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SouthCrest Financial Group Reports Preliminary 2Q20 Earnings

ATLANTA, July 21, 2020 (GLOBE NEWSWIRE) -- Brian D. Schmitt, Chief Executive Officer of SouthCrest Financial Group, Inc. (SCSG:PK) announced today that the Company reported preliminary earnings of $1.63 million or $0.21/share for the second quarter ended June 30, 2020.  Excluding non-core items, primarily securities gains, core earnings were $1.21 million, or $0.15/share.  Total core net income is up effectively flat from 2Q19, but core EPS increased by 20% from 1Q20.

“I would like to start with saying how proud I remain in the efforts of all of our team members who have operated at the highest standard possible during this remarkably difficult time.  Our SouthCrest family has gone above and beyond in taking care of each other, our customers and the communities we have the privilege to serve and live in.”

“Financially, we are comfortable with where we stand today but we continue to be diligent on the credit front.  The earnings run rate at SouthCrest has recovered to pre-COVID levels as expenses have declined slightly while the balance sheet adjustments made during the past four months have offset the negative interest margin impact of the first quarter FOMC rate cuts.  Loan deferrals appear to have hit a peak in June at approximately $58 million or 18% of loans.  As of this writing, based on communication with nearly every deferred borrower, and using the standard of payments actually occurring to signify the end of deferral, we expect deferrals at the end of July to be down 60% to $23MM or 7% of loans, and decline further in August to just 2% of loans.  As a result, we currently believe that our allowance for loan losses and future provisioning expense should be manageable for the rest of 2020.   We also believe that our strong earnings performance and significantly increased unrealized gain in our investment portfolio will provide additional capital if necessary.” 

The Company is also announcing that it will pay a regular quarterly dividend of $0.05/share on August 13, 2020 to shareholders of record July 30, 2020.

Total assets increased to $622.4 million vs. $577.7 million in 1Q20 and $528.5MM in the year ago quarter.  Loan growth was modest during the quarter finishing at $338.6 million vs. $334.5 million at the end of 1Q20 and $316.0 million 2Q19.  None of the loan growth during the quarter was the result of PPP loans as the Company partnered with a third party for that product.  The ALLL grew from $3.2MM (0.95% of loans) to $4.0MM (1.18% of loans) in the quarter with the elevated provision expense and a significant recovery that occurred in June.  Excess liquidity was reinvested into the investment portfolio which increased by $34MM during the quarter.

Interest income increased 4.3% from 1Q20 due to both the increase in loan balances and the larger investment portfolio.  Interest expense declined 3.8% during the quarter as well which increased the overall net interest income by 5.7% or $260,000 versus the first quarter.  During the second quarter, the cost of deposits declined by 8bps to 0.46%.  Provision expense increased to $450,000 from $150,000 in the first three months of 2020.

Non-interest income, excluding the $548,000 of securities gains, was down from the prior three months with NSF and overdraft fees declining by 48% as the primary driver.  Non-interest expense declined by 9% from the previous quarter with the majority of the decline resulting from the temporary elimination of bonus accruals.

The estimated Tier 1 Leverage ratio at the end of the quarter for SouthCrest Bank declined to 8.99% from 9.62% as a result of the deposit growth during the quarter.  On a fully converted basis (including the conversion of all preferred equity), TBV/share ended the quarter at $7.84 per share, up from $6.83 at the end of 2019 and $7.09 at the end of 1Q20.  This is directly a result of the timely securities purchases made during the past four months.  This metric will continue to be influenced by OCI changes resulting from the swings in interest rates.  Currently, the positive impact to TBV by OCI is $0.86/share vs. $0.09/share at the end of 4Q19 and $0.28/share as of 1Q20.  The current fully converted share count at the end of the quarter was 7.841 million shares, comprised of 5.786 million common shares and 2.055 million preferred shares.

Asset quality ratios improved slightly from the prior quarter, with NPAs to assets declining to 0.71% vs. 0.80% in 1Q20.  As of June 30, 2020 the Company’s OREO balances were $447,000.

ABOUT SOUTHCREST

SouthCrest Financial Group, Inc. is a bank holding company with over half a billion dollars in assets, headquartered in Atlanta, GA.  The company operates a 9 branch network throughout Georgia through its subsidiary bank, SouthCrest Bank, N.A.  The bank provides a full suite of retail, private, entrepreneurial, high-net-worth and commercial banking services, and online banking services. 

FORWARD-LOOKING STATEMENTS

This presentation may contain certain “forward-looking statements” that are subject to risks, uncertainties, and other factors that could cause actual results and shareholder values to differ materially from those projected.  Factors that could cause or contribute to such differences include economic conditions, government regulation and legislation, changes in interest rates, credit quality, competition, and other risk factors.  You should not rely upon forward-looking statements, as they are inherently unlikely to occur, and we do not assume any liability to update or correct any forward-looking statements that we make.

Andy Borrmann
Chief Financial Officer
678.734.3505

Statement of Operations ($000s, Unaudited)          
  Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020
Interest Income          
Loans          
Construction and Development $ 603 $ 636 $ 669 $ 744 $ 758
Commercial Real Estate   1,834   2,037   2,030   1,856   1,974
Commercial Loans   429   446   645   553   567
Multi Family   32   27   28   21   21
Residential Mortgage   1,101   991   1,029   904   750
Consumer Loans   41   41   34   36   29
County/Municipal Loans   22   22   24   34   41
Loss Share Loans   61   61   58   46   37
Investment Securities          
Federal Funds/Overnight Funds $ 88 $ 107 $ 77 $ 129 $ 6
Bank Owned CDs   6   6   2   0   0
Investment Securities   1,111   950   996   1023   1393
Total Interest Income $  5,329 $  5,324 $  5,592 $  5,346 $  5,576
           
Total Interest Expense $ 759 $ 658 $ 699 $ 769 $ 741
Net Interest Income $  4,570 $  4,666 $  4,893 $  4,577 $  4,835
Provision for Loan Losses   0   39   0   150   450
Net Interest Income after Loan Losses $  4,570 $  4,627 $  4,893 $  4,427 $  4,385
Other Income          
Service Charges on Deposits $ 153 $ 148 $ 144 $ 138 $ 132
NSF/Overdraft Fees   310   356   348   305   158
Other Service Charges   70   78   95   64   71
ATM/Billpay/DR Card Income   284   278   271   247   277
Other Income   131   308   268   238   664
Total Other Income $ 947 $ 1,169 $ 1,186 $ 992 $ 1,303
Non-Interest Expense          
Salaries, Other Comp (+ FAS123R) $ 1,842 $ 1,856 $ 2,140 $ 1,940 $ 1,711
Employee Benefits   370   391   379   412   341
Occupancy & FF&E Expense   570   564   529   503   506
Professional Fees   274   152   149   141   143
Data Processing   488   497   502   488   385
Other Expense   613   505   667   632   661
Total Noninterest Expenses $  4,157 $  3,963 $  4,366 $  4,116 $  3,747
Pre-Tax Income (Loss) $  1,360 $  1,832 $  1,713 $  1,303 $  1,941
Income Taxes   315   417   389   265   316
Net Income $  1,045 $  1,414 $  1,323 $  1,038 $  1,625
 
                   


Balance Sheet ($000s, Unaudited)          
Assets Q2 2019
  Q3 2019
  Q4 2019
  Q1 2020
  Q2 2020
 
Current Assets          
Cash & Due from Bank $ 30,930   $ 13,758   $ 38,555   $ 19,845   $ 22,520  
Federal Funds/Overnight Funds   0     0     5,215     0     7,873  
Bank Owned CDs   1,322     1,069     77     0     0  
Investment Securities   141,013     139,907     139,880     184,377     318,680  
Total Current Assets $ 173,265   $ 154,733   $ 183,727   $ 204,222   $ 249,072  
           
Loans          
Construction and Development $ 40,040   $ 43,661   $ 47,593   $ 56,430   $ 64,320  
Commercial Real Estate   153,527     155,397     146,287     142,610     139,407  
Commercial Loans   28,036     42,921     53,833     53,383     56,860  
Multi Family   1,970     1,939     1,611     1,601     1,590  
Residential Mortgage   85,064     80,391     77,772     73,778     66,810  
Consumer Loans   1,384     1,022     830     2,144     2,472  
County/Municipal Loans   2,037     2,037     3,109     3,732     4,851  
Loss Share Loans   3,933     3,859     3,601     2,451     2,315  
Total Loans $ 315,991   $ 331,227   $ 334,635   $ 336,129   $ 338,625  
Allowance for Loss   (3,022 )   (3,073 )   (3,039 )   (3,184 )   (3,984 )
Net Loans $ 312,698   $ 328,154   $ 331,596   $ 332,946   $ 334,641  
OREO   575     0     497     529     447  
FDIC Indemnification   0     0     0     0     0  
BOLI   22,186     22,323     22,456     22,583     22,737  
Fixed Assets, net   9,180     8,982     8,862     8,705     8,697  
Intangible Assets   100     96     84     80     68  
Other Assets   10,083     9,424     8,740     8,604     6,731  
Total Assets $ 528,503   $ 523,711   $ 555,960   $ 577,669   $ 622,383  
                               
Liabilities & Stockholders' Equity          
Liabilities          
Deposits          
DDAs $ 98,229   $ 94,680   $ 103,154   $ 96,517   $ 114,554  
Interest Bearing Demand   59,606     63,386     87,685     85,746     96,141  
Celebration Checking   100,950     97,277     98,558     103,718     111,421  
Money Market Accts   33,080     32,382     33,888     37,693     38,650  
Savings   44,407     44,383     44,370     44,516     47,674  
CDs Less Than $100k   56,256     56,543     54,228     53,616     52,709  
CDs Greater than $100k   38,854     41,846     43,404     47,259     47,049  
Total Deposits $ 431,382   $ 430,497   $ 465,288   $ 469,064   $ 508,198  


Other Liabilities   2,583     2,516     2,143     2,415     2,184  
Net Borrowings (Wholesale Funding)   33,795     33,429     34,697     50,228     50,546  
Total Liabilities $ 467,760   $ 466,443   $ 502,127   $ 521,708   $ 560,918  
Total Equity   60,743     57,268     53,833     55,961     61,465  
Total Liabilities & Stockholders' Equity $ 528,503   $ 523,711   $ 555,960   $ 577,669   $ 622,393  
                               


Ratios      
  Q2 2019   Q3 2019   Q4 2019   Q1 2020   Q2 2020  
ROAA 0.78 % 1.09 % 0.98 % 0.75 % 1.05 %
ROAE 7.04 % 10.10 % 9.52 % 7.30 % 10.87 %
NPAs/Assets (Core) 1.09 % 1.00 % 0.77 % 0.80 % 0.71 %
Est. T1 Leverage (Bank) 9.95 % 9.65 % 9.63 % 9.62 % 8.99 %
Total Common Shares 6,360,273   5,849,101   5,832,793   5,832,793   5,786,288  
Total Preferred Shares 2,061,719   2,058,121   2,054,759   2,054,759   2,054,759  
Total Common Equiv. Shares 8,421,992   7,907,222   7,887,552   7,887,552   7,841,047  
NIM (Bank) 3.74 % 3.92 % 4.03 % 3.65 % 3.37 %
Cost of Deposits (Bank) 0.51 % 0.54 % 0.53 % 0.54 % 0.46 %
Loan/Deposit 73.0 % 76.7 % 71.9 % 71.6 % 66.6 %
Employees 106   103   105   104   102  
Loans in Atlanta MSA 67.4 % 76.8 % 77.5 % 78.2 % 79.1 %
                     

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