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GrandSouth Bancorporation reports earnings for the fourth quarter of 2016 of $356 thousand and declares a dividend of $0.10 per common share.

Montag, 13.02.2017 18:42 von PR Newswire

PR Newswire

GREENVILLE, S.C., Feb. 13, 2017 /PRNewswire/ -- GrandSouth Bancorporation (GRRB:OTCQB), the holding company for GrandSouth Bank

GrandSouth Bancorporation had another strong year of growth in total assets for 2016.  Our expansion into three new markets combined with organic growth in our legacy branch locations produced total asset growth of approximately 21% year over year.  Total assets grew from $426 million at December 31, 2015 to $516 million at December 31, 2016.  We made a strategic decision to exit the commercial invoice financing business and sold this portfolio of loans in the first quarter of 2016.  2016 was also a year that we made more of an effort to exit loan relationships that failed to meet our quality standards.  The sale of loans and quality attrition combined for a $14 million decline in loans outstanding in the first quarter of the year.  Our bank was able to overcome this hurdle and still achieve 13.4% loan growth with 69% of the growth coming in the fourth quarter of 2016.

Total deposits grew by 23% to $430 million compared to $350 million at December 31, 2015. Several initiatives contributed to this success.  We added a treasury management calling officer in July 2015 with a goal to increase our corporate checking and money market balances.  For the first time, our lenders were given goals not only to originate loan relationships but also to originate and expand core deposit relationships. Also in 2016, we worked with our deposit operations team to create branch goals that focused on core deposit growth and non-interest fee income.  These combined efforts lead to a 27% increase in core deposits, and a 48% reduction in brokered deposits.  Implementing this strategy also achieved 15% growth in our demand deposits, our lowest cost funding source.  Our core deposit focus is also responsible for a 48% increase in our money market account balances from $126 million in 2015 to $186 million in 2016. 

This deposit success accomplished several important things.  First, it has repositioned our bank with a more stable funding source with core deposit growth versus non-core fund sources.  Second, it has blended a lower cost funding source (checking and money market accounts) with our higher cost funding source making us less reliant on rate sensitive funding sources such as certificates of deposits.  Third, it has lowered our loan to deposit ratio and improved our liquidity.  We are giving serious consideration to expanding our treasury management sales force to further add and expand core deposit relationships and improve our overall deposit mix.

Our automobile floorplan lending division continued to perform well during 2016. We implemented plans during 2015 to increase the sales effort for the division and this investment is beginning to yield results. The outstanding loan balance for this division increased to $81.0 million at December 31, 2016. This represents an increase of 38% over the balance at December 31, 2015 of $58.6 million. The losses as a percentage of average loans outstanding remained steady at 2.53% in 2016 compared to 2.57% in 2015. These losses totaled to $1.6 million for 2016, or 67% of the net charge offs of the company. Additionally, personnel expenses increased 26% during the year to $4.2 million.

Investments for future growth of our company are not without cost.  Non-interest expense for the fourth quarter of this year increased by 37.5% to $5.8 million from $4.2 million in the fourth quarter of 2015.  The bulk of this increase is related to staffing cost in our three new markets, adding sales representatives to our floor plan lending division, and premises cost related to our three new markets.   We have also added additional cost in the support areas of credit, deposit operations, and loan operations to support the growth we have experienced and anticipate will continue. 

In addition to the increase in non-interest expense cost that we anticipated, we also incurred additional non-interest expense costs that we did not anticipate.  We paid $600 thousand to settle an employment contract, as well as incurring $800 thousand in legal and accounting fees associated with an investigation into possible wrongdoing by a former customer of the bank and three former employees of the bank.

The bank also took a more conservative posture with loan charge offs, other real estate owned book balances, and the allowance for loan losses.  We charged down several loans that were graded substandard and had a decline in collateral value.  We continually monitor our other real estate owned values with new appraisals and write down these assets to 85% of the current appraised value.  We made larger contributions to the allowance to account for new loan growth and to increase the overall amount as a percentage of total loans.  Our allowance as a percentage of total loans was 1.23% at December 31, 2016 compared to 1.17% at the end of 2015.

As you will note in the following financial report, our earnings for the 12 months ending 2016 are down substantially from the same period last year.  We believe that the increase in expenses we have incurred going into new markets, in our credit management department, and operations departments are positioning us for long term growth and profitability.  We are also confident net interest income growth will accelerate as we realize the annualized impact from the loan growth we experienced in the fourth quarter of 2016.  We anticipate that we will continue to experience strong asset growth as our entry in new markets begins to season.

Your executive management team does not take the decline in earnings lightly.  While we anticipated our planned expansion and growth would put pressure on earnings, we also realize that it is our job to make our investment in the future provide a return as quickly as possible without sacrificing quality.  We appreciate the support from our shareholders and customers and look forward to another strong year of continued success. 

Sincerely,

JB Schwiers
President

GrandSouth Bancorporation (GRRB:OTCQB), the holding company for GrandSouth Bank, announced today that net income for the quarter ended December 31, 2016 was $386 thousand compared to $1.2 million during the quarter ended December 31, 2015.

The Board of Directors declared a dividend of $0.10 per common share ($0.105 per Series A preferred share) payable on February 28, 2017 to shareholders of record on February 15, 2017. This is our fifteenth consecutive quarterly dividend.

Overview

  • Net loans increased by $49.4 million, or 13.4%, during the quarter.
  • GrandSouth Bancorporation's efficiency ratio was 74.30% during the fourth quarter of 2016 compared to 63.61% during the fourth quarter of 2015.
  • GrandSouth Bancorporation's return on average assets was 0.31% during the fourth quarter of 2016 compared to 1.12% in the same quarter last year.
  • The return on average equity was 3.00% in the fourth quarter of 2016, down from 11.25% in the fourth quarter of 2015.

Net Interest Income
During the fourth quarter of 2016, net interest income before the provision for loan losses was $7.4 million, up from $6.4 million during the fourth quarter of 2015. Average loans during the fourth quarter of 2016 were $404.3 million compared to $361.3 million during the same period last year. The net interest margin was 6.41% in the fourth quarter of 2016, down from 6.42% in the fourth quarter of 2015 and up from 6.15% in the prior quarter.

Noninterest income
Noninterest income was $372 thousand during the fourth quarter of 2016, compared to $161 thousand during the same quarter of 2015.

Noninterest Expense
Noninterest expense was $5.8 million for the fourth quarter of 2016 compared to $4.2 million for the fourth quarter of 2015. Growth in non-interest expense during the quarter was impacted by the Company's in-process expansion of two new offices in the Columbia and Orangeburg, S.C. markets.  Employee compensation increased by $581 thousand compared to the fourth quarter of 2015.  During the fourth quarter of 2016, we sold $350 thousand of other real estate owned (OREO) properties recognizing gains of $178 thousand, and we recognized impairment in the amount of $164 thousand on OREO properties resulting in a net gain of $14 thousand. This compared to a loss on OREO of $63 thousand for the fourth quarter of 2015.

The efficiency ratio increased to 74.30% during the quarter ended December 31, 2016 from 63.61% during the fourth quarter of 2015.

Loan Portfolio
Net loan growth in the fourth quarter of 2016 was $48.6 million.

The composition of our loan portfolio consisted of the following at December 31, 2016 and December 31, 2015:




December 31,


December 31,




2016


2015




(Dollars in thousands)







Loans secured by real estate:





Commercial, financial and agricultural

$           130,577


$          100,485


Real estate - construction, land development and other land loans

38,372


47,714


Real estate - mortgage

214,679


182,284


Installment loans to individuals

35,164


38,867



Loans, gross

418,792


369,350


Allowance for possible loan losses

(5,158)


(4,315)



Loans, net

$           413,634


$          365,035








 

Loan Loss Provision/Asset Quality
The loan loss provision for the quarter ended December 31, 2016 was $1.4 million, compared to $710 thousand for the same period last year. Net charge offs for the three months ended December 31, 2016 were $608 thousand, compared to $578 thousand for the same period in 2015.

OREO as of December 31, 2016 was $4.9 million compared to $5.3 million as of the end of the previous year. Nonaccrual loans were $2.9 million at December 31, 2016 compared to $1.7 million at the end of last year.

GrandSouth Bancorporation's allowance for loan losses as a percentage of total loans at December 31, 2016 was 1.23%, compared to 1.17% at the end of 2015. Management believes the allowance is adequate at this time but continues to monitor trends in environmental factors which may potentially affect future losses.

Securities Portfolio
Investment securities, all of which are available-for-sale, were $25.5 million at December 31, 2016 up from $14.9 million at December 31, 2015.

Securities in our investment portfolio as of December 31, 2016 were as follows:

  • callable agency securities in the amount of $6.9 million
  • residential government-sponsored mortgage-backed securities in the amount of $11.9 million
  • taxable municipal bonds in the amount of $1.0 million
  • nontaxable municipal bonds in the amount of $5.7 million

During the fourth quarter of 2016, we purchased $1.0 million of callable agency securities and $3.1 million of residential government-sponsored mortgage-backed securities. Two callable agency securities in the amount of $4.0 million were called and 19 residential government-sponsored mortgage-backed securities in the amount of $1.9 million were sold.

Deposits
Total deposits were $430.3 million at December 31, 2016 compared to $350.3 million at December 31, 2015. Interest-bearing accounts were $360.4 million at December 31, 2016 up from $304.7 million at December 31, 2015.

Shareholders' Equity
Total shareholders' equity increased from $42.7 million at December 31, 2015 to $50.7 million at December 31, 2016, the increase of which resulted from the completion of the sale of $12 million in common stock through a private placement along with the retention of earnings, all of which was partially offset by the redemption of all remaining Series T-3 preferred stock.  Our Tier 1 Risk Based Capital Ratios were 13.75% and 13.90% for GrandSouth Bancorporation and GrandSouth Bank, respectively, as of December 31, 2016.

GrandSouth Bancorporation is a bank holding company with assets of $515.5 million at December 31, 2016. GrandSouth Bank provides a range of financial services to individuals and small and medium sized businesses. GrandSouth Bank has six branches in South Carolina, located in Greenville, Fountain Inn, Anderson, Greer, Columbia and Orangeburg, S.C.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that relate to future events or the future performance of GrandSouth Bancorporation. Forward-looking statements are not guarantees of performance or results. These forward-looking statements are based on the current beliefs and expectations of the respective management of GrandSouth Bancorporation and GrandSouth Bank and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond their respective control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed or implied in these forward-looking statements because of numerous possible uncertainties. Words like "may," "plan," "contemplate," "anticipate," "believe," "intend," "continue," "expect," "project," "predict," "estimate," "could," "should," "would," "will," and similar expressions, should be considered as identifying forward-looking statements, although other phrasing may be used. Such forward-looking statements involve risks and uncertainties and may not be realized due to a variety of factors. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the reports (such as Annual Reports) filed by GrandSouth Bancorporation.  You should consider such factors and not place undue reliance on such forward-looking statements. No obligation is undertaken by GrandSouth Bancorporation to update such forward-looking statements to reflect events or circumstances occurring after the issuance of this press release.

GrandSouth Bancorporation

Greenville, SC


Condensed Consolidated Balance Sheets

(Unaudited)












December 31,


December 31,





2016


2015





(Dollars in thousands)

Assets





Cash and due from banks

$       34,923


$       11,695


Interest bearing transaction accounts with other banks

3,086


456


Federal funds sold

5,309


3,701



Cash and cash equivalents

43,318


15,852


Certificates of deposit with other banks

2,500


2,000


Securities available-for-sale

25,543


14,885


Other investments, at cost

1,319


1,276


Loans, gross

418,792


369,350


Allowance for loan losses

(5,158)


(4,315)


Loans, net of allowance for loan losses

413,634


365,035


Premises and equipment, net

10,211


8,814


Bank owned life insurance

6,390


6,226


Assets acquired in settlement of loans

4,902


5,275


Interest receivable

3,755


3,133


Deferred income taxes

1,530


1,274


Goodwill

737


737


Other assets

1,676


1,983



Total assets

$     515,515


$     426,490








Liabilities and shareholders' equity





Deposits






Noninterest bearing

$       69,878


$       45,515



Interest bearing

360,449


304,746




Total deposits

430,327


350,261


Federal Home Loan Bank advances

22,000


22,000


Junior subordinated debentures

8,247


8,247


Interest payable

111


98


Other liabilities

4,140


3,138



Total liabilities

464,825


383,744


Shareholders' equity

50,690


42,746



Total liabilities and shareholders' equity

$     515,515


$     426,490








 

Condensed Consolidated Statements of Income

(Unaudited)












For the three months


For the twelve months





ended December 31,


ended December 31,





2016


2015


2016


2015





(Dollars in thousands)












Interest income

$          8,150


$       6,992


$     29,943


$      26,923

Interest expense

744


543


2,521


2,032


Net interest income

7,406


6,449


27,422


24,891

Provision for loan losses

1,354


710


3,269


1,100

Net interest income after provision for loan losses

6,052


5,739


24,153


23,791

Noninterest income









Service charges on deposit accounts

128


70


441


283


Gain on sale of securities

114


0


120


23


Net gain on sale of premises and equipment

(14)


15


11


103


Increase in value of life insurance assets

41


35


164


130


Other

103


41


272


148



Total noninterest income

372


161


1,008


687

Noninterest expense









Salaries and employee benefits

3,323


2,742


12,905


9,855


Premises and equipment

445


259


1,441


966


Loss on sale and impairment of assets acquired in settlement of loans

(14)


63


(325)


228


Data processing

279


199


1,014


726


Other expenses

1,746


941


5,066


3,386



Total noninterest expense

5,779


4,204


20,101


15,161

Income before income taxes

645


1,696


5,060


9,317

Income tax provision

259


496


1,875


3,306

Net income

386


1,200


3,185


6,011


Deductions for amounts not available to common shareholders:










Dividends declared or accumulated on preferred stock

(30)


(34)


(151)


(146)

Net income available to common shareholders

$             356


$        1,166


$        3,034


$          5,865

 

Financial Highlights

(Unaudited)












For the three months


For the twelve months





ended December 31,


ended December 31,





2016


2015


2016


2015





(Dollars in thousands)












Per share data:









Earnings per share, basic

$         0.08


$         0.34


$         0.68


$         1.73


Earnings per share, diluted

$         0.08


$         0.32


$         0.67


$         1.66


Book value per share

$       11.02


$       10.66


$       11.02


$       10.66


Tangible book value per share

$       10.85


$       10.45


$       10.85


$       10.45


Weighted average shares outstanding, basic

4,494,129


3,496,592


4,434,979


3,391,019


Weighted average shares outstanding, diluted

4,588,865


3,633,483


4,535,682


3,534,880


Shares outstanding at end of period

4,483,990


3,522,645


4,483,990


3,522,645












Selected performance ratios and other data:








Return on average assets

0.31%


1.12%


0.69%


1.48%


Return on average equity

3.00%


11.25%


6.22%


14.09%


Yield on average earning assets

6.29%


6.40%


6.30%


6.51%


Cost of funds

0.80%


0.64%


0.72%


0.63%


Net interest margin

6.41%


6.42%


6.38%


6.57%


Efficiency ratio

74.30%


63.61%


70.70%


59.27%


Charge-offs, net to average loans

0.60%


0.64%


0.65%


0.47%

 



As of



December 31,


December 31,



2016


2015



(Dollars in thousands)






Shareholders' equity to total assets

9.83%


10.03%

Tier 1 risk-based capital ratio

13.90%


13.61%

Intangible assets





Goodwill

$         737


$         737






Other real estate owned

$      4,902


$     5,275

Nonaccrual loans

2,935


1,685

Loans past due 90 days and accruing interest (a)

82


142


Total nonperforming assets

7,919


7,102

Allowance for loan losses to loans, gross

1.23%


1.17%

(a) - Amount represents the net of the loans wholly or partially guaranteed by the US Government.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/grandsouth-bancorporation-reports-earnings-for-the-fourth-quarter-of-2016-of-356-thousand-and-declares-a-dividend-of-010-per-common-share-300406616.html

SOURCE GrandSouth Bancorporation