Friday, October 25, 2019

SouthCrest Financial Group, Inc. (SCSG) – BUY



SCSG Beats Our Estimate, Enhances Buyback And Special Dividend To Utilize Excess Capital

PORTFOLIO MANAGER BRIEF

  • 3Q19 EPS: Reported $0.18, Core $0.17, Janney $0.14. Securities Gain $0.01 impact. ROA exceed 1.00%.
  • Stronger Loan growth pushed both NIM-Net Interest Margin and top-line spread revenue as excess liquidity utilized. NIM rose 16bps from stronger mix of Loans to Total Earning Assets.
  • Loans-to-Deposits ratio rose to 77% from 73%.
  • New lender hires suggest healthy Loan pipeline in 4Q19 and early 2020.
  • Capital generation is strong and being utilized for share repurchases and special dividend this quarter ($0.50/share, paid 12-10-19 with record date of 11-26-19).
  • Share buyback completed earlier in 3Q19 ($5M, 6% of shares) with a new authorization for another $10M in shares available for repurchase through 2021.
  • Stock remains inexpensive at 119% of tangible book value (updated for 9-30-19) with 10.9% TCE ratio and scarce Deposit franchise in the Atlanta, GA MSA with low-cost Deposits and a high percentage of core funding.
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