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Southeastern Bank Financial Corp. Reports Record Third Quarter 2013 Earnings

AUGUSTA, Ga., Oct. 25, 2013 (GLOBE NEWSWIRE) -- Southeastern Bank Financial Corp. (OTCQB:SBFC), the holding company for Georgia Bank & Trust Company of Augusta (GB&T), today reported record quarterly net income of $4.2 million for the three months ended Sept. 30, 2013, or $0.63 in diluted earnings per share, compared to $3.9 million, or $0.58 in diluted earnings per share, in the third quarter of 2012.

"We achieved another record quarter of earnings driven by solid growth in our core banking operations and effective expense controls," said President and Chief Executive Officer R. Daniel Blanton. "Our performance has been very consistent from quarter to quarter. Our net interest income has continued to rise while our noninterest expenses have declined, leading to steady, healthy margins and growth in our return on assets. Another area of stability has been our asset quality, which continued to improve in the third quarter, enabling us to further reduce our loan loss provision. As expected, our noninterest income declined on a year-over-year basis resulting from a drop-off in demand for mortgage refinancing due to higher interest rates."

Total assets at Sept. 30, 2013, were $1.7 billion, an increase of $28.5 million from Dec. 31, 2012. Loans outstanding at the end of the third quarter were $900.6 million, a slight decrease from Dec. 31, 2012, and an increase of $17.5 million from Sept. 30, 2012. Total deposits were $1.4 billion at Sept. 30, 2013, an increase of $20.4 million from Dec. 31, 2012, and an increase of $5.3 million from Sept. 30, 2012. Cash and cash equivalents totaled $64.9 million at the end of the third quarter of 2013.

Net interest income for the third quarter of 2013 totaled $13.2 million, a slight increase from $13.0 million for the same period in 2012. Noninterest income for the third quarter totaled $4.9 million, a 16.5 percent decrease from $5.8 million for the same period a year ago, resulting from a slowdown in mortgage origination volume. Noninterest expense was $10.2 million in the third quarter of 2013, a 4.4 percent decrease from a year ago, as a result of reduced salary and benefit costs.

The net interest margin was 3.31 percent for the quarter-ended Sept. 30, 2013, compared to 3.36 percent at the end of the second quarter of 2013, and 3.34 percent a year ago. Annualized return on average assets (ROA) was 0.99 percent for the third quarter of 2013, an increase of 6 basis points from the same period a year ago, and annualized return on average shareholder's equity (ROE) was 12.84 percent, an increase of 95 basis points from the third quarter of 2012.

Nonperforming assets at Sept. 30, 2013, were 1.78 percent of total assets, compared to 2.08 percent at June 30, 2013, and 2.03 percent at Sept. 30, 2012. Net charge-offs for the third quarter of 2013 totaled 1.17 percent of average loans on an annualized basis, compared to 1.87 percent annualized in the second quarter of 2013 and 1.34 percent annualized in the third quarter of 2012. The company held $1.2 million in OREO at Sept. 30, 2013, compared to $1.1 million at June 30, 2013, and $4.1 million at Sept. 30, 2012.

The company's loan-loss provision expense was $1.9 million in the third quarter of 2013, compared to $2.4 million in the second quarter of 2013 and $2.4 million in the third quarter a year ago. The allowance for loan losses at Sept. 30, 2013, was $26.6 million, or 2.99 percent of loans outstanding, compared to $27.3 million, or 3.12 percent of loans outstanding, at June 30, 2013, and $29.1 million, or 3.41 percent of loans outstanding, at Sept. 30, 2012.

Net income for the nine months ended Sept. 30, 2013, totaled $12.0 million, compared to net income of $10.5 million from the same period of 2012. Diluted earnings per share for the first nine months of 2013 were $1.79, a 13.3 percent increase from $1.58 per share earned in the same period a year ago.

Net interest income for the first nine months of 2013 was $39.7 million, a 2.9 percent increase from $38.6 million in the first nine months of 2012. Noninterest income was $14.9 million for the first nine months of 2013, a 9.2 percent decrease from $16.4 million in the same period of 2012. Noninterest expense was $31.3 million for the nine-month period ended Sept. 30, 2013, a 6 percent decrease from $33.2 million in the same period in 2012.

"While our profitability has been solid and steady, we expect the increase in mortgage rates to have a negative impact on both re-finance and purchase origination revenue resulting in lower levels for the near future," said Blanton. "As such, we will continue to proceed with both optimism and caution, maintaining a watchful eye for opportunities for growth and managing the risks to our business."

About Southeastern Bank Financial Corp.

Southeastern Bank Financial Corp. is the $1.7 billion-asset bank holding company of Georgia Bank & Trust Company of Augusta (GB&T). GB&T is the largest locally owned and operated community bank in the Augusta metro market, with nine full-service Augusta-area offices, three full-service offices in Aiken County, S.C. operating as Southern Bank & Trust and one limited service Loan Production Office in Athens, GA. The company also has mortgage operations in Augusta and Savannah. The banks focus primarily on real estate, commercial and consumer loans to individuals, small to medium-sized businesses and professionals, and also provide wealth management and trust services. The company's common stock is publicly traded under the symbol SBFC on OTCQB. Investors can find Real-Time quotes and market information for the Company on www.otcmarkets.com or by visiting the Company's Web site, www.georgiabankandtrust.com.

Safe Harbor Statement – Forward-Looking Statements

Statements made in this release by Southeastern Bank Financial Corporation (The Company) other than those concerning historical information, should be considered forward-looking and subject to various risks and uncertainties. Such forward-looking statements are made based upon management's belief as well as assumptions made by, and information currently available to, management pursuant to "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The Company's actual results may differ materially from the results anticipated in forward-looking statements due to a variety of factors, including: unanticipated changes in the Bank's local economy and in the national economy; governmental monetary and fiscal policies; deposit levels, loan demand, loan collateral values and securities portfolio values; difficulties in interest rate risk management; difficulties in operating in a variety of geographic areas; the effects of competition in the banking business; changes in governmental regulation relating to the banking industry, including regulations relating to branching and acquisitions; failure of assumptions underlying the establishment of reserves for loan losses, including the value of collateral underlying delinquent loans; and other factors. The Company cautions that such factors are not exclusive. The Company does not undertake to update any forward-looking statement that may be made from time to time by, or on behalf of, the Company.

SOUTHEASTERN BANK FINANCIAL CORPORATION
Consolidated Balance Sheets
September 30,
2013 December 31,
Assets (Unaudited) 2012
Cash and due from banks $ 62,301,687 $ 39,565,757
Interest-bearing deposits in other banks 2,554,290 4,322,317
Cash and cash equivalents 64,855,977 43,888,074
Available-for-sale securities 655,525,261 654,738,964
Loans held for sale 13,816,847 30,051,204
Loans 886,768,902 871,446,844
Less allowance for loan losses 26,558,065 28,846,336
Loans, net 860,210,837 842,600,508
Premises and equipment, net 26,145,132 26,145,378
Accrued interest receivable 6,639,061 6,602,879
Bank-owned life insurance 35,455,058 34,825,588
Restricted equity securities 5,319,600 5,295,600
Other real estate owned 1,154,541 3,489,887
Prepaid FDIC assessment -- 2,023,977
Deferred tax asset 18,798,247 10,406,187
Other assets 3,053,149 2,434,228
$1,690,973,710 $1,662,502,474
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing $ 176,502,843 $ 158,066,510
Interest-bearing:
NOW accounts 342,244,341 349,531,376
Savings 524,179,994 504,193,793
Money management accounts 18,755,629 18,032,530
Time deposits over $100,000 267,180,250 280,870,648
Other time deposits 112,798,796 110,576,827
1,441,661,853 1,421,271,684
Securities sold under repurchase agreements 697,981 976,433
Advances from Federal Home Loan Bank 74,000,000 64,000,000
Accrued interest payable and other liabilities 17,592,301 18,924,619
Due to broker 3,635,649 --
Subordinated debentures 21,546,646 21,546,646
Total liabilities 1,559,134,430 1,526,719,382
Stockholders' equity:
Preferred stock, no par value; 10,000,000 shares authorized; 0 shares outstanding in 2013 and 2012, respectively -- --
Common stock, $3.00 par value; 10,000,000 shares authorized; 6,680,225 and 6,680,225 shares issued in 2013 and 2012, respectively; 6,679,426 and 6,675,000 shares outstanding in 2013 and 2012, respectively 20,040,675 20,040,675
Additional paid-in capital 62,858,518 62,835,122
Retained earnings 55,272,952 45,028,153
Treasury stock, at cost; 799 and 5,225 shares in 2013 and 2012, respectively (11,114) (72,680)
Accumulated other comprehensive income (loss), net (6,321,751) 7,951,822
Total stockholders' equity 131,839,280 135,783,092
$1,690,973,710 $1,662,502,474
SOUTHEASTERN BANK FINANCIAL CORPORATION
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
Interest income:
Loans, including fees $ 11,668,193 $ 11,741,990 $ 35,103,130 $ 34,960,016
Investment securities 3,874,708 4,134,441 11,753,961 12,801,516
Interest-bearing deposits in other banks 13,255 15,036 50,140 61,576
Total interest income 15,556,156 15,891,467 46,907,231 47,823,108
Interest expense:
Deposits 1,637,737 2,227,312 5,150,259 7,318,465
Securities sold under repurchase agreements 3,924 738 5,625 9,408
Other borrowings 684,450 683,606 2,030,026 1,910,598
Total interest expense 2,326,111 2,911,656 7,185,910 9,238,471
Net interest income 13,230,045 12,979,811 39,721,321 38,584,637
Provision for loan losses 1,887,354 2,401,386 6,046,046 6,567,098
Net interest income after provision for loan losses 11,342,691 10,578,425 33,675,275 32,017,539
Noninterest income:
Service charges and fees on deposits 1,849,000 1,732,609 5,316,563 5,028,932
Gain on sales of loans 1,659,195 2,948,935 5,716,007 7,267,387
Gain on sale of fixed assets, net -- 4,000 21,704 10,459
Investment securities gains (losses), net (162,619) (36,333) (191,945) 441,186
Other-than-temporary loss:
Total impairment loss -- -- -- (13,314)
Less loss recognized in other comprehensive income -- -- -- (4,268)
Net impairment loss recognized in earnings -- -- -- (9,046)
Retail investment income 557,222 419,903 1,545,062 1,446,549
Trust service fees 300,529 279,808 889,784 857,084
Earnings from cash surrender value of bank-owned life insurance 326,514 304,892 896,963 830,875
Miscellaneous income 332,527 169,543 707,940 535,274
Total noninterest income 4,862,368 5,823,357 14,902,078 16,408,700
Noninterest expense:
Salaries and other personnel expense 5,712,535 6,603,393 18,050,477 19,343,362
Occupancy expenses 940,349 1,014,315 2,814,485 3,111,118
Other real estate losses (gains), net 10,508 (96,667) 627,808 1,252,269
Other operating expenses 3,549,935 3,166,798 9,769,033 9,444,855
Total noninterest expense 10,213,327 10,687,839 31,261,803 33,151,604
Income before income taxes 5,991,732 5,713,943 17,315,550 15,274,635
Income tax expense 1,789,415 1,838,467 5,334,180 4,735,723
Net income $ 4,202,317 $ 3,875,476 $ 11,981,370 $ 10,538,912
Other comprehensive income (loss):
Unrealized gain (loss) on derivatives 179,133 30,034 1,304,103 (327,825)
Unrealized gain (loss) on securities available-for-sale (5,022,623) 4,467,565 (24,857,051) 9,194,471
Reclassification adjustment for realized (gain) loss on securities, net of OTTI 162,619 36,333 191,945 (432,140)
Tax effect 1,820,859 (1,763,699) 9,087,430 (3,281,023)
Total other comprehensive income (loss) (2,860,012) 2,770,233 (14,273,573) 5,153,483
Comprehensive income (loss) $ 1,342,305 $ 6,645,709 $ (2,292,203) $ 15,692,395
Basic net income per share $ 0.63 $ 0.58 $ 1.79 $ 1.58
Diluted net income per share $ 0.63 $ 0.58 $ 1.79 $ 1.58
Weighted average common shares outstanding 6,679,426 6,680,020 6,678,555 6,679,294
Weighted average number of common and common equivalent shares outstanding 6,679,426 6,680,020 6,678,555 6,679,294

CONTACT: Ronald L. Thigpen Executive Vice President and COO Southeastern Bank Financial Corp. 706-481-1014Source:Southeastern Bank Financial Corp.