BOCA RATON, Fla., July 28, 2008 (PRIME NEWSWIRE) -- Sun American Bancorp ("Sun American") (Nasdaq:SAMB), the bank holding company for Sun American Bank, today reported a net loss of $2.5 million or $0.24 per diluted share, in the second quarter of 2008, compared to net income of $119,000, or $0.01 per diluted share, in the second quarter of 2007. For the six months ended June 30, 2008, the net loss was $2.5 million or $0.24 per diluted share, compared to net income of $216,000 or $0.02 per diluted share for the six months ended June 30, 2007.
Michael Golden, Chairman of Sun American Bank stated, "Pre-tax income for the second quarter, excluding provision for loan losses, stock option expense, and OREO expenses, was $533,000, compared to $388,000 in the second quarter of 2007 representing a 27% improvement. Pre-tax income for the six months of 2008, excluding provision for loan losses, stock option expense, and OREO expenses, was $951,000, compared to $862,000 for same period in 2007, an improvement of 10% in core operating earnings. We believe this is an indication of our operating performance continuing to be on target despite a turbulent market place."
2008 Balance Sheet Highlights - -- Total assets grew $71 million or 12% from year end. -- Net loans grew $45 million or 10% from year end. -- Gross new loans booked in the first half of 2008 were $109 million. -- Funded loans increased by $77 million in the first half of 2008. -- Total deposits grew $85 million or 22% from year end. -- Core customer deposits increased by $70 million or 26% from year end. -- Allowance for loan loss increased $9 million from $6.5 million or 38% from year end resulting in a strong allowance of 1.83% of total loans compared to 1.46% at year end. -- Non-performing assets increased to $16.7 million or 2.58% of assets from $7.3 million or 1.26% of assets at year end. -- Over $12 million of troubled loans have been managed out of the Bank in the last twelve months. 2008 Income Statement Highlights - -- Net interest margin was 3.62% in Q2 2008 compared to 3.74% in Q1 2008 and 3.68% in Q4 2007. -- Net interest income in Q2 2008 increased by 6% compared to Q1 2008. -- Pre tax earnings before credit costs and stock option expenses were $533,000 in Q2 2008 compared to $418,000 in Q1 2008 and $127,000 in Q4 2007. -- Average cost of funds decreased to 2.96% at June 30, 2008 compared to 4.07% at year end. -- Operating expenses decreased by $461,000 or 4.2% in first half 2008 compared to 2007.
Operating Results
Sun American's quarterly net interest income was $5.0 million compared to $5.5 million in the second quarter a year ago due to NIM compression -- something that most banks face in the current environment. Overall average loan portfolio yield decreased from 8.69% at June 30, 2007 to 7.07% at June 30, 2008. Comparatively, average overall cost of funds decreased from 4.70% for the six months ended June 30, 2007 to 3.72% for the six months ended June 30, 2008.
The NIM for the second quarter of 2008 was 3.62%, compared to 3.74% in Q1 2008, 3.68% in Q4 2007 and 4.25% for the second quarter of 2007.
Net interest income actually increased in the second quarter of 2008 compared to the first quarter of 2008, reflective of successfully managing down our cost of funds and the positive impact of our asset liability management strategies in a declining interest rate environment.
Interest and fees on loans decreased 14% to $7.9 million in the second quarter of 2008 compared to the second quarter of 2007 due to the lower yields earned on loans.
For the second quarter of 2008, Sun American recorded $4 million in provision for loan losses in response to higher levels of non-performing assets associated with collateral dependent commercial real estate loans. The comparative provision for loan loss for the three months ended June 30, 2007 was a recovery of $198,000. Interest income of $137,000 was reversed in the second quarter of 2008 related to loans where the collection of interest income became doubtful. Operating expenses decreased to $5.3 million for the second quarter of 2008 from $5.9 million in the second quarter of 2007. The reduction in expenses is attributed to savings associated with staff reduction initiatives and lower incentive compensation costs. In addition, the results for the second quarter of 2007 included a one-time charge of $292,000 for obsolete fixed assets associated with the demolition of a branch.
For the six months ended June 30, 2008, Sun American also recorded $4 million in provision for loan losses again in response to rising non-performing assets associated with collateral dependent commercial real estate loans. The net interest margin ("NIM") was at 3.67% for the six months of 2008 compared to 4.40% for the six months in 2007. Interest income of $207,000 was reversed during the first six months of 2008 related to loans where the collection of interest income became doubtful. Net interest income totaled $9.8 million for the six months ended June 30, 2008 compared to $10.4 million for the same period in 2007. Operating expenses decreased to $10.5 million for the six months of 2008, from $11.0 million for the same period in 2007. The reduction in expenses is attributed to savings associated with staff reduction initiatives and lower incentive compensation costs. In addition, the results for the first six months of 2007 included a one-time charge of $292,000 for obsolete fixed assets associated with the demolition of a branch.
Sun American President and Chief Executive Officer Michael Golden said, "We believe that increasing the reserve allowance to the current level was the most prudent and conservative position for the Bank to take at this time. One of the issues we have with a number of our borrowers' assets, which is the same as other banks, is the continually lower appraisal values of the collateral. When the deterioration of assets stops, we expect to find relief from the majority of financial problems that we, and other banks, are experiencing. Needless to say the Florida real estate market remains in a difficult place for the banking business and will remain that way until such time that economic events take place that change those conditions. We maintain that our core financial results continue to remain strong, in light of the economic and competitive pressures affecting our market place today, I still feel very confident that when the cycle turns up that we will be well positioned to take advantage of the financial markets that will present themselves. We have shown that we are able to grow the Bank's loan portfolio by booking $109 million of new loans before runoffs and amortization. I maintain the best model to work our way out of the challenges we face in today's banking environment is to earn our way out of it by adding good quality loans that produce better than average net interest margins. In turn this growth will give us the financial returns in the future that we have produced in the past."
Non-interest expenses were $5.3 million in the second quarter of 2008, a decrease of 10% from $5.9 million in the second quarter a year ago. Mr. Golden stated that "salaries and benefits reflect cost reduction initiatives undertaken during the second half of 2007. The number of full time equivalent staff has reduced by 11% from levels of one year ago. Occupancy and equipment included a $292,000 fixed asset write-off in 2007."
Second quarter 2008 results included recognition of stock based compensation expense of approximately $280,000 before tax compared to $257,000 in the second quarter of 2007.
Robert Nichols, Chief Financial Officer noted, "Our net interest income is increasing in 2008 even with the higher levels of non-performing loans. We have experienced strong growth in new loans and core deposits in the first half of 2008. Our net interest margin has remained stable in the past three quarters. We have significantly lowered our cost of funds throughout the first half of 2008. We believe this provides clear evidence that our core operating results are improving despite the higher credit costs we have incurred in this difficult economic period."
Balance Sheet Activity
Sun American ended the quarter with assets of $649 million at June 30, 2008, up $54 million or 9% from $595 million at June 30, 2007 and up $71 million or 12% compared to December 31, 2007.
Net loans were $485 million at June 30, 2008, an increase of 14% from $425 million at June 30, 2007, and up $45 million or 10% compared to December 31, 2007.
Total non-performing assets were $16.7 million at June 30, 2008, compared to $7.3 million at December 31, 2007, and $7.9 million at June 30, 2007. The ratio of non-performing assets as a percentage of total assets increased to 2.58% at June 30, 2008 from 1.26% at December 31, 2007 and 1.33% at June 30, 2007.
The total allowance for loan losses was $9.0 million at June 30, 2008 compared to $6.5 million at December 31, 2007 and $3.8 million at June 30, 2007. The allowance for loan losses as a percentage of the total loan portfolio was strengthened to 1.83% at June 30, 2008 compared to 1.46% at December 31, 2007 and 0.88% at June 30, 2007. In the second quarter of 2008, charge-offs amounted to $319,000. The charge-offs were due to three home equity lines of credit.
Robert Garrett, Chief Lending Officer, noted "As stated in the past, we continue to work aggressively to resolve issues related to clients experiencing loan performance issues, as well as those that we have identified as having the potential for performance issues down the road. Initiatives include workouts, loan sales, and when required, foreclosures. We have successfully managed over $12 million in troubled assets out of the Bank in the past twelve months. Our policy is to monitor borrower activity closely and to identify potential problems preemptively. We want to work with our borrowers to provide solutions that work in the best interests of both the borrower and the Bank. We recognize that the challenges within the real estate markets will not go away overnight and more than likely will continue throughout 2008. We have an extremely experienced management team in our Special Assets Department that is led by an individual with twenty five years of experience, and who has worked through similar market conditions in years past."
Total deposits increased by $85 million or 22% from year end including a $70 million or 26% increase in core customer deposits. Total deposits were $18 million or 4% higher than the June 30, 2007 levels.
Stockholders' equity decreased 12% to $94 million compared to $107 million at June 30 2007. The $13 million decrease in equity was due to net losses of $5.8 million incurred since June 30, 2007. In addition, Sun American bought back 700,000 shares of common stock in the period at a cost of $3.6 million and bought back stock purchase warrants at a cost of $1.6 million, both of which resulted in a reduction of shareholder equity. In addition, Sun American booked a capital reduction adjustment to the purchase price of Beach Bank of approximately $2 million.
Mr. Golden further commented that "capital preservation is a primary focus of the Bank during this period and that we are, and intend to remain, well capitalized despite higher loan loss provisions."
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SUN AMERICAN BANCORP CONSOLIDATED BALANCE SHEETS June 30, December 31, 2008 2007 ------------ ------------ (Unaudited) ASSETS Cash and due from financial institutions $ 10,075,366 $ 8,109,917 Federal funds sold 5,288,000 -- ------------ ------------ Total cash and cash equivalents 15,363,366 8,109,917 Securities available for sale 5,395,665 5,778,655 Securities held to maturity (fair value 2008 - $71,096,454, 2007 - $ 50,940,402) 71,526,598 50,306,758 Loans, net of allowance for loan losses of $9,036,265 and $6,503,508 485,388,777 439,961,953 Federal Reserve Bank stock 3,002,700 3,180,900 Federal Home Loan Bank stock 2,840,600 4,658,500 Accrued interest receivable 2,921,152 2,698,469 Premises and equipment, net 10,606,887 11,211,441 Goodwill 42,257,804 42,362,255 Intangibles 2,288,984 2,719,538 Other assets 7,197,389 6,884,053 ------------ ------------ $648,789,922 $577,872,439 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Non-interest bearing $ 55,317,911 $ 50,098,536 Interest bearing 410,810,237 330,608,180 ------------ ------------ Total deposits 466,128,148 380,706,716 Securities sold under agreements to repurchase 37,629,012 14,983,655 Federal Home Loan Bank advances 40,000,000 78,000,000 Notes payable 7,528,871 2,703,155 ------------ ------------ Accrued expenses and other liabilities 3,380,980 3,660,365 ------------ ------------ Total liabilities 554,667,011 480,053,891 Minority interest 26,855 27,359 Shareholders' equity Common stock, $.025 par value; 20,000,000 shares authorized; 10,234,820 shares outstanding at June 30, 2008, 10,632,434 shares outstanding at December 31, 2007 273,374 273,374 Additional paid-in capital 106,308,326 105,728,957 Accumulated deficit (8,485,932) (6,025,754) Treasury stock, 700,124 shares at June 30, 2008, 302,510 shares at December 31, 2007 (3,565,855) (1,990,641) Accumulated other comprehensive loss (433,857) (194,747) ------------ ------------ Total shareholders' equity 94,096,056 97,791,189 ------------ ------------ $648,789,922 $577,872,439 ============ ============ SUN AMERICAN BANCORP CONSOLIDATED STATEMENTS OF INCOME Six Months Ended ---------------------------- June 30, June 30, 2008 2007 ------------ ------------ (Unaudited) (Unaudited) Interest and dividend income: Loans, including fees $ 16,062,084 $ 16,801,749 Securities 2,061,849 1,706,709 Federal funds sold and other 98,741 468,962 ------------ ------------ 18,222,674 18,977,420 Interest expense: Deposits 6,810,371 7,891,865 Federal Home Loan Bank advances 1,159,090 650,319 Other 466,275 81,323 ------------ ------------ 8,435,736 8,623,507 ------------ ------------ Net interest income before provision for loan losses 9,786,938 10,353,913 Provision for loan losses 3,999,204 (198,000) ------------ ------------ Net interest income after provision for loan losses 5,787,734 10,551,913 Non-interest income: Service charges on deposit accounts 834,655 810,006 Other income 161,142 163,742 Net losses on sales of securities -- (937) ------------ ------------ 995,797 972,811 Non-interest expenses: Salaries and employee benefits 4,889,743 5,138,860 Occupancy and equipment 2,710,833 2,847,719 Data and item processing 486,218 647,905 Professional fees 494,271 639,372 Insurance 304,240 265,082 Advertising 60,048 53,543 Amortization of intangible assets 412,220 334,736 Other 1,191,514 1,082,824 ------------ ------------ 10,549,087 11,010,041 ------------ ------------ Income (loss) before income taxes and minority interest (3,765,556) 514,683 Minority interest in net loss (income) of subsidiary 444 (13,535) ------------ ------------ Income (loss) before provision for income taxes (3,765,112) 501,148 ------------ ------------ Income tax (benefit) expense (1,304,934) 285,379 ------------ ------------ Net (loss) income $ (2,460,178) $ 215,769 ============ ============ Basic (loss) earnings per share $ (0.24) $ 0.02 ============ ============ Diluted (loss) earnings per share $ (0.24) $ 0.02 ============ ============ Weighted average number of common shares, basic 10,369,412 10,073,259 ============ ============ Weighted average number of common shares, diluted 10,369,412 11,201,860 ============ ============ SUN AMERICAN BANCORP CONSOLIDATED STATEMENTS OF INCOME Three Months Ended ---------------------------- June 30, June 30, 2008 2007 ------------ ------------ (Unaudited) (Unaudited) Interest and dividend income: Loans, including fees $ 7,865,177 $ 9,180,119 Securities 1,120,668 933,697 Federal funds sold and other 35,935 106,013 ------------ ------------ 9,021,780 10,219,829 Interest expense: Deposits 3,197,377 4,181,576 Federal Home Loan Bank advances 454,886 528,813 Other 339,352 57,280 ------------ ------------ 3,991,615 4,767,669 ------------ ------------ Net interest income before provision for loan losses 5,030,165 5,452,160 Provision for loan losses 4,047,604 (198,000) ------------ ------------ Net interest income after provision for loan losses 982,561 5,650,160 Non-interest income: Service charges on deposit accounts 418,544 454,079 Other income 8,127 36,500 Net losses on sales of securities -- (937) ------------ ------------ 426,671 489,642 Non-interest expenses: Salaries and employee benefits 2,430,984 2,658,038 Occupancy and equipment 1,350,078 1,647,607 Data and item processing 258,330 282,735 Professional fees 254,587 310,211 Insurance 146,790 123,707 Advertising 25,964 35,927 Amortization of intangible assets 193,906 229,854 Other 616,358 569,613 ------------ ------------ 5,276,997 5,857,692 ------------ ------------ Income (loss) before income taxes and minority interest (3,867,765) 282,110 Minority interest in net loss (income) of subsidiary 541 (82) ------------ ------------ Income (loss) before provision for income taxes (3,867,224) 282,028 ------------ ------------ Income tax (benefit) expense (1,401,681) 162,683 ------------ ------------ Net (loss) income $ (2,465,543) $ 119,345 ============ ============ Basic (loss) earnings per share $ (0.24) $ 0.01 ============ ============ Diluted (loss) earnings per share $ (0.24) $ 0.01 ============ ============ Weighted average number of common shares, basic 10,276,390 10,828,210 ============ ============ Weighted average number of common shares, diluted 10,276,390 11,794,318 ============ ============ SUN AMERICAN BANCORP CONSOLIDATED AVERAGE BALANCE SHEET For the six month period ended June 30, ----------------------------------------------------- 2008 2007 ------------------------ --------------------------- Average Average Average Interest Yield/ Average Interest Yield/ Balance (4) Rate(3) Balance (4) Rate(3) -------- ------- ----- -------- -------- ---- (Dollars in thousands) Assets: Interest-earning assets: Investments (1) $ 70,975 $ 2,062 5.83% $ 66,535 $ 1,707 5.17% Federal funds sold and other 7,542 99 2.63 18,276 469 5.17 Loans: Commercial loans (2) 33,054 1,118 6.78 33,661 1,530 9.17 Commercial mortgage loans (2) 307,893 10,944 7.13 246,996 10,695 8.73 Consumer loans (2) 5,222 198 7.60 4,601 199 8.73 Residential mortgage loans (2) 78,312 2,772 7.10 85,224 3,667 8.68 Home equity and other loans (2) 31,154 1,030 6.63 19,509 711 7.35 -------- ------- ---- -------- -------- ---- Total loans 455,635 16,062 7.07 389,991 16,802 8.69 -------- ------- -------- -------- Total interest earning assets 534,152 18,223 6.84 474,802 18,978 8.06 Non-interest earning assets 73,579 59,875 -------- -------- Total $607,731 $534,677 ======== ======== Liabilities and Stockholders' Equity: Interest-bearing liabilities: Deposits: NOW accounts $ 68,532 886 2.59 $ 95,538 1,939 4.09 Money Market accounts 54,351 890 3.29 49,335 1,026 4.19 Savings accounts 26,931 417 3.10 12,157 193 3.20 Certificates of deposit 203,550 4,617 4.55 183,547 4,734 5.20 -------- ------- -------- -------- Total inte- rest-bearing deposits 353,364 6,810 3.87 340,577 7,892 4.67 Federal funds purchased and securities sold under repurchase agreement 22,716 368 3.25 3,794 81 4.32 Federal Home Loan Bank advances 74,516 1,159 3.12 25,891 651 5.07 Notes payable 3,897 98 5.07 -- -- -- -------- ------- -------- -------- Total interest bearing liabilities 454,493 8,436 3.72 370,262 8,624 4.70 -------- ------- -------- -------- Non-interest bearing liabilities 56,235 68,655 Stockholders' equity 97,003 95,760 -------- -------- Total $607,731 $534,677 ======== ======== Net Interest income and yield on net interest-earning assets $ 9,787 3.67% $ 10,354 4.40% ======= ==== ======== ==== -------------- (1) Includes investment securities, Federal Reserve Bank stock and Federal Home Loan Bank stock. (2) Includes loans for which the accrual of interest has been suspended. (3) Yields and rates are annualized. (4) Includes Fee Income on Loans.