July 24, 2009
SCBT Financial Corporation Reports Net Income of $5.4 million for the Second Quarter
SCBT Financial Corporation Reports Net Income of $5.4 million for the Second Quarter;
Declares Cash Dividend
• Redeemed Preferred Stock & Common Stock Warrant issued to US Treasury
• Raised $29.2 million in common stock
--Earnings & Net Income
• Net income of $5.4 million --- before preferred stock dividend
• Net income available to common shareholders of $1.5 million
• Diluted earnings per share of $0.13 for the quarter
• Net interest margin --- 4.07%; up from 3.87% in 1Q 2009
• Core deposit growth --- excluding all CDs --- up $40.1 million; 14.4% annualized increase
• Expense management --- 60.9% efficiency ratio; down from 62.4% in 1Q 2009
• Mortgage banking income --- up 72% over 2Q 2008
• Allowance for loan losses: 1.45% of period end loans; up from 1.40% at 1Q 2009;
• NPAs: 1.39% of total assets and 1.74% of loans and repossessed assets;
• Net charge-offs --- decreased to 0.74% annualized from 0.79% for 1Q 2009
Download this news release as a PDF.
COLUMBIA, S.C.—July 24, 2009—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 June 30, 2009. The Company produced solid results due primarily to its net interest margin, strong noninterest income in mortgage banking and continued solid expense control.
Quarterly Cash Dividend
The Board of Directors of SCBT has declared 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 August 14, 2009 to shareholders of record as of August 7, 2009.
Second 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 of $5.4 million, which was reduced by the preferred stock dividend of $3.9 million and resulted in net income available to the common shareholders of $1.5 million, or $0.13 per diluted share for the three months ended June 30, 2009 compared to consolidated net income of $6.1 million, or $0.60 per diluted share for the second quarter of 2008, a $4.6 million decrease. This decrease was primarily the result of three items:
• a one-time $3.3 million charge in the form of an accelerated deemed dividend to account for the difference between the recorded amount of the preferred stock and its redemption price;
• accrual of $1.3 million for the FDIC special assessment; and
• $1.2 million increase in OREO expenses and loan-related costs.
“I am pleased with our overall second quarter results as we continue to be soundly profitable, expand our customer base and continue to have manageable credit issues. This quarter had a number of significant events as we repurchased our preferred stock/warrant from the US Treasury, enhanced our capital levels through a common stock issuance, expanded our net interest margin and reduced many operating expenses,” said Robert R. Hill, Jr., President and CEO. “Our team continues to produce strong results, including a 72% increase in mortgage banking fee income and a 14.4% increase in non-CD core deposits. We did experience one-time charges in conjunction with exiting the US Treasury TARP Capital Purchase Program and we incurred the FDIC’s special deposit premium assessment. We are fortunate that the financial strength of our company allowed us to be among the first banks in the country to repurchase our TARP preferred stock and redeem the warrant issued to the Treasury.”
During the second quarter of 2009, the Company’s average total assets increased by $101.9 million, a 3.8% increase over the second quarter of 2008. The growth in average total assets was supported by growth in average total deposits of $137.1 million, an increase of 6.8% from the second quarter of 2008. Average earning assets for the quarter increased by $72.8 million, or 2.9%, compared to the second quarter of 2008.
The Company’s annualized return on average assets (ROAA) for the second quarter decreased to 0.77% compared to 0.91% for the second quarter of 2008, but increased from 0.64% for the first quarter of 2009. Total average shareholders' equity at June 30, 2009 was $298.8 million, an increase of $59.1 million, or 24.6% from December 31, 2008. This increase was due to the issuance of 64,779 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series T, to the U.S. Treasury (“UST”) in January 2009 and the issuance of 1.356 million shares of common stock in May 2009. Also, during the second quarter of 2009, the Company redeemed the preferred stock for $64.779 million and repurchased the common stock warrant from the UST for $1.4 million. Annualized return on average equity (ROAE) for the quarter was 7.23%, down from 11.13% for the second quarter of 2008. Annualized return on average tangible equity (ROATE) for the second quarter decreased to 9.43% from 16.18% for the comparable period in the prior year, but increased from 8.05% in the first quarter of 2009.
Annualized net charge-offs decreased to 0.74% from 0.79% experienced in the first quarter of 2009, and increased from 0.17% experienced in the second quarter of 2008. During the second quarter, non-performing assets (NPAs) as a percentage of loans and repossessed assets increased to 1.74% compared to 0.39% one year ago and 1.34% for the first quarter of 2009. NPAs to total assets at June 30, 2009 were 1.39% compared to 0.31% at the end of the second quarter in 2008 and 1.09% at the end of the first quarter 2009. The increase in NPAs continues to reflect the pressure within the real estate markets throughout our operating area and within the economy as a whole. During the second quarter, the Company’s other real estate owned (“OREO”) decreased by $400,000 from the prior quarter end, but increased by $8.0 million from June 30, 2008. Nonaccrual loans (including accruing loans past due 90 days or more) increased $8.6 million from the first quarter of 2009, and by $22.5 million from the second quarter in 2008.
At June 30, 2009, nonperforming loans totaled $29.9 million, representing 1.34% of period-end loans. OREO at the end of the second quarter was $9.2 million, up from $6.1 million at December 31, 2008 and from $1.2 million at the end of the second quarter of 2008. The allowance for loan losses at June 30, 2009 was $32.4 million and represented 1.45% of total period-end loans. The current allowance for loan losses provides 1.08 times coverage of period-end nonperforming loans down from 1.50 times in the first quarter of 2009 and 3.89 times at June 30, 2008. In the second quarter, net charge-offs were $4.2 million, or an annualized 0.74% of average loans compared to $907,000, or 0.17% in the same period of 2008 and $4.5 million, or 0.79% in the first quarter of 2009. The provision for loan losses was $4.5 million for the second quarter of 2009 compared to $2.3 million for the comparable quarter one year ago, and $5.0 million in the first quarter of 2009.
During the second quarter, the Company partially charged-off two loan participations (related to Silverton Bank) which were acquired in purchase business combinations in 2005 and 2007, totaling $1.0 million. One of these assets has been moved to OREO, and the other remains in the loan portfolio at June 30, 2009. Additionally, another Silverton loan participation carried a specific reserve of approximately 40% at June 30, 2009, up from approximately 33% at March 31, 2009. The FDIC was named receiver of Silverton Bank on May 1, 2009. The recent appraisals of these properties, along with the unlikely prospect of collection and the FDIC’s desire to quickly sell the assets associated with Silverton Bank drove the actions taken by the Company. The Company’s recorded balance of the four assets related to Silverton, net of reserves, was approximately $3.0 million at June 30, 2009.
Loans and Deposits
The Company decreased total loans 0.5% since the second quarter of 2008, driven by reductions in construction and land development loans of $68.6 million, commercial and industrial loans of $35.2 million, consumer non real estate loans of $27.2 million and other loans of $33.0 million. Offsetting the loan reductions has been loan growth in consumer owner occupied loans of $15.2 million, home equity loans of $40.1 million, commercial owner occupied loans of $75.5 million and commercial non-owner occupied of $13.6 million. Total loans outstanding were $2.2 billion at June 30, 2009 compared to $2.2 billion at June 30, 2008. The balance of mortgage loans held for sale increased $38.1 million from December 31, 2008 to $53.9 million at June 30, 2009, and it was more than 2.8 times the June 30, 2008 balance of $19.0 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, except CDs less than $100,000, compared to the second quarter of 2008. Total deposits increased by $28.5 million, or 5.3% annualized, from the end of the first quarter of 2009. All categories of deposits increased during the quarter except for small denomination CDs and NOW accounts as compared to the previous quarter. The Company initiated a deposit campaign to increase its core deposit base (excluding all CDs). The largest growth on a year-to-date basis has occurred in money market accounts with a $71.0 million increase, or 51.0% annualized; savings accounts have grown $17.1 million, or 24.2% annualized; NOW accounts have grown by $24.7 million, or 16.6% annualized; and demand deposits grew by $18.6 million, or 12.2% annualized. The Company continues to reduce rates paid on the various deposits in order to manage its net interest margin within favorable levels. The Company decreased brokered deposits since the end of 2008 by $100.0 million, down to $10.0 million at June 30, 2009. With the continued decline in loans outstanding and the capital raised in May of 2009, the Company has a very strong capital and liquidity position at the end of the quarter. Total deposits outstanding at the end of the second quarter of 2009 were $2.2 billion, an increase of $123.5 million, or 6.0%, compared to the second quarter of 2008.
In addition, over the last two months of the 2nd quarter, the Company has increased its correspondent relationships with a select group of smaller financial institutions and thereby has increased significantly the liquidity and funding sources for the Company. This funding source along with the slow down in net loan growth has increased the liquidity position of the Company by approximately $100 million at June 30, 2009 from the end of 2008.
Net Interest Income and Margin
Non-taxable equivalent net interest income (before provision for loan losses) was $26.0 million for the second quarter of 2009, up 10.4% from $23.6 million in the comparable period last year. Tax-equivalent net interest margin increased 26 basis points from the second quarter of 2008 to 4.07%. Compared to the first quarter of 2009, tax-equivalent net interest margin increased 20 basis points. With interest rates continuing at relatively low levels and the expectation of increased premium costs from the FDIC, the Company has continued to aggressively manage deposit pricing and funding sources during the first half of 2009 and expanded the net interest margin. Partially offsetting the positive impact of lower deposit yields has been the increase in non-performing assets.
The Company’s average yield on interest-earning assets decreased 60 basis points while the average rate on interest-bearing liabilities decreased 96 basis points from the second quarter of 2008. During the second quarter of 2009, the Company’s average total assets increased to $2.8 billion, a 3.8% increase over the second quarter of 2008. The increase reflected an $80.3 million increase in average total loans to $2.3 billion from the second quarter of 2008, the result of the modest loan growth during the last half of 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 58 basis points compared to the second quarter of 2008. Average investment securities were $199.3 million at June 30, 2009, or 19.6% lower than the balance in 2008. The growth in average total assets was supported by growth in average total deposits of $137.1 million, an increase of 6.8% from the second quarter of 2008.
Noninterest Income and Expense
Noninterest income was $7.8 million for the second quarter of 2009 compared to $8.1 million for the second quarter of 2008, a decrease of $366,000, or 4.5% from the comparable quarter. This decrease was driven primarily by an other than temporary impairment (“OTTI”) recorded on a pooled trust preferred security of $544,000 and by a $213,000, or 5.3%, decline in service charges on deposit accounts. Mortgage banking income increased $894,000, or 72.1%, driven primarily by the decline in mortgage interest rates. The Company continues to experience a significant increase in refinancing activity. Bankcard services income and trust and investment services income were flat compared to the same period one year ago, and other income decreased by 29.9% due primarily to a reduction in returns on bank owned life insurance.
Compared to the first quarter of 2009, noninterest income was up by $630,000, driven by the following increases: mortgage banking income up $873,000, service charges on deposit accounts up $234,000 and bankcard services income up $108,000. These increases were primarily offset by the $544,000 OTTI recorded during the second quarter.
Noninterest expense was $21.0 million in the second quarter of 2009, a 6.8% increase or $1.3 million, compared to $19.7 million in the second quarter of 2008. During the second quarter, the Company had increased costs in two specific areas: (1) OREO expense and loan related costs were higher by $1.2 million, and (2) FDIC assessments were higher by $1.9 million, due to the second quarter special assessment of $1.3 million and other increases by the FDIC. The Company managed the other expense categories to partially offset these significant increases. Several compensation adjustments were recorded, including reducing or stopping the accrual of all incentive compensation for second quarter of 2009, suspending the Company match in the 401(k) plan, and recording a curtailment gain of $782,000 related to the Company’s decision to suspend benefits provided under the defined benefit pension plan. The Company’s quarterly efficiency ratio decreased to 60.9% compared to 62.3% one year ago, and to 62.4% in the first quarter of 2009.
“The Company’s net interest margin came in very strong for the quarter compared to the first quarter of 2009, and we continued to focus on our expenses, even with the significant increases in FDIC assessments and costs related to OREO and asset quality,” said John C. Pollok, COO and CFO. “Our efficiency ratio dropped below 61.0%; and our net interest margin was 4.07% for the quarter.”
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 49 financial centers in 16 South Carolina counties and Mecklenburg County in North Carolina. Named in Forbes as one of the 100 Most Trustworthy Companies in America, 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.
Cautionary Statement Regarding Forward Looking Statements
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 Exchange Act of 1934. 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; (10) economic downturn risk resulting in deterioration in the credit markets; (11) greater than expected non-interest expenses; (12) excessive loan losses; and (13) other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.
« Back to List of News