GREENVILLE, S.C., May 6, 2017 /PRNewswire/ --

GrandSouth Bancorporation (OTCQB: GRRB), the holding company for GrandSouth Bank

GrandSouth Bancorporation had another excellent quarter of growth in total assets ending March 31, 2017.  Our investment into three new markets combined with organic growth in our legacy offices produced asset growth of approximately 28.4% year over year.  Total assets grew from $435.8 million as of March 31, 2016 to $559.4 million as of March 31, 2017. For the quarter, total assets grew approximately $44 million or 8.5% from December 31, 2016. 

Loan demand is robust throughout our entire footprint.  Many of our clients are telling us that they are having record setting performance in their companies.  This enhanced economic activity necessitates new equipment purchases, expansion to plants and warehouses.  Our expansion into Columbia and Orangeburg is also providing geographical diversification in our loan portfolio.  The addition of Chris Bradham as our Senior Agriculture Lender opens up an entire new market of farm lending, stretching along the I-95 corridor from Dillon County to Dorchester County.  This addition, combined with strong organic loan demand in the upstate, produced gross loan growth of $96 million and a 27% increase year over year.  For the first quarter, our gross loan growth was 7.7%. 

We have continued to restructure the deposit side of our balance sheet by executing our plan to decrease our reliance on wholesale funding, while growing our core deposit base.  Our treasury management calling officer is our point person focused on corporate checking growth.  Through a strategic joint calling program with our commercial lenders we have been able to grow our non-interest bearing checking 27.4% in the first quarter of 2017 and 81.5% year over year.  Our money market accounts have grown to $189 million dollars at the end of the first quarter which provides a 29% deposit increase year over year.  We had excellent growth in Columbia and Orangeburg.  In less than 8 months these new markets generated approximately $56.9 million in new deposit growth. 

Brokered deposits declined by 44% year over year.  Total deposits for our bank increased by $42.8 million in the first quarter and by $101.8 million year over year. This is a 9.9% growth in the first quarter and 27.4% growth from March 31, 2016. 

Our specialty floor plan lending division experienced a spike in losses for the first quarter.  This level of chargeoffs is outside the level we have historically experienced over the past years.  The used car industry began to see a decline in values during the fourth quarter of 2016.  This combined with a delay in the delivery of tax refunds due to the passage of the Path Act of 2015 created problems for our dealers.  CarBucks recorded chargeoffs of $1.6 million for the first quarter which equates to an annualized 7.56%.  This accounted for 92% of total company chargeoffs of $1.8 million.  Our management team in this division believes this rate will come down during the remainder of the year, but will remain higher than our historical averages.  We made additional provisions to our allowance for loan loss to accommodate for this change in loss history and as you will note, our allowance for loan losses as a percentage increased to 1.35% at March 31, 2017 from 1.23% at December 31, 2016.  We are watching the industry trends that affect our automobile floor plan division very closely and are prepared to make changes in our underwriting requirements and credit line terms if necessary.

While we are disappointed in the first quarter results for our automobile floor plan lending vision, we are optimistic that it will continue to play an important earnings role in the future.  We have been in this business for over ten years and it has been a significant contributor to the success of our company.

As you will note in our financial information presented below, the efficiency of the company has improved to 65.10% for the first quarter of 2017 from 74.30% from the fourth quarter of 2016.  The investments we made in the last two years for the future success of our company are beginning to yield results.  We expect these results will continue to improve as we grow into our new markets and continue to expand our franchise.

As you will also note in the following financial information, our earnings for the three months ending March 31, 2017 are down substantially from the same period last year.  The majority of this negative comparison is the result of our experience in the floor plan lending division.  We expect that these results will improve as we review the portfolio and adjust our risk tolerance to the change in market conditions.  We appreciate the support from our shareholders and customers and look forward to continued success in 2017.

Sincerely,

JB Schwiers
President & CEO

GrandSouth Bancorporation (OTCQB: GRRB), the holding company for GrandSouth Bank, announced today that net income for the quarter ended March 31, 2017 was $95 thousand compared to $1.5 million during the quarter ended March 31, 2016.

The Board of Directors declared a dividend of $0.10 per common share ($0.105 per Series A preferred share) payable on May 26, 2017 to shareholders of record on May 15, 2017. This is our sixteenth consecutive quarterly dividend.

Overview

  • Net loans increased by $31.3 million, or 7.6%, during the quarter.
  • GrandSouth Bancorporation's efficiency ratio was 65.10% during the first quarter of 2017 compared to 57.50% during the first quarter of 2016.
  • GrandSouth Bancorporation's return on average assets was 0.07% during the first quarter of 2017 compared to 1.37% in the same quarter last year.
  • The return on average equity was 0.74% in the first quarter of 2017, down from 12.84% in the first quarter of 2016.

Net Interest Income
During the first quarter of 2017, net interest income before the provision for loan losses was $8.1 million, up from $6.8 million during the first quarter of 2016.  Average loans during the first quarter of 2017 were $437.8 million compared to $363.2 million during the same period last year. The net interest margin was 6.82% in the first quarter of 2017, up from 6.75% in the first quarter of 2016 and up from 6.41% in the prior quarter.

Noninterest income
Noninterest income was $253 thousand during the first quarter of 2017, compared to $158 thousand during the same quarter of 2016.

Noninterest Expense
Noninterest expense was $5.4 million for the first quarter of 2017 compared to $4.0 million for the first quarter of 2016.  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 $699 thousand compared to the first quarter of 2016. 

The efficiency ratio increased to 65.10% during the quarter ended March 31, 2017 from 57.50% during the first quarter of 2016.

Loan Portfolio
Net loan growth in the first quarter of 2017 was $31.3 million.

The composition of our loan portfolio consisted of the following at March 31, 2017 and December 31, 2016:


March 31,


December 31,


2017


2016


(Dollars in thousands)





Loans secured by real estate:




     Commercial, financial and agricultural

$           138,442


$          130,577

     Real estate - construction, land development and other




          land loans

35,830


38,371

     Real estate - mortgage

232,515


214,679

     Installment loans to individuals

44,205


35,164

          Loans, gross

450,992


418,791

     Allowance for possible loan losses

(6,093)


(5,158)

          Loans, net

$           444,899


$          413,633

Loan Loss Provision/Asset Quality
The loan loss provision for the quarter ended March 31, 2017 was $2.7 million, compared to $630 thousand for the same period last year. Net charge offs for the three months ended March 31, 2017 were $1.8 million, compared to $626 thousand for the same period in 2016.

OREO as of March 31, 2017 was $5.5 million compared to $4.9 million as of the end of the previous year. Nonaccrual loans were $3.1 million at March 31, 2017 compared to $2.9 million at the end of last year.

GrandSouth Bancorporation's allowance for loan losses as a percentage of total loans at March 31, 2017 was 1.35%, compared to 1.23% at the end of 2016. 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 $23.3 million at March 31, 2017 down from $25.5 million at December 31, 2016.

Securities in our investment portfolio as of March 31, 2017 were as follows:

  • callable agency securities in the amount of $6.9 million
  • residential government-sponsored mortgage-backed securities in the amount of $11.6 million
  • taxable municipal bonds in the amount of $1.0 million
  • nontaxable municipal bonds in the amount of $3.8 million

During the first quarter of 2017, four municipal securities in the amount of $1.8 million were called. 

Deposits
Total deposits were $473.0 million at March 31, 2017 compared to $430.3 million at December 31, 2016. Interest-bearing accounts were $384.1 million at March 31, 2017 up from $360.4 million at December 31, 2016.

Shareholders' Equity
Total shareholders' equity decreased from $50.7 million at December 31, 2016 to $50.5 million at March 31, 2017, the decrease of which resulted from the retention of earnings, payment of dividends, exercise of stock options, expense of stock option grants, and changes in the fair market value of investments.  Our Tier 1 Risk Based Capital Ratios were 13.06% and 12.88% for GrandSouth Bancorporation and GrandSouth Bank, respectively, as of March 31, 2017.

GrandSouth Bancorporation is a bank holding company with assets of $559.4 million at March 31, 2017. 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)






March 31,


December 31,


2017


2016


(Dollars in thousands)

Assets



     Cash and due from banks

$

30,831


$

34,923

     Interest bearing transaction accounts with other banks

1,700


3,086

     Federal funds sold

23,825


5,309

          Cash and cash equivalents

56,356


43,318

     Certificates of deposit with other banks

2,500


2,500

     Securities available-for-sale

23,296


25,543

     Other investments, at cost

1,398


1,319

     Loans, gross

450,992


418,791

     Allowance for loan losses

(6,093)


(5,158)

     Loans, net of allowance for loan losses

444,899


413,633

     Premises and equipment, net

11,247


10,211

     Bank owned life insurance

6,429


6,390

     Assets acquired in settlement of loans

5,491


4,902

     Interest receivable

3,898


3,755

     Deferred income taxes

1,521


1,530

     Goodwill

737


737

     Other assets

1,634


1,676

          Total assets

$

559,406


$

515,514





Liabilities and shareholders' equity




     Deposits




          Noninterest bearing

$

88,961


$

69,878

          Interest bearing

384,086


360,449

               Total deposits

473,047


430,327

     Federal Home Loan Bank advances

22,000


22,000

     Junior subordinated debentures

8,247


8,247

     Interest payable

153


111

     Other liabilities

5,431


4,140

          Total liabilities

508,878


464,825

     Shareholders' equity

50,528


50,689

          Total liabilities and shareholders' equity

$

559,406


$

515,514

 

Condensed Consolidated Statements of Income
(Unaudited)




For the three months ended March 31,


2017


2016


(Dollars in thousands)





Interest income

$

8,947


$

7,435

Interest expense

881


594

   Net interest income

8,066


6,841

Provision for loan losses

2,720


630

Net interest income after provision for loan losses

5,346


6,211

Noninterest income




   Service charges on deposit accounts

127


92

   Gain on sale of securities

7


-

   Net gain on sale of premises and equipment

-


-

   Increase in value of life insurance assets

38


40

   Other

81


26

      Total noninterest income

253


158

Noninterest expense




   Salaries and employee benefits

3,457


2,758

   Premises and equipment

435


277

   Loss on sale and impairment of assets acquired in




      settlement of loans

4


(1)

   Data processing

287


202

   Other expenses

1,232


788

      Total noninterest expenses

5,415


4,024

Income before income taxes

184


2,345

Income tax provision

89


835

Net income

95


1,510

Deductions for amounts not available to common




   Shareholders:




   Dividends declared or accumulated on preferred stock

(30)


(30)

Net income available to common shareholders

65


1,480

 

Financial Highlights
(Unaudited)




For the three months


ended March 31,


2017


2016



Per share data:




     Earnings per share, basic

$

0.01


$

0.36

     Earnings per share, diluted

$

0.01


$

0.35

     Book value per share

$

10.94


$

11.05

     Tangible book value per share

$

10.78


$

10.89

     Weighted average shares




          outstanding, basic

4,490,290


4,134,953

     Weighted average shares




          outstanding, diluted

4,575,840


4,244,300

Shares outstanding at end of period

4,497,990


4,540,665





Selected performance ratios and other data:




     Return on average assets

0.07%


1.37%

     Return on average equity

0.74%


12.84%

     Yield on average earning assets

6.61%


6.63%

     Cost of funds

0.86%


0.66%

     Net interest margin

6.82%


6.75%

     Efficiency ratio

65.10%


57.50%

     Charge-offs, net to average loans

1.66%


0.69%






As of


March 31,


December 31,


2017


2016


(Dollars in thousands)





Shareholders' equity to total assets

9.03%


9.83%

Tier 1 risk-based capital ratio

13.06%


13.90%

Intangible assets




     Goodwill

$

737


$

737

Other real estate owned

$

5,491


$

4,902

Loans past due 90 days and accruing interest (a)

84


82

     Total nonperforming assets

8,631


7,919

Allowance for loan losses to loans, gross

1.35%


1.23%

 

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

SOURCE GrandSouth Bancorporation


Source: GrandSouth Bancorporation