April 26, 2013
SCBT Reports Operating Results for 1Q 2013
COLUMBIA, S.C.—April 26, 2013—SCBT Financial Corporation (NASDAQ: SCBT), the holding company for SCBT, today released its unaudited results of operations and other financial information for the three-month period ended March 31, 2013. Highlights of the first quarter 2013 include:
- Net income of $10.6 million, or $0.63 diluted EPS in 1Q 2013 compared to $5.9 million, or $0.38 diluted EPS in 4Q 2012 and $7.0 million, or $0.50 diluted EPS, in 1Q 2012;
- Operating earnings, which excludes merger-related expense and securities gains or losses, of $12.0 million, or $0.71 diluted EPS in 1Q 2013 compared to $11.1 million, or $0.72 diluted EPS in 4Q 2012 and $7.1 million, or $0.51 diluted EPS in 1Q 2012;
- Completed the Savannah Bancorp, Inc. (“Savannah”) system conversion and integration;
- Core deposit growth, excluding CDs and the Peoples and Savannah acquisitions, up $32.8 million in 1Q 2013, or 5.2% annualized growth;
- Non-interest bearing deposits exceeded $1.0 billion;
- Return on average assets was 0.84% annualized in 1Q 2013 compared to 0.52% in 4Q 2012 and 0.71% in 1Q 2012;
- Operating efficiency ratio was 64.5% in 1Q 2013 compared to 62.8% in 4Q 2012 and compared to 66.3% in 1Q 2012;
- Net charge-offs of non-acquired loans decreased to 0.56% annualized for 1Q 2013, compared to 0.64% annualized for 4Q 2012 and 0.66% annualized for 1Q 2012;
- Non-performing Assets (NPAs): 1.49% of total assets for 1Q 2013 compared to 1.58% for 4Q 2012 and 2.26% for 1Q 2012; 2.91% of loans and repossessed assets, excluding acquired assets, for 1Q 2013 compared to 3.13% for 4Q 2012 and 3.72% for 1Q 2012; and
- Legacy loan growth for 1Q 2013 was $33.3 million or 5.2% annualized.
Quarterly Cash Dividend
The Board of Directors of SCBT has declared a quarterly cash dividend of $0.18 per share payable on its common stock. This per share amount is equal to the dividend paid in the immediately preceding quarter and is $0.01 per share, or 5.9%, higher than a year ago. The dividend will be payable on May 24, 2013 to shareholders of record as of May 17, 2013.
First Quarter 2013 Financial Performance
Please refer to the accompanying tables for detailed comparative data on results of operations and financial results.
The Company reported consolidated net income of $10.6 million, or $0.63 per diluted share, for the three months ended March 31, 2013 compared to consolidated net income of $5.9 million, or $0.38 per diluted share, for the fourth quarter of 2012. This $4.7 million increase was primarily the net result of improved net interest income, reduced provision for loan losses, and a reduction in merger-related expenses. The increases were offset by non-interest expense increases which are primarily due to salary and benefits expense increases.
“I am encouraged that our earnings continue to improve each quarter. We had solid performance this quarter and also experienced some impact from the conversion and integration of Savannah, as well as some seasonality in non-interest income,” said Robert R. Hill, Jr., president and CEO. “Our legacy loan growth continued at a nice pace of 5.2% annualized, and our non-interest demand deposits now exceed $1.0 billion. We also enjoyed strong growth in our wealth management area and bank card revenue, but experienced lower deposit service charge income and mortgage banking income due to seasonality. Our operating performance remained steady compared to the prior quarter with an operating return on average assets of 0.95% and operating return on equity of 9.49%. With the integration of Savannah, continued credit improvement in our acquired and non-acquired loan portfolios, and the announcement of the merger with First Financial Holdings, we remain very optimistic about the opportunities for continued improvement in our performance.”
During the first quarter of 2013, SCBT continued to experience improvement in asset quality, excluding acquired loans and OREO, as nonperforming loans declined by $5.3 million, or 8.6%, and classified assets declined by $2.3 million, or 1.6% from the fourth quarter of 2012. We continue to see meaningful improvement in the trailing average of historical loan losses as the high charge-off quarters from prior periods are being replaced with much lower current loss rates. Nonperforming assets to total assets declined to 1.49% primarily due to the decrease in non-acquired nonaccrual loans. NPAs, excluding acquired NPAs, declined by $4.7 million from the fourth quarter 2012 level. Improvements in asset quality continue as we experience improvement in housing starts (permits), home sales, and lower unemployment rates.
At March 31, 2013, the allowance for non-acquired loan losses was $41.7 million, or 1.60% of non-acquired period-end loans. The current allowance for loan losses provides 0.73 times coverage of period-end non-acquired nonperforming loans. Net charge-offs within the non-acquired loan portfolio decreased to $3.6 million, or 0.56% annualized from $4.1 million, or 0.64% annualized in the fourth quarter of 2012, and from $4.1 million, or 0.66% annualized in the first quarter of 2012.
Non-acquired other real estate owned (“OREO”) increased modestly by $611,000 from the fourth quarter of 2012 and decreased by $1.7 million from the first quarter of 2012. During the first quarter, the Company recorded write-downs on 23 properties totaling $1.1 million; sold $2.0 million of non-acquired OREO for a net $7,000 gain; and added 19 properties for a total of $3.6 million.
Net Interest Income and Margin
Non-taxable equivalent net interest income was $53.8 million for the first quarter of 2013, a $5.9 million increase from the fourth quarter 2012, resulting from the following:
- Higher balance of average acquired loans (up $414.3 million) along with credit releases totaling $6.6 million resulted in an increase of $6.7 million of interest income on acquired loans; partially offset by
- A decrease of 15 basis points in the yield on non-acquired loans which resulted in a decrease of $958,000 of interest income on non-acquired loans, with $616,000 related to the fewer days (90 vs. 92) in the first quarter compared to the fourth quarter of 2012.
Taxable-equivalent net interest margin increased 24 basis points from the first quarter of 2012 and 6 basis points from the fourth quarter of 2012 to 4.94%. The average yield on interest earning assets increased 3 basis points while the average rate on interest-bearing liabilities declined 18 basis points from the first quarter of 2012. During the first quarter of 2013, average total assets increased to $5.1 billion and average earning assets increased to almost $4.5 billion. This growth in average total assets was supported by growth in average total deposits to $4.2 billion. At March 31, 2013, non-interest bearing deposits exceeded $1.0 billion.
Noninterest Income and Expense
Noninterest income was relatively flat for the first quarter of 2013 compared to the first quarter of 2012. Increases in all noninterest income categories (excluding negative accretion on the indemnification asset) totaling $4.0 million were offset by the $3.9 million increase in the negative accretion on the FDIC indemnification asset. The negative accretion results from the reduction of expected cash flows of this asset related to certain pools of acquired loans which had improved estimated cash flows, and is being recognized over the shorter of the underlying assets remaining life or remaining term of the loss share agreements.
Compared to the fourth quarter of 2012, noninterest income was down a total of $1.2 million, excluding securities gains (losses). This decrease was the result of the following: (1) mortgage banking income decreased $819,000 due to fewer loans sold and reduced pipeline of mortgage loans; (2) service charges on deposit accounts were down $552,000 due to seasonality; and (3) the negative accretion on the FDIC indemnification asset increased by $624,000. Partially offsetting these decreases were increases of $570,000 in trust and investment services income and $228,000 in bankcard services income.
Noninterest expense was $46.4 million in the first quarter of 2013, a 31.9% or $11.2 million increase from $35.2 million in the first quarter of 2012. This increase was driven primarily by increased merger-related charges from the Savannah merger of $1.7 million and from the proposed First Financial merger of $300,000, and an increase in salaries and benefits of $5.2 million, or 28.8%. The increase in salaries and employee benefits resulted primarily from the impact of a full quarter of the addition of new FTEs largely related to the two acquisitions completed during 2012.
Compared to the fourth quarter of 2012, noninterest expense decreased by $1.7 million. The decrease resulted from a $5.6 million decline in merger-related expenses. This decline was partially offset by increases in most other noninterest expense categories from the full quarter impact of Savannah.
Balance Sheet and Capital
At March 31, 2013, SCBT’s total assets were $5.1 billion, up from $4.0 billion at March 31, 2012, and relatively flat from $5.1 billion at December 31, 2012. Since March 31, 2012, the company’s balance sheet has grown by almost $1.1 billion, or 27.1%, due primarily to closing of the Peoples Bancorporation, Inc. and The Savannah Bancorp, Inc. acquisitions. The asset growth was spread among increases in investment securities, acquired loans, non-acquired loans, premises and equipment, bank owned life insurance, and intangibles; and these were offset by declines in OREO of $12.5 million and decreases in FDIC receivables of $107.0 million. The asset growth was supported primarily by $698.9 million in core deposit growth, $93.3 million in correspondent bank federal funds purchased and $127.7 million in additional capital.
The Company’s book value per share increased to $30.22 per share at March 31, 2013, compared to $29.97 at December 31, 2012. Capital increased by $6.7 million due primarily to net income of $10.6 million partially offset by $3.1 million in dividends paid to our shareholders. Tangible book value (“TBV”) per share increased by $0.35 per share to $22.89 at March 31, 2013 from $22.54 at December 31, 2012 due to the capital increases described above.
The total risk-based capital ratio is estimated to have increased by 40 basis points from the fourth quarter of 2012 to 14.3%, due primarily to a change in risk-weighted asset mix relative to the increase in capital. Tier 1 leverage ratio decreased to 8.8% from 9.8% at December 31, 2012. The decline is driven by an almost $600.0 million increase in average total assets due to including a full quarter of Savannah assets in the average balance. The Company’s capital positions remain “well-capitalized” by all measures at March 31, 2013.
“Our net interest income remains strong with an increase of $5.9 million compared to last quarter, primarily the result of the addition of the Savannah acquired loan portfolio for the whole quarter,” said John C. Pollok, CFO and COO. “With the conversion of Savannah now completed, we are now planning the merger with First Financial over the next several months.”
SCBT Financial Corporation (the “Company”), Columbia, South Carolina is a registered bank holding company incorporated under the laws of South Carolina. The Company consists of SCBT, the Bank and the following divisions: NCBT, CBT, The Savannah Bank, and Minis & Co., Inc. Providing financial services for over 78 years, SCBT Financial Corporation operates 81 locations in 19 South Carolina counties, 10 North Georgia counties, 2 Coastal Georgia counties and Mecklenburg County in North Carolina. SCBT Financial Corporation has assets of approximately $5.1 billion and its stock is traded under the symbol SCBT in the NASDAQ Global Select Market. More information can be found at www.SCBTonline.com.
Statements included in this press release include non-GAAP measures and should be read along with the accompanying tables which provide a reconciliation of non-GAAP measures to GAAP measures. Management believes that these non-GAAP measures provide additional useful information. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial condition as reported under GAAP.
Cautionary Statement Regarding Forward Looking Statements
Statements included in this report which are not historical in nature are intended to be, and are hereby identified as, forward looking statements for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934. Forward looking statements generally include words such as “expects,” “projects,” “anticipates,” “believes,” “intends,” “estimates,” “strategy,” “plan,” “potential,” “possible” and other similar expressions. The Company cautions readers that forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from forecasted results. Such risks and uncertainties, include, among others, the following possibilities: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the definitive merger agreement between the Company and First Financial Holdings, Inc. (“First Financial”); (2) the outcome of any legal proceedings that may be instituted against the Company or First Financial; (3) the inability to complete the transactions contemplated by the Merger Agreement due to the failure to satisfy each transaction’s respective conditions to completion, including the receipt of regulatory approval; (4) credit risk associated with an obligor’s failure to meet the terms of any contract with the bank or otherwise fail to perform as agreed; (5) interest risk involving the effect of a change in interest rates on both the bank’s earnings and the market value of the portfolio equity; (6) liquidity risk affecting the bank’s ability to meet its obligations when they come due; (7) price risk focusing on changes in market factors that may affect the value of traded instruments in “mark-to-market” portfolios; (8) transaction risk arising from problems with service or product delivery; (9) compliance risk involving risk to earnings or capital resulting from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards; (10) strategic risk resulting from adverse business decisions or improper implementation of business decisions; (11) reputation risk that adversely affects earnings or capital arising from negative public opinion; (12) terrorist activities risk that results in loss of consumer confidence and economic disruptions; (13) cybersecurity risk related to our dependence on internal computer systems and the technology of outside service providers, as well as the potential impacts of third-party security breaches, subjects the company to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events; (14) economic downturn risk resulting in deterioration in the credit markets; (15) greater than expected noninterest expenses; (16) excessive loan losses; (17) failure to realize synergies and other financial benefits from, and to limit liabilities associates with, mergers and acquisitions, including mergers with Peoples Bancorporation (“Peoples”), The Savannah Bancorp, Inc. (“Savannah”), and First Financial, within the expected time frame; (18) potential deposit attrition, higher than expected costs, customer loss and business disruption associated with the integration of Savannah and First Financial, including, without limitation, potential difficulties in maintaining relationships with key personnel and other integration related-matters; (19) the risks of fluctuations in market prices for Company Common Stock that may or may not reflect economic condition or performance of the Company; (20) the payment of dividends on Company Common Stock is subject to regulatory supervision as well as the discretion of the board of directors of the Company; and (21) other factors, which could cause actual results to differ materially from future results expressed or implied by such forward looking statements.
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