BOCA RATON, Fla., Oct. 25, 2007 (PRIME NEWSWIRE) -- Sun American Bancorp ("Sun American") (Nasdaq:SAMB), the bank holding company for Sun American Bank, today reported a net loss of $265,000 or $0.02 per share for the third quarter ended September 30, 2007, compared to net income of $491,000 or $0.05 per diluted share for the third quarter of 2006. Third quarter ended September 30, 2007 results included the recognition of stock-based compensation expense of approximately $254,000, and non-recurring restructuring charges of $50,000.
For the first nine months of 2007, the net loss was $50,000, or $0.00 per diluted share, compared to net income of $1.3 million, or $0.15 per diluted share, in the comparable nine month period a year ago. Results for the nine months ended September 30, 2007 included the following items totaling $1.1 million that were not required in the nine months ended September 30, 2006:
-- Fixed asset write-off of the razing of an older branch for $292,000; -- Conversion costs related to two bank acquisitions of $199,000; -- Restructuring charges in connection with staff reductions of $50,000; -- Additional stock compensation expense of $342,000; -- Additional income tax expense of $200,000.
In addition, the reported diluted earnings per share in 2007 reflect 3.2 million shares issued since September 2006 to partially finance activities in the acquisition of Independent Community Bank and Beach Bank.
Third Quarter 2007 Highlights (compared to third quarter 2006) included:
* Revenues advanced 25% to $5.4 million. * Net interest income before provision for loan losses grew 19% to $4.9 million. * Nonperforming assets represented 1.61% of total assets. * Net interest margin for the nine months ended September 30, 2007 was 4.19%. * Loans increased 60% to $435 million. * Deposits increased 87% to $442 million. * Assets increased 78% to $589 million. * Book value per share increased to $9.76 from $8.26.
Sun American President and Chief Executive Officer Michael Golden said, "Our core financial outlook remains healthy, particularly our strong capital position. In light of the economic and competitive pressures affecting our market place today, which are far from over, I still feel very confident that when the cycle turns up that we will be well positioned to take advantage of it financially.
The lower results for the third quarter as in past quarters of 2007 continue to be attributable to a few different factors.
First, the increased investment in our infrastructure such as the implementation of our new operations center, five new branches and related branch employees to support a larger business which we believe is attainable in the coming few years, has obviously added to our overhead costs. Without this added infrastructure we could not grow our bank in a safe and sound manner to a billion dollar bank.
Second, the unprecedented winding down of new construction development in South Florida resulted in a considerable reduction in the amount of new construction loans booked, which had been a large part of our loan growth in recent years. The run off of construction loans is not necessarily a bad thing, except when they can not be replaced with new loans. In our case, this run off, combined with loan pay offs and amortizations, has resulted in a net loss of loans to our portfolio of over $19 million in 2007 (excluding the impact of loans acquired).
Lastly, the inverted yield curve that we have experienced during the majority of 2007 resulted in a narrowing of our net interest margin which obviously reduced our net income.
Keeping these issues in mind, we have taken the following steps to offset these challenges and restore our business to expected levels of profitability.
We do not plan to add to our branch total as we now have enough brick and mortar to support the necessary deposit growth for the billion dollar bank we hope to become. We have restructured the supervision of our branches and we believe this will result in better accountability and hence more new accounts being opened with lower costs of funds. Our emphasis continues to be on low cost funds, as we train our branch personnel to open new demand deposit type accounts. This step ultimately will help our net interest margin.
We have also taken steps to reduce non essential staff in the last quarter resulting in a reduction of 10% of our staff. We have also reviewed operating expenses to reduce unnecessary operational costs. The message to our employees is to proactively focus on reduced operating expenses.
Since the beginning of the year we have added five senior loan officers to our staff, bringing us to a total of ten as of this date. Our pipe line of new loans has started to build significantly due to the increase of loan officers and I believe this will continue to build and give us better financial results in the near future."
Mr. Golden further reported that, "We have undertaken a number of initiatives to improve the performance of our share price during 2007. We have moved our stock trading to the NASDAQ Global Market and have undertaken a reverse stock split to improve the attractiveness of our stock.
We instituted a stock buy back program and have purchased over 72,000 shares in the open market under this program. Finally, we have initiated a tender offer to purchase a number of series of our warrants in order to reduce the dilutive effect of these securities on our operating results.
We will continue to seek innovative ways to manage our business to improve our shareholder returns.
I believe the steps we have taken will result in a meaningful improvement of our financial results for our franchise in 2008 and beyond. Eventually the real estate economy in Florida along with the rest of the country will return to normal and we will be in a position to take advantage of it."
Operating Results
Sun American's quarterly net interest income increased to $4.9 million compared to $4.1 million in the third quarter a year ago. Year-to-date, net interest income increased 32% to $15.2 million compared to $11.5 million in the same period in 2006. Increases resulted from the increase in the loan portfolio balances. Interest and fees on loans increased 41% to $8.7 million in the third quarter of 2007, and increased 53% to $25.5 million year-to-date, compared to their respective periods a year ago. Non-interest income was $485,000 in the third quarter of 2007 compared to $201,000 in the third quarter a year ago, and year-to-date, non-interest income was $1.5 million, compared to $621,000 in the first nine months a year ago. The fee revenue increase primarily resulted from an increase in service charges on deposit accounts, an increase in the number of accounts as a result of the two acquisitions.
Total revenues, consisting of net interest income before the provision for loan losses and non-interest income, grew 25% to $5.4 million in the third quarter, compared to $4.3 million in the third quarter of 2006. Revenues increased 37% to $16.7 million in the first nine months of 2007, compared to $12.1 million in the same period a year ago.
The net interest margin through the nine months of 2007 was 4.19%, compared to 5.39% for the same period in 2006.
Non-interest expenses were $5.7 million in the third quarter of 2007, an increase from $3.6 million in the third quarter a year ago. For the first nine months of 2007, non-interest expenses were $16.7 million compared to $10.0 million in the first nine months of 2006. Salaries and employee benefits and occupancy costs associated with the expansion of our branch network constituted the majority of the increase in expenses. Also included in 2007 are non-recurring operational conversion costs of approximately $199,000 associated with the Beach Bank asset acquisition and Independent Community Bank merger, $50,000 of restructuring charges, fixed asset write downs of $292,000, and $77,000 of litigation settlement costs.
Sun American incurred stock-based compensation expense of $766,000 for the first nine months of 2007, compared to $424,000 for the first nine months of 2006.
Results for the nine month period ended September 30, 2007 reflected a reduction of loan loss provision in the amount of $167,000. The comparative provision for loan loss for the nine months ended September 30, 2006 was $795,000. The 2007 negative provision was derived despite the increased loan values that were realized through two acquisition transactions and was representative of a number of factors that included:
-- The allowance for loan losses due to the increase in portfolio values associated with the two bank acquisition transactions were booked directly to our allowance for loan losses and to goodwill as purchase price adjustments related to the transactions and did therefore not impact the current year loan loss provision at Acquisition. -- Apart from the growth in loan balances related to the two acquisitions, our loan portfolio has actually decreased by approximately $19 million which reflected loan amortizations, pay downs, payoffs and loan sales in excess of new loan origination. -- The portion of our loan loss provision that is determined by historic loss performance has improved under our loan methodology resulting in a smaller provision requirement. This was offset to some extent by assigning higher provisions in other areas to reflect current market exposures.
The provision for income taxes was $200,000 for the first nine months of 2007, compared to nil for the first nine months of 2006 as no income tax provision was recorded in 2006 due to the utilization of benefits of past loss carry forwards.
Balance Sheet Activity
Net loans increased 60%, to $435 million at September 30, 2007, compared to $272 million a year earlier.
Assets increased 78% to $589 million at September 30, 2007, compared to $331 million a year earlier.
Total deposits grew 87% to $442 million at September 30, 2007, compared to $237 million at September 30, 2006.
Stockholders' equity increased 67% to $106 million compared to $63 million at the end of the third quarter a year ago. Equity growth was due to the issuance of common shares associated with two acquisition transactions. Book value per share improved to $9.76 at September 30, 2007, compared to $8.26 a year earlier.
Credit Quality
At September 30, 2007, nonperforming assets totaled $9.5 million, representing 1.61% of total assets. This compares to $7.9 million at the end of the second quarter. Of the $9.5 million, other real estate owned was $124,000, a decrease from $985,000 in the second quarter. The allowance for loan losses at September 30, 2007 was $3.8 million and represented 0.87% of total loans. In the third quarter, recoveries of $42,000, exceeded charge-offs of $4,000.
Mr. Golden noted that, "We have experienced an increase in nonperforming assets during 2007. We did manage to reduce certain NPA'S in the third quarter from the second quarter but unfortunately found it necessary to add a couple others. We are working aggressively to resolve issues related to clients who are, or who may in future, experience loan performance issues. Initiatives include work outs, loan sales and, when required, foreclosures. Our policy is to monitor borrower activity closely and to identify potential issues before they amplify. We want to work with our borrowers to provide solutions that work in the best interests of both the borrower and the Bank. However we recognize that during this period of real estate challenges these types of problems do not go away over night and we very well may have to continue to deal with them into the next quarter or two."
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Except for historical information containing herein, the matters set forth in this news release are "forward looking" statements, as defined in the Private Securities Litigation Reform Act of 1995. Although Sun American Bancorp believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions; there can be no assurance that its expectations will be realized. Forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from Sun American Bancorp's expectations. Factors that could contribute to such differences include those identified in Sun American Bancorp's Form 10-K for the year-ended December 31, 2006, and those described from time to time in Sun American's other filings with the Securities and Exchange Commission, news releases and other communications.
SUN AMERICAN BANCORP CONSOLIDATED BALANCE SHEETS September 30, 2007 and December 31, 2006 September 30, December 31, 2007 2006 ------------ ------------ (Unaudited) ASSETS Cash and due from financial institutions $ 8,660,240 $ 7,878,379 Federal funds sold 2,361,000 48,537,000 ------------ ------------ Total cash and cash equivalents 11,021,240 56,415,379 Securities available for sale 11,096,602 5,173,796 Securities held to maturity (fair value 2007 - $58,297,982, 2006 - $ 51,980,571) 58,257,730 52,244,379 Loans, net (of allowance for loan losses of $3,821,876 and $3,052,638) 435,335,915 350,742,657 Federal Reserve Bank stock 3,075,850 1,749,300 Federal Home Loan Bank stock 2,588,500 1,289,600 Accrued interest receivable 2,898,028 2,409,283 Premises and equipment, net 11,371,816 9,880,563 Goodwill 45,631,369 17,440,156 Intangibles 2,958,559 1,758,082 Other assets 4,543,574 4,780,002 ------------ ------------ $588,779,183 $503,883,197 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Non interest bearing $ 58,585,308 $ 53,334,086 Interest bearing 383,812,353 349,644,106 ------------ ------------ Total deposits 442,397,661 402,978,192 Repurchase agreements 3,879,636 1,547,273 Federal Home Loan Bank advances 32,000,000 11,000,000 Accrued expenses and other liabilities 4,420,707 3,816,044 ------------ ------------ Total liabilities 482,698,004 419,341,507 Minority interest 28,076 27,753 Shareholders' equity Common stock, $.025 par value; 20,000,000 shares authorized; 2007 - 10,862,374 shares outstanding, 2006 - 9,270,657 shares outstanding 273,374 231,766 Capital surplus 109,640,338 87,407,548 Accumulated deficit (2,965,087) (2,915,439) Treasury stock, at cost; 72,570 shares (631,575) -- Accumulated other comprehensive loss (263,947) (209,938) ------------ ------------ Total shareholders' equity 106,053,103 84,513,937 ------------ ------------ $588,779,183 $503,883,197 ============ ============ SUN AMERICAN BANCORP CONSOLIDATED STATEMENTS OF INCOME Nine months ended September 30, 2007 and 2006 September 30, September 30, 2007 2006 ------------ ------------ (Unaudited) (Unaudited) Interest and dividend income: Loans, including fees $ 25,498,880 16,657,407 Securities 2,642,216 954,969 Federal funds sold and other 711,630 383,216 ------------ ------------ 28,852,726 17,995,592 Interest expense: Deposits 12,647,249 5,959,505 Other 973,075 515,949 ------------ ------------ 13,620,324 6,475,454 ------------ ------------ Net interest income before provision for loan losses 15,232,402 11,520,138 Provision for loan losses (167,306) 795,304 ------------ ------------ Net interest income after provision for loan losses 15,399,708 10,724,834 Non-interest income: Service charges on deposit accounts 1,229,347 621,060 Fees for other services to customers 239,768 -- Net losses on sales of securities (11,540) -- ------------ ------------ 1,457,575 621,060 Non-interest expenses: Salaries and employee benefits 7,840,514 5,228,888 Occupancy and equipment 4,300,746 2,083,655 Data and item processing 919,278 511,671 Professional fees 870,329 507,380 Insurance 426,654 182,764 Amortization of intangible assets 564,591 112,232 Other 1,768,967 1,373,825 ------------ ------------ 16,691,079 10,000,415 ------------ ------------ Income before income taxes and minority interest 166,204 1,345,479 Minority interest in net income of subsidiary (16,028) (713) ------------ ------------ Income before provision for income taxes 150,176 1,344,766 ------------ ------------ Income tax expense 199,824 -- ------------ ------------ Net (loss) income $ (49,648) 1,344,766 ============ ============ Basic earnings per share $ 0.00 0.18 ============ ============ Diluted earnings per share $ 0.00 0.15 ============ ============ Weighted average number of common shares, basic 10,754,472 7,540,168 ============ ============ Weighted average number of common shares, diluted 10,754,472 8,946,766 ============ ============ SUN AMERICAN BANCORP CONSOLIDATED STATEMENTS OF INCOME Three months ended September 30, 2007 and 2006 September 30, September 30, 2007 2006 ------------ ------------ (Unaudited) (Unaudited) Interest and dividend income: Loans, including fees $ 8,697,131 6,171,473 Securities 935,507 350,017 Federal funds sold and other 242,668 34,502 ------------ ------------ 9,875,306 6,555,992 Interest expense: Deposits 4,755,384 2,238,723 Other 241,433 211,497 ------------ ------------ 4,996,817 2,450,220 ------------ ------------ Net interest income before provision for loan losses 4,878,489 4,105,772 Provision for loan losses 30,694 225,853 ------------ ------------ Net interest income after provision for loan losses 4,847,795 3,879,919 Non-interest income: Service charges on deposit accounts 419,341 201,362 Fees for other services to customers 76,026 -- Net losses on sales of securities (10,603) -- ------------ ------------ 484,764 201,362 Non-interest expenses: Salaries and employee benefits 2,701,654 1,875,317 Occupancy and equipment 1,453,027 785,318 Data and item processing 271,373 188,788 Professional fees 272,961 161,856 Insurance 161,572 83,195 Amortization of intangible assets 229,855 36,388 Other 590,596 459,621 ------------ ------------ 5,681,038 3,590,483 ------------ ------------ Income (loss) before minority interest (348,479) 490,798 Minority interest in net income of subsidiary (2,493) (47) ------------ ------------ Income (loss) before provision for taxes (350,972) 490,751 ------------ ------------ Income tax expense (85,555) -- ------------ ------------ Net income (loss) $ (265,417) 490,751 ============ ============ Basic earnings per share $ (0.02) 0.06 ============ ============ Diluted earnings per share $ (0.02) 0.05 ============ ============ Weighted average number of common shares, basic 10,855,621 7,656,141 ============ ============ Weighted average number of common shares, diluted 10,855,621 9,109,974 ============ ============