April 28, 2009
SCBT Financial Corporation Reports Net Income of $4.5 million for the First Quarter
--Earnings & Net Income• Net income of $4.5 million --- before preferred stock dividend
• Net income available to common shareholders of $3.7 million
• Diluted earnings per share of $0.33 for the quarter
• Core deposit growth --- excluding all CDs --- up $91.3 million; 35.6% annualized increase
• Expense management --- 62.41% efficiency ratio; down from 65.05% at 4Q 2008
• Mortgage banking income --- up 22.4% over 1Q 2008
• Allowance for loan losses: 1.40% of period end loans; up from 1.36% at 4Q 2008
• NPAs: 1.09% of total assets and 1.34% of loans and repossessed assets;
• Net charge-offs --- increased to 0.79% annualized for the quarter
SCBT Financial Corporation (NASDAQ: SCBT), the holding company for SCBT, National Association, today released its unaudited results of operations and other financial information for the three-month period ended March 31, 2009. The Company produced solid results due primarily to its net interest margin, strong noninterest income in mortgage banking area and good expense control.
Quarterly Cash Dividend
The Board of Directors of SCBT declared today a quarterly cash dividend of $0.17 per share payable on its common stock. This per share amount is equal to the dividend paid in the immediately preceding quarter and will be payable on May 29, 2009 to shareholders of record as of May 15, 2009.
First Quarter 2009 Results of Operations
Please refer to the accompanying tables for detailed comparative data on results of operations and financial results.
The Company reported consolidated net income available to the common shareholders of $3.7 million, or $0.33 per diluted share for the three months ended March 31, 2009 compared to consolidated net income of $6.0 million, or $0.58 per diluted share for the first quarter of 2008, a $2.3 million or 37.9% decrease.
“I continue to be pleased with how our company is performing in a very difficult environment,” said Robert R. Hill, Jr., President and CEO. “Our solid tangible and regulatory capital levels, pre-tax pre-provision cash flows, and strong and conservative balance sheet have our company very well positioned. While we continue to see some erosion in credit metrics, our non-performing asset levels continue to be manageable and we anticipate this will continue. I am most encouraged about new customer relationships our bank is obtaining. We kicked off a deposit campaign earlier this year, and we have generated 35.6% annualized increase in core deposits, 8,886 new accounts, and total new loan volume for the quarter of $332 million. The health of our company is providing a unique opportunity to build our customer base, and our bankers are doing an excellent job of taking advantage of this opportunity.”
During the first quarter of 2009, the Company’s average total assets increased by $213.0 million, an 8.0% increase over the first quarter of 2008. The growth in average total assets was supported by growth in average total deposits of $228.9 million, an increase of 11.7% over the total in the first quarter of 2008. Average earning assets for the quarter increased by $186.2 million, or 7.6%, compared to the first quarter of 2008.
The Company’s annualized return on average assets (ROAA) for the first quarter decreased to 0.64% compared to 0.90% for the first quarter of 2008, and increased from 0.51% for the fourth quarter of 2008. Total average shareholders' equity at March 31, 2009 was $300.5 million, an increase of $60.7 million, or 25.3% from December 31, 2008. This increase is due primarily to the issuance of 64,779 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series T, to the U.S. Treasury in January. Annualized return on average equity (ROAE) for the quarter was 6.10%, down from 11.01% for the first quarter of 2008. Annualized return on average tangible equity (ROATE) for the first quarter decreased to 8.05% from 16.13% for the comparable period in the prior year, and decreased from 8.46% in the fourth quarter of 2008.
Annualized net charge-offs increased to 0.79% from 0.35% experienced in the fourth quarter of 2008, and increased from 0.09% experienced in the first quarter of 2008. During the first quarter, non-performing assets (NPAs) as a percentage of loans and repossessed assets increased to 1.34% compared to 0.36% one year ago and 0.91% for the fourth quarter of 2008. NPAs to total assets at March 31, 2009 were 1.09% compared to 0.28% at the end of the first quarter in 2008 and 0.76% at the end of the fourth quarter 2008. The increase in NPAs continues to reflect the pressure within the real estate market throughout all of the markets in which we operate and within the economy as a whole. During the first quarter, the Company’s other real estate owned (“OREO”) increased $3.4 million from the end of the fourth quarter. Nonaccrual loans (including accruing loans past due 90 days or more) increased $6.4 million from the fourth quarter of 2008, and by $14.4 million from the end of the first quarter in 2008.
At March 31, 2009, nonperforming loans totaled $21.3 million, representing 0.93% of period-end loans. OREO at the end of the first quarter was $9.6 million, an increase from $6.1 million at the end of the fourth quarter 2008 and from $651,000 at the end of the first quarter of 2008. The allowance for loan losses at March 31, 2009 was $32.1 million and represented 1.40% of total period-end loans. The current allowance for loan losses provides 1.50 times coverage of period-end nonperforming loans. In the first quarter, net charge-offs were $4.5 million, or an annualized 0.79% of average loans compared to $480,000, or 0.09% in the same period of 2008 and $2.0 million, or 0.35% in the linked quarter. The provision for loan losses was $5.0 million for the first quarter of 2009 compared to $1.2 million for the comparable quarter one year ago, and $4.4 million in the fourth quarter of 2008.
During the first quarter, the Company charged-off a loan participation which was acquired in the purchase business combination of The Scottish Bank in November of 2007. The lead bank has taken the deed on the property, which was the collateral for this loan. The recent appraisal along with unlikely prospect of collection has resulted in the Company charging off approximately $1.7 million of this $2.3 million exposure and moving this asset to OREO. In addition, during the first quarter, the Company further charged-off another loan by $506,000, based upon a more recent appraisal. This loan has also been moved to OREO.
Loans and Deposits
The Company increased total loans 6.9% since the first quarter of 2008, driven by continued growth in consumer real estate loans, home equity loans and commercial owner occupied loans. Total loans outstanding were $2.3 billion at March 31, 2009 compared to $2.1 billion for the year ended March 31, 2008. The balance of mortgage loans held for sale increased $27.9 million from the fourth quarter of 2008 to $43.6 million at March 31, 2009, and was more than the balance at March 31, 2008 of $28.1 million reflective of the low interest rate environment within the mortgage banking industry and the increase in refinancing activity by consumers.
Total deposits increased in all categories compared to the first quarter of 2008. Total deposits decreased by a total of $1.4 million, or 0.3% annualized, from the end of the fourth quarter of 2008. All categories of deposits increased during the quarter except for small denomination CDs, which decreased primarily due to the maturity of brokered deposits added during late 2008. The decrease in this category more than offset the increases in all of the other categories of deposits. The Company initiated a deposit campaign to increase its core deposit base. The largest growth occurred in NOW accounts with a $34.3 million or 46.1% annualized increase, money market accounts $32.1 million or 46.2% annualized increase, demand deposits grew by $12.0 million, or 15.9% annualized increase, and savings deposits grew by $12.8 million, or 36.2% annualized increase. The Company continues to reduce rates paid on the various deposits in order to manage its net interest margin within acceptable levels. The Company decreased the use of brokered deposits during the first quarter by $85.0 million from the fourth quarter of 2008. With the decline in loans outstanding and the participation in the government’s capital purchase program, the Company was able to fund all of its balance sheet accordingly during the quarter. Total deposits outstanding at the end of the first quarter of 2009 were $2.2 billion, an increase of $135.6 million, or 6.7%, compared to the first quarter of 2008.
Net Interest Income and Margin
Non-taxable equivalent net interest income (before provision for loan losses) was $25.0 million for the first quarter of 2009, up 9.1% from $22.9 million in the comparable period last year. Tax-equivalent net interest margin increased 8 basis points from the first quarter of 2008 to 3.87%. Compared to the fourth quarter of 2008, tax-equivalent net interest margin increased 1 basis point from 3.86%. With interest rates remaining at very low levels and the expectation of increased cost from the FDIC, the Company has continued to aggressively manage deposit pricing and funding sources during the first quarter of 2009 and limited the amount of margin compression. The continued increase in non-performing assets has further pressed the net interest margin as well.
The Company’s average yield on interest-earning assets decreased 104 basis points while the average rate on interest-bearing liabilities decreased 126 basis points from the first quarter of 2008. During the first quarter of 2009, the Company’s average total assets increased to $2.9 billion, an 8.0% increase over the first quarter of 2008. The increase reflected a $185.5 million increase in average total loans to $2.3 billion from the first quarter of 2008, the result of the strong loan growth during 2008. The increase in volume of loans at lower current market rates combined with variable rate loan resets resulted in the average yield on loans falling by 107 basis points compared to the first quarter of 2008. Average investment securities were $213.8 million at March 31, 2009, or 17.2% lower than the balance in 2008. The growth in average total assets was supported by growth in average total deposits of $228.9 million, an increase of 11.7% from the first quarter of 2008.
Noninterest Income and Expense
Noninterest income was $7.1 million for the first quarter of 2009 compared to $7.5 million for the first quarter of 2008, a decrease of $374,000, or 5.0% from the comparable quarter. This decrease was driven primarily by a decline in service charges on deposit accounts which were down 5.8%, or $220,000. Mortgage banking income increased $231,000, or 22.4%, driven primarily by the decline in mortgage interest rates. The Company has and is experiencing a significant increase in refinancing activity. Bankcard services income increased by $26,000, or 2.2%. Trust and investment services income was flat compared to the same period one year ago. Other income decreased by 49.6% due to the reduction in cash surrender value on bank owned life insurance (“BOLI”), and in 2008, the Company received a cash payment for the partial redemption of VISA, Inc. shares of $253,000.
Compared to the fourth quarter of 2008, noninterest income was up by $1.0 million, driven by mortgage banking income, bankcard services income, trust and investment services income, and other noninterest income. During the fourth quarter, the Company recorded securities losses of $507,000 which mostly offset the decline in service charges on deposit accounts in the first quarter compared to the fourth quarter. Also, the Company recorded a loss on BOLI of $260,000 during the fourth quarter.
Noninterest expense was $20.2 million in the first quarter of 2009, a 0.3% increase or $58,000, compared to $20.1 million in the first quarter of 2008. During the first quarter, the Company had increased cost in two specific areas: (1) OREO expense and loan related costs were higher by $325,000, and (2) FDIC assessments were higher by $724,000. The Company managed the other expense categories to offset these significant increases, including reducing or stopping the accrual of all incentive compensation for first quarter of 2009. The Company’s quarterly efficiency ratio decreased to 62.41% compared to 65.66% one year ago, and compared to 65.05% in the fourth quarter of 2008.
“SCBT maintained its net interest margin during the quarter compared to the fourth quarter of 2008, managed expenses to the same level as the first quarter one year ago,” said John C. Pollok, COO and CFO. “Our efficiency ratio has again dropped below 63.00%; and our net interest margin was 3.87%, thanks to the review of the funding (deposit) side of the balance sheet on a very timely basis. Our mortgage banking income was extremely strong during the first quarter within the secondary market for mortgage loans and should remain so as we head into the second quarter of 2009, with a very strong pipeline. Mortgage interest rates have hit some very attractive lows for those refinancing and for those purchasing new homes.”
SCBT Financial Corporation, Columbia, South Carolina is a registered bank holding company incorporated under the laws of South Carolina. The Company consists of SCBT, N.A., the third largest bank headquartered in South Carolina, and NCBT, a Division of SCBT, N.A. Providing financial services for 75 years, SCBT Financial Corporation operates 50 financial centers in 16 South Carolina counties and Mecklenburg County in North Carolina. SCBT Financial Corporation has assets of approximately $2.8 billion and its stock is traded under the symbol SCBT on the NASDAQ Global Select Market. More information can be found at www.SCBTonline.com.
For additional information, please visit our website at www.SCBTonline.com.
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Statements included in this press release 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 and Exchange Act of 1934, as amended. SCBT Financial Corporation 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) 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; (2) 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; (3) liquidity risk affecting the bank’s ability to meet its obligations when they come due; (4) price risk focusing on changes in market factors that may affect the value of traded instruments in “mark-to-market” portfolios; (5) transaction risk arising from problems with service or product delivery; (6) compliance risk involving risk to earnings or capital resulting from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards; (7) strategic risk resulting from adverse business decisions or improper implementation of business decisions; (8) reputation risk that adversely affects earnings or capital arising from negative public opinion; (9) terrorist activities risk that results in loss of consumer confidence and economic disruptions; and (10) economic downturn risk resulting in changes in the credit markets, greater than expected non-interest expenses, excessive loan losses, restrictions imposed under the United States Treasury's Capital Purchase Program and the possibility that our company may repurchase some or all of the securities issued to United States Treasury under the Capital Purchase Program, and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.