First South Bancorp, Inc. Reports Increase in March 31, 2012 Quarterly Operating Results

24 Apr, 2012, 15:49 ET from First South Bancorp, Inc.

WASHINGTON, N.C., April 24, 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 ended March 31, 2012.

For the 2012 first quarter, net income increased 41.3% to $461,896 or $0.05 per diluted common share, from net income of $326,782 or $0.03 per diluted common share earned in the comparative 2011 first quarter.  

Tom Vann, President and CEO, commented, "I am pleased to report the Company's operating results for the first quarter of 2012. The Company continues to generate solid core earnings.  First quarter 2012 net earnings were $461,896, after recording $1.8 million of credit loss provisions and $898,194 of other real estate owned valuation adjustments.  In the 2012 first 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 declined during this quarter, based on our evaluation we continue to take a conservative position on 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, declined to $54.8 million at March 31, 2012, from $60.0 million at December 31, 2011.  Loans on non-accrual status declined to $11.0 million at March 31, 2012, from $21.6 million at December 31, 2011.  

The Bank recorded $1.8 million of provisions for credit losses in the 2012 first quarter, compared to $2.5 million in the 2011 first 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 $14.4 million at March 31, 2012 (2.7% of total loans), compared to $15.2 million at December 31, 2011 (2.8% of total loans). Net charge offs were $2.6 million in the 2012 first quarter, compared to $2.0 million in the 2011 first quarter.

Mr. Vann stated, "Management continues to take a prudent and conservative posture in provisioning for credit losses 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."

Other real estate owned increased marginally to $17.3 million at March 31, 2012, from $17.0 million at December 31, 2011, reflecting foreclosure activity net of sales and write-downs 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.

Net Interest Income

Net interest income declined to $7.5 million for the 2012 first quarter, from $7.8 million for the 2011 first 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 remained constant at 4.4% for both the 2012 first quarter and the 2011 first quarter.

Non-Interest Income

Total non-interest income increased to $3.2 million for the 2012 first quarter, from $2.0 million for the comparative 2011 first quarter.  The Bank strives to maintain a consistent level of revenue across loan and deposit service offerings.  Fees, service charges and loan servicing fees remained constant at $1.7 million for both the 2012 first quarter and the comparative 2011 first quarter.

Net gains from mortgage loan sales increased to $304,608 in the 2012 first quarter, from $119,982 in the comparative 2011 first quarter.  Net gains from mortgage-backed securities sales increased to $1.0 million in the 2012 first quarter, from $52,146 in the comparative 2011 first quarter.

In its efforts of mitigating nonperforming assets, the Bank recognized $28,964 of net losses on the sale of other real estate owned properties during the 2012 first quarter, compared to net losses of $82,095 in the 2011 first quarter.

Non-Interest Expense

Total non-interest expense increased to $8.2 million for the 2012 first quarter, from $6.8 million for the comparative 2011 first quarter.  Compensation and fringe benefits, the largest component of these expenses, increased to $4.2 million for the 2012 first quarter, from $3.8 million for the comparative 2011 first quarter, reflecting the Bank's efforts to maintain sufficient staffing levels necessary to support commercial and retail customer service, credit administration and banking operations.

Expenses attributable to valuation adjustments, renovating, maintenance and property taxes paid for the current volume of other real estate owned properties increased to $1.3 million for the 2012 first quarter, from $219,518 for the comparative 2011 first quarter.  

FDIC insurance premiums declined to $252,400 for the 2012 first quarter, from $291,500 for the comparative 2011 first 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 declined to $200,940 for the 2012 first quarter, compared to a $224,540 for the comparative 2011 first quarter.  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 increased to $750.3 million at March 31, 2012, from $746.9 million at December 31, 2011. Net loans and leases receivable declined to $511.4 million at March 31, 2012, from $525.2 million at December 31, 2011, 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 declined to $123.0 million at March 31, 2012, from $138.5 million at December 31, 2011, reflecting the net of sales, principal repayments and securitizations of certain mortgage loans during the current quarter.  Cash and overnight investments increased to $64.7 million at March 31, 2012, from $32.8 million at December 31, 2011, reflecting net changes in the Bank's cash flow and liquidity position resulting primarily from core deposit growth and slower loan demand.    

Total deposits increased to $648.3 million at March 31, 2012, from $642.6 million at December 31, 2011.  Borrowings in the form of repurchase agreements declined to $1.7 million at March 31, 2012, from $2.1 million at December 31, 2011.  The cost of funds improved to 0.9% for the 2012 first quarter, from 1.0% for the comparative 2011 first quarter.

Stockholders' equity increased to $84.3 million at March 31, 2012, from $84.1 million at December 31, 2011, reflecting year-to-date net income and changes in accumulated other comprehensive income.  The equity to assets ratio was 11.2% at March 31, 2012, compared to 11.3% at December 31, 2011.  There were 9,751,271 common shares outstanding at both March 31, 2012 and December 31, 2011.  The book value per common share was $8.65 at March 31, 2012, compared to $8.63 at December 31, 2011.

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.

First South Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition

March 31,

December 31

2012

2011

*

Assets

(unaudited)

Cash and due from banks

$

15,568,565

$

14,298,146

Interest-bearing deposits in financial institutions

49,093,447

18,476,173

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

123,036,373

138,515,210

Loans and leases receivable:

  Held for sale

9,361,702

6,435,983

  Held for investment

516,419,348

533,960,226

  Allowance for loan and lease losses

(14,396,097)

(15,194,014)

          Loans and leases receivable, net

511,384,953

525,202,195

Premises and equipment, net

12,984,563

11,679,430

Other real estate owned

17,323,798

17,004,874

Stock in Federal Home Loan Bank of Atlanta, at cost

1,886,900

1,886,900

Accrued interest receivable

2,451,090

2,210,314

Goodwill

4,218,576

4,218,576

Mortgage servicing rights

1,267,504

1,237,161

Identifiable intangible assets

62,880

70,740

Income tax receivable

3,118,961

2,194,677

Prepaid expenses and other assets

7,952,387

9,946,459

         Total assets

$

750,349,997

$

746,940,855

Liabilities and Stockholders' Equity

Deposits:

 Demand

$

262,500,055

$

243,719,526

 Savings

31,068,007

28,988,522

 Large denomination certificates of deposit

188,266,783

195,429,182

 Other time

166,513,496

174,479,477

         Total deposits

648,348,341

642,616,707

Borrowed money

1,680,899

2,096,189

Junior subordinated debentures

10,310,000

10,310,000

Other liabilities

5,667,512

7,804,687

         Total liabilities

666,006,752

662,827,583

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

35,816,901

35,815,098

Retained earnings, substantially restricted

76,971,977

76,510,081

Treasury stock, at cost

(31,967,269)

(31,967,269)

Accumulated other comprehensive income, net

3,424,123

3,657,849

          Total stockholders' equity

84,343,245

84,113,272

          Total liabilities and stockholders' equity

$

750,349,997

$

746,940,855

*Derived from audited consolidated financial statements

First South Bancorp, Inc. and Subsidiary

Consolidated Statements of Operations

(unaudited)

Three Months Ended

March 31

2012

2011

Interest income:

 Interest and fees on loans

$

7,666,575

$

8,823,994

 Interest and dividends on investments and deposits

1,246,961

1,067,205

          Total interest income

8,913,536

9,891,199

Interest expense:

 Interest on deposits

1,321,195

1,976,869

 Interest on borrowings

1,116

27,414

 Interest on junior subordinated notes

92,193

81,320

          Total interest expense

1,414,504

2,085,603

Net interest income

7,499,032

7,805,596

Provision for credit losses

1,840,000

2,450,011

          Net interest income after provision for credit losses

5,659,032

5,355,585

Non-interest income:

 Fees and service charges

1,480,136

1,486,702

 Loan servicing fees

212,801

198,084

 Gain (loss) on sale of other real estate, net

(28,964)

(82,095)

 Gain on sale of mortgage loans

304,608

119,982

 Gain on sale of mortgage-backed securities

1,033,857

52,146

 Other  income

240,311

207,131

          Total non-interest income

3,242,749

1,981,950

Non-interest expense:

 Compensation and fringe benefits

4,157,612

3,789,679

 Federal deposit insurance premiums

252,400

291,500

 Premises and equipment

428,468

423,280

 Advertising

66,034

47,105

 Payroll and other taxes

405,795

401,628

 Data processing

598,149

600,541

 Amortization of intangible assets

100,556

147,202

 Other real estate owned expense

1,278,300

219,518

 Other

951,631

865,760

          Total non-interest expense

8,238,945

6,786,213

Income before income tax expense

662,836

551,322

Income tax expense

200,940

224,540

Net income

$

461,896

$

326,782

Per share data:

Basic earnings per share

$

0.05

$

0.03

Diluted earnings per share

$

0.05

$

0.03

Average basic shares outstanding

9,751,271

9,751,271

Average diluted shares outstanding

9,751,271

9,751,271

First South Bancorp, Inc.

 Supplemental Financial Data (Unaudited)

3/31/2012

12/31/2011

9/30/2011

6/30/2011

3/31/2011

Consolidated balance sheet data:

          (dollars in thousands except per share data)

Total assets

$

750,350

$

746,941

$

768,411

$

784,538

$

791,154

Loans receivable (net):

Mortgage

$

80,263

$

66,249

$

80,453

$

56,564

$

53,925

Commercial

352,459

378,823

405,712

428,141

445,930

Consumer

71,270

72,821

74,097

76,459

79,517

Leases

7,393

7,309

7,972

7,825

7,829

Total loans (net)

$

511,385

$

525,202

$

568,234

$

568,989

$

587,201

Cash and investments

$

64,662

$

32,774

$

32,909

$

44,565

$

34,537

Mortgage-backed securities

123,036

138,515

119,764

124,539

120,565

Premises and equipment

12,985

11,679

11,209

10,753

10,196

Goodwill

4,219

4,219

4,219

4,219

4,219

Mortgage servicing rights

1,268

1,237

1,091

1,197

1,284

Deposits:

Savings

$

31,068

$

28,988

$

27,551

$

26,999

$

26,251

Checking

262,500

243,720

243,582

240,048

237,605

Certificates

354,780

369,909

394,007

416,855

429,772

Total deposits

$

648,348

$

642,617

$

665,140

$

683,902

$

693,628

Borrowings

$

1,681

$

2,096

$

1,976

$

2,349

$

2,363

Junior subordinated debentures

10,310

10,310

10,310

10,310

10,310

Stockholders' equity

84,343

84,113

82,061

80,894

79,648

Consolidated earnings summary:

Interest income

$

8,914

$

9,363

$

9,861

$

10,188

$

9,891

Interest expense

1,415

1,608

1,852

2,010

2,086

Net interest income

7,499

7,755

8,009

8,178

7,805

Provision for credit losses

1,840

2,640

2,643

3,080

2,450

Noninterest income

3,243

2,648

2,292

2,498

1,982

Noninterest expense

8,239

7,180

6,999

6,988

6,786

Income tax expense

201

142

256

226

225

Net income

$

462

$

441

$

403

$

382

$

326

Per Share Data:

Basic earnings per share

$

0.05

$

0.05

$

0.04

$

0.04

$

0.03

Diluted earnings per share

$

0.05

$

0.05

$

0.04

$

0.04

$

0.03

Book value per share

$

8.65

$

8.63

$

8.42

$

8.30

$

8.17

Average basic shares

9,751,271

9,751,271

9,751,271

9,751,271

9,751,271

Average diluted shares

9,751,271

9,751,271

9,751,271

9,751,271

9,751,271

3/31/2012

12/31/2011

9/30/2011

6/30/2011

3/31/2011

          (dollars in thousands except per share data)

Performance ratios:

Yield on average earning assets

5.26%

5.44%

5.64%

5.78%

5.59%

Cost of funds

0.87%

0.96%

1.08%

1.14%

1.18%

Net interest spread

4.39%

4.48%

4.56%

4.64%

4.41%

Net interest margin/average earning assets

4.42%

4.51%

4.58%

4.64%

4.41%

Earning assets to total assets

90.90%

91.09%

90.47%

88.61%

89.85%

Return on average assets (annualized)

0.25%

0.23%

0.21%

0.19%

0.16%

Return on average equity (annualized)

2.18%

2.13%

1.97%

1.90%

1.63%

Average assets

$

744,395

$

757,905

$

774,383

$

791,644

$

794,615

Average earning assets

$

678,043

$

688,457

$

698,984

$

704,792

$

707,982

Average equity

$

84,582

$

82,708

$

81,757

$

80,517

$

79,978

Equity/Assets

11.24%

11.26%

10.68%

10.31%

10.07%

Tangible Equity/Assets

10.67%

10.69%

10.12%

9.76%

9.52%

Asset quality data and ratios:

Loans on nonaccrual status:

Nonaccrual loans

 Earning

$

2,255

$

10,601

$

3,179

$

3,853

$

4,954

 Non-Earning

$

8,757

$

11,007

$

15,107

$

15,657

$

11,769

    Total Non-Accrual Loans

$

11,012

$

21,608

$

18,286

$

19,510

$

16,723

Nonaccrual restructured loans

  Past Due TDRs

$

6,029

$

9,170

$

12,568

$

11,228

$

15,024

  Current TDRs

$

20,456

$

12,247

$

11,172

$

10,421

$

8,780

     Total TDRs

$

26,485

$

21,417

$

23,740

$

21,649

$

23,804

Total loans on nonaccrual status

$

37,497

$

43,025

$

42,026

$

41,159

$

40,527

Other real estate owned

$

17,324

$

17,005

$

12,886

$

11,387

$

12,069

Total nonperforming assets

$

54,821

$

60,030

$

54,912

$

52,546

$

52,596

Allowance for credit losses

$

14,637

$

15,448

$

18,563

$

18,918

$

19,551

Allowance for credit losses to loans

2.78%

2.85%

3.16%

3.21%

3.22%

Net charge-offs

$

2,638

$

5,752

$

3,018

$

3,713

$

1,966

Net charge-offs to loans

0.52%

1.10%

0.53%

0.65%

0.32%

Nonaccrual loans to loans

7.33%

8.19%

7.40%

7.23%

6.90%

Nonperforming assets to assets

7.31%

8.06%

7.15%

6.69%

6.65%

Loans to deposits

81.25%

84.26%

88.35%

86.10%

87.63%

Loans to assets

70.21%

72.66%

76.48%

75.06%

76.82%

Loans serviced for others

$

316,297

$

319,363

$

302,307

$

314,220

$

317,816

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

SOURCE First South Bancorp, Inc.



RELATED LINKS

http://www.firstsouthnc.com