First South Bancorp, Inc. Reports September 30, 2009 Quarterly and Nine Months Earnings
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WASHINGTON, N.C., Oct. 13 /PRNewswire-FirstCall/ -- First South Bancorp, Inc. (Nasdaq: FSBK) (the "Company"), the parent holding company of First South Bank (the "Bank"), reports its earnings for the quarter ended September 30, 2009 (unaudited) and its earnings for the nine months ended September 30, 2009 (unaudited).
Net income was $1.8 million ($0.18 per share diluted) for both the 2009 third quarter and the linked 2009 second quarter, compared to $2.1 million ($0.21 per share diluted) for the 2008 third quarter. Net income for the first nine months of 2009 was $5.5 million ($0.57 per share diluted), compared to net income of $9.0 million ($0.93 per share diluted) for the first nine months of 2008.
The Bank recorded provisions for credit losses of $1.3 million in the 2009 third quarter and $1.7 million in both the linked 2009 second quarter and the comparative 2008 third quarter. Credit loss provisions were necessary to replenish net charge-offs and strengthen the allowance for credit losses at levels the Bank believes is adequate to absorb probable losses in the loan portfolio. The allowance for credit losses was $12.6 million at September 30, 2009, representing 1.8% of total loans and leases.
"The increase in our allowance for credit losses over the past several quarters is the result of our internal risk grading analysis and is primarily attributable to our commercial real estate portfolio," said Bill Wall, executive vice president and chief financial officer. "We have taken a conservative posture in our provisioning for credit losses as we continue to aggressively manage problem assets. We believe the current level of our allowance for credit losses is adequate, however, there is no assurance in the future that regulators, increased risks in the loan portfolio, or changes in economic conditions will not require additional adjustments to the allowance for credit losses," said Wall.
"The Company remains profitable, continues to maintain a strong capital position in excess of the well-capitalized regulatory guidelines, and combined with strengthening of the allowance for credit losses should enhance our future earnings when economic conditions improve," stated Wall.
Net interest income increased to $8.3 million for the 2009 third quarter from $7.9 for the linked 2009 second quarter, compared to $9.0 million for the 2008 third quarter. The increase in net interest income in the current quarter has been influenced by deposit repricing and the rollover of maturing time deposits at lower interest rates. The net interest spread was 4.1% for the 2009 third quarter, 3.8% for the linked 2009 second quarter and 4.2% for the comparative 2008 third quarter.
Total non-interest income was $2.4 million for the 2009 third quarter, $3.2 million for the linked 2009 second quarter and $2.4 million for the 2008 third quarter. The Bank maintained a consistent level of revenue across both loan and deposit service offerings as loan fees, deposit fees and service charges and servicing fee income was $2.0 million in the 2009 third quarter and $2.1 million in both the linked 2009 second quarter and the comparative 2008 third quarter.
Net gains recognized from the sale mortgage loans, mortgage-backed securities and investment securities was $247,000 in the 2009 third quarter, $883,000 in the linked 2009 second quarter and $136,000 in the comparative 2008 third quarter.
Total non-interest expense was $6.5 million for both the 2009 third quarter and the linked 2009 second quarter, compared to $6.3 million for 2008 third quarter. Compensation and fringe benefits, the largest component of non-interest expense, has remained relatively consistent at $3.5 million for the 2009 third quarter, $3.6 million for the linked 2009 second quarter, and $3.4 million for the comparative 2008 third quarter, reflecting the Bank's efforts of managing its human resources cost. FDIC insurance premiums were $275,000 for the 2009 third quarter, $540,000 for the linked 2009 second quarter (reflecting the FDIC's $400,000 mandatory 5 basis point special assessment), and $109,000 for the comparative 2008 third quarter.
Total assets were $855.9 million at September 30, 2009, compared to $875.9 million at December 31, 2008. Total loans declined to $681.7 million at September 30, 2009 from $744.7 million at December 31, 2008. Mortgage-backed securities increased to $86.3 million at September 30, 2009 from $32.8 million at December 31, 2008, reflecting the securitization of certain mortgage loans during 2009. Cash, interest bearing deposits and investment securities was $46.7 million at September 30, 2009 and $63.3 million at December 31, 2008.
Nonaccrual loans declined to $7.1 million at September 30, 2009 from $10.7 million at December 31, 2008, reflecting management's efforts of managing problem assets and improving credit quality. Management believes it has thoroughly evaluated its nonaccrual loans and they are either well collateralized or adequately reserved.
Other real estate owned increased to $12.5 million at September 30, 2009 from $7.7 million at December 31, 2008, reflecting a rise in foreclosures of certain real estate properties during 2009. Based on fair value analysis, the Bank believes the adjusted carrying values of these real estate properties are representative of their fair market values, although there are no assurances that the ultimate sales prices will be equal to or greater than the carrying values.
Total deposits declined to $709.9 million at September 30, 2009 from $716.4 million at December 31, 2008, while borrowings declined to $39.0 million at September 30, 2009 from $52.6 million at December 31, 2008. The cost of funds for the 2009 third quarter improved to 2.0%, from 2.3% for the linked 2009 second quarter and 2.7% for the comparative 2008 third quarter. The Bank has been able to improve its cost of funds by the combination of pricing new deposits, the renewal of maturing time deposits and the repositioning of borrowings within the current lower interest rate environment.
First South Bank has been serving the citizens of eastern North Carolina since 1902 and offers a variety of financial products and services, including a leasing company. Securities brokerage services are made available through an affiliation with an independent broker/dealer. The Bank operates through its main office headquartered in Washington, North Carolina, and has 28 full service branch offices and two loan production offices located throughout central, eastern, northeastern and southeastern North Carolina.
First South Bancorp, Inc. may be accessed on its website at www.firstsouthnc.com. The Company's common stock symbol as traded on the NASDAQ Global Select Market is "FSBK".
Statements contained in this release, which are not historical facts, are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors which include the effects of future economic conditions, governmental fiscal and monetary policies, legislative and regulatory changes, the risks of changes in interest rates, the effects of competition, and including without limitation to other factors that could cause actual results to differ materially as discussed in documents filed by the Company with the Securities and Exchange Commission from time to time.
(NASDAQ: FSBK)
For more information contact:
Bill Wall (CFO) or Tom Vann (CEO)
Phone: (252) 946-4178
Website: www.firstsouthnc.com
First South Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
September 30 December 31
2009 2008*
---- ----
Assets (unaudited)
Cash and due from banks $16,426,912 $20,888,676
Interest-bearing deposits in
financial institutions 24,882,380 5,831,683
Investment securities -
available for sale 5,431,669 36,563,646
Mortgage-backed securities
- available for sale 85,677,465 31,995,157
Mortgage-backed securities
- held for investment 597,170 832,221
Loans and leases
receivable, net:
Held for sale 7,395,152 5,566,262
Held for investment 674,301,261 739,165,035
Premises and equipment, net 8,608,313 9,049,929
Real estate owned 12,474,026 7,710,560
Federal Home Loan Bank of
Atlanta stock, at cost
which approximates market 3,889,500 3,658,600
Accrued interest receivable 3,425,955 3,786,760
Goodwill 4,218,575 4,218,576
Mortgage servicing rights 1,247,265 1,005,725
Identifiable intangible assets 141,480 165,060
Prepaid expenses
and other assets 7,216,244 5,417,231
--------- ---------
Total assets $855,933,367 $875,855,121
============ ============
Liabilities and Stockholders' Equity
Deposits:
Demand $220,017,625 $223,365,542
Savings 23,407,287 26,555,881
Large denomination
certificates of deposit 236,658,259 207,102,876
Other time 229,768,022 259,402,497
----------- -----------
Total deposits 709,851,193 716,426,796
Borrowed money 39,040,146 52,558,492
Junior subordinated debentures 10,310,000 10,310,000
Other liabilities 9,451,493 8,738,808
--------- ---------
Total liabilities 768,652,832 788,034,096
Common stock, $.01 par value,
25,000,000 shares authorized;
11,254,222 issued; 9,740,596
shares outstanding 97,406 97,381
Additional paid-in capital 35,842,550 35,924,426
Retained earnings,
substantially restricted 82,549,803 82,867,095
Treasury stock at cost (32,194,216) (32,247,365)
Accumulated other
comprehensive income,
net 984,992 1,179,488
------- ---------
Total
stockholders'
equity 87,280,535 87,821,025
---------- ----------
Total liabilities and
stockholders' equity $855,933,367 $875,855,121
============ ============
*Derived from audited consolidated financial statements
First South Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Interest income:
Interest and fees on
loans $11,162,577 $13,379,203 $34,428,527 $42,721,576
Interest and dividends
on investments and
deposits 1,033,088 1,010,107 2,779,797 3,269,998
--------- --------- --------- ---------
Total interest
income 12,195,665 14,389,310 37,208,324 45,991,574
---------- ---------- ---------- ----------
Interest expense:
Interest on deposits 3,537,810 4,864,737 11,815,289 16,556,440
Interest on
borrowings 293,355 399,500 974,106 1,194,757
Interest on junior
subordinated notes 90,658 146,960 307,966 487,915
------ ------- ------- -------
Total interest
expense 3,921,823 5,411,197 13,097,361 18,239,112
--------- --------- ---------- ----------
Net interest income 8,273,842 8,978,113 24,110,963 27,752,462
Provision for credit
losses 1,260,000 1,744,916 4,480,000 2,893,600
--------- --------- --------- ---------
Net interest
income after
provision
for credit
losses 7,013,842 7,233,197 19,630,963 24,858,862
--------- --------- ---------- ----------
Non-interest income:
Fees and service
charges 1,835,435 1,897,939 5,477,372 5,879,783
Loan servicing fees 173,967 163,967 496,795 490,496
Gain (loss) on sale of
real estate, net (86,875) (3,664) (161,323) 96,837
Gain on sale of
mortgage loans 247,189 108,316 935,291 512,544
Gain on sale of
mortgage-backed
securities - 27,626 - 97,537
Gain on sale of
investment
securities - - 917,866 -
Other income 231,313 246,401 768,081 857,348
------- ------- ------- -------
Total non-interest
income 2,401,029 2,440,585 8,434,082 7,934,545
--------- --------- --------- ---------
Non-interest expense:
Compensation and
fringe benefits 3,524,025 3,401,733 10,523,200 10,440,902
Federal insurance
premiums 274,908 109,413 955,117 153,190
Premises and
equipment 451,967 500,037 1,371,822 1,512,625
Advertising 37,155 23,637 100,171 86,941
Payroll and other
taxes 330,426 276,201 1,017,520 970,764
Data processing 625,837 686,707 1,829,505 1,953,777
Amortization of
intangible assets 122,003 103,108 371,334 331,910
Other 1,164,154 1,221,041 2,877,064 2,727,470
--------- --------- --------- ---------
Total non-interest
expense 6,530,475 6,321,877 19,045,733 18,177,579
--------- --------- ---------- ----------
Income before income
taxes 2,884,396 3,351,905 9,019,312 14,615,828
Income taxes 1,122,727 1,296,251 3,493,246 5,647,470
--------- --------- --------- ---------
Net income $1,761,669 $2,055,654 $5,526,066 $8,968,358
========== ========== ========== ==========
Per share data:
Basic earnings per
share $0.18 $0.21 $0.57 $0.93
Diluted earnings per
share $0.18 $0.21 $0.57 $0.93
Dividends per share $0.20 $0.20 $0.60 $0.60
Weighted average
shares-Basic 9,738,475 9,751,221 9,738,225 9,719,512
Weighted average
shares-Diluted 9,738,550 9,768,515 9,738,250 9,743,727
First South Bancorp, Inc.
Supplemental Quarterly Financial Data (Unaudited)
9/30/2009 6/30/2009 3/31/2009 12/31/2008 9/30/2008
--------- --------- --------- ---------- ---------
Consolidated balance (dollars in thousands except per share data)
sheet data:
Total assets $855,933 $886,192 $875,850 $875,855 $888,633
Loans receivable (net):
Mortgage 49,944 53,537 60,132 46,252 44,035
Commercial 528,216 547,904 566,706 585,893 590,212
Consumer 92,809 94,749 98,292 101,180 102,929
Leases 10,727 9,717 10,692 11,406 12,546
------ ----- ------ ------ ------
Total 681,696 705,907 735,822 744,731 749,722
Cash and investments 46,741 57,342 50,867 63,284 69,176
Mortgage-backed
securities 86,275 81,596 51,100 32,827 32,503
Premises and
equipment 8,608 8,714 8,866 9,050 9,234
Goodwill 4,219 4,219 4,219 4,219 4,219
Mortgage servicing
rights 1,247 1,230 1,079 1,006 1,076
Deposits:
Savings 23,407 24,730 26,561 26,556 18,249
Checking 220,018 225,647 224,249 223,366 229,271
Certificates 466,426 480,634 469,624 466,505 475,350
------- ------- ------- ------- -------
Total 709,851 731,011 720,434 716,427 722,870
Borrowings 39,040 49,695 49,606 52,558 57,772
Junior subordinated
debentures 10,310 10,310 10,310 10,310 10,310
Stockholders' equity 87,281 86,708 87,785 87,821 86,824
Consolidated earnings summary:
Interest income $12,196 $12,442 $12,571 $13,372 $14,389
Interest expense 3,922 4,546 4,629 5,078 5,411
----- ----- ----- ----- -----
Net interest income 8,274 7,896 7,942 8,294 8,978
Provision for credit
losses 1,260 1,700 1,520 1,150 1,745
Noninterest income 2,401 3,212 2,821 2,149 2,441
Noninterest expense 6,530 6,513 6,002 5,987 6,322
Income taxes 1,123 1,135 1,236 1,287 1,296
----- ----- ----- ----- -----
Net income $1,762 $1,760 $2,005 $2,019 $2,056
====== ====== ====== ====== ======
Per Share Data:
Earnings per share-
Basic $0.18 $0.18 $0.21 $0.21 $0.21
Earnings per share-
Diluted $0.18 $0.18 $0.21 $0.21 $0.21
Dividends per share $0.20 $0.20 $0.20 $0.20 $0.20
Book value per share $8.96 $8.90 $9.01 $9.02 $8.92
Average shares-
Basic 9,738,475 9,738,096 9,738,096 9,738,096 9,751,221
Average shares-
Diluted 9,738,550 9,738,096 9,738,096 9,743,987 9,768,515
9/30/2009 6/30/2009 12/31/2008 12/31/2008 9/30/2008
--------- --------- ---------- ---------- ---------
(dollars in thousands except per share data)
Performance ratios:
Yield on earning
assets 6.09% 6.10% 6.19% 6.57% 6.93%
Cost of funds 2.03% 2.32% 2.37% 2.59% 2.71%
---- ---- ---- ---- ----
Net interest spread 4.06% 3.78% 3.82% 3.98% 4.22%
Net interest margin
on earning assets 4.13% 3.87% 3.91% 4.08% 4.32%
Earning assets to
total assets 92.38% 92.43% 92.79% 92.29% 92.03%
Return on average
assets 0.81% 0.80% 0.91% 0.92% 0.92%
Return on average
equity 8.06% 7.98% 9.07% 9.19% 9.37%
Efficiency ratio 61.10% 58.57% 55.70% 57.25% 55.30%
Dividend payout
ratio 111.11% 111.11% 95.24% 95.24% 95.24%
Average assets $867,976 $881,307 $878,795 $879,864 $898,349
Average earning
assets $801,625 $816,210 $812,831 $813,993 $830,759
Average equity $87,418 $88,240 $88,443 $87,876 $87,737
Equity/Assets 10.20% 9.78% 10.02% 10.02% 9.77%
Tangible Equity/
Assets 9.69% 9.29% 9.52% 9.53% 9.28%
Asset quality data
and ratios:
Nonaccrual loans $7,132 $7,609 $6,940 $10,727 $8,510
Restructured
loans $4,304 $4,304 $4,276 $4,275 $4,017
------ ------ ------ ------ ------
Total nonperforming
loans $11,436 $11,913 $11,216 $15,002 $12,527
Other real estate
owned $12,474 $10,408 $10,573 $7,711 $6,987
------- ------- ------- ------ ------
Total nonperforming
assets $23,910 $22,321 $21,789 $22,713 $19,514
Allowance for loan
and lease losses $12,318 $11,726 $10,878 $11,618 $11,284
Allowance for
unfunded loan
commitments $269 $269 $312 $340 $378
---- ---- ---- ---- ----
Allowance for
credit losses $12,587 $11,995 $11,190 $11,958 $11,662
Allowance for loan
and lease losses
to loans 1.77% 1.63% 1.45% 1.53% 1.48%
Allowance for
unfunded loan
commitments
to unfunded
commitments 0.29% 0.28% 0.30% 0.29% 0.28%
---- ---- ---- ---- ----
Allowance for credit
losses to loans 1.81% 1.67% 1.50% 1.58% 1.53%
Net charge-offs
(recoveries) $668 $894 $2,288 $854 $431
Net charge-offs
(recoveries)
to loans 0.098% 0.127% 0.311% 0.115% 0.057%
Nonperforming loans
to loans 1.68% 1.69% 1.52% 2.01% 1.67%
Nonperforming assets
to assets 2.79% 2.52% 2.49% 2.59% 2.20%
Loans to deposits 96.03% 96.57% 102.16% 103.95% 103.71%
Loans to assets 79.64% 79.66% 84.03% 85.03% 84.37%
Loans serviced
for others $281,935 $268,266 $254,195 $255,510 $259,326
SOURCE First South Bancorp, Inc.
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