FIRST SOUTH BANCORP, INC. WASHINGTON, N.C., July 20, 2017 /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 six months ended June 30, 2017.
The Company generated net income of $2.1 million for the 2017 second quarter, a 27.5% increase from the $1.6 million of earnings for the 2016 second quarter. Net income for the first six months of 2017 was $3.9 million, a 27.8% increase from the $3.1 million earned for the first six months of 2016.
The Company's diluted earnings per share (EPS) for the 2017 second quarter increased 29.4% to $0.22 per share, from $0.17 per share for the 2016 second quarter. Diluted EPS for the first six months of 2017 increased 28.1% to $0.41 per share, from $0.32 per share for the first six months of 2016. The Company's strong loan growth continues to drive solid core revenue, enhancing its capital position while maintaining excellent credit quality.
Significant Event. The Company and Carolina Financial Corporation ("Carolina Financial") previously announced the execution of an Agreement and Plan of Merger and Reorganization, dated June 9, 2017. The agreement provides that the Company will merge with and into Carolina Financial and the Bank will merge with and into Carolina Financial's wholly owned bank subsidiary, CresCom Bank, with Carolina Financial and CresCom Bank as the surviving entities. It is currently anticipated that the legal merger will take place in the fourth quarter of 2017. The merger is subject to both regulatory and shareholder approval.
In connection with the merger transaction, the Company incurred $278,000 of professional fees and services expense that impacted our results of operations for the quarter and six months ended June 30, 2017. Excluding the net effects of these expenses, net income for the 2017 second quarter would have totaled $2.3 million, or $0.24 per diluted common share. Net income for the first six months of 2017 would have been $4.1 million, or $0.43 per diluted common share. The Company anticipates that it will incur additional expenses associated with the merger transaction prior to consummation in the fourth quarter. The following table presents net income and diluted EPS for the respective June 30, 2017 second quarter and six month periods adjusted for the impact of the merger-related transaction expenses:
Quarter Ended Six Months Ended
6/30/17 6/30/17
-------- --------
(In thousands, except per
share data)
Reported Net Income
(GAAP) $2,055 $3,927
Adjustments for Merger
Expenses:
Professional Fees and
Services 278 278
Income Tax Benefit
(Qtr-29.96% /YTD-
29.68%) (83) (82)
--- ---
Net Income Adjusted
for Merger Expenses* $2,250 $4,123
====== ======
Reported Diluted EPS
(GAAP) $0.22 $0.41
Impact of Merger
Expenses on Diluted
EPS* $0.02 $0.02
Diluted EPS Adjusted
for Merger Expenses* $0.24 $0.43
Bruce Elder, President and CEO, commented, "We are excited about partnering with Carolina Financial and CresCom Bank to create the premier community bank in the Carolinas. We believe First South shareholders and customers will be rewarded as the combination of these two banks is expected to provide superior financial performance along with an exceptional customer experience. We plan to leverage the new resources and products available to us through CresCom Bank to attract new customers and expand our existing relationships."
Mr. Elder further commented, "We continue to remain focused on growing our core earnings and increasing the volume of quality earning assets. Although our financial results were moderately impacted by merger-related expenses in the 2017 second quarter, we were still able to generate net income and EPS growth in the upper 20% range through increases in net interest income and core non-interest income while controlling non-interest expenses."
Highlights:
-- Strong quarterly earnings performance with net income of $2.1 million;
diluted EPS of $0.22 per share; return on average assets (ROA) of 0.79%,
return on average equity (ROE) of 9.01% and return on average tangible
common equity* (ROTCE) of 9.82%.
-- Pre-tax, pre-provision operating earnings* for the current quarter of
$3.5 million are 38.2% higher than the $2.5 million reported for the
2016 second quarter.
-- Strong loan growth as loans-held-for-investment increased by $49.5
million and $76.0 million for the 2017 second quarter and six-month
periods, respectively.
-- Total deposits have grown $106.1 million or 12.9% over last twelve
months to $931.5 million.
-- Strong core deposit growth as demonstrated by an increase in total
non-interest bearing deposits of 17.7% to $208.7 million on a
year-over-year basis.
-- Expanded the net interest margin (NIM) to 3.78% versus 3.76% and 3.74%
for the second quarter of 2016 and the first quarter of 2017,
respectively.
-- Increased non-interest income through enhanced fees from a growing core
deposit base and robust mortgage banking activity.
-- Asset quality metrics continue to improve with lower levels of past due
and non-performing loans.
-- Continue to maintain a solid capital position.
The Company's strong loan and deposit growth continues to result in increased revenue, allowing for growth in both net interest income (NII) and non-interest income. Our NII grew to $9.1 million in the 2017 second quarter, from $8.1 million in the comparative 2016 second quarter. NII for first six months of 2017 grew to $17.7 million, from the $15.9 million of NII generated in the first six months of 2016.
Total non-interest income was $3.6 million, or 28.2% of total revenue (net interest income plus non-interest income) in the 2017 second quarter, compared to $3.5 million, or 30.5%, in the comparative 2016 second quarter. Total non-interest income for first six months of 2017 was $6.9 million, or 27.9% of total revenue, compared to $7.1 million, or 31.0% for first six months of 2016. Excluding the impact of gains on the sales of investment securities of $184,000 for the 2016 second quarter and $467,000 for the first six months of 2016, the Company increased non-interest income by $194,000 and $199,000, respectively. In 2016, investment securities were sold primarily to fund growth in our loan portfolio.
Non-interest expenses in the 2017 second quarter were $9.2 million, compared to $9.0 million for the 2016 second quarter. Total non-interest expenses for the first six months of 2017 totaled $18.3 million, compared to $18.2 million for first six months of 2016. The moderate increase for the respective 2017 reporting periods is attributable to the $278,000 in merger-related expenses noted above.
Income tax expense was $879,000 for the 2017 second quarter, compared to $665,000 for the 2016 second quarter. The effective income tax rates were 29.96% and 29.20% for these reporting periods, respectively. For the first six months of 2017, income tax expense was $1.7 million versus $1.2 million for the first six months of 2016. The effective income tax rates were 29.68% and 28.72%, respectively for the 2017 and 2016 six-month periods.
Balance Sheet Growth. Loans and leases held for investment (HFI) totaled $776.7 million at June 30, 2017, increasing $76.0 million, or 10.8%, over the $700.6 million held at December 31, 2016. Loans held for sale totaled $6.4 million at June 30, 2017 versus $5.1 million held at December 31, 2016. Investment securities and interest-bearing deposits at other banks totaled to $212.9 million at June 30, 2017, versus $216.4 million at December 31, 2016, as some cash was redeployed to support growth in our loans and leases portfolios.
Deposits totaled $931.5 million at June 30, 2017, increasing $60.9 million, or 7.0%, from $870.6 million at December 31, 2016. Non-maturity deposits (personal and business checking, money market, and savings accounts) grew by $53.1 million, or 8.7%, to $667.2 million at June 30, 2017, from $614.1 million at December 31, 2016. CDs increased to $264.3 million at June 30, 2017, from $256.6 million at December 31, 2016. CDs represented 28.4% and 29.5% of total deposits at June 30, 2017, and December 31, 2016, respectively.
Stockholders' equity increased by $4.7 million to $91.9 million at June 30, 2017, from $87.2 million at December 31, 2016. This increase primarily reflects the $3.9 million of net income earned for the first six months of 2017 and a $1.4 million increase in accumulated other comprehensive income resulting from the mark-to-market adjustment of the available-for-sale securities portfolio, and is net of $665,000 of dividends declared.
The tangible equity to assets ratio* was 8.12% at June 30, 2017, compared to 8.21% at December 31, 2016. The tangible book value per common share* increased to $9.07 at June 30, 2017, from $8.57 at December 31, 2016.
Asset Quality. Solid asset quality metrics in the 2017 second quarter continue to reflect the Company's disciplined credit culture. Non-performing assets (NPAs) declined to $5.0 million at June 30, 2017, or 0.47% of total assets, from $6.3 million, or 0.63% of total assets, at December 31, 2016. NPAs at June 30, 2017 included $2.4 million of other real estate owned (OREO), which declined by $791,000, or 24.5%, from $3.2 million at December 31, 2016. Nonaccrual loans and leases were $2.5 million at June 30, 2017, or 0.33% of loans and leases HFI, compared to $3.1 million, or 0.44%, at December 31, 2016.
The provision for credit losses in the 2017 second quarter was $485,000, compared to $325,000 for the 2016 second quarter. The provision for credit losses was $750,000 in the first six months of 2017, compared to $550,000 in the first six months of 2016. The allowance for loan losses represented 1.21% of loans and leases HFI at June 30, 2017, compared to 1.24% at December 31, 2016.
Regulatory Capital Strength. As of June 30, 2017, reported regulatory capital ratios at the Bank were 12.57% for total risk-based capital, 11.37% for tier 1 risk-based capital and common equity tier 1 risk-based capital and 8.84% for tier 1 leverage, compared to 13.01% for total risk-based capital, 11.80% for tier 1 risk-based capital and common equity tier 1 risk-based capital and 8.89% for tier 1 leverage at December 31, 2016.
Key Performance Ratios. Some of our key performance ratios are ROA, ROE and the efficiency ratio. ROA was 0.79% for the 2017 second quarter, compared with 0.68% for the 2016 second quarter. ROE was 9.01% for the 2017 second quarter, compared with 7.55% for the 2016 second quarter. The Company's efficiency ratio for the 2017 second quarter improved to 71.65%, from 77.59% for the comparative 2016 second quarter. The efficiency ratio for the first six months of 2017 improved to 73.23%, from 79.14% for first six months of 2016. The efficiency ratio measures the proportion of net operating revenues that are absorbed by overhead expenses.
Corporate and Investor Information. The Bank has been serving the citizens of eastern and central North Carolina since 1902 and offers a variety of financial products and services to business and individual customers. The Bank operates through its main office headquartered in Washington, North Carolina, and has 28 full service branch offices located throughout eastern and central North Carolina. The Bank also provides a full menu of leasing services through its wholly-owned subsidiary, First South Leasing, LLC. In addition, under its First South Wealth Management division, the Bank makes securities brokerage services available through an affiliation with an independent broker/dealer.
Additional investor information for the Company and the Bank may be accessed on our website at www.firstsouthnc.com.
The Company's common stock symbol as traded on the NASDAQ Global Select Market is "FSBK".
Forward-Looking Statements. 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 failure to obtain all regulatory approvals and meet other closing conditions pursuant to the Agreement and Plan of Merger and Reorganization, dated as of June 9, 2017, by and between Carolina Financial Corporation ("CARO") and the Company (the "CARO Merger"), including approval by the stockholders of CARO and the Company, respectively, on the expected terms and time schedule; delay in closing the CARO Merger; difficulties and delays in integrating CARO's and the Company's businesses or fully realizing cost savings and other benefits; business disruption as a result of the CARO Merger; customer acceptance of CARO products and services; potential difficulties encountered in expanding into a new market following the CARO Merger; 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 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. The Company assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
*Non-GAAP Financial Measures. Important disclosures about and reconciliations of non-GAAP measures to the corresponding GAAP measures, are provided below and attached to this press release.
This press release and the accompanying Supplemental Financial Data contain financial information determined by methods other than in accordance with generally accepted accounting principles (GAAP) in the United States. Management uses these "non-GAAP" measures in their analysis of the Company's performance. Management believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrating the effects of significant gains and charges. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of non-GAAP disclosures are provided within the accompanying tables to this press release.
First South Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
June 30, December 31, June 30,
2017 2016 2016
---- ---- ----
Assets (Unaudited) (Unaudited)
Cash and due from banks $23,049,153 $22,854,712 $24,376,456
Interest-bearing deposits with
banks 17,022,773 23,320,968 16,357,259
Investment securities available
for sale, at fair value 195,401,445 192,606,119 199,855,361
Investment securities held to
maturity 506,553 509,617 509,036
Mortgage loans held for sale 6,380,856 5,098,518 5,251,714
Loans and leases held for
investment 776,656,251 700,642,291 668,842,905
Allowance for loan and lease
losses (9,366,564) (8,673,172) (8,338,244)
---------- ---------- ----------
Net loans and leases held for
investment 767,289,687 691,969,119 660,504,661
Premises and equipment, net 11,152,205 11,291,596 11,671,166
Assets held for sale 185,906 192,720 192,720
Other real estate owned 2,437,946 3,229,423 5,540,672
Federal Home Loan Bank stock, at
cost 1,847,700 1,573,700 2,317,500
Accrued interest receivable 3,448,043 3,525,684 3,141,824
Goodwill 4,218,576 4,218,576 4,218,576
Mortgage servicing rights 2,134,256 2,148,905 1,272,952
Identifiable intangible assets 1,490,348 1,611,187 1,753,350
Bank-owned life insurance 18,351,387 18,080,183 17,795,206
Prepaid expenses and other assets 6,462,221 8,470,887 6,720,669
--------- --------- ---------
Total assets $1,061,379,055 $990,701,914 $961,479,122
============== ============ ============
Liabilities and Stockholders'
Equity
Deposits:
Non-interest bearing
demand $208,671,921 $196,917,165 $177,281,556
Interest bearing demand 308,799,734 272,098,903 242,206,763
Savings 149,720,673 145,031,981 142,151,162
Large denomination certificates of
deposit 136,978,726 122,819,510 118,773,827
Other time 127,363,292 133,732,804 145,049,086
----------- ----------- -----------
Total deposits 931,534,346 870,600,363 825,462,394
Borrowed money 22,500,000 17,000,000 32,500,000
Junior subordinated debentures 10,310,000 10,310,000 10,310,000
Other liabilities 5,138,320 5,607,832 5,880,159
--------- --------- ---------
Total liabilities 969,482,666 903,518,195 874,152,553
----------- ----------- -----------
Common stock, $.01 par value,
25,000,000 shares authorized;
9,502,520; 9,494,935; and
9,493,776 shares outstanding,
respectively 95,025 94,949 94,938
Additional paid-in capital 36,072,883 36,018,743 35,978,994
Retained earnings 52,822,834 49,560,595 46,241,836
Accumulated other comprehensive
income 2,905,647 1,509,432 5,010,801
--------- --------- ---------
Total stockholders' equity 91,896,389 87,183,719 87,326,569
---------- ---------- ----------
Total liabilities and
stockholders' equity $1,061,379,055 $990,701,914 $961,479,122
============== ============ ============
First South Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
Interest income:
Interest and fees on loans $8,700,534 $7,642,097 $16,913,822 $14,833,692
Interest on investments and
deposits 1,392,349 1,356,030 2,783,029 2,836,282
--------- --------- --------- ---------
Total interest income 10,092,883 8,998,127 19,696,851 17,669,974
---------- --------- ---------- ----------
Interest expense:
Interest on deposits 830,192 697,426 1,584,181 1,366,702
Interest on borrowings 60,469 58,711 122,429 131,797
Interest on junior subordinated notes 127,011 141,578 251,261 281,617
------- ------- ------- -------
Total interest expense 1,017,672 897,715 1,957,871 1,780,116
--------- ------- --------- ---------
Net interest income 9,075,211 8,100,412 17,738,980 15,889,858
Provision for credit losses 485,000 325,000 750,000 550,000
------- ------- ------- -------
Net interest income after provision for
credit losses 8,590,211 7,775,412 16,988,980 15,339,858
--------- --------- ---------- ----------
Non-interest income:
Deposit fees and service charges 1,964,665 1,931,050 3,820,885 3,838,457
Loan fees and charges 92,723 138,649 178,767 195,634
Mortgage loan servicing fees 316,988 273,689 638,827 507,689
Gain on sale and other fees on mortgage
loans 654,016 568,403 1,127,578 982,264
Gain (loss) on sale of other real estate,
net (26,151) (14,315) 55,500 (26,484)
Gain on sale of investment securities - 183,955 - 467,470
Other income 555,678 466,798 1,034,464 1,159,085
------- ------- --------- ---------
Total non-interest income 3,557,919 3,548,229 6,856,021 7,124,115
--------- --------- --------- ---------
Non-interest expense:
Compensation and fringe benefits 5,000,901 4,944,984 10,114,454 9,984,939
Federal deposit insurance premiums 157,118 160,525 304,492 322,134
Premises and equipment 1,334,666 1,380,675 2,733,216 2,754,484
Marketing 119,050 229,434 182,790 417,253
Data processing 807,722 749,731 1,601,090 1,546,217
Amortization of intangible assets 151,269 133,571 300,466 265,099
Other real estate owned expense 105,093 212,883 269,859 306,557
Other 1,538,363 1,235,090 2,754,365 2,556,137
--------- --------- --------- ---------
Total non-interest expense 9,214,182 9,046,893 18,260,732 18,152,820
--------- --------- ---------- ----------
Income before income tax expense 2,933,948 2,276,748 5,584,269 4,311,153
Income tax expense 879,031 664,734 1,657,155 1,238,345
------- ------- --------- ---------
NET INCOME $2,054,917 $1,612,014 $3,927,114 $3,072,808
========== ========== ========== ==========
Per share data:
Basic earnings per share $0.22 $0.17 $0.41 $0.32
Diluted earnings per share $0.22 $0.17 $0.41 $0.32
Dividends per share $0.035 $0.030 $0.070 $0.055
Average basic shares outstanding 9,500,958 9,493,776 9,499,289 9,492,489
Average diluted shares outstanding 9,554,420 9,519,565 9,548,382 9,517,248
First South Bancorp, Inc.
Supplemental Financial Data (Unaudited)
Quarter to Date Year to Date
--------------- ------------
6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016 6/30/2017 6/30/2016
--------- --------- ---------- --------- --------- --------- ---------
(dollars in thousands except per share data)
Consolidated balance sheet data:
--------------------------------
Total assets $1,061,379 $1,039,424 $990,702 $985,795 $961,479 $1,061,379 $961,479
Loans held for sale: $6,381 $2,507 $5,099 $7,313 $5,252 $6,381 $5,252
Loans and leases held for investment
(HFI):
Mortgage $76,249 $73,107 $74,905 $74,710 $73,100 $76,249 $73,100
Commercial 593,732 558,578 535,047 518,265 510,678 593,732 510,678
Consumer 83,730 73,188 69,454 69,039 66,138 83,730 66,138
Leases 22,945 22,270 21,236 20,452 18,927 22,945 18,927
Total loans and leases HFI 776,656 727,143 700,642 682,466 668,843 776,656 668,843
Allowance for loan and lease losses (9,367) (8,941) (8,673) (8,498) (8,338) (9,367) (8,338)
------ ------ ------ ------ ------ ------ ------
Net loans and leases HFI $767,289 $718,202 $691,969 $673,968 $660,505 $767,289 $660,505
Cash & interest bearing deposits $40,072 $70,713 $46,176 $57,209 $40,734 $40,072 $40,734
Investment securities 195,908 195,048 193,116 193,765 200,364 195,908 200,364
Bank-owned life insurance 18,351 18,219 18,080 17,937 17,795 18,351 17,795
Premises and equipment 11,152 11,572 11,292 11,609 11,671 11,152 11,671
Goodwill 4,219 4,219 4,219 4,219 4,219 4,219 4,219
Mortgage servicing rights 2,134 2,140 2,149 2,091 1,273 2,134 1,273
Identifiable intangible assets 1,490 1,551 1,611 1,682 1,753 1,490 1,753
Deposits:
Non-interest checking $208,672 $204,576 $196,917 $189,873 $177,281 $208,672 $177,281
Interest checking 222,267 212,386 189,401 176,034 170,153 222,267 170,153
Money market 86,533 86,598 82,698 88,081 72,054 86,533 72,054
Savings 149,721 147,718 145,032 141,701 142,151 149,721 142,151
Certificates 264,341 268,588 256,552 264,142 263,823 264,341 263,823
------- ------- ------- ------- ------- ------- -------
Total deposits $931,534 $919,866 $870,600 $859,831 $825,462 $931,534 $825,462
Borrowings $22,500 $15,000 $17,000 $20,000 $32,500 $22,500 $32,500
Junior subordinated debentures 10,310 10,310 10,310 10,310 10,310 10,310 10,310
Stockholders' equity 91,896 89,282 87,184 88,294 87,327 91,896 87,327
Consolidated earnings summary:
------------------------------
Interest income $10,093 $9,604 $9,336 $9,210 $8,998 $19,697 $17,670
Interest expense 1,018 940 920 911 898 1,958 1,780
----- --- --- --- --- ----- -----
Net interest income 9,075 8,664 8,416 8,299 8,100 17,739 15,890
Provision for credit losses 485 265 200 220 325 750 550
Noninterest income 3,558 3,298 3,372 3,691 3,548 6,856 7,124
Noninterest expense 9,214 9,047 8,819 8,929 9,046 18,261 18,153
----- ----- ----- ----- ----- ------ ------
Income before taxes 2,934 2,650 2,769 2,841 2,277 5,584 4,311
Income tax expense 879 778 775 947 665 1,657 1,238
--- --- --- --- --- ----- -----
Net income $2,055 $1,872 $1,994 $1,894 $1,612 $3,927 $3,073
====== ====== ====== ====== ====== ====== ======
Per Share Data:
---------------
Basic earnings per share $0.22 $0.20 $0.21 $0.20 $0.17 $0.41 $0.32
Diluted earnings per share $0.22 $0.20 $0.21 $0.20 $0.17 $0.41 $0.32
Dividends per share $0.035 $0.035 $0.030 $0.030 $0.030 $0.070 $0.055
Book value per share $9.67 $9.40 $9.18 $9.30 $9.20 $9.67 $9.20
Shares outstanding 9,502,520 9,500,266 9,494,935 9,494,935 9,493,776 9,502,520 9,493,776
Average basic shares 9,500,958 9,497,601 9,494,935 9,494,861 9,493,776 9,499,289 9,492,489
Average diluted shares 9,554,420 9,541,548 9,529,753 9,525,302 9,519,565 9,548,382 9,517,248
Performance ratios (tax equivalent):
------------------------------------
Yield on average earning assets 4.19% 4.15% 4.07% 4.13% 4.17% 4.17% 4.12%
Cost of interest bearing liabilities 0.55% 0.52% 0.52% 0.52% 0.52% 0.54% 0.52%
---- ---- ---- ---- ---- ---- ----
Net interest spread 3.65% 3.62% 3.55% 3.61% 3.64% 3.63% 3.60%
Net interest margin 3.78% 3.74% 3.68% 3.73% 3.76% 3.76% 3.71%
Average earning assets to total average
assets 93.61% 93.32% 92.92% 92.42% 92.38% 93.47% 92.29%
Return on average assets (annualized) 0.79% 0.75% 0.80% 0.78% 0.68% 0.77% 0.66%
Return on average equity (annualized) 9.01% 8.52% 8.94% 8.52% 7.55% 8.77% 7.26%
Efficiency ratio 71.65% 74.92% 74.16% 73.84% 77.59% 73.23% 79.14%
Average assets $1,041,823 $1,014,310 $992,192 $968,729 $947,761 $1,028,027 $943,232
Average earning assets $975,211 $946,578 $921,984 $895,290 $875,529 $960,850 $870,496
Average equity $91,452 $89,143 $88,694 $88,481 $85,927 $90,294 $85,096
Equity/Assets 8.66% 8.59% 8.80% 8.96% 9.08% 8.66% 9.08%
Supplemental Financial Data (Unaudited)
Quarter to Date Year to Date
--------------- ------------
6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016 6/30/2017 6/30/2016
--------- --------- ---------- --------- --------- --------- ---------
(dollars in thousands except per share data)
Asset quality data and ratios:
------------------------------
Nonaccrual loans and leases:
Non-TDR
nonaccrual loans
and leases
Earning $495 $576 $410 $569 $555 $495 $555
Non-Earning 1,489 1,479 1,257 1,289 1,075 1,489 1,075
Total Non-TDR nonaccrual
loans and leases $1,984 $2,055 $1,667 $1,858 $1,630 $1,984 $1,630
------ ------ ------ ------ ------ ------ ------
TDR nonaccrual
loans and leases
Current TDRs $549 $720 $422 $792 $706 $549 $706
Past Due TDRs 0 0 962 248 250 0 250
Total TDR nonaccrual loans and
leases $549 $720 $1,384 $1,040 $956 $549 $956
---- ---- ------ ------ ---- ---- ----
Total nonaccrual loans and leases $2,533 $2,775 $3,051 $2,898 $2,586 $2,533 $2,586
Loans and leases >90 days past due, still
accruing 0 0 0 0 218 0 218
Other real estate owned 2,438 3,115 3,229 4,810 5,541 2,438 5,541
----- ----- ----- ----- ----- -----
Total nonperforming assets $4,971 $5,890 $6,280 $7,708 $8,345 $4,971 $8,345
====== ====== ====== ====== ====== ====== ======
Allowance for loan and lease losses to
loans and leases
HFI 1.21% 1.23% 1.24% 1.25% 1.25% 1.21% 1.25%
Net charge-offs (recoveries) $59 $(3) $25 $60 $122 $57 $78
Net charge-offs (recoveries) to total
loans and leases 0.01% 0.00% 0.00% 0.01% 0.02% 0.01% 0.01%
Total nonaccrual loans and leases to
total loans
and leases HFI 0.33% 0.38% 0.44% 0.42% 0.39% 0.33% 0.39%
Total nonperforming assets to total
assets 0.47% 0.57% 0.63% 0.78% 0.87% 0.47% 0.87%
Total loans and leases to total deposits 84.06% 79.32% 81.06% 80.22% 81.66% 84.06% 81.66%
Total loans and leases to total assets 73.78% 70.20% 71.24% 69.97% 70.11% 73.78% 70.11%
Loans serviced for others $363,489 $368,617 $371,956 $370,606 $292,222 $363,489 $292,222
Reconciliation of Non-GAAP Measures:
------------------------------------
Pre-tax pre-provision operating
earnings (non-GAAP):
Income before taxes (GAAP) $2,934 $2,650 $2,769 $2,841 $2,277 $5,584 $4,311
Provision for credit losses 485 265 200 220 325 750 550
--- --- --- --- --- --- ---
Pre-tax pre-provision net income 3,419 2,915 2,969 3,061 2,602 6,334 4,861
Securities (gains) losses, net 0 0 0 0 (184) 0 (467)
OREO valuations 58 119 140 0 103 177 110
OREO (gains) losses, (net) 26 (82) (80) (77) 14 (56) 26
--- --- --- --- --- --- ---
Pre-tax pre-provision operating
earnings (non-GAAP) $3,503 $2,952 $3,029 $2,984 $2,535 $6,455 $4,530
====== ====== ====== ====== ====== ====== ======
Total core non-interest income (non-
GAAP):
Non-interest income (GAAP) $3,558 $3,298 $3,372 $3,691 $3,548 $6,856 $7,124
Securities (gains) losses, net 0 0 0 0 (184) 0 (467)
OREO (gains) losses, (net) 26 (82) (80) (77) 14 (56) 26
--- --- --- --- --- --- ---
Total core non-interest income (non-GAAP) $3,584 $3,216 $3,292 $3,614 $3,378 $6,800 $6,683
====== ====== ====== ====== ====== ====== ======
Tangible equity (non-GAAP):
Total equity (GAAP) $91,896 $89,282 $87,184 $88,294 $87,327 $91,896 $87,327
Intangible assets (a) 5,709 5,770 5,830 5,901 5,972 5,709 5,972
Tangible equity (non-GAAP) $86,187 $83,512 $81,354 $82,393 $81,355 $86,187 $81,355
======= ======= ======= ======= ======= ======= =======
Tangible Equity/Assets (non-GAAP) 8.12% 8.03% 8.21% 8.36% 8.46% 8.12% 8.46%
Tangible book value per share (non-GAAP) $9.07 $8.79 $8.57 $8.68 $8.57 $9.07 $8.57
Return on average tangible common equity
(non-GAAP):
Net income (GAAP) $2,055 $1,872 $1,994 $1,894 $1,612 $3,927 $3,073
Amortization of intangibles, net of tax 42 43 51 47 50 85 101
--- --- --- --- --- --- ---
Tangible net income available to
shareholders (non-GAAP) $2,097 $1,915 $2,045 $1,941 $1,662 $4,012 $3,174
====== ====== ====== ====== ====== ====== ======
Average equity 91,452 89,143 88,694 88,481 85,927 90,294 85,096
Average intangible assets (a) 5,748 5,809 5,876 5,946 6,018 5,778 6,053
Average tangible common equity (non-GAAP) $85,704 $83,334 $82,818 $82,535 $79,909 $84,516 $79,043
======= ======= ======= ======= ======= ======= =======
Return on average tangible common equity
(non-GAAP) 9.82% 9.32% 9.82% 9.36% 8.37% 9.57% 8.05%
(a) Excludes mortgage servicing rights
Average Balances - Yield/Cost Analysis
Three Months Ended June 30,
---------------------------
2017 2016
---- ----
Average Interest Average Average Interest Average
Balance Yield/Cost Balance Yield/Cost
------- ---------- ------- ----------
Interest earning
assets: (Dollars in thousands)
Loans receivable $750,246 $8,701 4.60% $657,301 $7,642 4.62%
Investments and
deposits 224,965 1,392 2.83 (1) 218,228 1,356 2.82 (1)
------- ----- ---- ------- ----- ----
Total earning
assets 975,211 10,093 4.19 (1) 875,529 8,998 4.17 (1)
Nonearning assets 66,612 72,232
Total assets $1,041,823 $947,761
========== ========
Interest bearing liabilities:
Deposits $714,938 830 0.47 $653,904 697 0.43
Borrowings 18,044 61 1.34 21,531 59 1.10
Junior subordinated
debentures 10,310 127 4.87 10,310 142 5.43
------ --- ---- ------ --- ----
Total interest
bearing
liabilities 743,292 1,018 0.55 685,745 898 0.52
Noninterest bearing
demand deposits 201,511 - - 170,244 - -
------- --- --- ------- --- ---
Total sources of
funds 944,803 1,018 0.43 855,989 898 0.42
Other liabilities 5,568 5,845
Stockholders'
equity 91,452 85,927
------ ------
Total liabilities
and equity $1,041,823 $947,761
========== ========
Net interest income $9,075 $8,100
====== ======
Interest rate spread (1)(2) 3.65% 3.64%
==== ====
Net interest margin (1)(3) 3.78% 3.76%
==== ====
Ratio of earning assets to interest bearing liabilities 131.20% 127.68%
====== ======
Six Months Ended June 30,
-------------------------
2017 2016
---- ----
Average Interest Average Average Interest Average
Balance Yield/Cost Balance Yield/Cost
------- ---------- ------- ----------
Interest earning
assets: (Dollars in thousands)
Loans receivable $729,510 $16,914 4.62% $639,323 $14,834 4.60%
Investments and
deposits 231,340 2,783 2.75 (1) 231,173 2,836 2.77 (1)
------- ----- ---- ------- ----- ----
Total earning
assets 960,850 19,697 4.17 (1) 870,496 17,670 4.12 (1)
Nonearning assets 67,177 72,736
Total assets $1,028,027 $943,232
========== ========
Interest bearing liabilities:
Deposits $703,463 1,584 0.45 $647,682 1,367 0.42
Borrowings 20,105 123 1.22 27,422 132 0.97
Junior subordinated
debentures 10,310 251 4.85 10,310 281 5.40
------ --- ---- ------ --- ----
Total interest
bearing
liabilities 733,878 1,958 0.54 685,414 1,780 0.52
Noninterest bearing
demand deposits 198,308 - - 166,756 - -
------- --- --- ------- --- ---
Total sources of
funds 932,186 1,958 0.42 852,170 1,780 0.42
Other liabilities 5,547 5,966
Stockholders'
equity 90,294 85,096
------ ------
Total liabilities
and equity $1,028,027 $943,232
========== ========
Net interest income $17,739 $15,890
======= =======
Interest rate spread (1)(2) 3.63% 3.60%
==== ====
Net interest margin (1)(3) 3.76% 3.71%
==== ====
Ratio of earning assets to interest bearing
liabilities 130.93% 127.00%
====== ======
(1) Shown as a tax-adjusted yield.
(2) Represents the difference between the average yield on earning assets and the average cost of funds.
(3) Represents net interest income divided by average earning assets.
For more information contact:
First South Bancorp, Inc.
Bruce Elder (CEO) (252) 940-4936
Scott McLean (CFO) (252) 940-5016
Website: www.firstsouthnc.com
View original content:http://www.prnewswire.com/news-releases/first-south-bancorp-inc-reports-june-30-2017-quarterly-and-six-months-operating-results-300491537.html
SOURCE First South Bancorp, Inc.
