First South Bancorp, Inc. Reports Increase in December 31, 2011 Quarterly and Year End Operating Results

WASHINGTON, N.C., Jan. 13, 2012 /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 and year ended December 31, 2011.

For the 2011 fourth quarter, net income increased 9.4% to $441,000 or $0.05 per diluted common share, from net income of $403,000 or $0.04 per diluted common share earned in the linked 2011 third quarter, compared to a net operating loss of $6.5 million or ($0.67) per diluted common share for the 2010 fourth quarter. 

Net income for the year ended December 31, 2011 increased to $1.6 million or $0.16 per diluted common share, compared to a net operating loss of $2.4 million or ($0.24) per diluted common share for the year ended December 31, 2010.

Tom Vann, President and CEO, commented, "I am pleased to report the Company's operating results for the fourth quarter of 2011. The Company continues to generate solid core earnings.  Fourth quarter 2011 net earnings were $441,000, after recording $2.6 million of credit loss provisions.  In the 2011 fourth quarter, we continued evaluating the credit quality of the Bank's loan portfolio and market values of foreclosed properties.  While the volume of our nonperforming assets increased during 2011, based on our current analysis we continue to remain cautiously optimistic about the financial stress some of our borrowers are facing.  Consequently, we are provisioning accordingly to replenish net charge-offs and to maintain our allowance for loan and lease losses at an adequate level.  Mitigating our nonperforming assets will continue to be a top priority for the Bank during 2012," said Mr. Vann.

Asset Quality

Total nonperforming assets, including loans on non-accrual status, restructured loans on non-accrual status and other real estate owned, increased to $60.0 million at December 31, 2011, from $52.9 million at December 31, 2010.  Loans on non-accrual status increased to $21.6 million at December 31, 2011, from $14.3 million at December 31, 2010.  At December 31, 2011, $10.6 million of these loans were earning interest, compared to $5.1 million at December 31, 2010.

Restructured loans on non-accrual status, declined to $21.4 million at December 31, 2011, from $27.0 million at December 31, 2010.  At December 31, 2011, $12.2 million of these restructured loans were current and making scheduled payments according to the terms of their restructure, compared to $14.6 million at December 31, 2010.  Performing restructured loans on full accrual status totaled $25.4 million at December 31, 2011, compared to $31.3 million at December 31, 2010. 

Other real estate owned increased to $17.0 million at December 31, 2011, from $11.6 million at December 31, 2010, reflecting foreclosure activity net of sales of certain real estate properties. 

"The stabilization of property values continues to be an issue in the markets we serve.  We will continue monitoring these values and mitigate nonperforming assets as quickly as feasible," said Mr. Vann.

The Bank recorded $2.6 million of provisions for credit losses in both the 2011 fourth quarter and the linked 2011 third quarter, compared to $13.7 million in the 2010 fourth quarter. Credit loss provisions were necessary to replenish net charge-offs and to maintain the allowance for loan and lease losses (ALLL) at a level that management believes is adequate to absorb probable future losses in the loan portfolio.  The ALLL was $15.2 million at December 31, 2011 (2.8% of total loans), compared to $18.8 million at December 31, 2010 (3.0% of total loans). Net charge offs were $5.8 million in the 2011 fourth quarter, compared to $3.0 million in the linked 2011 third quarter and $3.4 million in the 2010 fourth quarter.

Mr. Vann stated, "Management continues to feel it is prudent to take a conservative posture in provisioning for credit losses during these weak economic conditions as we mitigate 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 ALLL."

Net Interest Income

Net interest income remained relatively consistent at $7.8 million for the 2011 fourth quarter, compared to $8.0 million for the linked 2011 third quarter and $7.8 million for the 2010 fourth quarter. The change in levels of net interest income is influenced by the volume of interest-earning assets and interest-bearing liabilities and the management of rates earned and paid during each respective reporting period. The net interest margin on average earning assets also remained relatively consistent at 4.5% for the 2011 fourth quarter, compared to 4.6% for the linked 2011 third quarter and 4.3% for the 2010 fourth quarter.

Non-Interest Income

Total non-interest income increased to $2.6 million for the 2011 fourth quarter, from $2.3 million for the linked 2011 third quarter and $1.9 million for the comparative 2010 fourth quarter.  Revenue from loan and deposit service offerings (loan fees, deposit fees and service charges and servicing fee income) also remained relatively consistent at $1.7 million for both the 2011 fourth quarter and the linked 2011 third quarter, compared to $1.9 million for the comparative 2010 fourth quarter.

Net gains from mortgage loan sales increased to $467,000 in the 2011 fourth quarter, from $165,000 in the linked 2011 third quarter and $311,000 in the comparative 2010 fourth quarter.  Net gains from mortgage-backed securities sales increased to $262,000 in the 2011 fourth quarter, from $204,000 in the linked 2011 third quarter and $51,000 in the comparative 2010 fourth quarter.

In its efforts of mitigating nonperforming assets, the Bank recognized $24,000 of net losses on the sale of other real estate owned properties during the 2011 fourth quarter, compared to net losses of $16,000 in the linked 2011 third quarter and $597,000 in the 2010 fourth quarter.

Non-Interest Expense

Total non-interest expense increased to $7.2 million for the 2011 fourth quarter, from $7.0 million for the linked 2011 third quarter and $6.7 million for the 2010 fourth quarter.  The largest component of non-interest expense, compensation and fringe benefits, declined to $3.6 million for the 2011 fourth quarter, from $3.7 million for the linked 2011 third quarter and $3.8 million for the comparative 2010 fourth quarter, reflecting the Bank's efforts of managing human resources cost.

Expenses attributable to valuation adjustments, renovating, maintenance and property taxes paid for the current volume of other real estate owned properties increased to $977,000 for the 2011 fourth quarter, from $579,000 for the linked 2011 third quarter, and $220,000 for the comparative 2010 fourth quarter. 

FDIC insurance premiums declined to $261,000 for the 2011 fourth quarter, from $388,000 for the linked 2011 third quarter and $290,000 for the comparative 2010 fourth quarter, reflecting a new change in the FDIC's deposit insurance assessment calculation based on assets and tier one capital versus deposits.

Other noninterest expenses including premises and equipment, advertising, data processing, repairs and maintenance, office supplies, professional fees, taxes and insurance, etc., remained relatively consistent during the respective reporting periods.

Income tax expense was $142,000 for the 2011 fourth quarter and $256,000 for the linked 2011 third quarter, compared to a $4.3 million income tax benefit for the 2010 fourth quarter that resulted from a net pre-tax operating loss.  Changes in the amount of income tax expense reflects changes in pretax income, deductible expenses, the application of permanent and temporary differences and the applicable income tax rates in effect during each period. 

Balance Sheet

Total assets declined to $745.2 million at December 31, 2011, from $797.2 million at December 31, 2010. Net loans and leases receivable declined to $525.2 million at December 31, 2011, from $606.1 million at December 31, 2010, reflecting the net of principal repayments, the volume of loans originated, foreclosures, sales, and securitizations of loans into mortgage-backed securities during the current year.  Mortgage-backed securities increased to $135.8 million at December 31, 2011, from $98.9 million at December 31, 2010, reflecting the net of purchases, sales, principal repayments and securitizations of certain mortgage loans during the current year.  Cash and overnight investments declined to $32.8 million at December 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 declined to $642.6 million at December 31, 2011, from $689.5 million at December 31, 2010.  Borrowings declined to $2.1 million at December 31, 2011, from $11.5 million at December 31, 2010, reflecting the repayment of a $10.0 million fixed-rate FHLB advance.  The cost of funds improved to 1.0% for the 2011 fourth quarter, from 1.1% for the linked 2011 third quarter and from 1.2% for the comparative 2010 fourth quarter. The Bank manages its cost of funds by a combination of pricing new deposits, the renewal of maturing time deposits and the repositioning of borrowings in the current lower interest rate environment. 

Stockholders' equity increased to $82.4 million at December 31, 2011, from $79.5 million at December 31, 2010, reflecting year-to-date net income and changes in accumulated other comprehensive income.  The equity to assets ratio increased to 11.1% at December 31, 2011, from 10.0% at December 31, 2010.  There were 9,751,271 common shares outstanding at both December 31, 2011 and December 31, 2010.  The book value per common share increased to $8.45 at December 31, 2011, from $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 26 full service branch offices 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.

(NASDAQ: FSBK)

For more information contact:
Bill Wall (CFO) (252-940-5017)
Tom Vann (CEO) (252-940-4916)
Website: www.firstsouthnc.com

  

 

First South Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31

 

 

December 31

 

 

 

 

 

 

2011

 

 

2010

*

 

 

Assets

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

14,298,146

 

$

14,684,377

 

 

 

Interest-bearing deposits in financial institutions

 

 

18,476,173

 

 

29,749,236

 

 

 

Mortgage-backed securities - available for sale, at fair value

 

 

85,309,481

 

 

98,637,742

 

 

 

Mortgage-backed securities - held for investment

 

 

50,524,724

 

 

244,836

 

 

 

Loans and leases receivable:

 

 

 

 

 

 

 

 

 

   Held for sale

 

 

6,435,983

 

 

4,464,040

 

 

 

   Held for investment

 

 

533,960,226

 

 

620,440,530

 

 

 

   Allowance for loan and lease losses

 

 

(15,194,014)

 

 

(18,830,288)

 

 

 

           Loans and leases receivable, net

 

 

525,202,195

 

 

606,074,282

 

 

 

Premises and equipment, net

 

 

11,679,430

 

 

9,162,538

 

 

 

Other real estate owned

 

 

17,004,874

 

 

11,616,390

 

 

 

Stock in Federal Home Loan Bank of Atlanta, at cost

 

 

1,886,900

 

 

3,474,900

 

 

 

Accrued interest receivable

 

 

2,210,314

 

 

2,336,527

 

 

 

Goodwill

 

 

4,218,576

 

 

4,218,576

 

 

 

Mortgage servicing rights

 

 

1,237,161

 

 

1,357,659

 

 

 

Identifiable intangible assets

 

 

70,740

 

 

102,180

 

 

 

Income tax receivable

 

 

2,205,941

 

 

2,864,993

 

 

 

Prepaid expenses and other assets

 

 

10,897,815

 

 

12,721,610

 

 

 

 

 

 

 

 

 

 

 

 

 

          Total assets

 

$

745,222,470

 

$

797,245,846

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

  Demand

 

$

243,719,526

 

$

234,501,026

 

 

 

  Savings

 

 

28,988,522

 

 

24,498,789

 

 

 

  Large denomination certificates of deposit

 

 

195,429,182

 

 

222,578,449

 

 

 

  Other time

 

 

174,479,477

 

 

207,886,450

 

 

 

          Total deposits

 

 

642,616,707

 

 

689,464,714

 

 

 

Borrowed money

 

 

2,096,189

 

 

11,503,110

 

 

 

Junior subordinated debentures

 

 

10,310,000

 

 

10,310,000

 

 

 

Other liabilities

 

 

7,804,688

 

 

6,454,818

 

 

 

          Total liabilities

 

 

662,827,584

 

 

717,732,642

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $.01 par value, 25,000,000 shares authorized;

 

 

 

 

 

 

 

 

 

   11,254,222 shares issued; 9,751,271 shares outstanding

 

 

97,513

 

 

97,513

 

 

 

Additional paid-in capital

 

 

35,815,098

 

 

35,795,586

 

 

 

Retained earnings, substantially restricted

 

 

76,510,081

 

 

74,956,772

 

 

 

Treasury stock, at cost

 

 

(31,967,269)

 

 

(31,967,269)

 

 

 

Accumulated other comprehensive income, net

 

 

1,939,463

 

 

630,602

 

 

 

           Total stockholders' equity

 

 

82,394,886

 

 

79,513,204

 

 

 

 

 

 

 

 

 

 

 

 

 

           Total liabilities and stockholders' equity

 

$

745,222,470

 

$

797,245,846

 

 

 

 

 

 

 

 

 

 

 

 

 

*Derived from audited consolidated financial statements