WASHINGTON, N.C., April 20, 2011 /PRNewswire/ -- First South Bancorp, Inc. (NASDAQ: FSBK) (the "Company"), the parent holding company of First South Bank (the "Bank"), reports its unaudited operating results for the quarter ended March 31, 2011.
The Company reported net income of $327,000 for the 2011 first quarter, compared to a net loss of $6.5 million for the linked 2010 fourth quarter, and net income of $1.5 million for the 2010 first quarter. Net income per diluted common share was $0.03 for the 2011 first quarter, compared to net loss per diluted common share of $0.67 for the linked 2010 fourth quarter and net income per diluted common share of $0.16 for the 2010 first quarter.
Tom Vann, President and CEO, commented, "I am pleased to report the Company's operating results for the first quarter of 2011. The Company continues to generate solid core earnings. First quarter 2011 earnings were $327,000 net after recording $2.5 million of loan loss provisions. In the 2011 first quarter, we continued evaluating the credit quality of the Bank's loan portfolio and market values of foreclosed properties. Although our non-accrual loans declined modestly during the current quarter, based on our current analysis we remain cautiously optimistic about the financial stress some of our borrowers continue to face. Consequently, we are provisioning accordingly to maintain our loan loss reserves at an adequate level. Reducing our non-accrual loans will continue to be a top priority during 2011," said Mr. Vann.
Asset Quality
Non-accrual loans declined to $40.5 million at March 31, 2011, from $41.3 million at December 31, 2010. Non-accrual loans include non-accrual restructured loans, which declined to $23.8 million at March 31, 2010, from $27.0 million at December 31, 2010. Other real estate owned increased to $12.1 million at March 31, 2011 from $11.6 million at December 31, 2010, reflecting foreclosure activity net of sales of certain real estate properties during the first quarter. Total nonperforming assets declined to $52.6 million at March 31, 2011, from $52.9 million at December 31, 2010. "While we are encouraged that property values appear to be stabilizing, we will continue to monitor these values and mitigate nonperforming assets as quickly as feasible," said Mr. Vann.
The Bank recorded $2.5 million of provisions for credit losses in the 2011 first quarter, compared to $13.7 million in the linked 2010 fourth quarter and $2.4 million in the 2010 first quarter. Credit loss provisions were necessary to replenish net charge-offs and to maintain the allowance for credit losses at a level that management believes is adequate to absorb probable future losses in the loan portfolio. The allowance for loan and lease losses (ALLL) increased to $19.3 million at March 31, 2011 (3.2% of total loans), from $18.8 million at December 31, 2010 (3.0% of total loans). Net charge offs were $2.0 million in the 2011 first quarter, compared to $3.4 million in the linked 2010 fourth quarter and $2.8 million in the 2010 first quarter.
Bill Wall, executive vice president and chief financial officer stated, "We continue to take a conservative posture in our provisioning for credit losses as we aggressively manage problem assets. We believe the current level of our ALLL 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."
Net Interest Income
Net interest income remained constant at $7.8 million for both the 2011 first quarter and the linked 2010 fourth quarter, compared to $8.8 million for the 2010 first quarter. The changes in volume of net interest income in the past two quarters has been influenced by earnings from an increased volume of mortgage-backed securities, the level of non-accrual loans and a reduction in the cost of funds. The net interest margin on average earning assets improved to 4.4% for the 2011 first quarter, from 4.3% for the linked 2010 fourth quarter and 4.7% for the 2010 first quarter.
Non-Interest Income
Total non-interest income was $2.0 million for the 2011 first quarter, $1.9 million for the linked 2010 fourth quarter and $2.7 million for the 2010 first quarter. Revenue from loan and deposit service offerings (loan fees, deposit fees and service charges and servicing fee income) remained relatively consistent at $1.7 million for the 2011 first quarter, compared to $1.9 million for the linked 2010 fourth quarter and $1.8 million for the 2010 first quarter.
Net gains from mortgage loan sales was $120,000 in the 2011 first quarter, $311,000 in the linked 2010 fourth quarter and $192,000 in the 2010 first quarter. Net gains recognized from investment and mortgage-backed securities sales was $52,000 in the 2011 first quarter, $51,000 in the linked 2010 forth quarter and $480,000 in the 2010 first quarter.
In its efforts of mitigating nonperforming assets, the Bank recognized $82,000 of net losses on the sale of other real estate owned properties during the 2011 first quarter, compared to $597,000 of net losses in the linked 2010 fourth quarter and $12,000 of net gains in the 2010 first quarter.
Non-Interest Expense
Total non-interest expense was $6.8 million for the 2011 first quarter, $6.7 million for the linked 2010 fourth quarter and $6.5 million for the 2010 first quarter.
The largest component of non-interest expense, compensation and fringe benefits, was $3.8 million for both the 2011 first quarter and the linked 2010 fourth quarter, and $3.7 million for the 2010 first quarter, reflecting the Bank's efforts of managing its human resources cost.
Other noninterest expenses including FDIC insurance premiums, premises and equipment, advertising, data processing, repairs and maintenance, office supplies, professional fees, taxes and insurance, etc., remained relatively consistent during the respective periods.
Income tax expense was $225,000 for the 2011 first quarter, compared to a $4.3 million income tax benefit recognized in the linked 2010 fourth quarter (a result of the 2010 fourth quarter pre-tax operating loss) and $1.0 of income tax expense in the 2010 first quarter. Changes in the amounts of income tax provisions reflect changes in the volume of pretax income and estimated income tax rates in effect during each respective period.
Balance Sheet
Total assets declined to $791.2 million at March 31, 2011, from $797.2 million at December 31, 2010. Net loans and leases receivable declined to $587.2 million at March 31, 2011 from $606.1 million at December 31, 2010, reflecting a combination of principal repayments, sales and securitizations of loans into mortgage-backed securities, and the volume of loans originated during the current quarter. Mortgage-backed securities increased to $120.6 million at March 31, 2011, from $98.9 million at December 31, 2010, reflecting the net of purchases, sales and securitization of certain mortgage loans during the current quarter. Cash and investments declined to $34.5 million at March 31, 2011, from $44.4 million at December 31, 2010, reflecting net changes in the Bank's cash flow and liquidity position, including the repayment of borrowings.
Total deposits increased to $693.6 million at March 31, 2011, from $689.5 million at December 31, 2010. Borrowings declined to $2.4 million at March 31, 2011, from $11.5 million at December 31, 2010. During the current quarter, the Bank repaid a $10.0 million fixed-rate FHLB advance. The cost of funds improved to 1.2% for both the 2011 first quarter and the linked 2010 fourth quarter, from 1.3% for the 2010 first quarter. The Bank is managing 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.
Stockholders' equity was $79.6 million at March 31, 2011, compared to $79.5 million at December 31, 2010, reflecting the net effect of quarterly net income and changes in accumulated other comprehensive income. The equity to assets ratio was 10.1% at March 31, 2011 and 10.0% at December 31, 2010. There were 9,751,271 common shares outstanding at both March 31, 2011 and December 31, 2010. The book value per share was $8.17 at March 31, 2011 and $8.15 at December 31, 2010.
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".
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 one loan production office located throughout central, eastern, northeastern and southeastern North Carolina.
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.
First South Bancorp, Inc. and Subsidiary | ||||||||
Consolidated Statements of Financial Condition | ||||||||
March 31 | December 31 | |||||||
2011 | 2010 | * | ||||||
Assets | (unaudited) | |||||||
Cash and due from banks | $ | 15,000,014 | $ | 14,684,377 | ||||
Interest-bearing deposits in financial institutions | 19,536,680 | 29,749,236 | ||||||
Mortgage-backed securities - available for sale | 64,105,062 | 98,637,742 | ||||||
Mortgage-backed securities - held for investment | 56,460,313 | 244,836 | ||||||
Loans and leases receivable, net: | ||||||||
Held for sale | 2,461,545 | 4,464,040 | ||||||
Held for investment | 584,739,558 | 601,610,242 | ||||||
Premises and equipment, net | 10,195,855 | 9,162,538 | ||||||
Other real estate owned | 12,068,659 | 11,616,390 | ||||||
Federal Home Loan Bank of Atlanta stock, at cost | ||||||||
which approximates market | 3,474,900 | 3,474,900 | ||||||
Accrued interest receivable | 2,457,808 | 2,336,527 | ||||||
Goodwill | 4,218,576 | 4,218,576 | ||||||
Mortgage servicing rights | 1,283,517 | 1,357,659 | ||||||
Identifiable intangible assets | 94,320 | 102,180 | ||||||
Income tax receivable | 2,480,088 | 6,217,679 | ||||||
Prepaid expenses and other assets | 12,576,673 | 9,368,924 | ||||||
Total assets | $ | 791,153,568 | $ | 797,245,846 | ||||
Liabilities and Stockholders' Equity | ||||||||
Deposits: | ||||||||
Demand | $ | 237,604,636 | $ | 234,501,026 | ||||
Savings | 26,251,381 | 24,498,789 | ||||||
Large denomination certificates of deposit | 226,729,367 | 222,578,449 | ||||||
Other time | 203,042,422 | 207,886,450 | ||||||
Total deposits | 693,627,806 | 689,464,714 | ||||||
Borrowed money | 2,363,378 | 11,503,110 | ||||||
Junior subordinated debentures | 10,310,000 | 10,310,000 | ||||||
Other liabilities | 5,204,028 | 6,454,818 | ||||||
Total liabilities | 711,505,212 | 717,732,642 | ||||||
Common stock, $.01 par value, 25,000,000 shares authorized; | ||||||||
11,254,222 issued; 9,751,271 and 9,751,271 | ||||||||
shares outstanding, respectively | 97,513 | 97,513 | ||||||
Additional paid-in capital | 35,824,203 | 35,795,586 | ||||||
Retained earnings, substantially restricted | 75,283,554 | 74,956,772 | ||||||
Treasury stock at cost | (31,967,269) | (31,967,269) | ||||||
Accumulated other comprehensive income, net | 410,355 | 630,602 | ||||||
Total stockholders' equity | 79,648,356 | 79,513,204 | ||||||
Total liabilities and stockholders' equity | $ | 791,153,568 | $ | 797,245,846 | ||||
*Derived from audited consolidated financial statements | ||||||||
First South Bancorp, Inc. and Subsidiary | |||||||
Consolidated Statements of Operations | |||||||
(unaudited) | |||||||
Three Months Ended | |||||||
March 31 | |||||||
2011 | 2010 | ||||||
Interest income: | |||||||
Interest and fees on loans | $ | 8,823,994 | $ | 10,108,953 | |||
Interest and dividends on investments and deposits | 1,067,205 | 1,042,274 | |||||
Total interest income | 9,891,199 | 11,151,227 | |||||
Interest expense: | |||||||
Interest on deposits | 1,976,869 | 2,153,638 | |||||
Interest on borrowings | 27,414 | 139,096 | |||||
Interest on junior subordinated notes | 81,320 | 80,016 | |||||
Total interest expense | 2,085,603 | 2,372,750 | |||||
Net interest income | 7,805,596 | 8,778,477 | |||||
Provision for credit losses | 2,450,011 | 2,420,000 | |||||
Net interest income after provision for credit losses | 5,355,585 | 6,358,477 | |||||
Non-interest income: | |||||||
Fees and service charges | 1,486,702 | 1,630,517 | |||||
Loan servicing fees | 198,084 | 179,733 | |||||
Gain (loss) on sale of other real estate, net | (82,095) | 12,497 | |||||
Gain on sale of mortgage loans | 119,982 | 192,096 | |||||
Gain on sale of mortgage-backed securities | 52,146 | 480,082 | |||||
Other income | 207,131 | 199,247 | |||||
Total non-interest income | 1,981,950 | 2,694,172 | |||||
Non-interest expense: | |||||||
Compensation and fringe benefits | 3,789,679 | 3,691,202 | |||||
Federal deposit insurance premiums | 291,500 | 297,265 | |||||
Premises and equipment | 423,280 | 459,186 | |||||
Advertising | 47,105 | 31,563 | |||||
Payroll and other taxes | 401,628 | 376,614 | |||||
Data processing | 600,541 | 618,396 | |||||
Amortization of intangible assets | 147,202 | 117,485 | |||||
Other | 1,085,278 | 908,463 | |||||
Total non-interest expense | 6,786,213 | 6,500,174 | |||||
Income (loss) before income tax expense (benefit) | 551,322 | 2,552,475 | |||||
Income tax expense (benefit) | 224,540 | 1,002,778 | |||||
Net income (loss) | $ | 326,782 | $ | 1,549,697 | |||
Per share data: | |||||||
Basic earnings (loss) per share | $ | 0.03 | $ | 0.16 | |||
Diluted earnings (loss) per share | $ | 0.03 | $ | 0.16 | |||
Dividends per share | $ | 0.00 | $ | 0.20 | |||
Average basic shares outstanding | 9,751,271 | 9,742,505 | |||||
Average diluted shares outstanding | 9,751,271 | 9,742,505 | |||||
First South Bancorp, Inc. | Supplemental Financial Data (Unaudited) | ||||||||||||
Quarterly | |||||||||||||
3/31/2011 | 12/31/2010 | 9/30/2010 | 6/30/2010 | 3/31/2010 | |||||||||
Consolidated balance sheet data: | (dollars in thousands except per share data) | ||||||||||||
Total assets | $ | 791,154 | $ | 797,246 | $ | 811,912 | $ | 812,771 | $ | 800,608 | |||
Loans receivable (net): | |||||||||||||
Mortgage | $ | 53,925 | $ | 55,450 | $ | 53,995 | $ | 49,470 | $ | 48,379 | |||
Commercial | 445,930 | 463,155 | 496,489 | 502,425 | 498,525 | ||||||||
Consumer | 79,517 | 79,469 | 83,801 | 83,550 | 85,502 | ||||||||
Leases | 7,829 | 8,000 | 8,095 | 9,413 | 9,877 | ||||||||
Total loans (net) | $ | 587,201 | $ | 606,074 | $ | 642,380 | $ | 644,858 | $ | 642,283 | |||
Cash and investments | $ | 34,537 | $ | 44,434 | $ | 40,815 | $ | 34,737 | $ | 22,690 | |||
Mortgage-backed securities | 120,565 | 98,883 | 87,245 | 92,559 | 94,735 | ||||||||
Premises and equipment | 10,196 | 9,163 | 9,216 | 9,240 | 9,034 | ||||||||
Goodwill | 4,219 | 4,219 | 4,219 | 4,219 | 4,219 | ||||||||
Mortgage servicing rights | 1,284 | 1,358 | 1,299 | 1,268 | 1,281 | ||||||||
Deposits: | |||||||||||||
Savings | $ | 26,251 | $ | 24,499 | $ | 24,946 | $ | 25,155 | $ | 24,709 | |||
Checking | 237,605 | 234,501 | 237,677 | 224,950 | 225,997 | ||||||||
Certificates | 429,772 | 430,465 | 433,432 | 444,435 | 433,734 | ||||||||
Total deposits | $ | 693,628 | $ | 689,465 | $ | 696,055 | $ | 694,540 | $ | 684,440 | |||
Borrowings | $ | 2,363 | $ | 11,503 | $ | 12,164 | $ | 12,665 | $ | 12,441 | |||
Junior subordinated debentures | 10,310 | 10,310 | 10,310 | 10,310 | 10,310 | ||||||||
Stockholders' equity | 79,648 | 79,513 | 87,293 | 87,110 | 85,962 | ||||||||
Consolidated earnings summary: | |||||||||||||
Interest income | $ | 9,891 | $ | 9,928 | $ | 10,963 | $ | 10,829 | $ | 11,151 | |||
Interest expense | 2,086 | 2,166 | 2,222 | 2,258 | 2,372 | ||||||||
Net interest income | 7,805 | 7,762 | 8,741 | 8,571 | 8,779 | ||||||||
Provision for credit losses | 2,450 | 13,700 | 3,962 | 2,070 | 2,420 | ||||||||
Noninterest income | 1,982 | 1,919 | 3,400 | 2,830 | 2,694 | ||||||||
Noninterest expense | 6,786 | 6,738 | 6,745 | 6,741 | 6,500 | ||||||||
Income tax expense (benefit) | 225 | (4,260) | 424 | 1,032 | 1,003 | ||||||||
Net income (loss) | $ | 326 | $ | (6,497) | $ | 1,010 | $ | 1,558 | $ | 1,550 | |||
Per Share Data: | |||||||||||||
Basic earnings (loss) per share | $ | 0.03 | $ | (0.67) | $ | 0.10 | $ | 0.16 | $ | 0.16 | |||
Diluted earnings (loss) per share | $ | 0.03 | $ | (0.67) | $ | 0.10 | $ | 0.16 | $ | 0.16 | |||
Dividends per share | $ | 0.00 | $ | 0.00 | $ | 0.09 | $ | 0.20 | $ | 0.20 | |||
Book value per share | $ | 8.17 | $ | 8.15 | $ | 8.96 | $ | 8.94 | $ | 8.82 | |||
Average basic shares | 9,751,271 | 9,748,948 | 9,743,971 | 9,743,971 | 9,742,505 | ||||||||
Average diluted shares | 9,751,271 | 9,748,948 | 9,743,971 | 9,744,679 | 9,742,505 | ||||||||
First South Bancorp, Inc. | Supplemental Financial Data (Unaudited) Quarterly | ||||||||||||
3/31/2011 | 12/31/2010 | 9/30/2010 | 6/30/2010 | 3/31/2010 | |||||||||
(dollars in thousands except per share data) | |||||||||||||
Performance ratios: | |||||||||||||
Yield on average earning assets | 5.59% | 5.51% | 5.92% | 5.86% | 5.99% | ||||||||
Cost of funds | 1.18% | 1.24% | 1.24% | 1.26% | 1.32% | ||||||||
Net interest spread | 4.41% | 4.30% | 4.68% | 4.60% | 4.67% | ||||||||
Net interest margin/average earning assets | 4.41% | 4.31% | 4.72% | 4.64% | 4.72% | ||||||||
Earning assets to total assets | 89.85% | 89.94% | 90.96% | 91.13% | 91.66% | ||||||||
Return on average assets (annualized) | 0.16% | -3.21% | 0.50% | 0.77% | 0.76% | ||||||||
Return on average equity (annualized) | 1.63% | -30.31% | 4.60% | 7.17% | 7.13% | ||||||||
Efficiency ratio | 69.25% | 69.52% | 55.50% | 59.05% | 56.59% | ||||||||
Average assets | $ | 794,615 | $ | 810,459 | $ | 813,900 | $ | 808,266 | $ | 811,859 | |||
Average earning assets | $ | 707,982 | $ | 720,813 | $ | 741,214 | $ | 738,645 | $ | 744,415 | |||
Average equity | $ | 79,978 | $ | 85,746 | $ | 87,760 | $ | 86,957 | $ | 86,897 | |||
Equity/Assets | 10.07% | 9.97% | 10.75% | 10.72% | 10.74% | ||||||||
Tangible Equity/Assets | 9.52% | 9.43% | 10.22% | 10.18% | 10.19% | ||||||||
Asset quality data and ratios: | |||||||||||||
Nonaccrual loans | $ | 16,723 | $ | 14,293 | $ | 14,073 | $ | 12,308 | $ | 8,578 | |||
Nonaccrual restructured loans | $ | 23,804 | $ | 26,973 | $ | 5,156 | $ | 5,647 | $ | 4,377 | |||
Total nonaccrual loans | $ | 40,527 | $ | 41,266 | $ | 19,229 | $ | 17,955 | $ | 12,955 | |||
Other real estate owned | $ | 12,069 | $ | 11,616 | $ | 8,599 | $ | 8,452 | $ | 8,383 | |||
Total nonperforming assets | $ | 52,596 | $ | 52,882 | $ | 27,828 | $ | 26,407 | $ | 21,338 | |||
Allowance for loan and lease losses | $ | 19,320 | $ | 18,830 | $ | 8,611 | $ | 7,951 | $ | 13,221 | |||
Allowance for unfunded loan commitments | $ | 231 | $ | 237 | $ | 163 | $ | 171 | $ | 178 | |||
Allowance for credit losses | $ | 19,551 | $ | 19,067 | $ | 8,774 | $ | 8,122 | $ | 13,399 | |||
Allowance for loan and lease losses to loans | 3.18% | 3.01% | 1.32% | 1.21% | 2.01% | ||||||||
Allowance for unfunded loan commitments | |||||||||||||
to unfunded commitments | 0.30% | 0.30% | 0.20% | 0.20% | 0.20% | ||||||||
Allowance for credit losses to loans | 3.22% | 3.04% | 1.35% | 1.24% | 2.04% | ||||||||
Net charge-offs (recoveries) | $ | 1,966 | $ | 3,407 | $ | 3,310 | $ | 7,347 | $ | 2,765 | |||
Net charge-offs (recoveries) to loans | 0.32% | 0.54% | 0.51% | 1.12% | 0.42% | ||||||||
Nonaccrual loans to loans | 6.67% | 6.59% | 2.95% | 2.74% | 1.97% | ||||||||
Nonperforming assets to assets | 6.65% | 6.63% | 3.43% | 3.25% | 2.67% | ||||||||
Loans to deposits | 87.63% | 90.83% | 93.72% | 94.49% | 95.97% | ||||||||
Loans to assets | 76.82% | 78.55% | 80.35% | 80.74% | 82.05% | ||||||||
Loans serviced for others | $ | 317,816 | $ | 318,218 | $ | 307,395 | $ | 299,361 | $ | 296,452 | |||
For more information contact:
Bill Wall (CFO) (252-940-5017) or
Tom Vann (CEO) (252-940-4916)
SOURCE First South Bancorp, Inc.
