Dear Fellow Shareholders, Customers, and Friends,
Thank you for a wonderful ten years. In May of 1997 we opened Southport Bank in a trailer with a dedicated staff of 11 employees. We have since grown to $486 million in assets, with 5 branches, a mortgage company and 137 employees.
Earnings were over $3.6 million or $3.18 per share in 2007. This marked our best year of earnings with a 21% increase over 2006. Also during 2007 we became the third largest bank in deposit market share for Kenosha County surpassing Johnson Bank. Although relatively new to Racine, we were the fourth fastest growing bank in Racine County deposits.
A key change for us was the election to become a Sub Chapter S bank. We joined nearly one third of US banks that have already made this election. In order to become eligible for Sub S, it required us to limit the number of shareholders to 100 family units. In December, we purchased $8 million worth of shares to get below the family unit threshold. Shareholders that were redeemed, received the equivalent of a 400% return on theiroriginal investment. For the remaining shareholders this will allow us to avoid double taxation while improving shareholder returns, increasing our competitive position and our ability to remain independent.
The value of our equity continues to grow. Your shares were appraised by the CPA firm of RSM McGladreyat $40 a share as of December 31, 2007 for our ESOP. Our practice continues to be a ready purchaser of shares at our appraised value to provide liquidity to our shareholders.
Southport helped meet the needs of our customers with net loan growth of $34 million in 2007, which includes commercial, consumer, and mortgage loans. In addition, over $200 million in residential mortgages were originated and sold in the secondary market. With the weakening economy we have had our share of loan losses. As the economy and our industry continue to decline in 2008, we expect further challenges in ourloan portfolio.
Liquidity of our bank remains strong with $50 million in marketable securities. Our liquidity provides stability and security as well as a base for future growth.
Investing in our staff through training is an important part of our culture. We have implemented an officer training program to grow our commercial bankers and future leaders from within our organization. We have spent many hours on training dedicated to maintaining our service culture and increasing our focus on relationship building with our customers. Many of our employees have attended both management and technical courses to develop their personal skills to advance within Southport Bank. All of our senior staff continues to participate in peer groups that allow us to model best practices within our industry.
Giving back to our community is part of our mission. Found later in this report is a list of over 200 community organizations that we have supported in order to improve the quality of life in Kenosha. Most of our employees are involved in volunteering their time as listed on the Community Involvement pages in this annual report. We have taken an active leadership role in over 90 community organizations. Southport Bank was recognized for our creative employee campaign of the year by United Way and we set another record for staff and bank contributions. We are now in the top 20 Kenosha County contributors to United Way. We believe this level of volunteer commitment is unsurpassed by any organization in Kenosha.
Increased competition and additional branching by other banks and credit unions in our markets continue. These competitors make us better as we continue to stay focused on our customers. We will continue to improve on our competitive advantages, which include having the best people in the market, giving back to our community, and providing a superior level of customer service.
I want to thank all of the people, especially our board, our advisory boards, and staff who continue to make Southport Bank a success.
Sincerely,
Karl J. Ostby
President and CEO
