First South Bancorp Inc., Washington, N.C. reported $6.5 million in net operating losses for the fourth quarter of 2010, mainly due to foreclosure related asset quality deterioration.
These losses compare to net incomes of $1 million in the previous quarter in 2010 and $1.5 million in 4Q2009.
Better performance in previous quarters during 2010 brought the year-end loss to $2.4 million compared to net income of $7 million at December 31, 2009.
The bank said results were driven by credit quality deterioration as total non-performing assets increased at December 31 to $52.9 million or 6.6% of all assets, up from $27.8 million or 3.4% at September 30, 2010.
First South Bancorp’s president and CEO, Tom Vann said he is “encouraged that property values appear to be stabilizing.” The bank’s goal however is to not only monitor these values, but also mitigate non-performing assets “as quickly as feasible” by boosting loan loss reserves “by a significant amount.”
More specifically, non-accrual loans increased to $41.3 million or 6.8% of all loans in its portfolio at December 31, 2010, up from only 3% at September 30, 2010, while other real estate owned assets increased to $11.6 million, up from $8.6 million in September.
Following “an intensive” evaluation of the credit quality of the bank’s loan portfolio and given “continued economic uncertainty” executives decided to take pro-active approach to credit risk management and provisions that will help keep the bank to be well capitalized. Vann stated in the company release, “capital levels will remain in excess of the regulatory requirements.” The hope is that as earnings are retained over the coming years more capital will be recovered and current problems are left behind.
In the fourth quarter of 2010 the bank soared its provisions for credit losses to $13.7 million, up from $4 million in the previous quarter and only $2.7 million in the last quarter of 2009.
These provisions were deemed necessary and adequate “to replenish net charge offs and strengthen the allowance for credit losses.”
ALLL, or allowance for loan and lease losses also increased to $18.8 million at December 31, 2010 representing 1.3% of total loans.
Furthermore, this year the bank will continue, “to aggressively manage” problem assets since even though the current ALLL levels are seen as adequate, “there is no assurance in the future that regulators, increased risks in the loan portfolio, or changes in the economic conditions will not require additional adjustments to the allowance for credit losses.”
