ASB Bancorp, Inc. Reports Third Quarter Results

ASHEVILLE, N.C., Oct. 30, 2012 /PRNewswire/ -- ASB Bancorp, Inc. (the "Company") (NASDAQ GM: ASBB), the holding company for Asheville Savings Bank, S.S.B. (the "Bank"), announced today its operating results for the three and nine month periods ended September 30, 2012. The Company reported net income of $457,000 for the quarter ended September 30, 2012 compared to net income of $571,000 for the same quarter of 2011. Net income totaled $627,000 for the nine months ended September 30, 2012 compared to $1.9 million for the same period of 2011.  On a basic and diluted per share basis, the Company had net income of $0.09 per share and $0.12 per share for the three and nine month periods ended September 30, 2012, respectively, while it had no shares outstanding during the three and nine month periods ended September 30, 2011.

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"We are encouraged by recent trends in our asset quality, particularly with the decrease in the levels of nonperforming loans," said Suzanne S. DeFerie, President and Chief Executive Officer.  "Our focus for subsequent quarters will be to aggressively reduce the levels of foreclosed real estate and to implement strategies for improvement in our net interest margin."

Third Quarter Highlights

  • Net income for the third quarter of 2012 was $457,000, or $0.09 per basic and diluted share.

  • Third quarter 2012 earnings and book value per share improved over the previous three quarters.

  • Nonperforming loans decreased $5.5 million, to $12.7 million at September 30, 2012 from $18.2 million at June 30, 2012.

  • Nonperforming assets decreased $2.5 million to $24.3 million, or 3.15% of total assets, at September 30, 2012 from $26.8 million, or 3.36% of total assets, at June 30, 2012 and have improved in each quarter of 2012.

  • Core deposits, or deposits excluding time deposits, increased $3.7 million to $379.2 million at September 30, 2012 from $375.5 million at June 30, 2012 and have increased in each of the previous four quarters. Since December 31, 2011, non-interest-bearing deposits increased $11.5 million, or 21.2%

Balance Sheet Review

Assets. Total assets decreased $18.5 million, or 2.3%, to $772.4 million at September 30, 2012 from $790.9 million at December 31, 2011. Cash and cash equivalents decreased $21.7 million, or 30.1%, to $50.6 million at September 30, 2012 from $72.3 million at December 31, 2011. Investment securities increased $32.1 million, or 12.9%, to $281.2 million at September 30, 2012 from $249.1 million at December 31, 2011, primarily due to the reinvestment into investment securities of proceeds from loan repayments and prepayments.   Loans receivable, net of deferred fees, decreased $30.2 million, or 7.0%, to $402.7 million at September 30, 2012 from $432.9 million at December 31, 2011 as loan repayments, prepayments, and foreclosures exceeded new loan originations.

Liabilities. Total deposits decreased $21.6 million, or 3.5%, to $586.7 million at September 30, 2012 from $608.2 million at December 31, 2011. During the nine months ended September 30, 2012, the Company continued its focus on core deposits, from which it excludes certificates of deposit. Core deposits increased $29.5 million, or 8.4%, to $379.2 million at September 30, 2012 from $349.7 million at December 31, 2011. Non-interest-bearing deposits increased $11.5 million, or 21.2%, to $65.6 million at September 30, 2012 from $54.1 million at December 31, 2011. Over the same period, certificates of deposit decreased $51.1 million, or 19.8%, to $207.4 million at September 30, 2012 from $258.5 million at December 31, 2011. Accounts payable and other liabilities increased $1.8 million, or 28.0%, to $8.1 million at September 30, 2012 from $6.3 million at December 31, 2011.

Asset Quality

Provision for Loan Losses. The provision for loan losses was $542,000 for the three months ended September 30, 2012 compared to $730,000 for the three months ended September 30, 2011. The decrease in the provision was due to the combination of fewer charge-offs in the loan portfolio, a decline in impaired loans, and lower loan balances. The allowance for loan losses totaled $10.2 million, or 2.54% of total loans, at September 30, 2012 compared to $10.6 million, or 2.45% of total loans, at December 31, 2011. The Company charged off $1.9 million in loans during the three months ended September 30, 2012 compared to $2.2 million during the three months ended September 30, 2011.

The provision for loan losses was $2.4 million for the nine months ended September 30, 2012 compared to $1.8 million for the nine months ended September 30, 2011. The increase in the provision was due to an increase in specific reserves for collateral dependent impaired loans during the quarter ended June 30, 2012 that resulted from a decline in the value of the real estate collateral securing the impaired loans.  Loan charge-offs totaled $3.0 million for the first nine months of 2012 compared to $3.8 million for the first nine months of 2011.

Nonperforming assets. Nonperforming assets totaled $24.3 million, or 3.15% of total assets, at September 30, 2012, compared to $28.7 million, or 3.63% of total assets, at December 31, 2011. Nonperforming assets included $12.7 million in nonperforming loans and $11.6 million in foreclosed real estate at September 30, 2012, compared to $20.6 million and $8.1 million, respectively, at December 31, 2011.

Nonperforming loans decreased $7.9 million, or 38.3%, to $12.7 million at September 30, 2012 from $20.6 million at December 31, 2011.  The decrease in nonperforming loans from December 31, 2011 to September 30, 2012 was primarily attributable to loans moving to foreclosed real estate, charge-offs and loan payments, which were partially offset by the addition of new loans that stopped performing during the period. At September 30, 2012, nonperforming loans included one $10.1 million commercial land development relationship, two commercial mortgages that totaled $1.3 million, three commercial and industrial loans that totaled $145,000, ten residential mortgage loans that totaled $1.0 million, and three home equity loans that totaled $155,000. As of September 30, 2012, the nonperforming loans had specific reserves of $940,000.

As of September 30, 2012, the Bank's largest nonperforming loan relationship was comprised of one primary loan for the construction of a mixed-use retail, commercial office, and residential condominium project located in western North Carolina and one debtor in possession loan that the Bank purchased in the second quarter of 2012 in order to secure its senior lien position. The loans totaled $10.1 million as of September 30, 2012 and were considered impaired and nonaccruing. The Bank established a $948,000 specific reserve in the second quarter of 2012 based on an updated appraisal, which was subsequently charged-off in the third quarter of 2012.  The Bank is in the process of foreclosure. The project has eight retail condominiums of which four have been leased, 11 commercial office condominiums of which three have sold, and 29 residential condominiums of which one has sold. 

Foreclosed real estate at September 30, 2012 included 17 properties with a total carrying value of $11.6 million compared to 18 properties with a total carrying value of $8.1 million at December 31, 2011. During the nine months ended September 30, 2012, in addition to an increase of $554,000 to the loss provision, there were eleven new properties totaling $6.3 million added to foreclosed real estate, while thirteen properties totaling $2.3 million were sold.

Income Statement Analysis

Net Interest Income.  Net interest income decreased by $431,000, or 8.6%, to $4.6 million for the three months ended September 30, 2012 compared to $5.0 million for the three months ended September 30, 2011. Total interest and dividend income decreased by $1.0 million, or 14.4%, to $6.1 million for the three months ended September 30, 2012 compared to $7.1 million for the three months ended September 30, 2011, primarily as a result of a 65 basis point decrease in yields on interest-earning assets and a $47.2 million decrease in average loan balances that partially offset a $72.3 million increase in the average balances of all other interest-earning assets, including investments. The decline in total interest and dividend income was partially offset by a $593,000, or 28.0%, decrease in interest expense to $1.5 million for the three months ended September 30, 2012 compared to $2.1 million for the three months ended September 30, 2011. The decrease in interest expense resulted from a 31 basis point reduction in the average rate paid on interest-bearing liabilities and a decline of $39.2 million in the average balances of interest-bearing liabilities comparing the three month periods.

Net interest income decreased by $1.6 million, or 10.4%, to $13.8 million for the nine months ended September 30, 2012 compared to $15.4 million for the nine months ended September 30, 2011. Total interest and dividend income decreased by $3.0 million, or 13.8%, to $19.0 million for the nine months ended September 30, 2012 compared to $22.1 million for the nine months ended September 30, 2011, primarily as a result of a 76 basis point decrease in yields on interest-earning assets and a $57.3 million decrease in average loan balances that partially offset a $99.3 million increase in the average balances of all other interest-earning assets, including investments. The decline in total interest and dividend income was partially offset by a $1.4 million, or 21.7%, decrease in interest expense to $5.2 million for the nine months ended September 30, 2012 compared to $6.6 million for the nine months ended September 30, 2011. The decrease in interest expense resulted from a 25 basis point reduction in the average rate paid on interest-bearing liabilities and a decline of $28.1 million in the average balances of interest-bearing liabilities comparing the nine month periods.

Noninterest Income.  Noninterest income increased $443,000, or 22.5%, to $2.4 million for the three months ended September 30, 2012 from $2.0 million for the three months ended September 30, 2011. Factors that contributed to the increase in noninterest income during the 2012 period were increases of $469,000 in gains from the sale of investment securities, $150,000 in mortgage banking income, and $56,000 from debit card services, which were partially offset by decreases of $126,000 in fees from deposits and other services and $106,000 in loan fees.  The increase in investment security gains resulted primarily from the Bank's efforts to better position its portfolio for rising rates, while the increase in mortgage banking income was attributable to higher volumes of mortgage loans sold. The decrease in deposit and other service charge income was primarily the result of lower deposit overdraft fees.

Noninterest income increased $863,000 to $6.4 million for the nine months ended September 30, 2012 from $5.5 million for the nine months ended September 30, 2011.  Factors that contributed to the increase in noninterest income during the 2012 period were increases of $1.1 million in gains from the sale of investment securities, $402,000 in mortgage banking income and $77,000 in debit card services, which were partially offset by decreases of $352,000 in fees from deposits and other services, $244,000 in loan fees, and $96,000 in other investment income. The increase in investment security gains resulted primarily from the Bank's efforts to better position its portfolio for rising rates, while the increase in mortgage banking income was attributable to higher volumes of mortgage loans sold. The decrease in deposit and other service charge income was primarily the result of lower deposit overdraft fees.

Noninterest Expense.  Noninterest expenses increased $447,000, or 8.4%, to $5.8 million for the three months ended September 30, 2012 compared to $5.3 million for the three months ended September 30, 2011. The primary factors affecting the increase were increases of $220,000 in salaries and employee benefits, $124,000 in other noninterest expenses, $83,000 in FDIC insurance premiums, $60,000 in advertising expenses, $37,000 in data processing fees, and $32,000 in professional services, which were partially offset by a decrease of $104,000 in foreclosed property expenses. The increase in salaries and benefits was primarily due to $112,000 in expenses related to the Bank's new employee stock ownership plan, and increases of $57,000 in compensation expenses and $51,000 in payroll taxes and other benefit plan expenses. The increase in other noninterest expenses was primarily attributable to increased expenses related to holding company and public company compliance and reporting.

Noninterest expenses increased $739,000, or 4.6%, to $16.9 million for the nine months ended September 30, 2012 compared to $16.2 million for the nine months ended September 30, 2011. The primary factors affecting the increase were increases of $767,000 in salaries and benefits, $320,000 in other noninterest expenses, and $82,000 in professional services, which were partially offset by decreases of $318,000 in foreclosed property expenses, $94,000 in FDIC insurance premiums, and $63,000 in occupancy expense.  The increase in salaries and benefits was primarily due to an increase of $310,000 in expenses related to the Bank's new employee stock ownership plan, a $285,000 increase in compensation expenses, and an increase of $172,000 in payroll taxes and other benefit plan expenses. The increase in other noninterest expenses was primarily attributable to increased expenses related to holding company and public company compliance and reporting.

The Bank is a North Carolina chartered stock savings bank with a community focus offering traditional financial services through 13 full-service banking centers located in Buncombe, Madison, McDowell, Henderson, and Transylvania counties in Western North Carolina.

This news release, as well as other written communications made from time to time by the Company and its subsidiaries and oral communications made from time to time by authorized officers of the Company, may contain statements relating to the future results of the Company (including certain projections and business trends) that are considered "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 (the PSLRA). Such forward-looking statements may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," "intend" and "potential." For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the PSLRA.

The Company cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: prevailing economic and geopolitical conditions; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting the Company's operations, pricing, products and services and other factors that may be described in the Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission. The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

Contact:

Suzanne S. DeFerie


Chief Executive Officer


(828) 254-7411

 
















Selected Financial Condition Data


























 September 30, 


 December 31, 



(dollars in thousands)






2012


2011*


% change
















Total assets








$ 772,407


$ 790,868


-2.3%

Cash and cash equivalents






50,583


72,327


-30.1%

Investment securities






281,166


249,081


12.9%

Loans receivable, net of deferred fees




402,724


432,883


-7.0%

Allowance for loan losses






(10,220)


(10,627)


3.8%

Deposits








586,686


608,236


-3.5%

Core deposits








379,237


349,695


8.4%

FHLB advances








60,000


60,000


0.0%

Accounts payable and other liabilities




8,068


6,303


28.0%

Total equity








117,225


115,571


1.4%

____________________

* Derived from audited consolidated financial statements.