October 22, 2009
SCBT Financial Corporation Reports Net Income of $2.2 million for the Third Quarter
- --Earnings & Net Income
- Net income of $2.2 million; up from $124,000 in 3Q 2008
- Diluted earnings per share of $0.17 for the quarter
- Net interest margin --- 4.04%; up from 3.86% in 3Q 2008
- Mortgage banking income --- up $944,000 over 3Q 2008
- Core deposit growth --- excluding all CDs --- up $52.2 million; 18.1% annualized increase
- Continued strong liquidity position --- $175.4 million in cash and cash equivalents
- Strong tangible common equity to tangible assets ratio --- 7.97%; up from 7.80% at 2Q 2009
- Allowance for loan losses: 1.55% of period end loans; up from 1.45% at 2Q 2009;
- NPAs: 1.56% of total assets and 1.96% of loans and repossessed assets;
- Net charge-offs --- increased to 0.92% annualized from 0.74% for 2Q 2009
COLUMBIA, S.C.—October 22, 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 September 30, 2009. The Company produced solid results due primarily to its net interest margin, noninterest income in mortgage banking and continued good 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 November 13, 2009 to shareholders of record as of November 6, 2009.
Third 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 $2.2 million, or $0.17 per diluted share for the three months ended September 30, 2009 compared to consolidated net income of $124,000, or $0.01 per diluted share for the third quarter of 2008, a $2.1 million increase. This increase was primarily the result of the following items:
- Net interest income increased by $1.7 million or 7.0%;
- Increase in the provision for loan losses of $4.2 million or 151.0%;
- Decrease in the amount of Other Than Temporary Impairment (“OTTI”) of $7.6 million;
- $499,000 increase for the FDIC assessments; and
- $2.1 million increase in OREO expenses and loan-related costs.
“I continue to be pleased with our overall performance,” said Robert R. Hill, Jr., President and CEO. “We are successfully navigating through this environment with a good net interest margin, good expense control, and strong core deposit growth. We are fortunate to attract very talented bankers to our team and many new customer relationships. However, we still have a lot of work to do with higher credit costs and problem loans. The continued high level of credit costs and the OTTI charge had a negative impact on our overall earnings.”
During the third quarter of 2009, the Company’s average total assets increased by $39.1 million, a 1.4% increase over the third quarter of 2008. The growth in average total assets was supported by growth in average total deposits of $78.3 million, an increase of 3.8% from the third quarter of 2008. Average earning assets for the quarter increased by $54.5 million, or 2.1%, compared to the third quarter of 2008.
The Company’s annualized return on average assets (ROAA) for the third quarter increased to 0.31% compared to 0.02% for the third quarter of 2008, but decreased from 0.77% for the second quarter of 2009. Total average shareholders' equity at September 30, 2009 was $283.0 million, an increase of $43.2 million, or 18.0% from December 31, 2008. This increase was due to the issuance of 64,779 shares of Fixed Rate Cumulative 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 which raised $29.2 million in new capital. 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 3.04%, up from 0.22% for the third quarter of 2008. Annualized return on average tangible equity (ROATE) for the third quarter increased to 4.13% from 0.69% for the comparable period in the prior year, but decreased from 9.43% in the second quarter of 2009.
Annualized net charge-offs increased to 0.92% from 0.74% experienced in the second quarter of 2009, and increased from 0.41% experienced in the third quarter of 2008. During the third quarter, non-performing assets (NPAs) as a percentage of loans and repossessed assets increased to 1.96% compared to 1.83% in the second quarter of 2009 and 0.66% one year ago. NPAs to total assets at September 30, 2009 were 1.56% compared to 1.46% at the end of the second quarter of 2009 and 0.54% one year ago. 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 third quarter, the Company’s other real estate owned (“OREO”) decreased by $5.0 million from the prior quarter end, but increased by $1.7 million from September 30, 2008. Nonaccrual loans (including accruing loans past due 90 days or more) increased $7.3 million from the second quarter of 2009, and by $24.8 million from the third quarter in 2008.
At September 30, 2009, nonperforming loans totaled $37.2 million, representing 1.68% of period-end loans. OREO at the end of the third quarter was $4.2 million, down from $6.1 million at December 31, 2008 and up from $2.5 million at the end of the third quarter of 2008. The allowance for loan losses at September 30, 2009 was $34.3 million and represented 1.55% of total period-end loans. The current allowance for loan losses provides 0.92 times coverage of period-end nonperforming loans, down from 1.08 times in the second quarter of 2009 and 2.36 times at September 30, 2008. In the third quarter, net charge-offs were $5.1 million, or an annualized 0.92% of average loans compared to $4.2 million, or 0.74% the previous quarter and $2.3 million, or 0.41% one year ago. The provision for loan losses was $7.0 million for the third quarter of 2009 compared to $2.8 million for the comparable quarter one year ago, and $4.5 million in the second quarter of 2009.
The Company’s recorded balance of the four assets related to Silverton was approximately $1.04 million at September 30, 2009. The FDIC was named receiver of Silverton Bank on May 1, 2009. During the third quarter, the Company charged-off two loan participations, (related to Silverton Bank) which were acquired in purchase business combinations in 2007, totaling approximately $1.8 million. These assets have now been valued at approximately twenty cents on the dollar. In addition, two other loan participations have been moved to OREO. One loan was moved to OREO at the end of the first quarter of 2009, and the other loan was moved at the end of the second quarter of 2009. During the third quarter, the Company wrote down the value of these properties by an additional $810,000. Increased activity by the FDIC to dispose of these assets and a known bid, along with the reduced prospect of collection drove the additional charge-offs and write downs recorded by the Company on these loans and OREO assets.
Loans and Deposits
The Company decreased total loans 3.1% since the third quarter of 2008, driven by reductions in construction and land development loans of $73.7 million, commercial and industrial loans of $33.8 million, consumer non real estate loans of $28.6 million and other loans of $24.8 million. Offsetting the loan reductions has been loan growth in home equity loans of $32.7 million, commercial owner occupied loans of $53.9 million and other income producing property of $9.5 million. Total loans outstanding were $2.2 billion at September 30, 2009 compared to $2.3 billion at September 30, 2008. The balance of mortgage loans held for sale increased $4.3 million from December 31, 2008 to $20.1 million at September 30, 2009. During the first half of 2009, mortgage loans held for sale increased sharply, as consumers took advantage of low interest rates and refinanced their home mortgages. The balance of mortgage loans held for sale at June 30, 2009 was $53.9 million. Since June 30, 2009, we have seen a return to a more normal pipeline of refinancing activity, and therefore a lower balance at September 30, 2009.
Total deposits decreased compared to the third quarter of 2008 by $11.6 million, or 0.54%. Certificates of deposit (“CDs”) less than $100,000 and CDs more than $100,000 decreased by $196.1 million, which was mostly offset by the other deposit categories. Given the decline in CD balances, total deposits decreased by $53.2 million, or 9.8% annualized, from the end of the second quarter of 2009. All categories of deposits increased during the quarter except for CDs and NOW accounts as compared to the previous quarter. The Company initiated a deposit campaign in 2009 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 $110.6 million increase, or 53.0% annualized; savings accounts have grown $20.1 million, or 18.9% annualized; NOW accounts have grown by $21.0 million, or 9.4% annualized; and demand deposits have grown by $31.9 million, or 14.0% annualized. The Company continues to reduce rates paid on CDs in order to manage its net interest margin within favorable levels. The Company decreased brokered deposits since the end of 2008 and held none of these at September 30, 2009, reflecting a $110.0 million decrease. With the continued decline in loans outstanding and the capital raised in May of 2009, the Company continued to maintain a very strong capital and liquidity position at the end of the quarter.
In addition, over the last five months, 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. Funds for these correspondents, along with the slow down in net loan growth, has increased the liquidity position of the Company by more than $117 million at September 30, 2009 from the end of 2008.
Net Interest Income and Margin
Non-taxable equivalent net interest income (before provision for loan losses) was $26.4 million for the third quarter of 2009, up 7.0% from $24.7 million in the comparable period last year. Tax-equivalent net interest margin increased 18 basis points from the third quarter of 2008 to 4.04%. Compared to the second quarter of 2009, tax-equivalent net interest margin decreased 3 basis points. This decrease was the result of earning approximately 25 basis points on excess Federal Reserve Balances with an average balance of $104.0 million during the quarter. Excluding both the average balances and the rate earned (25 basis points) on these assets, the net interest margin would have been approximately 4.19% for the quarter. With interest rates continuing at low levels, the expectation of increased premium costs from the FDIC, and ongoing slow loan demand, the Company has continued to aggressively manage deposit pricing and funding sources during the third quarter of 2009. The Company continued to focus on increasing core deposits with $52.2 million increase or 18.1%, on a link quarter basis, and has allowed $106.0 million in certificates of deposit to run off during the quarter. The increase in non-performing assets has partially offset the positive impact of lower deposit costs.
The Company’s average yield on interest-earning assets decreased 74 basis points while the average rate on interest-bearing liabilities decreased 102 basis points from the third quarter of 2008. During the third quarter of 2009, the Company’s average total assets increased to $2.8 billion, a 1.4% increase over the third quarter of 2008. The increase was the result of the increase in average short-term investments to $172.9 million, a $136.5 million increase from the third quarter of 2008. All other average earning asset categories decreased from the results of the third quarter of 2008. The decline in loan volume and lower current market rates in combination with variable rate loan resets resulted in the average yield on loans falling by 46 basis points compared to the third quarter of 2008. Average investment securities were $202.7 million at September 30, 2009, or 19.1% lower than the balance in 2008. The growth in average total assets was supported by growth in average total deposits of $78.3 million, an increase of 3.8% from the third quarter of 2008.
Noninterest Income and Expense
Noninterest income was $5.6 million for the third quarter of 2009 compared to a $2.7 million loss for the third quarter of 2008, an increase of $8.3 million. This increase reflects primarily an other than temporary impairment (“OTTI”) recorded during the third quarter of 2008 on Freddie Mac preferred securities of $9.8 million, compared to the credit portion of an OTTI recorded on pooled trust preferred securities of $2.2 million during the third quarter of 2009, and by a $944,000, or 186.2%, increase in mortgage banking income as the Company continued to experience refinancing activity during the third quarter of 2009. Trust and investment services income decreased $137,000, or 18.9%. Bankcard services income remained flat compared to the same period one year ago, and other income decreased by 28.8% due primarily to a reduction in returns on bank owned life insurance.
Compared to the second quarter of 2009, noninterest income was down by $2.2 million, primarily driven by the following decreases: (1) credit portion of OTTI recorded on a pooled trust preferred securities of $2.2 million was $1.7 million more than the second quarter of 2009, and (2) mortgage banking income was down by $683,000. These two decreases were partially reduced by a $270,000 increase in service charges on deposit accounts.
Noninterest expense was $21.8 million in the third quarter of 2009, a 14.1% increase or $2.7 million, compared to $19.1 million in the third quarter of 2008. During the third quarter, the Company had increased costs in three specific areas: (1) OREO expense and loan related costs were higher by $2.1 million, (2) FDIC assessments were higher by $499,000, and (3) salaries and employee benefits were higher by $485,000. The Company managed the other expense categories to partially offset these increases.
The Company’s quarterly efficiency ratio increased to 63.5% compared to 60.9% in the second quarter of 2009, and 59.8% one year ago. For the nine months ended September 30, 2009 and 2008, the efficiency ratio was 62.2% and 62.5%, respectively, reflecting a slight improvement.
“The Company’s net interest margin remains strong as we continue to manage through both the pressure on asset quality and the extremely low interest rate environment. We continued to focus on the expense stream; however, the costs related to loans, OREO and FDIC assessments continued to out-pace the savings in all other expense categories,” said John C. Pollok, COO and CFO.
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.
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.
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