South Atlantic Bancshares, Inc. reports earnings of 17 cents per diluted common share for the quarter ended March 31, 2020

MYRTLE BEACH, S.C. – South Atlantic Bancshares, Inc., parent of South Atlantic Bank, reported net income of $1.3 million, or $0.17 per diluted share, for the quarter ended March 31, 2020, compared to $1.3 million, or $0.17 per diluted share, reported for the quarter ended March 31, 2019.   Net income for the quarter ended March 31, 2020 totaled $1.3 million, or $0.17 per diluted common share, which was the same as the quarter ended March 31, 2019.

Financial Highlights

  • Return on average equity was 5.74 percent for the quarter ended March 31, 2020, compared to 6.42 percent for the quarter ended March 31, 2019.
  • Return on average assets was 0.69 percent for the quarter ended March 31, 2020, compared to 0.79 percent for the quarter ended March 31, 2019.
  • The net interest margin, taxable equivalent, was 3.98 percent for the quarter ended March 31, 2020, a 34 basis point decline from the quarter ended March 31, 2019.
  • Total loans grew 7.7 percent quarter-over-quarter, from $551.7 million at March 31, 2019 to $594.1 million at March 31, 2020.
  • Total deposits grew 10.4 percent quarter-over-quarter, from $575.8 million at March 31, 2019 to $635.6 million at March 31, 2020.
  • Total assets grew 9.3 percent quarter-over-quarter, from $681.3 million at March 31, 2019 to $744.8 million at March 31, 2020.
  • Asset quality continues to be pristine with non-performing assets to average total assets at 0.07 percent as of March 31, 2020.

The impact of the COVID-19 pandemic has caused a dramatic loss of business to many of our customers in our markets due to South Carolina Governor Henry McMaster’s executive orders limiting movements outside the home and permitting only certain “essential businesses” to remain open.

“Our company was poised to continue the financial performance of 2019 into fiscal year 2020, reporting very good loan and deposit growth during the first two months of the first quarter of 2020.  Due to the large cuts to the federal funds rate by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the closing of non-essential businesses to help stop the spread of the COVID-19 pandemic, our financial indicators are reflecting lower numbers compared to March 31, 2019.  However, we were a participating lender of the Small Business Administration (“SBA”) Payroll Protection Program (“PPP”) and we will continue to work with our customers who are participating in the PPP to support their employees and business operations.  If additional funds are dedicated to the PPP by Congress, we intend to work with those customers who have not yet participated in the PPP.  We developed and implemented an efficient process to allow our customers to apply, get approval from the SBA and get these PPP loans closed quickly so the proceeds are in our customers’ accounts.  To date, we have processed over 650 PPP loan applications totaling approximately $75 million.  We have also responded to the needs of many of our borrowers by granting short-term loan modifications to borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19.  Looking forward, we believe our Company is positioned to rebound once our customers can reopen for business and Governor McMaster lifts the executive orders limiting activities in the State of South Carolina,” said Wayne Wicker, Chief Executive Officer and Chairman of the Board for South Atlantic.

Operating Results

Net income for the quarter ended March 31, 2020 totaled $1.3 million, or $0.17 per diluted common share.  Net income for the quarter ended March 31, 2019 was $1.3 million, or $0.17 per diluted common share.

Net Interest Income and Net Interest Margin

Net interest income increased $309 thousand to $6.7 million for the quarter ended March 31, 2020, compared to $6.4 million for the quarter ended March 31, 2019.  The increase resulted from a 12.8 percent increase in interest-earning average asset balances due primarily from the increased interest income from loan growth of 8.0 percent for the quarter ended March 31, 2020.  Net interest margin, taxable equivalent (“net interest margin”), decreased 34 basis points from 4.32 percent at March 31, 2019 to 3.98 percent at March 31, 2020.  The decrease in net interest margin is primarily the result of the 150 basis point cut in federal funds rates by the Federal Reserve in March 2020, thus resulting in a 22 basis point drop in loan yield for the quarter ended March 31, 2020.  Net interest income to average assets was 3.62 percent for the quarter ended March 31, 2020, compared to 3.98 percent for the same quarterly period in 2019.  The decline is due primarily to a 14.4 percent increase in average assets and the decline in our earning asset yield compared to the same quarterly period in 2019.

Net interest income and the net interest margin are affected by purchase accounting accretion and amortization entries associated with the fair value measurements recorded effective September 1, 2018.  Interest income on loans totaling $93 thousand were recorded during the quarter ended March 31, 2020, compared to $72 thousand in the quarter ended March 31, 2019.  Purchase loan accretion amounts vary from period to period as a result of periodic cash flow re-estimations, loan payoffs, and payment performance.

Margin Analysis Compare

Average Yield and Rate

Average Funds

Interest Income/Expense

QTD
Actual
Mar 2020

QTD
Actual
Mar 2019

QTD
Actual
Mar 2020

QTD
Actual
Mar 2019

QTD
Actual
Mar 2020

QTD
Actual
Mar 2019

Earning Assets

   Loans

4.96

5.18

583,497,415

540,352,366

7,196,675

6,907,082

   Loan fees

0.13

0.13

0

0

187,584

166,861

      Loans with fees

5.09

5.31

583,497,415

540,352,366

7,384,259

7,073,943

   Mortgage loans held for sale

4.04

4.3

4,428,871

1,298,817

44,712

13,962

   Federal funds sold

1.52

2.59

6,914,421

5,577,763

26,136

35,635

   Deposits with banks

1.22

1.44

14,492,342

7,607,274

43,890

27,035

   Investment securities – taxable

3.03

3.83

62,340,474

25,821,739

472,160

247,207

   Investment securities – tax-exempt

4.36

3.75

7,916,989

24,870,984

67,387

181,703

      Total Earning Assets

4.77

5.11

679,590,512

605,528,944

8,038,544

7,579,485

Interest bearing liabilities

   Interest bearing demand

0.28

0.25

82,653,212

64,905,642

57,723

40,766

   Savings and Money Market

0.88

0.99

259,210,855

228,485,224

564,658

558,710

   Time deposits – Retail

2.05

1.93

126,380,591

91,036,453

645,619

434,165

   Time Deposits – Wholesale

2.26

1.87

10,017,403

11,675,942

56,312

53,711

      Total interest bearing deposits

1.11

1.11

478,262,061

396,103,261

1,324,311

1,087,351

   Federal home Loan Bank advances

0

2.37

0

14,577,778

0

86,378

   Other borrowings

2.22

2.9

1,409,033

1,103,922

7,792

7,902

      Total borrowed funds

2.22

2.41

1,409,033

15,681,700

7,792

94,280

      Total interest-bearing liabilities

1.12

1.16

479,671,094

411,784,961

1,332,104

1,181,631

Net interest rate spread

3.65

3.94

6,706,441

6,397,854

Effect of non-interest bearing deposits

-0.29

-0.31

162,230,396

150,900,579

Cost of funds

0.83

0.85

Net interest margin

3.98

4.32

Noninterest Income and Expense

Noninterest income totaled $1.6 million for the quarter ended March 31, 2020, compared to $875 thousand for the quarter ended March 31, 2019.  The increase in noninterest income was primarily related to increased mortgage production and gains on the restructure of the investment portfolio.  For the quarter ended March 31, 2020, noninterest expense increased $889 thousand to $6.5 million, compared to $5.6 million for the quarter ended March 31, 2019.  The increase in noninterest expense for the quarter is related to increases in compensation, benefits and occupancy as we expanded our market presence during 2019.  Expense control measures are being implemented where feasible; however, additional costs of working remote and the deep cleaning of offices may be offsetting these control measures.

Loan Loss Provision

Provision for loan losses for the quarters ended March 31, 2020 and 2019 was $245 thousand and $165 thousand, respectively.  This increase in provision for loan losses is due primarily to the increase in loan growth from March 31, 2019 to March 31, 2020, in addition to our anticipated economic impact of the COVID-19 pandemic.  The allowance for loan and lease losses at March 31, 2020 was $5.5 million, or 0.92 percent of total loans, compared to $4.6 million, or 0.83 percent of total loans at March 31, 2019.

Nonperforming Assets

Nonperforming assets as a percentage of average assets was 0.07 percent for the quarter ended March 31, 2020 compared to 0.09% for the same quarter 2019.

Capital Position

Shareholders’ equity totaled $90.1 million as of March 31, 2020, an increase of $8.3 million since March 31, 2019.  The Bank’s capital position remains above the minimum regulatory thresholds required to be considered “well-capitalized,” with a total risk-based capital ratio of 11.66 percent at March 31, 2020.  At March 31, 2019, the Bank had approximately $10.1 million in excess of the 10.0 percent minimum regulatory threshold required to be considered a “well-capitalized” institution.  In addition, the Company reported $14.3 million in additional capital available for distribution to the Bank.  The Company reported 7,504,040 total shares outstanding at March 31, 2020.

About South Atlantic Bancshares, Inc.

South Atlantic Bancshares, Inc. (OTCQX: SABK) is a registered bank holding company based in Myrtle Beach, South Carolina with $812 million in total assets.  The Company’s banking subsidiary, South Atlantic Bank, is a full service financial institution spanning the entire coastal area of South Carolina, and is locally owned, controlled and operated.  The Bank operates ten offices in Myrtle BeachCarolina ForestNorth Myrtle BeachMurrells InletPawleys IslandGeorgetownMount PleasantCharlestonBluffton and Hilton Head Island, South Carolina.  The Bank specializes in providing personalized community banking services to individuals, small businesses and corporations.  Services include a full range of consumer and commercial banking products, including mortgage, and treasury management, including South Atlantic Bank goMobile, the Bank’s mobile banking app.  The Bank also offers internet banking, no-fee ATM access, checking, CD and money market accounts, merchant services, mortgage loans, remote deposit capture, and more.  For more information, visit www.SouthAtlantic.bank