FIRST SOUTH BANCORP, INC. 
By 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
First South Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations
(unaudited)
Three Months Ended Year Ended
December 31 December 31
----------- -----------
2011 2010 2011 2010
Interest income:
Interest and fees on
loans $8,110,354 $8,971,629 $34,422,548 $38,843,771
Interest and
dividends on
investments and
deposits 1,252,652 956,429 4,880,827 4,027,268
--------- ------- --------- ---------
Total interest
income 9,363,006 9,928,058 39,303,375 42,871,039
--------- --------- ---------- ----------
Interest expense:
Interest on deposits 1,520,771 2,002,600 7,189,999 8,301,551
Interest on
borrowings 1,485 82,079 31,965 384,161
Interest on junior
subordinated notes 85,968 81,884 334,219 333,689
------ ------ ------- -------
Total interest
expense 1,608,224 2,166,563 7,556,183 9,019,401
--------- --------- --------- ---------
Net interest income 7,754,782 7,761,495 31,747,192 33,851,638
Provision for credit
losses 2,639,461 13,700,000 10,812,754 22,151,787
--------- ---------- ---------- ----------
Net interest income
after provision for
credit losses 5,115,321 (5,938,505) 20,934,438 11,699,851
--------- ---------- ---------- ----------
Non-interest income:
Fees and service
charges 1,512,785 1,665,795 6,067,185 6,864,083
Loan servicing fees 191,472 192,315 781,881 747,387
Gain (loss) on sale
of other real
estate, net (23,947) (596,751) (68,365) (523,173)
Gain on sale of
mortgage loans 467,287 311,169 864,233 1,155,690
Gain on sale of
mortgage-backed
securities 262,220 50,562 518,614 1,682,453
Gain on sale of
investment
securities - - - 2,406
Other income 238,403 296,282 1,256,477 915,022
------- ------- --------- -------
Total non-interest
income 2,648,220 1,919,372 9,420,025 10,843,868
--------- --------- --------- ----------
Non-interest
expense:
Compensation and
fringe benefits 3,557,057 3,783,196 14,946,438 15,583,817
Federal deposit
insurance premiums 260,914 289,626 1,233,377 1,158,544
Premises and
equipment 430,140 425,962 1,703,121 1,741,462
Advertising 50,066 36,798 181,121 148,380
Payroll and other
taxes 300,320 326,526 1,392,526 1,392,624
Data processing 635,901 677,019 2,558,390 2,576,386
Amortization of
intangible assets 100,660 145,659 542,698 493,785
Other real estate
owned expense 977,139 219,616 2,040,741 533,512
Other 868,171 833,855 3,354,936 3,096,324
------- ------- --------- ---------
Total non-interest
expense 7,180,368 6,738,257 27,953,348 26,724,834
--------- --------- ---------- ----------
Income before income
tax expense 583,173 (10,757,390) 2,401,115 (4,181,115)
Income tax expense 142,007 (4,259,923) 847,806 (1,801,319)
------- ---------- ------- ----------
Net income $441,166 $(6,497,467) $1,553,309 $(2,379,796)
======== =========== ========== ===========
Per share data:
Basic earnings per
share $0.05 $(0.67) $0.16 $(0.24)
Diluted earnings per
share $0.05 $(0.67) $0.16 $(0.24)
Dividends per share $0.00 $0.00 $0.00 $0.49
Average basic shares
outstanding 9,751,271 9,748,948 9,751,271 9,744,870
Average diluted
shares outstanding 9,751,271 9,748,948 9,751,271 9,745,047
First South Bancorp, Inc. Supplemental Financial Data (Unaudited)
Quarterly Year to Date
--------- ------------
12/31/2011 9/30/2011 6/30/2011 3/31/2011 12/31/2010 12/31/2011 12/31/2010
---------- --------- --------- --------- ---------- ---------- ----------
Consolidated balance sheet data: (dollars in thousands except per share data)
--------------------------------
Total assets $745,222 $768,411 $784,538 $791,154 $797,246 $745,222 $797,246
Loans receivable (net):
Mortgage $66,249 $80,453 $56,564 $53,925 $55,450 $66,249 $55,450
Commercial 378,823 405,712 428,141 445,930 463,155 378,823 463,155
Consumer 72,821 74,097 76,459 79,517 79,469 72,821 79,469
Leases 7,309 7,972 7,825 7,829 8,000 7,309 8,000
----- ----- ----- ----- ----- ----- -----
Total loans (net) $525,202 $568,234 $568,989 $587,201 $606,074 $525,202 $606,074
Cash and investments $32,774 $32,909 $44,565 $34,537 $44,434 $32,774 $44,434
Mortgage-backed securities 135,834 119,764 124,539 120,565 98,883 135,834 98,883
Premises and equipment 11,679 11,209 10,753 10,196 9,163 11,679 9,163
Goodwill 4,219 4,219 4,219 4,219 4,219 4,219 4,219
Mortgage servicing rights 1,237 1,091 1,197 1,284 1,358 1,237 1,358
Deposits:
Savings $28,988 $27,551 $26,999 $26,251 $24,499 $28,988 $24,499
Checking 243,720 243,582 240,048 237,605 234,501 243,720 234,501
Certificates 369,909 394,007 416,855 429,772 430,465 369,909 430,465
------- ------- ------- ------- ------- ------- -------
Total deposits $642,617 $665,140 $683,902 $693,628 $689,465 $642,617 $689,465
Borrowings $2,096 $1,986 $2,349 $2,363 $11,503 $2,096 $11,503
Junior subordinated debentures 10,310 10,310 10,310 10,310 10,310 10,310 10,310
Stockholders' equity 82,395 82,061 80,894 79,648 79,513 82,395 79,513
Consolidated earnings summary:
------------------------------
Interest income $9,363 $9,861 $10,188 $9,891 $9,928 $39,303 $42,871
Interest expense 1,608 1,852 2,010 2,086 2,166 7,556 9,019
----- ----- ----- ----- ----- ----- -----
Net interest income 7,755 8,009 8,178 7,805 7,762 31,747 33,852
Provision for credit losses 2,640 2,643 3,080 2,450 13,700 10,813 22,152
Noninterest income 2,648 2,292 2,498 1,982 1,919 9,420 10,844
Noninterest expense 7,180 6,999 6,988 6,786 6,738 27,953 26,725
Income tax expense (benefit) 142 256 226 225 (4,260) 848 (1,801)
--- --- --- --- ------ --- ------
Net income (loss) $441 $403 $382 $326 $(6,497) $1,553 $(2,380)
==== ==== ==== ==== ======= ====== =======
Per Share Data:
---------------
Basic earnings (loss) per share $0.05 $0.04 $0.04 $0.03 $(0.67) $0.16 $(0.24)
Diluted earnings (loss) per share $0.05 $0.04 $0.04 $0.03 $(0.67) $0.16 $(0.24)
Dividends per share $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.49
Book value per share $8.45 $8.42 $8.30 $8.17 $8.15 $8.45 $8.15
Average basic shares 9,751,271 9,751,271 9,751,271 9,751,271 9,748,948 9,751,271 9,744,870
Average diluted shares 9,751,271 9,751,271 9,751,271 9,751,271 9,748,948 9,751,271 9,745,047
12/31/2011 9/30/2011 6/30/2011 3/31/2011 12/31/2010 12/31/2011 12/31/2010
---------- --------- --------- --------- ---------- ---------- ----------
(dollars in thousands except per share data)
Performance ratios:
-------------------
Yield on average earning assets 5.44% 5.64% 5.78% 5.59% 5.51% 5.61% 5.81%
Cost of funds 0.96% 1.08% 1.14% 1.18% 1.21% 1.09% 1.26%
---- ---- ---- ---- ---- ---- ----
Net interest spread 4.48% 4.56% 4.64% 4.41% 4.30% 4.52% 4.55%
Net interest margin/average earning assets 4.51% 4.58% 4.64% 4.41% 4.31% 4.54% 4.59%
Earning assets to total assets 91.09% 90.47% 88.61% 89.85% 89.94% 91.09% 89.94%
Return on average assets (annualized) 0.23% 0.21% 0.19% 0.16% -3.21% 0.20% -0.29%
Return on average equity (annualized) 2.13% 1.97% 1.90% 1.63% -30.31% 1.91% -2.74%
Efficiency ratio 68.95% 67.77% 65.38% 69.25% 69.52% 67.83% 59.72%
Average assets $757,905 $774,383 $791,644 $794,615 $810,459 $757,905 $810,459
Average earning assets $688,457 $698,984 $704,792 $707,982 $727,718 $688,457 $727,718
Average equity $82,708 $81,757 $80,517 $79,978 $85,746 $82,708 $85,746
Equity/Assets 11.06% 10.68% 10.31% 10.07% 9.97% 11.06% 9.97%
Tangible Equity/Assets 10.48% 10.12% 9.76% 9.52% 9.43% 10.48% 9.43%
Asset quality data and ratios:
------------------------------
Loans on nonaccrual status:
Nonaccrual loans
Earning $10,601 $3,179 $3,853 $4,954 $5,143 $10,601 $5,143
Non-Earning $11,007 $15,107 $15,657 $11,769 $9,150 $11,007 $9,150
Total Non-Accrual Loans $21,608 $18,286 $19,510 $16,723 $14,293 $21,608 $14,293
Nonaccrual restructured
loans
Past Due TDRs $9,170 $12,568 $11,228 $15,024 $12,407 $9,170 $12,407
Current TDRs $12,247 $11,172 $10,421 $8,780 $14,566 $12,247 $14,566
Total TDRs $21,417 $23,740 $21,649 $23,804 $26,973 $21,417 $26,973
Total loans on nonaccrual status $43,025 $42,026 $41,159 $40,527 $41,266 $43,025 $41,266
Other real estate owned $17,005 $12,886 $11,387 $12,069 $11,616 $17,005 $11,616
------- ------- ------- ------- ------- ------- -------
Total nonperforming assets $60,030 $54,912 $52,546 $52,596 $52,882 $60,030 $52,882
Performing restructured loans on
accrual status $25,388 $19,820 $22,831 $16,055 $31,334 $25,388 $31,334
Allowance for loan and lease losses $15,194 $18,307 $18,667 $19,320 $18,830 $15,194 $18,830
Allowance for unfunded loan commitments $254 $256 $251 $231 $237 $254 $237
---- ---- ---- ---- ---- ---- ----
Allowance for credit losses $15,448 $18,563 $18,918 $19,551 $19,067 $15,448 $19,067
Allowance for loan and lease losses to loans 2.81% 3.12% 3.17% 3.18% 3.01% 2.81% 3.01%
Allowance for unfunded loan commitments
to unfunded commitments 0.38% 0.39% 0.36% 0.30% 0.30% 0.38% 0.30%
Allowance for credit losses to loans 2.85% 3.16% 3.21% 3.22% 3.04% 2.85% 3.04%
Net charge-offs (recoveries) $5,752 $3,018 $3,713 $1,966 $3,407 $14,449 $16,829
Net charge-offs (recoveries) to loans 1.10% 0.53% 0.65% 0.32% 0.54% 2.75% 2.78%
Nonaccrual loans to loans 8.19% 7.40% 7.23% 6.90% 6.81% 8.19% 6.81%
Nonperforming assets to assets 8.06% 7.15% 6.69% 6.65% 6.63% 8.06% 6.63%
Loans to deposits 84.26% 88.35% 86.10% 87.63% 90.83% 84.26% 90.83%
Loans to assets 72.66% 76.48% 75.06% 76.82% 78.55% 72.66% 78.55%
Loans serviced for others $319,363 $302,307 $314,220 $317,816 $318,218 $319,363 $318,218
SOURCE First South Bancorp, Inc.
