparison with $2.1 million or 0.17% of total loans as reported for December 31, 2007. At the end of the first quarter of 2007, nonperforming loans stood at $1.2 million or 0.11% of total loans. Nonperforming assets increased to $8.0 million or 0.48% of assets at March 31, 2008, compared to $2.8 million or 0.18% of assets at December 31, 2007. Net charge-offs as a percentage of average loans were 0.11% for the quarter ended March 31, 2008, 12 basis points lower than the 0.23% reported in the prior quarter. The provision for loan losses of $925 thousand was $175 thousand higher than the $750 thousand added in the fourth quarter of 2007. The Company's allowance for loan losses equaled $14.9 million, or 1.20% of total loans and 2.12 times nonperforming loans at March 31, 2008.

At March 31, 2008, stockholders' equity totaled $144.4 million and represented 8.5% of total assets. Stockholders' equity increased $6.3 million or 4.6% from $138.1 million for the year ago period. Regulatory capital ratios are all well in excess of the "well capitalized" threshold. Liquidity improved during the quarter as the investment portfolio grew by $67.2 million or 29.4% over year-end 2007 balances.

Southern Community Financial Corporation Chairman and Chief Executive Officer F. Scott Bauer commented, "We are very pleased with our performance and the efforts of our people in these challenging times for our industry. We remain well capitalized with good liquidity and strong reserves. It is particularly important in this environment that we continue our focus on being fundamentally sound and prudent."

Southern Community Financial Corporation is headquartered in Winston-Salem, North Carolina and is the holding company of Southern Community Bank and Trust, a community bank with twenty-two banking offices throughout North Carolina.

Southern Community Financial Corporation's common stock and trust preferred securities are listed on the NASDAQ Global Select Market under the trading symbols SCMF and SCMFO, respectively. Additional information about Southern Community is available on its website at www.smallenoughtocare.com or by email at investor.relations@smallenoughtocare.com.

Southern Community's executive management team will host a conference call on April 25, 2008, at 10:00 AM Eastern Time to discuss the quarter-end results. The call can be accessed by dialing 1-866-542-4241 or 1-416-641-6139 and asking for the Southern Community Financial Corporation call. A replay of the conference call can be accessed until 11:59 pm on May 26, 2008, by calling 1-800-408-3053 or 1-416-695-5800 and entering pass code 3258313.

This news release contains forward-looking statements. Such statements are subject to certain factors that may cause the Company's results to vary from those expected. These factors include changing economic and financial market conditions, competition, ability to execute our business plan, items already mentioned in this press release, and other factors described in our filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's judgment only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events and circumstances that arise after the date hereof.

For additional information:
F. Scott Bauer
Chairman/CEO
James Hastings
Executive Vice President/CFO
(336) 768-8500


























Southern Community Financial Corporation
(Dollars in thousands except per share data)
(Unaudited)

                               For the three months ended
Income            Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
 Statement         2008        2007        2007        2007        2007
               ----------- ----------- ----------- ----------- -----------

Total Interest
 Income        $    24,325 $    25,370 $    25,339 $    24,626 $    23,573
Total Interest
 Expense            13,323      14,132      14,350      13,607      13,052
               ----------- ----------- ----------- ----------- -----------
 Net Interest
  Income            11,002      11,238      10,989      11,019      10,521

Provision for
 Loan Losses           925         750         575         600         850

Net Interest
 Income after
 Provision for
 Loan Losses        10,077      10,488      10,414      10,419       9,671

Non-Interest
 Income
Service Charges
 on Deposit
 Accounts            1,406       1,441       1,266       1,173       1,051
Gain (Loss) and
 Net Cash
 Settlement on
 Economic
 Hedges              1,044          19          69          (4)         (5)
Other Income         1,139       1,380       1,211       1,644       2,086
               ----------- ----------- ----------- ----------- -----------
 Total
  Non-Interest
  Income             3,589       2,840       2,546       2,813       3,132

Non-Interest
 Expense
Salaries and
 Employee
 Benefits            5,794       5,467       5,267       5,341       5,143
Occupancy and
 Equipment           1,964       2,021       2,116       1,888       1,903
Other                2,802       2,999       2,966       3,076       2,713
               ----------- ----------- ----------- ----------- -----------
 Total
  Non-Interest
  Expense           10,560      10,487      10,349      10,305       9,759

Income Before
 Taxes               3,106       2,841       2,611       2,927       3,044
Provision for
 Income Taxes        1,041         948         890         996       1,035
               ----------- ----------- ----------- ----------- -----------

Net Income     $     2,065 $     1,893 $     1,721 $     1,931 $     2,009
               =========== =========== =========== =========== ===========

Net Income per
 Share
Basic          $      0.12 $      0.11 $      0.10 $      0.11 $      0.12
Diluted        $      0.12 $      0.11 $      0.10 $      0.11 $      0.11
               =========== =========== =========== =========== ===========





Balance Sheet    Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
                  2008        2007        2007        2007        2007
               ----------- ----------- ----------- ----------- -----------

Assets
Cash and due
 from Banks    $    35,037 $    31,905 $    24,227 $    32,742 $    28,014
Federal Funds
 Sold & Int
 Bearing
 Balances            4,752       2,250         420       8,563      14,945
Investment
 Securities        296,151     228,933     247,088     250,211     261,734

Loans held for
 sale                4,110       1,929       3,137       5,143       7,601

Loans            1,235,952   1,188,438   1,155,031   1,104,299   1,077,878
Allowance for
 Loan Losses       (14,853)    (14,258)    (14,197)    (13,677)    (13,417)
               ----------- ----------- ----------- ----------- -----------
 Net Loans       1,221,099   1,174,180   1,140,834   1,090,622   1,064,461

Bank Premises
 and Equipment      38,790      38,997      38,881      39,587      39,984
Goodwill            49,792      49,792      49,792      49,792      49,792
Other Assets        40,721      41,196      44,352      43,580      43,536
               ----------- ----------- ----------- ----------- -----------

Total Assets   $ 1,690,452 $ 1,569,182 $ 1,548,731 $ 1,520,240 $ 1,510,067
               =========== =========== =========== =========== ===========

Liabilities and
 Stockholders'
 Equity
Deposits
 Non-Interest
  Bearing      $   109,534 $   109,895 $   110,718 $   112,142 $   113,011
 Money market,
  savings and
  NOW              507,105     495,448     479,595     413,533     448,849
 Time              526,096     439,894     443,405     472,504     516,921
               ----------- ----------- ----------- ----------- -----------
 Total Deposits  1,142,735   1,045,237   1,033,718     998,179   1,078,781

Borrowings         393,306     372,405     360,309     371,024     281,157
Accrued
 Expenses and
 Other
 Liabilities        10,061       9,201      13,868      11,988      12,083
               ----------- ----------- ----------- ----------- -----------
 Total
  Liabilities    1,546,102   1,426,843   1,407,895   1,381,191   1,372,021

Total
 Stockholders'
 Equity            144,350     142,339     140,836     139,049     138,046
               ----------- ----------- ----------- ----------- -----------

Total
 Liabilities
 and
 Stockholders'
 Equity        $ 1,690,452 $ 1,569,182 $ 1,548,731 $ 1,520,240 $ 1,510,067
               =========== =========== =========== =========== ===========

Book Value per
 Share         $      8.33 $      8.18 $      8.04 $      7.89 $      7.93
               =========== =========== =========== =========== ===========





                            As of or for the three months ended
                  Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
                   2008        2007        2007        2007        2007
               ----------- ----------- ----------- ----------- -----------

Per Share Data:
Basic Earnings
 per Share     $      0.12 $      0.11 $      0.10 $      0.11 $      0.12
Diluted
 Earnings per
 Share         $      0.12 $      0.11 $      0.10 $      0.11 $      0.11
Book Value per
 Share         $      8.33 $      8.18 $      8.04 $      7.89 $      7.93
Cash dividends
 paid          $     0.040 $     0.040 $     0.040 $     0.040 $     0.035

Selected Performance Ratios:
Return on
 Average Assets
 (annualized)
 ROA                  0.51%       0.48%       0.45%       0.52%       0.56%
Return on
 Average Equity
 (annualized)
 ROE                  5.84%       5.35%       4.92%       5.58%       5.96%
Return on
 Tangible
 Equity
 (annualized)         9.12%       8.42%       7.80%       8.86%       9.56%
Net Interest
 Margin               2.98%       3.15%       3.16%       3.25%       3.22%
Net Interest
 Spread               2.67%       2.77%       2.75%       2.87%       2.85%
Non-interest
 Income as a %
 of Revenue          24.60%      20.17%      18.81%      20.34%      22.94%
Non-interest
 Income as a %
 of Average
 Assets               0.89%       0.72%       0.66%       0.75%       0.87%
Non-interest
 Expense to
 Average Assets       2.61%       2.67%       2.69%       2.75%       2.70%
Efficiency
 Ratio               72.37%      74.49%      76.46%      74.50%      71.48%

Asset Quality:
Nonperforming
 Loans         $     7,012 $     2,052 $     2,226 $       983 $     1,240
Foreclosed
 Assets        $     8,042 $     2,827 $     3,165 $     2,227 $     2,659
Nonperforming
 Loans to Total
 Loans                0.57%       0.17%       0.19%       0.09%       0.11%
Nonperforming
 Assets to
 Total Assets         0.48%       0.18%       0.20%       0.15%       0.18%
Allowance for
 Loan Losses to
 Period-end
 Loans                1.20%       1.20%       1.23%       1.23%       1.24%
Allowance for
 Loan Losses to
 Nonperforming
 Loans                2.12X       6.95X       6.38X      13.91X      10.82X
Net Charge-offs
 to Average
 Loans
 (annualized)         0.11%       0.23%       0.02%       0.12%       0.18%

Capital Ratios:
Equity to Total
 Assets               8.54%       9.07%       9.09%       9.15%       9.14%
Tangible Equity
 to Total
 Tangible
 Assets (1)           5.69%       6.00%       5.98%       5.97%       5.94%

Average
 Balances:
 Year to Date
  Interest
   Earning
   Assets      $ 1,485,037 $ 1,370,413 $ 1,355,030 $ 1,341,688 $ 1,324,218
  Total Assets   1,625,164   1,513,619   1,498,310   1,485,292   1,467,296
  Total Loans    1,219,800   1,114,677   1,093,693   1,074,700   1,054,315
  Equity           142,190     138,693     138,094     137,716     136,623
  Interest
   Bearing
   Liabilities   1,368,420   1,250,986   1,237,398   1,226,580   1,212,714

 Quarterly
  Interest
   Earning
   Assets      $ 1,485,037 $ 1,416,061 $ 1,381,279 $ 1,358,967 $ 1,324,218
  Total Assets   1,625,164   1,559,047   1,523,922   1,503,090   1,467,296
  Gross Loans    1,219,800   1,176,945   1,131,060   1,094,861   1,054,315
  Equity           142,190     140,470     138,838     138,797     136,623
  Interest
   Bearing
   Liabilities   1,368,420   1,291,307   1,258,681   1,240,293   1,212,714

Weighted
 Average Number
 of Shares
 Outstanding
  Basic         17,359,452  17,449,203  17,584,565  17,574,100  17,423,824
  Diluted       17,401,589  17,466,703  17,602,250  17,667,207  17,597,029
Period end
 outstanding
 shares         17,319,351  17,399,882  17,520,829  17,621,653  17,410,115




(1) - Tangible Equity to Total Tangible Assets is period-ending equity less
intangibles, divided by period-ending assets less intangibles.

Management provides the above non-GAAP measure, footnote (1) to provide
readers with the impact of purchase accounting on this key financial
ratio.

Contact Information

  • For additional information:
    F. Scott Bauer
    Chairman/CEO
    James Hastings
    Executive Vice President/CFO
    (336) 768-8500