Southcoast overstated 2007 earnings due to error

The parent company of Southcoast Community Bank said that it overstated its earnings for 2007 by $1.41 million, or about 29 percent, requiring it to amend its federal financial statements this week.

As a result, investors in Southcoast Financial Corp. saw their per-share profits decline by 18 cents, to 63 cents.

In a filing Thursday with the Securities and Exchange Commission, Mount Pleasant-based Southcoast said its unaudited financials for the previous calendar year contained an error caused by an accounting mistake.

L. Wayne Pearson, Southcoast's chairman and chief executive officer, declined to comment Friday beyond the filing and a brief written statement.

The discrepancy stemmed from a real estate deal on Dec. 20, when Southcoast sold property that it then leased back from the buyer.

At the time of the transaction, Southcoast said, the company consulted with unidentified accounting experts as to how the transaction should be recorded for bookkeeping purposes.

The $1.5 million gain originally was recorded as a lump sum of income. But the bank owner later determined that the proceeds had to be recorded in increments over the term of the lease, according to the filing.

Southcoast did not say who found the error or how it was discovered.

In January, the company reported a year-end profit for 2007 of $4.84 million, or 10 percent less than it earned in 2006.

The revised figures this week reduced its net income to $3.43 million, down 28.9 percent from the previous year.

The company said its fourth-quarter profit was $723,000, not the $1.66 million originally reported.

Shares of Southcoast edged up a penny Friday to close at $13.56.

Reach Peter Hull at 937-5594 or phull@postandcourier.com.