ASB Bancorp Reports Second Quarter Results

ASHEVILLE, N.C., July 31, 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 second quarter and year-to-date period ended June 30, 2012. The Company reported a net loss of $114,000 for the quarter ended June 30, 2012 compared to net income of $742,000 for the same quarter of 2011. Earnings were $170,000 for the six months ended June 30, 2012 compared to $1.3 million for the same period of 2011. On a basic and diluted per share basis, the Company had a net loss of $0.02 per share and net income of $0.03 per share for the three and six month periods ended June 30, 2012, respectively, while it had no shares outstanding during the three and six month periods ended June 30, 2011.

(Logo: http://photos.prnewswire.com/prnh/20111031/CL96775LOGO)

"A decline in collateral valuations related to impaired loans resulted in a large loan loss provision expense for the quarter which, in turn, resulted in the net loss," said Suzanne S. DeFerie, President and Chief Executive Officer. "While we are disappointed with this loss, we remain diligent in the prudent valuation of our problem asset portfolio even as price volatility in our local real estate market continues to result in lower appraised values." Ms. DeFerie added, "Growth in quality loans and a consistent improvement in the performance of our existing loans remain our areas of emphasis over the next several quarters."

Balance Sheet Review

Assets. Total assets increased $7.8 million, or 1.0%, to $798.7 million at June 30, 2012 from $790.9 million at December 31, 2011. Cash and cash equivalents increased $1.1 million, or 1.6%, to $73.5 million at June 30, 2012 from $72.3 million at December 31, 2011. Investment securities increased $35.6 million, or 14.3%, to $284.7 million at June 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 $23.7 million, or 5.5%, to $409.1 million at June 30, 2012 from $432.9 million at December 31, 2011 as loan repayments, prepayments, and foreclosures exceeded new loan originations.

Liabilities. Total deposits decreased $2.2 million, or 0.4%, to $606.0 million at June 30, 2012 from $608.2 million at December 31, 2011. During the six months ended June 30, 2012, the Company continued its focus on core deposits, from which it excludes certificates of deposit. Core deposits increased $25.8 million, or 7.4%, to $375.5 million at June 30, 2012 from $349.7 million at December 31, 2011. Over the same period, certificates of deposit decreased $28.0 million, or 10.8%, to $230.5 million at June 30, 2012 compared to $258.5 million at December 31, 2011. Accounts payable and other liabilities increased $9.8 million, or 154.7%, to $16.1 million at June 30, 2012 from $6.3 million at December 31, 2011 primarily due to a $8.7 million increase in amounts due for the purchase of investment securities in the process of settlement.

Asset Quality

Provision for Loan Losses. The provision for loan losses was $1.3 million for the three months ended June 30, 2012 compared to $424,000 for the three months ended June 30, 2011. The increase in the provision was due to an increase in the specific reserves for collateral dependent impaired loans that resulted from a decline in the value of the real estate collateral securing the impaired loans and an increase in the loss factors used to estimate the general allowance for loan losses, which were partially offset by 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 $11.6 million, or 2.83% of total loans, at June 30, 2012 compared to $10.6 million, or 2.45% of total loans, at December 31, 2011. We charged off $382,000 in loans during the three months ended June 30, 2012 compared to $781,000 during the three months ended June 30, 2011.

The provision for loan losses was $1.9 million for the six months ended June 30, 2012 compared to $1.1 million for the six months ended June 30, 2011. As was the case for the quarterly periods, the increase in the provision was due to an increase in the specific reserves for collateral dependent impaired loans that resulted from a decline in the value of the real estate collateral securing the impaired loans and an increase in the loss factors used to estimate the general allowance for loan losses, which were partially offset by the combination of fewer charge-offs in the loan portfolio and lower loan balances. We charged off $1.1 million in loans during the first six months of 2012 compared to $1.6 million during the first six months of 2011.

Nonperforming assets. Nonperforming assets totaled $26.8 million, or 3.36% of total assets, at June 30, 2012, compared to $28.7 million, or 3.63% of total assets, at December 31, 2011. Nonperforming assets included $18.2 million in nonperforming loans and $8.6 million in foreclosed real estate at June 30, 2012, compared to $20.6 million and $8.1 million, respectively, at December 31, 2011.

Nonperforming loans decreased $2.4 million, or 11.6%, to $18.2 million at June 30, 2012 from $20.6 million at December 31, 2011. The decrease in nonperforming loans from December 31, 2011 to June 30, 2012 was primarily attributable to loans totaling $2.4 million moving to foreclosed real estate and loan payoffs, which were partially offset by the addition of new loans that stopped performing during the period. At June 30, 2012, nonperforming loans included four commercial land development loans that totaled $15.1 million, two commercial mortgages that totaled $1.7 million, three commercial and industrial loans that totaled $490,000, eight residential mortgages that totaled $514,000, and three home equity loans that totaled $399,000. As of June 30, 2012, the nonperforming loans had specific reserves of $2.2 million.

As of June 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 $11.0 million as of June 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. The Bank plans to proceed with 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 June 30, 2012 included 20 properties with a total carrying value of $8.6 million compared to 18 properties with a total carrying value of $8.1 million as of December 31, 2011. During the six months ended June 30, 2012, in addition to an increase of $369,000 to the loss provision, there were eight new properties totaling $2.4 million added to foreclosed real estate, while six properties totaling $1.5 million were sold.

Income Statement Analysis

Net Interest Income. Net interest income decreased by $680,000, or 12.7%, to $4.7 million for the three months ended June 30, 2012 as compared to $5.3 million for the three months ended June 30, 2011. Total interest and dividend income decreased by $1.1 million, or 15.1%, to $6.4 million for the three months ended June 30, 2012 as compared to $7.5 million for the three months ended June 30, 2011, primarily as a result of an 84 basis point decrease in yields on interest-earning assets and a $59.2 million decrease in average loans that partially offset a $105.6 million increase in the average balances of investments and other interest-earning assets. The decline in total interest and dividend income was partially offset by a $462,000, or 21.0%, decrease in interest expense to $1.7 million for the three months ended June 30, 2012 compared to $2.2 million for the three months ended June 30, 2011. The decrease in interest expense resulted from a 24 basis point reduction in the average rate paid on interest-bearing liabilities and a decline of $26.1 million in the average balances of interest-bearing liabilities during the three month periods.

Net interest income decreased by $1.2 million, or 11.2%, to $9.3 million for the six months ended June 30, 2012 as compared to $10.4 million for the six months ended June 30, 2011. Total interest and dividend income decreased by $2.0 million, or 13.5%, to $12.9 million for the six months ended June 30, 2012 as compared to $15.0 million for the six months ended June 30, 2011, primarily as a result of an 82 basis point decrease in yields on interest-earning assets and a $62.4 million decrease in average loans that partially offset a $113.1 million increase in the average balances of investments and other interest-earning assets. The decline in total interest and dividend income was partially offset by a $847,000, or 18.8%, decrease in interest expense to $3.7 million for the six months ended June 30, 2012 compared to $4.5 million for the six months ended June 30, 2011. The decrease in interest expense resulted from a 23 basis point reduction in the average rate paid on interest-bearing liabilities and a decline of $22.5 million in the average balances of interest-bearing liabilities during the six month periods.

Noninterest Income. Noninterest income increased $109,000, or 5.8%, to $2.0 million for the three months ended June 30, 2012 from $1.9 million for the three months ended June 30, 2011. Factors that contributed to the increase in noninterest income during the 2012 period were increases of $105,000 in gains from the sale of investment securities and $292,000 in mortgage banking income, which were partially offset by decreases of $127,000 in fees from deposits and other services, $106,000 in loan fees, and $70,000 in other investment income. The decrease in deposit and other service charge income was primarily the result of lower deposit overdraft fees.

Noninterest income increased $420,000 to $4.0 million for the six months ended June 30, 2012 from $3.5 million for the six months ended June 30, 2011. Factors that contributed to the increase in noninterest income during the 2012 period were increases of $607,000 in gains from the sale of investment securities and $252,000 in mortgage banking income, which were partially offset by decreases of $226,000 in fees from deposits and other services, $100,000 in loan fees, and $96,000 in other investment income. The decrease in deposit and other service charge income was primarily the result of lower deposit overdraft fees.

Noninterest Expense. Noninterest expenses decreased $42,000 for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. The primary factors affecting the decrease were decreases of $185,000 in foreclosed property expenses, $94,000 in advertising expenses, $90,000 in FDIC insurance premiums, and $48,000 in occupancy expenses, which were partially offset by increases of $209,000 in salaries and benefits, $30,000 in professional services, and $129,000 in other noninterest expenses. The increase in salaries and benefits was primarily due to $104,000 in expenses related to the Bank's new employee stock ownership plan, and increases of $65,000 in payroll taxes and other benefit plan expenses, and $40,000 in compensation expenses for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. 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 $292,000 for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. The primary factors affecting the increase were increases of $547,000 in salaries and benefits, $196,000 in other noninterest expenses, and $50,000 in professional services, which were partially offset by decreases of $214,000 in foreclosed property expenses, $177,000 in FDIC insurance premiums, $71,000 in advertising expense, and $58,000 in occupancy expense. The increase in salaries and benefits was primarily due to a $228,000 increase in compensation expenses, $198,000 in expenses related to the Bank's new employee stock ownership plan, and an increase of $121,000 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


























(dollars in thousands)

























June 30,

2012


December 31,
2011*


%
change
















Total assets










$ 798,667


$ 790,868


1.0%

Cash and cash equivalents







73,475


72,327


1.6%

Investment securities








284,671


249,081


14.3%

Loans receivable, net of deferred fees






409,140


432,883


-5.5%

Allowance for loan losses








(11,563)


(10,627)


-8.8%

Deposits










606,022


608,236


-0.4%

FHLB advances








60,000


60,000


0.0%

Accounts payable and other liabilities






16,055


6,303


154.7%

Total equity










116,079


115,571


0.4%

* Derived from audited consolidated financial statements. 






































Selected Operating Data


























(dollars in thousands,

except shares outstanding

and per share data)


 Three Months Ended 

 Six Months Ended  

 June 30, 


 June 30, 

2012


2011*


% change


2012


2011*


% change
















Interest and















  dividend income


$     6,398


$     7,540


-15.1%


$   12,937


$   14,955


-13.5%

Interest expense


1,743


2,205


-21.0%


3,662


4,509


-18.8%

Net interest income


4,655


5,335


-12.7%


9,275


10,446


-11.2%

Provision for loan losses


1,293


424


205.0%


1,891


1,081


74.9%

Net interest income













  after provision for













  loan losses



3,362


4,911


-31.5%


7,384


9,365


-21.2%

Noninterest income


1,999


1,890


5.8%


3,957


3,537


11.9%

Noninterest expense


5,588


5,630


-0.7%


11,154


10,862


2.7%

Income (loss) before













  income tax 













  provision (benefit)


(227)


1,171


-119.4%


187


2,040


-90.8%

Income tax















  provision (benefit)


(113)


429


-126.3%


17


713


-97.6%

Net income (loss)


$      (114)


$       742


-115.4%


$       170


$     1,327


-87.2%
















Net income (loss) per













  common share:













  Basic




$     (0.02)


 n/a  


 n/a    


$      0.03


 n/a  


 n/a    

  Diluted




$     (0.02)


 n/a  


 n/a    


$      0.03


 n/a  


 n/a    

Average shares outstanding:











  Basic




5,156,843


 n/a  


 n/a    


5,152,941


 n/a  


 n/a    

  Diluted




5,156,843


 n/a  


 n/a    


5,152,941


 n/a  


 n/a    

*   Certain amounts for prior periods were reclassified to conform to the June 30, 2012 presentation.



Selected Average Balances and Yields/Costs






























For the Three Months Ended June 30,









2012


2011









 Average 


 Yield/ 


 Average 


 Yield/ 

(dollars in thousands)





 Balance 


 Cost 


 Balance 


 Cost 
















Interest-earning deposits with banks




$   62,491


0.36%


$   18,662


0.26%

Loans receivable






420,084


4.70%


479,309


5.13%

Investment securities






68,807


2.08%


74,023


2.61%

Mortgage-backed and similar securities




204,079


2.17%


137,029


2.71%

Other interest-earning assets




3,881


1.55%


3,944


0.92%

Interest-bearing deposits






547,247


0.84%


572,881


1.12%

Overnight and short-term borrowings




799


1.01%


1,305


0.61%

Federal Home Loan Bank advances




60,000


4.04%


60,000


4.02%
















Interest rate spread








2.26%




2.86%

Net interest margin








2.49%




3.01%
























For the Six Months Ended June 30,









2012


2011









 Average 


 Yield/ 


 Average 


 Yield/ 

(dollars in thousands)





 Balance 


 Cost 


 Balance 


 Cost 
















Interest-earning deposits with banks




$   65,192


0.34%


$   18,571


0.25%

Loans receivable






425,643


4.73%


488,081


5.11%

Investment securities






65,768


2.19%


67,726


2.65%

Mortgage-backed and similar securities




198,767


2.17%


130,271


2.65%

Other interest-earning assets




3,877


1.61%


3,957


0.87%

Interest-bearing deposits






548,968


0.90%


570,741


1.17%

Overnight and short-term borrowings




789


0.25%


1,519


0.53%

Federal Home Loan Bank advances




60,000


4.04%


60,000


4.03%
















Interest rate spread








2.24%




2.83%

Net interest margin








2.48%




2.98%
















Selected Asset Quality Data


































 Three Months Ended 

 Six Months Ended  

Allowance for Loan Losses




 June 30, 


 June 30, 

(dollars in thousands)






2012


2011


2012


2011
















Allowance for loan losses, beginning of period


$   10,562


$   12,632


$   10,627


$   12,676

Provision for loan losses






1,293


424


1,891


1,081
















Charge-offs







(382)


(781)


(1,098)


(1,585)

Recoveries








90


78


143


181

Net charge-offs






(292)


(703)


(955)


(1,404)
















Allowance for loan losses, end of period



$   11,563


$   12,353


$   11,563


$   12,353
















Allowance for loan losses as a percent of:









  Total loans







2.83%


2.64%


2.83%


2.64%

  Total nonperforming loans




63.42%


87.05%


63.42%


87.05%

Nonperforming Assets













(dollars in thousands)








 

June 30,

2012


December 31,
2011


% change
















Nonperforming Loans:













Nonaccruing Loans (1)













Commercial:














  Commercial construction and land development




$   15,087


$   14,695


2.7%

  Commercial mortgage








1,711


833


105.4%

  Commercial and industrial






490


2,595


-81.1%

  Total commercial








17,288


18,123


-4.6%

Non-commercial:













  Non-commercial construction and land development



-


110


-100.0%

  Residential mortgage








514


1,922


-73.3%

  Revolving mortgage








399


440


-9.3%

  Consumer










31


27


14.8%

  Total non-commercial








944


2,499


-62.2%

Total nonaccruing loans (1)






18,232


20,622


-11.6%
















Total loans past due 90 or more days











    and still accruing








-


-


0.0%
















Total nonperforming loans







18,232


20,622


-11.6%
















Foreclosed real estate








8,615


8,125


6.0%
















Total nonperforming assets






26,847


28,747


-6.6%
















Performing troubled debt restructurings (2)




5,191


1,142


354.6%

Performing troubled debt restructurings and









  total nonperforming assets






$   32,038


$   29,889


7.2%
















Nonperforming loans as a percent of total loans




4.46%


4.76%



Nonperforming assets as a percent of total assets




3.36%


3.63%



Performing troubled debt restructurings and









  total nonperforming assets to total assets




4.01%


3.78%



(1) Nonaccruing loans include nonaccruing troubled debt restructurings.





(2) Performing troubled debt restructurings exclude nonaccruing troubled debt restructurings.



Foreclosed Real Estate by Loan Type



 June 30, 2012 


 December 31, 2011 

(dollars in thousands)





 Number 


 Amount 


 Number 


 Amount 
















By foreclosed loan type:












Commercial mortgage






2


$     2,730


3


$     3,045

Commercial construction and land development


9


4,174


5


3,259

Residential mortgage






6


1,231


7


1,373

Residential construction and land development


3


480


3


448

Total 








20


$     8,615


18


$     8,125
















Foreclosed Real Estate








Six Months Ended 





(dollars in thousands)








 June 30, 2012 




















Beginning balance








$     8,125





Transfers from loans








2,368





Loss provisions








(369)





Loss on sale of foreclosed properties






(28)





Net proceeds from sales of foreclosed properties




(1,481)





Ending balance








$     8,615




















Selected Performance Ratios

































 Three Months Ended 

 Six Months Ended  









 June 30, 


 June 30, 









2012


2011


2012


2011
















Return on average assets (1)




-0.06%


0.40%


0.04%


0.36%

Return on average equity (1)




-0.39%


4.56%


0.29%


4.15%

Interest rate spread (1)(2)





2.26%


2.86%


2.24%


2.83%

Net interest margin (1)(3)





2.49%


3.01%


2.48%


2.98%

Noninterest expense to average assets (1)


2.84%


3.01%


2.83%


2.93%

Efficiency ratio (4)






83.48%


77.69%


83.81%


77.45%

(1) Ratios are annualized.











(2) Represents the difference between the weighted average yield on average interest-earning assets and the  

     weighted average cost on average interest-bearing liabilities. Tax exempt income is reported on a tax 

     equivalent basis using a federal marginal tax rate of 34%.






(3) Represents net interest income as a percent of average interest-earning assets. Tax exempt income is 

     reported on a tax equivalent basis using a federal marginal tax rate of 34%.



(4) Represents noninterest expenses divided by the sum of net interest income, on a tax equivalent basis

     using a federal marginal tax rate of 34%, and noninterest income.





Quarterly Data


































 Three Month Periods Ended 

(dollars in thousands, except shares


 June 30, 


 March 31, 


 December 31, 


 September 30, 


 June 30, 

outstanding and per share data)


2012


2012*


2011*


2011*


2011*
















Income Statement Data:













Interest and dividend income


$     6,398


$     6,539


$     6,783


$     7,112


$     7,540

Interest expense




1,743


1,919


2,013


2,120


2,205

Net interest income




4,655


4,620


4,770


4,992


5,335

Provision for loan losses




1,293


598


1,974


730


424

Net interest income after













  provision for loan losses



3,362


4,022


2,796


4,262


4,911

Noninterest income




1,999


1,958


1,896


1,973


1,890

Noninterest expense




5,588


5,566


5,879


5,313


5,630

Income (loss) before income 











  tax provision (benefit)




(227)


414


(1,187)


922


1,171

Income tax provision (benefit)


(113)


130


(476)


351


429

Net income (loss)




$      (114)


$       284


$      (711)


$       571


$       742
















Per Share Data:













Net income (loss) per share – Basic


$     (0.02)


$      0.06


$     (0.14)


 n/a  


 n/a  

Net income (loss) per share – Diluted


$     (0.02)


$       0.06


$      (0.14)


 n/a  


 n/a  

Book value per share




$    20.79


$     20.66


$     20.69


 n/a  


 n/a  

Weighted average shares outstanding:











  Basic






5,156,843


5,149,039


5,141,462


 n/a  


 n/a  

  Diluted






5,156,843


5,149,039


5,141,462


 n/a  


 n/a  

Ending shares outstanding



5,584,551


5,584,551


5,584,551


 n/a  


 n/a  






















 As Of 


 As Of 


 As Of 


 As Of 


 As Of 







 June 30, 


 March 31, 


 December 31, 


 September 30, 


 June 30, 

(dollars in thousands)



2012


2012


2011**


2011


2011
















Ending Balance Sheet Data:











Total assets






$ 798,667


$ 796,901


$ 790,868


$ 798,748


$ 755,143

Cash and cash equivalents



73,475


80,087


72,327


75,402


25,825

Investment securities




284,671


264,782


249,081


235,285


225,802

Loans receivable, net of deferred fees


409,140


416,307


432,883


450,263


467,599

Allowance for loan losses




(11,563)


(10,562)


(10,627)


(10,873)


(12,353)

Deposits






606,022


610,242


608,236


615,555


616,463

Escrowed stock order funds


-


-


-


49,063


-

FHLB advances




60,000


60,000


60,000


60,000


60,000

Total equity






116,079


115,360


115,571


67,681


65,547
















Asset Quality:













Nonperforming loans




$   18,232


$   18,063


$   20,622


$   11,565


$   11,070

Nonperforming assets




26,847


27,198


28,747


22,262


20,588

Nonperforming loans to total loans


4.46%


4.34%


4.76%


2.57%


2.37%

Nonperforming assets to total assets


3.36%


3.41%


3.63%


2.79%


2.73%

Allowance for loan losses




$   11,563


$   10,562


$   10,627


$   10,873


$   12,353

Allowance for loan losses to total loans


2.83%


2.54%


2.45%


2.41%


2.64%

Allowance for loan losses to











  nonperforming loans




63.42%


58.47%


51.53%


94.02%


111.59%

*   Certain amounts for prior periods were reclassified to conform to the June 30, 2012 presentation.



** Ending balance sheet data as of December 31, 2011 were derived from audited consolidated financial statements.

 

SOURCE ASB Bancorp, Inc.



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