Tidelands Bancshares posts $233,320 loss in first quarter

A squeeze on interest income and a spike in operating expenses combined to send Tidelands Bancshares Inc. into a loss during the first three months of this year.

The Mount Pleasant-based holding company for Tidelands Bank said Friday it lost $233,320, or 6 cents a share, compared with a profit of $175,680, or 4 cents a share, during the same period last year.

The company said the slump was due in part to actions by the Federal Reserve that reduced the federal funds rate 3 percentage points from the first quarter of 2007 through the end of March. As a result, the company's net interest margin dropped to 2.67 percent, from 3.43 percent a year earlier.

Interest margin is the difference between what a company earns on loans and the rate it pays to account holders. The first-quarter margin was the narrowest in the bank's five-year history, said Robert E. Coffee Jr., Tidelands president and chief executive officer.

Overhead associated with opening four branches last year, increasing the bank's branch network to six, also took its toll on the bottom line, Coffee said. The expansion raised Tidelands' operating expenses about $5 million from the same period last year, he said.

Tidelands now has branches in Summerville, Myrtle Beach, Bluffton, West Ashley and Mount Pleasant.

Coffee said the latest financial results came as no surprise, and the company remains on track to become a $1 billion coastal bank.

"We've done everything we said we were going to do," he said. "We know there will be some pain in the short term."

The investment in expansion already is paying off, Coffee said. Deposits at the end of the quarter were almost $455 million, up 17 percent from a year before, and loans grew by $23.4 million during the quarter to nearly $415 million.

While the current economic environment is challenging, Coffee said he sees some light at the end of the tunnel.

"I'm an optimist. I think the second half of the year will be better than the first."

Shares of Tidelands closed unchanged Friday at $9.85 on the Nasdaq.

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