SCBT Financial Corporation Reports Record Second Quarter Earnings and Continued Strong Asset Quality
July 17, 2007
HIGHLIGHTS:
–Second quarter earnings
Net income of $5.6 million – Up 11.4%
Diluted EPS of $0.60 – Up 11.3%
Total assets of $2.3 billion – Up 9.9%
–Continued strong asset quality with lower net charge-offs
Net charge-offs as a percentage of average loans of 0.09% compared to 0.27%
COLUMBIA, S.C.—July 17, 2007—SCBT Financial Corporation (NASDAQ: SCBT), the holding company for South Carolina Bank and Trust, N.A. and South Carolina Bank and Trust of the Piedmont, N.A., reported an increase in consolidated net income compared to the second quarter of 2006. The Company today released its unaudited results of operations and other financial information for the period ended June 30, 2007.
Second Quarter 2007 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 $5.6 million, or $0.60 per diluted share, for the three months ended June 30, 2007 compared to consolidated net income of $5.0 million, or $0.54 per diluted share, for the second quarter of 2006. Net income of $10.8 million for the first six months of 2007 reflects a 10.2% increase from $9.8 million in the first half of 2006. The Company had diluted earnings per share of $1.17 and $1.06 for the six months ended June 30, 2007 and 2006, respectively. The Company’s earnings growth reflected the strong profitability of its bank subsidiaries during the second quarter. Compared to the second quarter 2006, South Carolina Bank and Trust reported a 10.4% increase in net income to $5.3 million and South Carolina Bank and Trust of the Piedmont reported an 8.2% increase in net income to $722,000.
“We continued to maintain excellent asset quality during a very profitable second quarter,” commented Robert R. Hill, Jr., CEO of SCBT Financial Corporation. “We experienced solid increases in noninterest income during the quarter as secondary market mortgage fees increased 23.2%, bankcard services income increased 20.8%, and trust and investment services income increased 20.6% over the second quarter of 2006. As we expected, we began to see the net interest margin expand by 5 basis points from the first quarter. We believe the compression within our net interest margin has stabilized and could expand during the last half of 2007, if our funding cost remains flat. In addition, we continue to expand SCBT as South Carolina’s premier community bank. In April 2007, we opened a full-service branch in Charleston to replace a limited-service location. We believe that our exceptional banking team in Charleston provides the best products and services, and we are excited about the opportunities which exist in this growing market.”
During the second quarter of 2007, the Company’s total assets increased to $2.3 billion, a 9.9% increase over the second quarter of 2006. The growth in total assets was supported by growth in total deposits of $160.0 million, an increase of 9.9% over the total in the second quarter of 2006. Earning assets for the quarter increased by $206.3 million, or 10.8%, compared to the comparable period in 2006. The increase includes an 11.3% increase in investment securities to $234.9 million.
The Company’s annualized return on average assets for the second quarter increased to 1.00% compared to 0.99% for the second quarter of 2006 and 0.96% for the first quarter. Total shareholders’ equity at quarter end was $169.8 million, an increase of 9.9% from the second quarter of 2006. The Company’s total shareholders’ equity was impacted by a decrease in accumulated other comprehensive income resulting from the implementation in the fourth quarter 2006 of a new accounting pronouncement for defined benefit pension and other postretirement plans. Annualized return on average equity for the quarter was 13.27%, up from 13.07% for the second quarter of 2006. Annualized return on average tangible equity for the second quarter decreased to 16.82% from 17.08% for the comparable period in the prior year; but increased from 16.45% in the first quarter.
Asset Quality
The results reported during the second quarter reflect SCBT’s continued commitment to strong asset quality. John C. Pollok, senior executive vice president and CFO of SCBT Financial Corporation commented, “We are very pleased with the fact that we have been able to maintain very strong asset quality. We believe we have been able to avoid issues because of our underwriting processes and continual review of our loan portfolio. Additionally, we reported very low net charge-offs for the quarter. We continue our disciplined focus on strong asset quality within our loan portfolio.”
At June 30, 2007, nonperforming loans totaled $4.3 million, representing 0.24% of period-end loans. Other real estate owned at the end of the second quarter was $771,000, a slight increase from $525,000 in the first quarter. The allowance for loan losses at June 30, 2007 was $23.4 million and represented 1.29% of total loans. The current allowance for loan losses provides 5.42 times coverage of period-end nonperforming loans. In the second quarter, net charge-offs were $386,000, or an annualized 0.09% of average loans compared to 0.27% in the same period of 2006.
Loans and Deposits
The Company grew total loans 9.7% since the second quarter of 2006, an increase driven largely by continued growth in commercial loans. Commercial real estate loans totaled $875.0 million at quarter-end, a 2.5% increase from the first quarter in 2007 and a 16.4% increase from the comparable period in 2006. Commercial non real estate loans increased 4.0% to $204.9 million from the first quarter and 19.1% from the comparable period in 2006. Total loans outstanding were $1.8 billion at June 30, 2007 compared to $1.6 billion for the comparable period in 2006. The balance of mortgage loans held for sale decreased $5.8 million from the first quarter to $28.1 million.
Deposit growth remained strong compared to the same quarter in 2006, driven largely by growth in certificates of deposit and savings deposits. Total deposits outstanding at the end of the second quarter were $1.8 billion, an increase of $160.0 million, or 9.9%, compared to the second quarter in the prior year. When compared to first quarter, total deposits outstanding increased $66.9 million, or 3.9%; savings account deposit levels increased $20.5 million, or 21.7%; and certificates of deposits increased $47.8 million, or 6.3%. Noninterest bearing deposits grew $12.1 million, or 4.4%, to $285.2 million from the first quarter.
Net Interest Income and Margin
Non-taxable equivalent net interest income (before provision for loan losses) was $20.5 million for the second quarter of 2007, up 4.9% from $19.6 million in the comparable period last year. Tax-equivalent net interest margin decreased 22 basis points from the second quarter of 2006 to 3.99%. Compared to the first quarter of 2007, tax-equivalent net interest margin increased 5 basis points from 3.94%.
The Company’s average yields on interest-earning assets increased 31 basis points while rates on interest-bearing liabilities increased 62 basis points from the second quarter of 2006. During the second quarter of 2007, the Company’s average total assets increased to $2.2 billion, a 9.9% increase over the second quarter of 2006. The increase reflected a $149.2 million increase in average total loans to $1.8 billion from the second quarter. The increase in volume and a 35 basis point increase in average yields on total loans contributed to higher average yield on interest-earning assets during the second quarter. Average earning assets for the quarter increased by $202.2 million, or 10.8%, compared to the av
erage for the comparable period in 2006. Average investment securities were $227.3 million at June 30, 2007, or 10.7% higher than the balance in 2006. The growth in average total assets was supported by growth in average total deposits of $145.1 million, an increase of 9.2% over the average in the second quarter of 2006.
Noninterest Income and Expense
Noninterest income was $7.8 million in the second quarter of 2007, an increase from $6.7 million in the comparable period in 2006. This increase included a $332,000, or 23.2%, increase in secondary market mortgage fees; a $300,000, or 9.0%, increase in service charges on deposit accounts; a $179,000, or 20.8%, increase in bankcard services income; and a $170,000, or 34.3%, increase in other noninterest income. The increase in other noninterest income was driven by a $142,000 increase in the cash surrender value of bank owned life insurance. Additionally, trust and investment services income increased 20.6% from the comparable period in 2006.
Noninterest expense was $19.1 million in the second quarter of 2007, up from $16.8 million in the comparable period in 2006. The increase was driven by a $1.4 million, or 13.7%, increase in salaries and employee benefits expense driven by sales volume incentives paid to employees and the addition of six de novo locations since June 30, 2006. These locations accounted for approximately 30%, or $400,000, of the compensation increase from the same quarter a year ago. Information services expense increased $250,000, or 28.9%, compared to the prior year’s second quarter. Net occupancy expense increased $193,000, or 18.5%. Furniture and equipment expense increased $130,000, or 11.1%, compared to the second quarter in 2006.
SCBT Financial Corporation is a multi-bank holding company whose subsidiaries are South Carolina Bank and Trust, N.A. and South Carolina Bank and Trust of the Piedmont, N.A. The Mortgage Banc, Inc. is a wholly owned subsidiary of South Carolina Bank and Trust, N.A. Through these subsidiaries, SCBT Financial Corporation operates 45 financial centers in 16 South Carolina counties, and has served South Carolinians for more than 73 years. The Company offers a full range of retail and commercial banking services, mortgage lending services, trust and investment services, and consumer finance loans. SCBT Financial Corporation’s common stock is traded on the NASDAQ Global Select MarketSM under the symbol “SCBT.”
For additional information, please visit our website at www.SCBTonline.com.
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; and (9) terrorist activities risk that results in loss of consumer confidence and economic disruptions.
