First South Bancorp, Inc. Reports December 31, 2009 Quarterly and Year End Earnings

Jan 15, 2010, 09:30 ET from First South Bancorp, Inc.

WASHINGTON, N.C., Jan. 15 /PRNewswire-FirstCall/ -- First South Bancorp, Inc.  (Nasdaq: FSBK) (the "Company"), the parent holding company of First South Bank (the "Bank"), reports its unaudited earnings for both the quarter and year ended December 31, 2009.

Net income was $1.5 million ($0.16 per share diluted) for the 2009 fourth quarter compared to net income of $1.8 million ($0.18 per share diluted) for the linked 2009 third quarter, and $2.0 million ($0.21 per share diluted) for the comparative 2008 fourth quarter.

Net income for the year ended December 31, 2009 was $7.0 million ($0.72 per share diluted) compared to net income of $11.0 million ($1.12 per share diluted) for the year ended December 31, 2008.

The Bank recorded provisions for credit losses of $2.7 million in the 2009 fourth quarter compared to $1.3 million in the linked 2009 third quarter and $1.2 million in the comparative 2008 fourth quarter. Credit loss provisions were necessary to replenish net charge-offs and strengthen the allowance for credit losses at levels the Bank believes is adequate to absorb probable losses in the loan portfolio. The current level of the allowance for credit losses results from an internal risk grading analysis and is primarily attributable to the commercial real estate portfolio.  The allowance for credit losses was $13.7 million at December 31, 2009, representing 2.04% of total loans and leases.  

Bill Wall, executive vice president and chief financial officer, stated, "We have taken a conservative posture in our provisioning for credit losses as we continue to aggressively manage problem assets.  We believe the current level of our allowance for credit losses 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."  

"We welcome news from economists that the current recession may begin easing.  However, the current economic environment continues to be a challenging credit environment for both our customers and the banking industry.  As we address and manage through these challenges, we remain focused on long-term strategies.  These strategies include remediating problem assets, maintaining adequate levels of capital and liquidity, improving efficiency in our operations, building core customer relationships and improving our franchise value along with shareholder value.  The Company remains profitable, continues to maintain a strong capital position in excess of the well-capitalized regulatory guidelines, and combined with strengthening of the allowance for credit losses should enhance our future earnings as the current recessionary economic conditions substantially improve," stated Wall.

Net interest income increased to $8.9 million for the 2009 fourth quarter from $8.3 for both the linked 2009 third quarter and the comparative 2008 fourth quarter. The increase in net interest income in the current quarter has been influenced by deposit repricing and the rollover of maturing time deposits at lower interest rates. The net interest margin improved to 4.55% for the 2009 fourth quarter from 4.13% for the linked 2009 third quarter and 4.08% for the comparative 2008 fourth quarter.

Total non-interest income improved to $2.5 million for the 2009 fourth quarter from $2.4 million for the linked 2009 third quarter and $2.1 million for the comparative 2008 fourth quarter.  The Bank maintained a consistent level of revenue across both loan and deposit service offerings as loan fees, deposit fees and service charges and servicing fee income was $2.1 million in the 2009 fourth quarter and $2.0 million in both the linked 2009 third quarter and the comparative 2008 fourth quarter.

Net gains recognized from the sale of mortgage loans was $262,000 in the 2009 fourth quarter, $247,000 in the linked 2009 third quarter and $74,000 in the comparative 2008 fourth quarter.  

Total non-interest expense declined to $6.3 million for the 2009 fourth quarter from $6.5 million for the linked 2009 third quarter, compared to $6.0 million for 2008 fourth quarter.  Compensation and fringe benefits, the largest component of non-interest expense, has remained relatively consistent at $3.6 million for the 2009 fourth quarter, $3.5 million for the linked 2009 third quarter, and $3.3 million for the comparative 2008 fourth quarter, reflecting the Bank's efforts of managing its human resources cost. FDIC insurance premiums increased to $298,000 for the 2009 fourth quarter from $275,000 for the linked 2009 third quarter and $127,000 for the comparative 2008 fourth quarter, reflecting increased risk based assessment rates imposed by the FDIC.  

Total assets declined to $829.9 million at December 31, 2009 from $875.9 million at December 31, 2008. Total loans declined to $658.7 million at December 31, 2009 from $744.7 million at December 31, 2008, reflecting a combination of principal repayments and a decline in the volume of loans originated for investment during the current year.   Mortgage-backed securities increased to $97.2 million at December 31, 2009 from $32.8 million at December 31, 2008, reflecting the securitization of certain mortgage loans originated for sale during 2009.  Cash, interest bearing deposits and investment securities declined to $30.0 million at December 31, 2009 from $63.3 million at December 31, 2008, as the Bank has focused efforts on reducing lower yielding assets.

Nonaccrual and restructured loans declined to $10.2 million at December 31, 2009 from $15.0 million at December 31, 2008, reflecting management's efforts of remediating problem assets and managing credit quality.  Management believes it has thoroughly evaluated its nonaccrual loans and they are either well collateralized or adequately reserved.

Other real estate owned increased to $10.6 million at December 31, 2009 from $7.7 million at December 31, 2008, reflecting an increase in foreclosure activity of certain real estate properties during 2009. Based on fair value analysis, the Bank believes the adjusted carrying values of these real estate properties are representative of their fair market values, although there are no assurances that the ultimate sales prices will be equal to or greater than the carrying values.  

Total deposits declined to $688.5 million at December 31, 2009 from $716.4 million at December 31, 2008. Borrowings declined during 2009 to $37.4 million at December 31, 2009 from $52.6 million at December 31, 2008.  During 2009, the Bank chose to not match higher time deposit rates being offered by certain competitive financial institutions in its market area, in order to control its time deposit cost and to reduce its lower yielding liquid assets. The cost of funds for the 2009 fourth quarter improved to 1.61% from 2.03% for the linked 2009 third quarter and 2.59% for the comparative 2008 fourth quarter. The Bank has been able to improve 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.  

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 29 full service branch offices and one loan production 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

December 31

December 31

2009

2008

*

Assets

(unaudited)

Cash and due from banks

$

17,758,370

$

20,888,676

Interest-bearing deposits in financial institutions

11,879,794

5,831,683

Investment securities - available for sale

407,317

36,563,646

Mortgage-backed securities - available for sale

96,725,468

31,995,157

Mortgage-backed securities - held for investment

513,882

832,221

Loans and leases receivable, net:

 Held for sale

6,548,980

5,566,262

 Held for investment

652,106,538

739,165,035

Premises and equipment, net

8,539,759

9,049,929

Other real estate owned

10,561,071

7,710,560

Federal Home Loan Bank of Atlanta stock, at cost

    which approximates market

3,889,500

3,658,600

Accrued interest receivable

3,318,141

3,786,760

Goodwill

4,218,576

4,218,576

Mortgage servicing rights

1,278,688

1,005,725

Identifiable intangible assets

133,620

165,060

Prepaid expenses and other assets

12,010,931

5,417,231

         Total assets

$

829,890,635

$

875,855,121

Liabilities and Stockholders' Equity

Deposits:

 Demand

$

224,507,362

$

223,365,542

 Savings

23,137,391

26,555,881

 Large denomination certificates of deposit

224,198,974

207,102,876

 Other time

216,667,331

259,402,497

         Total deposits

688,511,058

716,426,796

Borrowed money

37,380,388

52,558,492

Junior subordinated debentures

10,310,000

10,310,000

Other liabilities

7,475,085

8,738,808

         Total liabilities

743,676,531

788,034,096

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

 11,254,222 issued; 9,742,296 and 9,738,096 shares outstanding

97,423

97,381

Additional paid-in capital

35,841,364

35,924,426

Retained earnings, substantially restricted

82,111,114

82,867,095

Treasury stock at cost

(32,158,074)

(32,247,365)

Accumulated other comprehensive income, net

322,277

1,179,488

          Total stockholders' equity

86,214,104

87,821,025

          Total liabilities and stockholders' equity

$

829,890,635

$

875,855,121

*Derived from audited consolidated financial statements

First South Bancorp, Inc. and Subsidiary

Consolidated Statements of Operations

(unaudited)

Three Months Ended

Year Ended

December 31

December 31

2009

2008

2009

2008

Interest income:

 Interest and fees on loans

$

10,782,733

$

12,460,618

$

45,211,260

$

55,182,193

 Interest and dividends on investments and deposits

1,068,842

911,604

3,848,639

4,181,602

          Total interest income

11,851,575

13,372,222

49,059,899

59,363,795

Interest expense:

 Interest on deposits

2,644,057

4,538,604

14,459,345

21,095,044

 Interest on borrowings

270,558

369,221

1,244,664

1,563,978

 Interest on junior subordinated notes

81,710

169,661

389,677

657,576

          Total interest expense

2,996,325

5,077,486

16,093,686

23,316,598

Net interest income

8,855,250

8,294,736

32,966,213

36,047,197

Provision for credit losses

2,700,000

1,150,000

7,180,000

4,043,600

          Net interest income after provision for credit losses

6,155,250

7,144,736

25,786,213

32,003,597

Non-interest income:

 Fees and service charges

1,899,647

1,870,412

7,377,019

7,750,195

 Loan servicing fees

182,878

167,577

679,673

658,073

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

(39,409)

(177,380)

(200,732)

(80,542)

 Gain on sale of mortgage loans

261,737

74,027

1,197,029

586,571

 Gain on sale of mortgage-backed securities

-

-

-

97,537

 Gain on sale of investment securities

-

-

917,866

-

 Other  income

221,584

214,378

988,865

1,071,726

          Total non-interest income

2,526,437

2,149,014

10,959,720

10,083,560

Non-interest expense:

 Compensation and fringe benefits

3,595,642

3,309,183

14,118,842

13,750,085

 Federal insurance premiums

298,510

127,182

1,253,627

280,372

 Premises and equipment

451,806

456,381

1,823,628

1,969,006

 Advertising

23,341

25,816

123,513

112,758

 Payroll and other taxes

309,928

275,979

1,327,449

1,246,743

 Data processing

623,089

677,044

2,452,593

2,630,821

 Amortization of intangible assets

117,268

102,351

488,602

434,260

 Other

880,283

1,013,182

3,756,547

3,740,652

          Total non-interest expense

6,299,867

5,987,118

25,344,801

24,164,697

Income before income taxes

2,381,820

3,306,632

11,401,132

17,922,460

Income taxes

872,050

1,287,170

4,365,296

6,934,640

Net income

$

1,509,770

$

2,019,462

$

7,035,836

$

10,987,820

Per share data:

Basic earnings per share

$

0.16

$

0.21

$

0.72

$

1.13

Diluted earnings per share

$

0.16

$

0.21

$

0.72

$

1.12

Dividends per share

$

0.20

$

0.20

$

0.80

$

0.80

Weighted average shares-Basic

9,738,475

9,738,096

9,738,225

9,761,944

Weighted average shares-Diluted

9,738,475

9,743,987

9,738,244

9,781,761

First South Bancorp, Inc.

Supplemental Quarterly Financial Data (Unaudited)

12/31/2009

9/30/2009

6/30/2009

3/31/2009

12/31/2008

Consolidated balance sheet data:

          (dollars in thousands except per share data)

Total assets

$

829,891

$

855,933

$

886,192

$

875,850

$

875,855

Loans receivable (net):

Mortgage

51,820

49,944

53,537

60,132

46,252

Commercial

508,279

528,216

547,904

566,706

585,893

Consumer

88,893

92,809

94,749

98,292

101,180

Leases

9,664

10,727

9,717

10,692

11,406

Total

658,656

681,696

705,907

735,822

744,731

Cash and investments

30,045

46,741

57,342

50,867

63,284

Mortgage-backed securities

97,239

86,275

81,596

51,100

32,827

Premises and equipment

8,540

8,608

8,714

8,866

9,050

Goodwill

4,219

4,219

4,219

4,219

4,219

Mortgage servicing rights

1,279

1,247

1,230

1,079

1,006

Deposits:

Savings

23,138

23,407

24,730

26,561

26,556

Checking

224,507

220,018

225,647

224,249

223,366

Certificates

440,866

466,426

480,634

469,624

466,505

Total

688,511

709,851

731,011

720,434

716,427

Borrowings

37,380

39,040

49,695

49,606

52,558

Junior subordinated debentures

10,310

10,310

10,310

10,310

10,310

Stockholders' equity

86,214

87,281

86,708

87,785

87,821

Consolidated earnings summary:

Interest income

$

11,851

$

12,196

$

12,442

$

12,571

$

13,372

Interest expense

2,996

3,922

4,546

4,629

5,078

Net interest income

8,855

8,274

7,896

7,942

8,294

Provision for credit losses

2,700

1,260

1,700

1,520

1,150

Noninterest income

2,527

2,401

3,212

2,821

2,149

Noninterest expense

6,300

6,530

6,513

6,002

5,987

Income taxes

872

1,123

1,135

1,236

1,287

Net income

$

1,510

$

1,762

$

1,760

$

2,005

$

2,019

Per Share Data:

Earnings per share-Basic

$

0.16

$

0.18

$

0.18

$

0.21

$

0.21

Earnings per share-Diluted

$

0.16

$

0.18

$

0.18

$

0.21

$

0.21

Dividends per share

$

0.20

$

0.20

$

0.20

$

0.20

$

0.20

Book value per share

$

8.85

$

8.96

$

8.90

$

9.01

$

9.02

Average shares-Basic

9,738,475

9,738,475

9,738,096

9,738,096

9,738,096

Average shares-Diluted

9,738,475

9,738,550

9,738,096

9,738,096

9,743,987

12/31/2009

9/30/2009

6/30/2009

3/31/2009

12/31/2008

          (dollars in thousands except per share data)

Performance ratios:

Yield on earning assets

6.09%

6.09%

6.10%

6.19%

6.57%

Cost of funds

1.61%

2.03%

2.32%

2.37%

2.59%

Net interest spread

4.48%

4.06%

3.78%

3.82%

3.98%

Net interest margin on earning assets

4.55%

4.13%

3.87%

3.91%

4.08%

Earning assets to total assets

91.81%

92.38%

92.43%

92.79%

92.29%

Return on average assets

0.72%

0.81%

0.80%

0.91%

0.92%

Return on average equity

6.88%

8.06%

7.98%

9.07%

9.19%

Efficiency ratio

55.28%

61.10%

58.57%

55.70%

57.25%

Dividend payout ratio

125.00%

111.11%

111.11%

95.24%

95.24%

Average assets

$

842,556

$

867,976

$

881,307

$

878,795

$

879,864

Average earning assets

$

777,896

$

801,625

$

816,210

$

812,831

$

813,993

Average equity

$

87,762

$

87,418

$

88,240

$

88,443

$

87,876

Equity/Assets

10.39%

10.20%

9.78%

10.02%

10.02%

Tangible Equity/Assets

9.86%

9.69%

9.29%

9.52%

9.53%

Asset quality data and ratios:

Nonaccrual loans

$

5,838

$

7,132

$

7,609

$

6,940

$

10,727

Restructured loans

$

4,343

$

4,304

$

4,304

$

4,276

$

4,275

Total nonperforming loans

$

10,181

$

11,436

$

11,913

$

11,216

$

15,002

Other real estate owned

$

10,561

$

12,474

$

10,408

$

10,573

$

7,711

Total nonperforming assets

$

20,742

$

23,910

$

22,321

$

21,789

$

22,713

Allowance for loan and lease losses

$

13,504

$

12,318

$

11,726

$

10,878

$

11,618

Allowance for unfunded loan commitments

$

240

$

269

$

269

$

312

$

340

Allowance for credit losses

$

13,744

$

12,587

$

11,995

$

11,190

$

11,958

Allowance for loan and lease losses to loans

2.00%

1.77%

1.63%

1.45%

1.53%

Allowance for unfunded loan commitments

to unfunded commitments

0.27%

0.29%

0.28%

0.30%

0.29%

Allowance for credit losses to loans

2.04%

1.81%

1.67%

1.50%

1.58%

Net charge-offs (recoveries)

$

1,543

$

668

$

894

$

2,288

$

854

Net charge-offs (recoveries) to loans

0.234%

0.098%

0.127%

0.311%

0.115%

Nonperforming loans to loans

1.55%

1.68%

1.69%

1.52%

2.01%

Nonperforming assets to assets

2.50%

2.79%

2.52%

2.49%

2.59%

Loans to deposits

95.66%

96.03%

96.57%

102.16%

103.95%

Loans to assets

79.37%

79.64%

79.66%

84.03%

85.03%

Loans serviced for others

$

289,324

$

281,935

$

268,266

$

254,195

$

255,510

For more information contact:

Bill Wall (CFO)

Phone: (252) 940-5017

Website: www.firstsouthnc.com

SOURCE First South Bancorp, Inc.



RELATED LINKS

http://www.firstsouthnc.com