Exhibit 99.1

 

PRESS RELEASE	FOR IMMEDIATE RELEASE
July 21, 2015	For more information contact:
First South Bancorp, Inc.	Bruce Elder (CEO)  (252) 940-4936
	Scott McLean (CFO)    (252) 940-5016
	Website: www.firstsouthnc.com

 

First South Bancorp, Inc. Reports June 30, 2015 Quarterly Operating Results

 

Washington, North Carolina - 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, 2015.

 

For the 2015 second quarter, net income increased 59.1% to $1.2 million, or $0.12 per diluted common share, from net income of $725,000, or $0.08 per diluted common share for the linked 2015 first quarter. The improvement in net income on a linked quarter basis is due to increases in net interest income and non-interest income, as well as a decline in non-interest expenses. The improvement reflects the impact of strong loan growth during the quarter coupled with enhanced fee income from deposit service offerings as the benefits of the branch acquisition transaction (the “acquisition”) with Bank of America (BOA) are being realized.

 

Net income and earnings per diluted common share for the current quarter declined by $132,000 and $0.01, respectively, when compared with $1.3 million or $0.13 per diluted common share earned for the quarter ended June 30, 2014.

 

Net income for the first six months of 2015 was $1.9 million, or $0.20 per diluted common share, compared to net income of $2.4 million, or $0.25 per diluted common share earned in the first six months of 2014. Earnings for the current six month period were positively impacted by increases in net interest income and non-interest income, as well as lower loan loss provisions. During this same period non-interest expenses have increased with growth of our franchise and supporting infrastructure. In addition, during the first six-months of 2015, the Bank incurred $425,000 of one-time transaction expenses associated the nine newly acquired branch offices.

 

Bruce Elder, President and CEO, commented, “Our biggest challenge heading into 2015 was to utilize the deposits acquired in December and put those funds to work in the loan and lease portfolio. During the second quarter we experienced net portfolio growth of almost $55 million bringing our year-to-date net growth to over $63 million. The growth will have a positive impact on interest income and earnings in future periods and growing earning assets remains a high priority. We will also continue to focus increasing non-interest income and efficiently managing operating expenses to improve efficiency and bottom-line results. While our efficiency ratio remains elevated due to the branch acquisition, we have made progress during the quarter. During the 2015 second quarter the Bank consolidated three branch offices into other nearby existing offices. By combining our resources in these markets we are able to improve our efficiency while maintaining our commitment to the communities and customers we serve.”

 

Mr. Elder commented further, “During the quarter ended June 30, 2015, we paid our sixth consecutive quarterly cash dividend of $0.025 per share. Our dividend payments for the six months ended June 30, 2015 represent a 25% payout ratio of diluted earnings per share. The payment of these quarterly dividends reflects the Company’s strong capital position, improved financial performance and our confidence in the future.”

 

Net Interest Income

 

Net interest income for the 2015 second quarter increased to $7.2 million from $7.1 million for the linked 2015 first quarter, and $6.6 million for the 2014 second quarter. Net interest income for the first six months of 2015 increased to $14.2 million, from $13.0 million for the comparative prior year period. The tax equivalent net interest margin improved 5 basis points to 3.67% for the 2015 second quarter, from 3.62% for the linked 2015 first quarter, and fell 49 basis points when compared to the 4.16% for the 2014 second quarter. The tax equivalent net interest margin for the first six months of 2015 declined by 56 basis points to 3.64%, from 4.20% for the comparative six month period of 2014. The declines were the result of investing the acquired deposits in lower earning investment securities.

 

 

Net interest margin for the current period declined compared to the three-month period ended June 30, 2014 due to a change in earning asset mix. The percentage of loans to total earning assets declined to 66% for the current period end compared to 72% for the prior period. Despite the decline in margin, net interest income increased by $624,000 over the comparative prior year three-month period primarily as a result of a $157.3 million increase in average earning assets. The expansion of our net interest income during the first half of 2015 compared to the same six month period of 2014 is due primarily to an increase in the volume of earning assets, which was partially offset by an increase in the volume of interest-bearing liabilities and a reduction in the yield on earning assets. We anticipate level of our current margin remaining somewhat stable over the near-term unless there are dramatic movements in interest rates.

 

Asset Quality and Provisions for Loan Losses

 

Total nonperforming assets were $11.6 million, or 1.3% of total assets at June 30, 2015, compared to $13.2 million or 1.5% of total assets at December 31, 2014, and $17.4 million or 2.5% of total assets at June 30, 2014. Total loans in non-accrual status were $4.3 million at June 30, 2015, compared to $5.0 million at December 31, 2014 and $7.8 million at June 30, 2014. Our level of other real estate owned (OREO) declined to $7.0 million at June 30, 2014, from $7.8 million at December 31, 2014 and $8.7 million at June 30, 2014. The Bank continues to place improving asset quality metrics as a key component of its short-term and long-term performance objectives.

 

The allowance for loan and lease losses (ALLL) was $7.4 million at June 30, 2014, representing 1.35% of loans and leases held for investment, compared to $7.5 million at December 31, 2014, or 1.57% of loans and leases held for investment, and $7.9 million at June 30, 2014, or 1.69% of loans and leases held for investment. The Bank recorded $140,000 of provision for credit losses in the 2015 second quarter, none in the linked 2015 first quarter, and $450,000 in the comparative 2014 second quarter. For the six months ended June 30, 2015, the Bank recorded $140,000 of provision for credit losses, compared to $700,000 in the first six months of 2014. Management believes the ALLL remains adequate.

 

Non-Interest Income

 

Total non-interest income is $3.6 million for the 2015 second quarter, compared to $3.2 million for the linked 2015 first quarter and $2.2 million for the 2014 second quarter.

 

Deposit fees and service charges increased to $2.1 million for the 2015 second quarter and represented 58.1% of total non-interest income. These results were improved over the $1.9 million generated for the linked 2015 first quarter and the $1.1 million earned in the comparative second quarter of 2014. This increase primarily reflects the additional fees and service charges generated from the acquisition transaction. We anticipate additional service charge revenue from deposits going forward, as we focus on growing our core deposit base through new customer acquisition.

 

Total non-interest income generated from the sale and servicing of mortgage loans and loan fees increased to $877,000 for the 2015 second quarter, compared to $624,000 in the linked 2015 first quarter and $612,000 for the 2014 second quarter.  An early spring sales season, coupled with the opportunities we are experiencing in the new markets we entered through the branch acquisition resulted in a higher level of activity for the current quarter. Due to volatility in interest rates near the end of the second quarter, mortgage originations may decline in the third quarter, as compared to the second quarter. We continue to explore various strategies to enhance our non-interest income, including the purchasing of servicing rights.

 

Included in other non-interest income is revenue from investments in Bank-owned life insurance (BOLI) of $128,000 for the 2015 second quarter, compared to $127,000 the linked 2015 first quarter and $132,000 for the 2014 second quarter.

 

Net gains from sales of OREO were $27,000 for the 2015 second quarter, compared to $46,000 for the linked 2015 first quarter and $34,000 for the 2014 second quarter, as the Bank continues in its efforts of disposing of nonperforming assets.

 

 

Net gains from investment securities sales were $201,000 for the 2015 second quarter, compared to $251,000 for the linked 2015 first quarter and none for the 2014 second quarter. During 2014, we implemented a strategy to pre-invest a large portion of the anticipated acquisition transaction proceeds into short and intermediate term investment securities until the funds could be converted to higher yielding assets. During the 2015 second quarter and linked first quarter, we sold $9.0 million and $13.8 million, respectively, of investment securities primarily to fund net growth in our loan portfolio.

 

Total core non-interest income, excluding net gains from securities and OREO sales, improved to $3.4 million for the 2015 second quarter, from $2.9 million for the linked 2015 first quarter and $2.1 million for the comparative 2014 second quarter, primarily due to the increase in deposit fees and service charges.

 

For the first six months of 2015, total non-interest income was $6.8 million, compared to $4.1 million for the first six months 2014. Fees and service charges on deposits increased significantly to $4.0 million for the first six months of 2015, compared to $2.1 million for the 2014 six month period, primarily resulting from additional revenue generated from accounts acquired in the acquisition. Revenue generated from the sale and servicing of mortgage loans and loan fees increased to $1.5 million for the first six months of 2015, from $1.1 million for 2014 six month period. Net gains recognized from the sale of investment securities and OREO increased to $452,000 and $73,000, respectively, for the first six months of 2015, from $14,000 and $73,000, respectively, for the first six months of 2014, reflecting an increased volume of sales activity in the respective periods. BOLI earnings declined to $254,000 for the first six months of 2015, from $265,000 for the first six months of 2014.

 

Non-Interest Expense

 

Total non-interest expense declined to $9.0 million for the 2015 second quarter, from $9.3 million for the linked 2015 first quarter, but was an increase over the $6.5 million reported for the comparative 2014 second quarter. For the first six months of 2015, total non-interest expense increased to $18.3 million, from the $13.0 million reported in the first six months of 2014.

 

Compensation and benefit expenses, the largest component of non-interest expenses, increased to $4.8 million for the 2015 second quarter, from $4.7 million for the linked 2015 first quarter and $3.8 million 2014 second quarter. For the first six months of 2015, compensation expense increased to $9.5 million, from $7.6 million for the first six months of 2014. The increase for the 2015 periods is attributable to the expense for the staff in the nine acquired branch offices, as well as staffing for our new Durham, NC commercial loan team and our new Customer Care Center. The Bank will continue to manage overall staffing levels to ensure we meet the ongoing needs of our customers and to support future growth.

 

FDIC insurance premiums increased to $149,000 for the 2015 second quarter, from $133,000 for the linked 2015 first quarter and $139,000 for the comparative 2014 second quarter. For the first six months of 2015, FDIC insurance was $282,000, compared to $284,000 for the first six months of 2014. The increased quarterly FDIC insurance premium is primarily attributable to growth of the deposit insurance assessment calculation base resulting from the acquisition transaction.

 

Premises and equipment expense was $1.3 million for the 2015 second quarter, compared to $1.4 million for the linked 2015 first quarter and $831,000 for the 2014 second quarter. Premises and equipment costs for the first quarter of 2015 include $57,000 of one-time acquisition expenses. For the first six months of 2015, premises and equipment expense increased to $2.7 million from $1.7 million for the first six months of 2014. While the recent branch acquisition has resulted in a larger infrastructure cost than our historical levels, we continue to pursue opportunities to gain efficiency and performance from our branch network and will make adjustments, such as we have with recent branch consolidations in Kinston, Rocky Mount and Lumberton. As such, given our current branch structure we would anticipate occupancy cost to maintain or improve from their current levels.

 

Advertising expense was $217,000 for the 2015 second quarter, compared to $163,000 for the linked 2015 first quarter and $106,000 for the 2014 second quarter. For the first six months of 2015, advertising expense increased to $380,000, from $169,000 for the first six months of 2014. The Bank is investing in building our brand awareness throughout our expanded footprint with additional marketing efforts, and as such, we anticipate that our advertising expenses will be above that of our historical levels.

 

 

Data processing costs declined to $880,000 for the 2015 second quarter, from $1.1 million for the linked 2015 first quarter, but increased by $311,000, when compared to the $568,000 reported for the 2014 first quarter. Data processing expense for the 2015 first quarter included $173,000 of one-time acquisition expenses. For the first six months of 2015, data processing expense increased to $2.0 million, from $1.2 million for the first six months of 2014. Data processing costs fluctuate in conjunction with changes in the number of customer accounts and transaction activity volumes and therefore, with the addition of accounts and customers from the acquisition, going forward we expect these costs to be above that of prior periods.

 

Total amortization of intangible assets, including mortgage servicing rights and identifiable intangible assets, was $130,000 for the 2015 second quarter, compared to $127,000 for the linked 2015 first quarter and a $15,000 recovery for the 2014 second quarter. For the first six months of 2015, amortization of intangible assets increased to $257,000, from $108,000 for the first six months of 2014. Amortization of mortgage servicing rights was $58,000 for the 2015 second quarter and $56,000 for the linked first quarter, compared to a $15,000 recovery for the 2014 second quarter. Amortization of the Company’s core deposit intangible, which is the only identifiable intangible asset subject to amortization, was $72,000 for both the 2015 second quarter and the linked first quarter, compared to none for the 2014 second quarter.

 

Expenses attributable to ongoing maintenance, property taxes and insurance for OREO properties were $115,000 for the 2015 second quarter, compared to $163,000 for the linked 2015 first quarter and $107,000 for the 2014 second quarter. For the first six months of 2015, OREO related expenses increased to $278,000, from $228,000 for the first six months of 2014. Quarterly OREO valuation adjustments were $41,000 for the 2015 second quarter, compared to $44,000 for the linked 2015 first quarter and none for the 2014 second quarter.

 

Other non-interest expense was $1.4 million for both the 2015 first quarter and the linked 2015 first quarter, compared to $898,000 for the 2014 second quarter. For the first six months of 2015, other non-interest expense increased to $2.8 million, from $1.8 million for the first six months of 2014. The year-over-year increase in operating expenses is primarily due to the branch acquisition.

 

Income tax expense was $486,000 for the 2015 second quarter, compared to $257,000 for the linked 2015 first quarter and $542,000 for the 2014 second quarter. For the first six months of 2015, income tax expense declined to $742,000, from $960,000 for the first six months of 2014. The effective income tax rates were 29.62% for the 2015 second quarter, 26.15% for the linked 2015 first quarter and 29.66% for the comparative 2014 second quarter. The effective income tax rates were 28.32% and 28.67% for the respective 2015 and 2014 six month periods. The Bank’s investment in BOLI and tax-exempt municipal bonds contribute to lowering the Company’s level of income tax expense and its effective income tax rates.

 

Balance Sheet

 

Total assets increased to $899.7 million at June 30, 2015, from $885.9 million at December 31, 2014. The increase is attributable to a net increase in the volume of earning assets, resulting primarily from net growth in the loan and lease receivable portfolio, and partially offset by the sale of investment securities and a reduction in the level of cash on our balance sheet to help fund loan growth.

 

Loans and leases held for investment grew by $63.2 million during the first six months of 2015. This reflects the eighth consecutive quarterly growth in loans and leases held for investment. As a result of this net growth, total loans and leases held for investment increased to $543.6 million at June 30, 2015, from $480.4 million at December 31, 2014. Loans held for sale increased to $6.2 million at June 30, 2015, from $4.8 million at December 31, 2014.

 

The investment securities portfolio and interest-bearing deposits declined to $276.1 million at June 30, 2015, from $325.6 million at December 31, 2014. As previously noted, in 2014 the Bank implemented a strategy to pre-invest a large portion of the anticipated BOA transaction proceeds into short and intermediate term investment securities until the funds can be converted to higher yielding assets. During the first six months of 2015, the Bank sold $22.8 million of investment securities primarily to fund our loan portfolio growth.

 

 

The Bank’s investment in BOLI was $15.4 million at June 30, 2015, compared to $15.1 million at December 31, 2014. The increase in BOLI levels is due to higher policy cash values.

 

Identifiable intangible assets were $2.0 million at June 30, 2015, compared to $2.2 million at December 31, 2014, reflecting the core deposit intangible associated with the acquisition transaction, which is being amortized over a ten year period.

 

Total deposits declined to $772.9 million at June 30, 2015, from $788.3 million at December 31, 2014. Total non-maturity deposits declined to $529.4 million at June 30, 2015, from $533.9 million at December 31, 2014. However, during the first half of 2015 our level of non-interest bearing deposits grew $11.4 million to $158.9 million. Certificates of deposits declined to $243.5 million or 31.5% of total deposits at June 30, 2015, from $254.3 million or 32.3% of total deposits at December 31, 2014.

 

Stockholders' equity declined to $80.1 million at June 30, 2015, from $80.4 million at December 31, 2014. This increase primarily reflects the $1.9 million of net income earned for the first six months, net of a $958,000 decline in accumulated other comprehensive income primarily resulting from the mark-to-market adjustment of the available-for-sale securities portfolio, $478,000 dividends declared, and $793,000 used to acquire shares of the Company’s common stock pursuant to an announced repurchase program. There were 9,503,964 common shares outstanding at June 30, 2015, compared to 9,598,007 shares outstanding at December 31, 2014, reflecting the net effect of 3,359 shares issued pursuant to the vesting of restricted stock awards and 97,402 shares purchased through the stock repurchase program.

 

The tangible equity to assets ratio was 8.21% at June 30, 2015, compared to 8.36% at December 31, 2014. Despite the decline in tangible equity, our tangible book value per common share increased to $7.77 at June 30, 2015, from $7.71 at December 31, 2014 as a result of our share repurchases.

 

Key Performance Ratios

 

Some of our key performance ratios are the return on average assets (ROA), the return on average equity (ROE) and the efficiency ratio. ROA is 0.53% for the 2015 second quarter, compared with 0.33% for the linked 2015 first quarter and 0.73% for the 2014 second quarter. ROE is 5.63% for the 2015 second quarter compared with 3.59% for the linked 2015 first quarter and 6.61% for the 2014 second quarter. The efficiency ratio (noninterest expenses as a percentage of net interest income plus noninterest income) improved to 83.71% for the 2015 second quarter, from 91.30% for the linked 2015 first quarter, but was higher than the 72.77% for the 2014 second quarter. The efficiency ratio measures the proportion of net operating revenues that are absorbed by overhead expenses.

 

First South Bank has been serving the citizens of eastern and central 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 32 full service branch offices located throughout eastern and central North Carolina.

 

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 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.

 

 

Non-GAAP Financial Measures

 

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States. First South Bancorp, Inc.’s 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 in the current period. 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. See the attached disclosures for a reconciliation of any non-GAAP measures to the most directly comparable GAAP measure.

 

(More)

(NASDAQ: FSBK)

 

 

First South Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition

 

		June 30,				December 31,
		2015				2014
Assets		(unaudited)				(*)
Cash and due from banks		$	21,097,689			$	23,281,016
Interest-bearing deposits with banks			15,502,764				32,835,661
Investment securities available for sale, at fair value			260,120,058				292,298,910
Investment securities held to maturity			507,881				507,309
Loans held for sale:
Mortgage loans			6,170,548				4,792,943
Total loans held for sale			6,170,548				4,792,943
Loans and leases held for investment			543,636,466				480,436,270
Allowance for loan and lease losses			(7,363,953	)			(7,519,970	)
Net loans and leases held for investment			536,272,513				472,916,300
Premises and equipment, net			15,246,139				15,821,436
Other real estate owned			7,009,371				7,755,541
Federal Home Loan Bank stock, at cost			2,156,800				606,500
Accrued interest receivable			2,921,574				2,851,650
Goodwill			4,218,576				4,218,576
Mortgage servicing rights			1,212,642				1,178,115
Identifiable intangible assets			2,039,212				2,182,909
Income tax receivable			915,935				2,594,376
Bank-owned life insurance			15,379,872				15,125,498
Prepaid expenses and other assets			8,965,479				6,898,192
Total assets		$	899,737,053			$	885,864,932
Liabilities and Stockholders' Equity
Deposits:
Non-interest bearing demand		$	158,929,188			$	147,543,594
Interest bearing demand			239,381,849				268,472,945
Savings			131,078,264				117,932,606
Large denomination certificates of deposit			107,709,106				111,523,043
Other time			135,770,525				142,808,182
Total deposits			772,868,932				788,280,370
Borrowed money			32,000,000				-
Junior subordinated debentures			10,310,000				10,310,000
Other liabilities			4,436,409				6,837,701
Total liabilities			819,615,341				805,428,071
Common stock, $.01 par value, 25,000,000 shares authorized;
9,503,964 and 9,598,007 shares outstanding, respectively			95,040				95,980
Additional paid-in capital			35,903,908				35,869,195
Retained earnings			41,912,214				41,303,204
Accumulated other comprehensive income			2,210,550				3,168,482
Total stockholders' equity			80,121,712				80,436,861
Total liabilities and stockholders' equity		$	899,737,053			$	885,864,932

 

(*) Derived from audited consolidated financial statements

 

 

First South Bancorp, Inc. and Subsidiary

Consolidated Statements of Operations

Three and Six Months Ended June 30, 2015 and 2014

(unaudited)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2015				2014				2015				2014
Interest income:
Interest and fees on loans		$	6,260,775			$	5,969,398			$	12,195,294			$	11,898,632
Interest on investments and deposits			1,639,763				1,248,271				3,469,740				2,394,082
Total interest income			7,900,538				7,217,669				15,665,034				14,292,714
Interest expense:
Interest on deposits			562,241				526,343				1,131,989				1,086,052
Interest on borrowings			7,421				44,428				7,516				45,112
Interest on junior subordinated notes			141,578				81,359				280,078				161,280
Total interest expense			711,240				652,130				1,419,583				1,292,444
Net interest income			7,189,298				6,565,539				14,245,451				13,000,270
Provision for credit losses			140,000				450,000				140,000				700,000
Net interest income after provision for credit losses			7,049,298				6,115,539				14,105,451				12,300,270
Non-interest income:
Deposit fees and service charges			2,102,664				1,139,262				3,974,859				2,066,209
Loan fees and charges			63,088				41,425				116,236				78,557
Mortgage loan servicing fees			304,705				250,107				543,447				476,428
Gain on sale and other fees on mortgage loans			572,549				362,016				957,533				648,069
Gain on sale of other real estate, net			27,349				33,999				73,216				73,419
Gain on sale of investment securities			201,157				-				451,938				13,509
Other income			344,675				343,775				678,820				732,327
Total non-interest income			3,616,187				2,170,584				6,796,049				4,088,518
Non-interest expense:
Compensation and fringe benefits			4,806,350				3,823,779				9,539,972				7,627,777
Federal deposit insurance premiums			148,639				139,022				281,882				283,620
Premises and equipment			1,290,526				831,016				2,664,453				1,657,161
Advertising			216,967				105,579				379,651				169,012
Data processing			879,576				568,215				1,986,421				1,153,808
Amortization of intangible assets			129,610				(14,592	)			257,069				108,212
Other real estate owned expense			156,849				107,183				363,591				228,488
Other			1,397,461				898,027				2,807,183				1,812,950
Total non-interest expense			9,025,978				6,458,229				18,280,222				13,041,028
Income before income tax expense			1,639,507				1,827,894				2,621,278				3,347,760
Income tax expense			485,609				542,062				742,303				959,925
NET INCOME		$	1,153,898			$	1,285,832			$	1,878,975			$	2,387,835
Per share data:
Basic earnings per share		$	0.12			$	0.13			$	0.20			$	0.25
Diluted earnings per share		$	0.12			$	0.13			$	0.20			$	0.25
Dividends per share		$	0.025			$	0.025			$	0.050			$	0.050
Average basic shares outstanding			9,526,656				9,629,040				9,548,393				9,640,736
Average diluted shares outstanding			9,546,235				9,648,158				9,568,257				9,659,572

 

 

First South Bancorp, Inc.

Supplemental Financial Data (Unaudited)

		Quarter to Date																				Year to Date
		6/30/2015				3/31/2015				12/31/2014				9/30/2014				6/30/2014				6/30/2015				6/30/2014
		(dollars in thousands except per share data)
Consolidated balance sheet data:
Total assets		$	899,737			$	879,555			$	885,865			$	734,666			$	711,547			$	899,737			$	711,547
Loans held for sale:		$	6,171			$	7,947			$	4,793			$	5,540			$	4,715			$	6,171			$	4,715
Loans held for investment:
Mortgage		$	68,812			$	66,957			$	66,391			$	67,791			$	69,454			$	68,812			$	69,454
Commercial			399,734				346,326				338,861				331,209				322,775				399,734				322,775
Consumer			62,265				62,756				62,792				61,959				66,122				62,265				66,122
Leases			12,825				12,637				12,392				12,054				11,650				12,825				11,650
Total loans held for investment			543,636				488,676				480,436				473,013				470,001				543,636				470,001
Allowance for loan and lease losses			(7,364	)			(7,203	)			(7,520	)			(7,504	)			(7,926	)			(7,364	)			(7,926	)
Net loans held for investment		$	536,272			$	481,473			$	472,916			$	465,509			$	462,075			$	536,272			$	462,075
Cash & interest bearing deposits		$	36,600			$	59,641			$	56,117			$	20,106			$	17,658			$	36,600			$	17,658
Investment securities			260,628				272,990				292,806				188,472				172,468				260,628				172,468
Premises and equipment			15,246				15,481				15,821				12,494				11,671				15,246				11,671
Goodwill			4,219				4,219				4,219				4,219				4,219				4,219				4,219
Identifiable intangible asset			2,039				2,111				2,183				0				0				2,039				0
Mortgage servicing rights			1,213				1,160				1,178				1,171				1,180				1,213				1,180
Deposits:
Non-interest checking		$	158,929			$	147,946			$	147,544			$	99,219			$	97,734			$	158,929			$	97,734
Interest checking			169,736				180,114				180,558				130,421				133,512				169,736				133,512
Money market			69,646				84,379				87,915				52,052				45,941				69,646				45,941
Savings			131,078				123,457				117,932				90,190				85,703				131,078				85,703
Certificates			243,480				248,129				254,331				230,166				229,571				243,480				229,571
Total deposits		$	772,869			$	784,025			$	788,280			$	602,048			$	592,461			$	772,869			$	592,461
Borrowings		$	32,000			$	0			$	0			$	37,500			$	25,500			$	32,000			$	25,500
Junior subordinated debentures			10,310				10,310				10,310				10,310				10,310				10,310				10,310
Stockholders' equity			80,122				81,403				80,437				80,363				79,150				80,122				79,150
Consolidated earnings summary:
Interest income		$	7,901			$	7,764			$	7,569			$	7,316			$	7,218			$	15,665			$	14,293
Interest expense			712				708				742				716				652				1,420				1,292
Net interest income			7,189				7,056				6,827				6,600				6,566				14,245				13,001
Provision for credit losses			140				0				0				400				450				140				700
Noninterest income			3,616				3,180				2,251				2,245				2,170				6,796				4,088
Noninterest expense			9,026				9,254				8,896				6,537				6,458				18,280				13,041
Income before taxes			1,639				982				182				1,908				1,828				2,621				3,348
Income tax expense			485				257				40				565				542				742				960
Net income		$	1,154			$	725			$	142			$	1,343			$	1,286			$	1,879			$	2,388
Adjusted pre-tax pre-provision operating
earnings (non-GAAP):
Income before taxes		$	1,639			$	982			$	182			$	1,908			$	1,828			$	2,621			$	3,348
Provision for credit losses			140				0				0				400				450				140				700
Pre-tax pre-provision net income			1,779				982				182				2,308				2,278				2,761				4,048
Securities gains			(201	)			(251	)			0				0				0				(452	)			(14	)
OREO valuations			41				44				131				62				0				85				11
OREO gains (net)			(27	)			(46	)			(33	)			(9	)			(34	)			(73	)			(73	)
Adjusted pre-tax pre-provision operating
earnings (non-GAAP)		$	1,592			$	729			$	280			$	2,361			$	2,244			$	2,321			$	3,972
Per Share Data:
Basic earnings per share		$	0.12			$	0.08			$	0.02			$	0.14			$	0.13			$	0.20			$	0.25
Diluted earnings per share		$	0.12			$	0.08			$	0.02			$	0.14			$	0.13			$	0.20			$	0.25
Dividends per share		$	0.025			$	0.025			$	0.025			$	0.025			$	0.025			$	0.050			$	0.050
Book value per share		$	8.43			$	8.54			$	8.38			$	8.37			$	8.25			$	8.43			$	8.25
Tangible book value per share		$	7.77			$	7.88			$	7.71			$	7.93			$	7.81			$	7.77			$	7.81
Average basic shares			9,526,656				9,570,820				9,598,007				9,598,007				9,629,040				9,548,393				9,640,736
Average diluted shares			9,546,235				9,590,979				9,618,820				9,616,004				9,648,158				9,568,257				9,659,572

 

 

First South Bancorp, Inc.

Supplemental Financial Data (Unaudited)

		Quarter to Date																				Year to Date
		6/30/2015				3/31/2015				12/31/2014				9/30/2014				6/30/2014				6/30/2015				6/30/2014
		(dollars in thousands except per share data)
Performance ratios (tax equivalent):
Yield on average earning assets			4.02	%			3.97	%			4.18	%			4.52	%			4.56	%			4.00	%			4.61	%
Cost of interest bearing liabilities			0.45	%			0.44	%			0.48	%			0.53	%			0.49	%			0.45	%			0.50	%
Net interest spread			3.57	%			3.53	%			3.70	%			3.99	%			4.07	%			3.55	%			4.11	%
Net interest margin			3.67	%			3.62	%			3.78	%			4.09	%			4.16	%			3.64	%			4.20	%
Avg earning assets to total avg assets			91.29	%			91.23	%			92.18	%			91.30	%			91.31	%			91.26	%			91.53	%
Return on average assets (annualized)			0.53	%			0.33	%			0.07	%			0.74	%			0.73	%			0.43	%			0.70	%
Return on average equity (annualized)			5.63	%			3.59	%			0.70	%			6.70	%			6.61	%			4.62	%			6.27	%
Efficiency ratio			83.71	%			91.30	%			96.31	%			72.52	%			72.77	%			87.39	%			75.17	%
Average assets		$	877,827			$	879,564			$	794,286			$	717,091			$	705,393			$	878,696			$	692,500
Average earning assets		$	801,396			$	802,387			$	732,153			$	654,700			$	644,074			$	801,892			$	633,845
Average equity		$	82,233			$	81,880			$	81,739			$	80,243			$	78,724			$	82,056			$	77,703
Equity/Assets			8.91	%			9.25	%			9.08	%			10.94	%			11.12	%			8.91	%			11.12	%
Tangible Equity/Assets			8.21	%			8.54	%			8.36	%			10.36	%			10.53	%			8.21	%			10.53	%
Asset quality data and ratios:
Nonaccrual loans:
Non-TDR nonaccrual loans
Earning		$	990			$	858			$	723			$	317			$	312			$	990			$	312
Non-Earning			806				1,158				1,075				940				2,853				806				2,853
Total Non-TDR nonaccrual loans		$	1,796			$	2,016			$	1,798			$	1,257			$	3,165			$	1,796			$	3,165
TDR nonaccrual loans
Past Due TDRs		$	1,065			$	1,206			$	1,233			$	1,260			$	3,303			$	1,065			$	3,303
Current TDRs			1,459				1,194				2,007				2,027				1,326				1,459				1,326
Total TDR nonaccrual loans		$	2,524			$	2,400			$	3,240			$	3,287			$	4,629			$	2,524			$	4,629
Total nonaccrual loans		$	4,320			$	4,416			$	5,038			$	4,544			$	7,794			$	4,320			$	7,794
Loans >90 days past due, still accruing			248				0				389				476				896				248				896
Other real estate owned			7,009				7,082				7,756				8,103				8,729				7,009				8,729
Total nonperforming assets		$	11,577			$	11,498			$	13,183			$	13,123			$	17,419			$	11,577			$	17,419
Allowance for loan and lease losses to
loans held for investment			1.35	%			1.47	%			1.57	%			1.59	%			1.69	%			1.35	%			1.69	%
Net charge-offs (recoveries)		$	(21	)		$	317			$	(17	)		$	822			$	328			$	296			$	384
Net charge-offs (recoveries) to total loans			0.00	%			0.06	%			0.00	%			0.17	%			0.07	%			0.05	%			0.08	%
Total nonaccrual loans to total loans			0.79	%			0.89	%			1.04	%			0.95	%			1.64	%			0.79	%			1.64	%
Total nonperforming assets to total assets			1.29	%			1.31	%			1.49	%			1.79	%			2.45	%			1.29	%			2.45	%
Total loans to total deposits			71.14	%			63.34	%			61.56	%			79.49	%			80.13	%			71.14	%			80.13	%
Total loans to total assets			61.11	%			56.46	%			54.77	%			65.14	%			66.72	%			61.11	%			66.72	%
Loans serviced for others		$	300,801			$	301,482			$	306,822			$	310,341			$	315,732			$	300,801			$	315,732