Southcoast Announces 2014 First Half Results

MT. PLEASANT, SC – Southcoast Financial Corporation
(Nasdaq:SOCB) announced that it had unaudited net
income of $1,352,000, or $.19 per diluted share, for the six months
ended June 30, 2014. This compares to unaudited net income of
$8,041,000, or $1.14 per diluted share, for the six months ended June
30, 2013. The difference in net income between the two periods
primarily relates to the one-time tax benefit of $6.4 million derived
from the recapture of the Company’s deferred tax asset in the second
quarter of 2013. The June 30, 2014 income per share is based on
7,087,860 diluted average shares compared to 7,072,956 diluted average
shares for 2013. Income before income taxes increased 23.7% to
$2,076,000 from $1,678,000. The 2014 pretax results were influenced by
a growth in loan interest income, reduced funding costs, and reductions
in noninterest expenses.

For the six months ended June 30, 2014, net interest income totaled
$7,203,000, an increase of $297,000 from $6,906,000 for the six months
ended June 30, 2013.

Noninterest income for 2014 decreased to $1,118,000 from $1,280,000 for
2013, primarily due to a $150,000 reduction in fees on mortgage loans
sold.

Noninterest expense levels decreased from $6,508,000 for 2013 to
$6,245,000 for 2014. Contributing to this decrease were reductions in
salaries and benefits, FDIC insurance premiums, and overhead expenses
on other real estate owned.

For the quarter ended June 30, 2014, the unaudited net income was
$709,000, or $0.10 per diluted share. This compares to an unaudited net
income of $7,035,000, or $0.99 per diluted share for the quarter ended
June 30, 2013. The net income for the quarter ended June 30, 2013,
included a one-time tax benefit of $6,419,000 resulting from the
Company’s recapture of its deferred tax asset valuation allowance. The
June 30, 2014 income per share is based on 7,089,902 diluted average
shares compared to 7,074,210 diluted average shares for the quarter
ended June 30, 2013.

Total assets as of June 30, 2014 were $465.0 million compared to $447.4
million as of December 31, 2013, an increase of 3.93%. Loans, excluding
loans held for sale, increased $17.6 million or 5.31% to $349.5
million, from $331.9 million as of December 31, 2013. Deposits
increased by $18.6 million, or 5.90% to $334.5 million at June 30,
2014, from $315.8 million at December 31, 2013. The increase in loans
was completely funded by an increase in core non-time deposits. Growth
in core non-time deposits is a major strategy incorporated in our
Company’s strategic plan.

The Company continues to show improvement in asset quality. For the
first six months of 2014, additions to the allowance for loan losses
have not been required. Increased recoveries, reduced non-performing
assets, controlled delinquencies, and reduced classified loans all
contributed to this result. The ratio of nonperforming assets to total
assets was 2.76% as of June 30, 2014, compared to 3.53% as of June 30,
2013. The allowance for loan losses as a percentage of loans was 1.73%
as of June 30, 2014, compared to 2.26% as of June 30, 2013. The
allowance for loan losses as a percentage of total nonperforming loans
totaled 76.40% as of June 30, 2014, compared to 72.45% as of June 30,
2013.

“The value of our franchise continues to improve as our performance
improves. We are proud of our accomplishments as they reflect the
loyalty of our customers and the dedication of our employees”, said L.
Wayne Pearson, Chairman and Chief Executive Officer.

About Southcoast Financial Corporation

Southcoast Financial Corporation, headquartered in Mt. Pleasant, South
Carolina, is the holding company of Southcoast Community Bank. The
Bank, which opened for business July 20, 1998, is a state chartered
commercial bank operating from its main office at 530 Johnnie Dodds
Boulevard in Mt. Pleasant, South Carolina and nine branches in the
Charleston, South Carolina area. Southcoast Financial Corporation’s
common stock is traded on the NASDAQ Global Market under the symbol
SOCB.