ASHEBORO, N.C., April 29, 2010 (GLOBE NEWSWIRE) -- FNB United Corp. (Nasdaq:FNBN), the holding company for CommunityOne Bank, N.A., and its wholly owned subsidiary, Dover Mortgage Company, today reported that following a $9.5 million provision to the allowance for loan losses, the Company had a net loss of $5.1 million, or $0.45 per diluted share, for the first quarter of 2010, compared to a net loss of $6.2 million, or $0.54 per diluted share, for the first quarter of 2009. The provision for loan losses increased the total allowance for loan losses to total loans ratio to 3.61% from 3.17% at December 31, 2009.
"Although the regional real estate economy continues to show weakness as we enter 2010, we are beginning to see signs of stabilization," said R. Larry Campbell, Interim President and CEO. We continue to be encouraged by our financial performance on a pre-tax and pre-provision basis which we believe will sustain us during these difficult times. We continue to meet our current regulatory ratios to be well capitalized at March 31, 2010 with our Tier I leverage ratio at 5.5% and our total risk-based capital ratio at 10.4%."
Credit Quality
FNB United recorded a $9.5 million provision to its allowance for loan losses in the first quarter, compared to a $24.7 million provision in the previous quarter and $14.1 million in the first quarter a year ago. The provision in the first quarter was a result of continued deterioration of asset quality in the first quarter of 2010. The allowance for loan losses was $55.9 million, or 3.61% of loans held for investment, at March 31, 2010, compared to $49.5 million, or 3.17%, at December 31, 2009, and $38.6 million, or 2.43%, at March 31, 2009.
"As we continue to build our allowance for loan losses, the Company experienced $3.1 million in net charge-offs, or 0.20% of average loans, in the first quarter of 2010," said Campbell. The majority of the $3.1 million in charge-offs during the first quarter were comprised of construction loans. Net charge-offs were $17.5 million, or 1.12% of average loans, in the previous quarter and $10.2 million, or 0.64% of average loans, in the first quarter a year ago.
Nonperforming assets totaled $242.1 million, or 11.91% of total assets, at March 31, 2010, compared to $209.8 million, or 9.99% of total assets, three months earlier and $128.0 million, or 5.9%, of total assets at March 31, 2009. Nonperforming assets include all nonperforming loans, all loans over 90 days delinquent and still accruing, and other real estate owned. FNB United's real estate owned and repossessed loan collateral was $41.4 million at quarter-end, compared to $35.2 million in the previous quarter, and $9.2 million at March 31, 2009. Loans delinquent 30 to 89 days were $30.7 million as of March 31, 2010.
In 2009, the Company initiated stimulus loan programs for mortgage and consumer loans to reduce the level of non-performing assets. The stimulus programs target not only existing nonperforming loan relationships and other real estate owned, but also a variety of customer properties financed by CommunityONE Bank. As of April 26, 2010, we closed $33.3 million in loans under our stimulus loan program. The program specifics are located on the Bank's website at www.myyesbank.com and include a detailed listing of properties that qualify under the program.
In the first quarter 2010, CommunityONE subsidiary Dover Mortgage Company originated $92 million in loans throughout its network, including 85.0% in FHA, VA, USDA or other government loans. CommunityONE originated an additional $39 million in 1-4 family loans. The Bank's portfolio of 1-4 family mortgages continues to perform well. Of the approximately 5,000 loans serviced for the Bank's portfolio or for Fannie Mae, only 15 homes are currently in process of foreclosure. "We've been working hard to keep families in their homes, and I credit the successful efforts by our staff in assisting these homeowners," said Campbell.
Balance Sheet
The Company has initiated a balance sheet strategy to selectively decrease 100% risk-based assets to improve regulatory capital ratios. Assets decreased 5.7% to $2.03 billion at March 31, 2010, compared to $2.15 billion a year earlier. Loans held for investment were $1.55 billion at quarter-end, compared to $1.58 billion a year earlier. Consumer loans increased $35 million, commercial loans decreased $99 million and residential loans were up $28 million at March 31, 2010, compared to a year ago. The loan portfolio remains well diversified with a wide variety of borrowers and collateral.
Total deposits increased 4.8% to $1.68 billion at March 31, 2010, compared to $1.61 billion twelve months earlier. Certificates of deposit decreased 1.0% to $914 million, from $924 million a year ago while other deposits increased 12.7% to $769 million at March 31, 2010, compared to $683 million a year earlier. Brokered certificates of deposits were $86.3 million at March 31, 2010, which was 5.1% of total deposits, compared to $140.6 million at March 31, 2009, or 8.7% of total deposits.
Shareholders' equity was $94.1 million at March 31, 2010, compared to $192.8 million a year earlier. The Company incurred a write down of goodwill of $52.4 million in 2009 and the establishment of a deferred tax valuation reserve of $23.0 million since the first quarter 2009.
Capital Measures
FNB United remains well-capitalized for regulatory purposes with a Tier 1 capital ratio of 5.5% and a total risk-based capital ratio of 10.4% as of March 31, 2010. Book value per share was $3.66 at quarter-end compared to $12.35 a year earlier, and tangible book value per share was $3.24 at quarter-end, compared to $7.28 a year earlier.
In October 2009, FNB United announced it would temporarily discontinue its regular quarterly cash dividend on common stock to conserve capital. In February 2009, FNB United received $51.5 million as a participant in the U.S. Treasury Department's Capital Purchase Program. FNB United issued 51,500 shares of senior preferred stock and a related warrant for 2,207,143 shares of FNB United common stock to the U.S. Treasury. To date, FNB United has paid $2.6 million in dividends on the senior preferred stock to the U.S. Treasury.
Net Interest Margin
FNB United's net interest margin was 3.35% for the first quarter of 2010 compared to 3.29% for the immediate prior quarter and 3.03% for the first quarter a year ago. "We are experiencing improvement in both our yield on earning assets and our cost of interest bearing liabilities. Yield on earning assets increased to 5.04% in the first quarter versus 5.37% in the first quarter 2009, while the cost of our interest bearing liabilities decreased at a faster pace, falling to 1.81% in the first quarter 2010 versus 2.56% in the first quarter 2009," said Campbell.
Income Statement
First quarter net interest income before the provision for loan losses increased 11.1% to $15.7 million, compared to $14.1 million in the first quarter a year ago. Net interest income before the provision for loan losses was $16.3 million the immediate prior quarter. Total noninterest income was $4.9 million for the quarter, compared to $5.7 million in the preceding quarter and $5.6 million in the fourth quarter a year ago. The decline in noninterest income for the first quarter of 2010 versus the fourth quarter of 2009 was primarily due to lower overdraft fees and lower net security gains in the first quarter 2010. The decline in noninterest income for the first quarter of 2010 versus the first quarter 2009 was primarily due to a decrease in mortgage loan income compared to the first quarter a year ago.
"We had another good quarter of managing controllable operating expenses," said Campbell. "We have made progress in improving our core operating efficiency, primarily through lower personnel costs of $702,000 and lower net occupancy expenses of $221,000. An offset to this improvement was additional FDIC insurance charges of $417,000. First quarter noninterest expense was $14.8 million, compared to $16.4 million in the fourth quarter of 2009 and $15.6 million in the first quarter a year ago."
About the Company
FNB United Corp. is the Asheboro, North Carolina based bank holding company for CommunityOne Bank, N.A., and the bank's subsidiary, Dover Mortgage Company. Opened in 1907, CommunityOne Bank (MyYesBank.com) operates 45 offices in 38 communities throughout central, southern and western North Carolina. Through these companies, FNB United offers a complete line of consumer, mortgage and business banking services, including loan, deposit, cash management, wealth management and internet banking services.
This news release may contain forward-looking statements regarding future events. Forward-looking statements often address our expected future business and financial performance, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," or "will." These statements are only predictions and are subject to risks and uncertainties that could cause the actual events or results to differ materially. These risks and uncertainties include risks of managing our growth, changes in financial markets, changes in real estate markets, regulatory changes, changes in interest rates, changes in economic conditions being less favorable than anticipated, and loss of deposits and loan demand to other financial institutions. Additional information concerning factors that could cause actual results to be materially different from those in the forward-looking statements is contained in FNB United's filings with the Securities and Exchange Commission. FNB United does not assume any obligation to update these forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.
| RESULTS OF OPERATIONS (Unaudited) | ||||||
| (In thousands except share and per share data) | Quarter Ended | Percent Change From | ||||
| March 31, 2010 | December 31, 2009 | March 31, 2009 | December 31, 2009 | March 31, 2009 | ||
| Interest Income | ||||||
| Interest and fees on loans | $ 19,405 | $ 20,157 | $ 21,599 | -3.7% | -10.2% | |
| Interest and dividends on investments securities: | ||||||
| Taxable income | 3,825 | 4,392 | 3,067 | -12.9% | 24.7% | |
| Non-taxable income | 435 | 500 | 600 | -13.0% | -27.5% | |
| Other interest income | 86 | 117 | 80 | -26.5% | 7.5% | |
| Total interest income | 23,751 | 25,166 | 25,346 | -5.6% | -6.3% | |
| Interest Expense | ||||||
| Deposits | 6,402 | 7,042 | 8,874 | -9.09% | -27.86% | |
| Borrowed funds | 1,648 | 1,831 | 2,340 | -9.99% | -29.57% | |
| Total interest expense | 8,050 | 8,873 | 11,214 | -9.28% | -28.21% | |
| Net Interest Income before Provision for Loan Losses | 15,701 | 16,293 | 14,132 | -3.63% | 11.10% | |
| Provision for loan losses | 9,490 | 24,682 | 14,059 | -61.55% | -32.50% | |
| Net Interest (Loss)/Income After Provision for Loan Losses | 6,211 | (8,389) | 73 | -174.04% | NM | |
| Noninterest Income | ||||||
| Service charges on deposit accounts | 1,938 | 2,316 | 2,133 | -16.32% | -9.14% | |
| Mortgage loan income | 1,184 | 1,185 | 1,926 | -0.08% | -38.53% | |
| Cardholder and merchant services income | 680 | 660 | 562 | 3.03% | 21.00% | |
| Trust and investment services | 479 | 500 | 341 | -4.20% | 40.47% | |
| Bank-owned life insurance | 241 | 236 | 228 | 2.12% | 5.70% | |
| Other service charges, commissions and fees | 360 | 265 | 287 | 35.85% | 25.44% | |
| Security gains | 13 | 438 | (6) | -97.03% | -316.67% | |
| Other income | 30 | 125 | 173 | -76.00% | -82.66% | |
| Total noninterest income | 4,925 | 5,725 | 5,644 | -13.97% | -12.74% | |
| Noninterest Expense | ||||||
| Personnel expense | 7,762 | 7,783 | 8,464 | -0.27% | -8.29% | |
| Net occupancy expense | 1,301 | 1,349 | 1,522 | -3.56% | -14.52% | |
| Furniture, equipment and data processing expense | 1,769 | 1,796 | 1,761 | -1.50% | 0.45% | |
| Professional fees | 561 | 350 | 760 | 60.29% | -26.18% | |
| Stationery, printing and supplies | 118 | 166 | 182 | -28.92% | -35.16% | |
| Advertising and marketing | 483 | 519 | 587 | -6.94% | -17.72% | |
| Other real estate owned | 471 | 1,440 | 74 | -67.29% | 536.49% | |
| Credit/debit card expense | 462 | 416 | 328 | 11.06% | 40.85% | |
| FDIC assessment | 721 | 730 | 304 | -1.23% | 137.17% | |
| Other expense | 1,180 | 1,819 | 1,626 | -35.13% | -27.43% | |
| Total noninterest expense | 14,828 | 16,368 | 15,608 | -9.41% | -5.00% | |
| Loss Before Income Taxes | (3,692) | (19,032) | (9,891) | -80.60% | -62.67% | |
| Income taxes (benefit)/expense | 586 | 9,000 | (4,124) | -93.49% | -114.21% | |
| Net Loss | (4,278) | (28,032) | (5,767) | -84.74% | -25.82% | |
| Preferred stock dividends | (819) | (818) | (431) | 0.12% | 90.02% | |
| Net Loss to Common Shareholders' | $ (5,097) | $ (28,850) | $ (6,198) | -82.33% | -17.76% | |
| Loss per common share: | ||||||
| Basic | $ (0.45) | $ (2.53) | $ (0.54) | -82.33% | -17.87% | |
| Diluted | $ (0.45) | $ (2.53) | $ (0.54) | -82.33% | -17.87% | |
| Cash dividends declared per common share | $ -- | $ -- | $ 0.025 | NM | -100.00% | |
| Weighted average shares outstanding: | ||||||
| Basic | 11,424,159 | 11,423,058 | 11,410,063 | |||
| Diluted | 11,424,159 | 11,423,058 | 11,410,063 | |||
| FINANCIAL CONDITION (Unaudited) | |||||
| (In thousands except share and per share data) | As of | Percent Change From | |||
| March 31, 2010 | December 31, 2009 | March 31, 2009 | December 31, 2009 | March 31, 2009 | |
| ASSETS | |||||
| Cash and due from banks | $ 49,346 | $ 27,600 | $ 28,608 | 78.8% | 72.5% |
| Interest-bearing bank balances | 351 | 98 | 5,390 | 258.2% | -93.5% |
| Federal funds sold | -- | -- | 235 | NM | -100.0% |
| Securities available-for-sale | 183,192 | 237,630 | 263,108 | -22.9% | -30.4% |
| Securities held-to-maturity | 84,853 | 88,559 | 64,989 | -4.2% | 30.6% |
| Loans held for sale | 42,956 | 58,219 | 48,475 | -26.2% | -11.4% |
| Loans held for investment | 1,548,405 | 1,563,021 | 1,583,857 | -0.9% | -2.2% |
| Less: Allowance for loan losses | (55,895) | (49,461) | (38,573) | 13.0% | 44.9% |
| Net loans held for investment | 1,492,510 | 1,513,560 | 1,545,284 | -1.4% | -3.4% |
| Premises and equipment, net | 47,490 | 48,115 | 50,112 | -1.3% | -5.2% |
| Other real estate owned | 41,359 | 35,170 | 4,119 | 17.6% | 904.1% |
| Goodwill | -- | -- | 52,395 | NM | -100.0% |
| Core deposit premiums | 4,769 | 4,968 | 5,564 | -4.0% | -14.3% |
| Bank-owned life insurance | 31,146 | 30,883 | 29,117 | 0.9% | 7.0% |
| Other assets | 54,573 | 56,494 | 56,630 | -3.4% | -3.6% |
| Total Assets | $ 2,032,545 | $ 2,101,296 | $ 2,154,026 | -3.3% | -5.6% |
| LIABILITIES | |||||
| Deposits: | |||||
| Noninterest-bearing demand deposits | $ 156,780 | $ 152,522 | $ 143,145 | 2.8% | 9.5% |
| Interest-bearing deposits: | |||||
| Demand, savings, and money market deposits | 612,219 | 594,377 | 539,171 | 3.0% | 13.5% |
| Time deposits of $100,000 or more | 422,023 | 425,858 | 399,774 | -0.9% | 5.6% |
| Other time deposits | 492,259 | 549,371 | 524,605 | -10.4% | -6.2% |
| Total deposits | 1,683,281 | 1,722,128 | 1,606,695 | -2.3% | 4.8% |
| Retail repurchase agreements | 13,907 | 13,592 | 22,572 | 2.3% | -38.4% |
| Federal Home Loan Bank advances | 151,786 | 166,165 | 172,928 | -8.7% | -12.2% |
| Federal funds purchased | -- | 10,000 | 75,000 | -100.0% | -100.0% |
| Subordinated debt | 15,000 | 15,000 | 15,000 | 0.0% | 0.0% |
| Junior subordinated debentures | 56,702 | 56,702 | 56,702 | 0.0% | 0.0% |
| Other liabilities | 17,770 | 19,350 | 12,359 | -8.2% | 43.8% |
| Total liabilities | 1,938,446 | 2,002,937 | 1,961,256 | -3.2% | -1.2% |
| SHAREHOLDERS' EQUITY | |||||
| Series A preferred stock | 48,380 | 48,205 | 47,697 | 0.4% | 1.4% |
| Common stock warrants | 3,891 | 3,891 | 3,891 | 0.0% | 0.0% |
| Common stock | 28,566 | 28,566 | 28,570 | 0.0% | 0.0% |
| Surplus | 115,059 | 115,039 | 114,909 | 0.0% | 0.1% |
| Retained earnings/(accumulated deficit) | (101,331) | (96,234) | 2,420 | 5.3% | NM |
| Accumulated other comprehensive loss | (466) | (1,108) | (4,717) | -57.9% | -90.1% |
| Total shareholders' equity | 94,099 | 98,359 | 192,770 | -4.3% | -51.2% |
| Total Liabilities and Shareholders' Equity | $ 2,032,545 | $ 2,101,296 | $ 2,154,026 | -3.3% | -5.6% |
| Shares outstanding at end of period | 11,426,413 | 11,426,413 | 11,428,003 | 0.0% | 0.0% |
| Book value per share (1) | $ 3.66 | $ 4.05 | $ 12.35 | -9.6% | -70.4% |
| Tangible book value per share (1)(2) | $ 3.24 | $ 3.61 | $ 7.28 | -10.3% | -55.5% |
| (1) - Calculation is based on number of shares outstanding at the end of the period rather than weighted average shares outstanding and does not include preferred stock or stock warrants. | |||||
| (2) - Calculation excludes goodwill and core deposit premiums. | |||||
| ADDITIONAL FINANCIAL INFORMATION | |||
| (Dollars in thousands) | |||
| (Rates / Ratios Annualized) | |||
| For the Quarters Ended | |||
| OPERATING PERFORMANCE: | March 31, 2010 | December 31, 2009 | March 31, 2009 |
| Average loans | $ 1,596,853 | $ 1,625,333 | $ 1,637,920 |
| Average securities | 309,766 | 348,158 | 281,980 |
| Average other interest-earning assets | 26,096 | 27,180 | 23,307 |
| Average noninterest-earning assets | 142,958 | 136,870 | 166,931 |
| Total average assets | $ 2,075,673 | $ 2,137,541 | $ 2,110,138 |
| Average interest-bearing deposits | $ 1,554,539 | $ 1,574,068 | $ 1,404,718 |
| Average noninterest bearing deposits | 155,337 | 152,977 | 145,657 |
| Average borrowings | 250,274 | 275,625 | 370,228 |
| Average noninterest-earning liabilities | 16,792 | 7,556 | 14,275 |
| Total average liabilities | 1,976,942 | 2,010,226 | 1,934,878 |
| Total average shareholders' equity | 98,731 | 127,315 | 175,260 |
| Total average liabilities and shareholders' equity | $ 2,075,673 | $ 2,137,541 | $ 2,110,138 |
| Interest rate yield on loans | 4.93% | 4.93% | 5.36% |
| Interest rate yield on securities | 5.88% | 5.88% | 5.74% |
| Interest rate yield on interest-earning assets | 5.04% | 5.05% | 5.37% |
| Interest rate expense on deposits | 1.67% | 1.77% | 2.56% |
| Interest rate expense on borrowings | 2.67% | 2.64% | 2.56% |
| Interest rate expense on interest-bearing liabilities | 1.81% | 1.90% | 2.56% |
| Interest rate spread | 3.23% | 3.15% | 2.80% |
| Net interest margin | 3.35% | 3.29% | 3.03% |
| Other operating income / Average assets | 0.96% | 1.06% | 1.08% |
| Other operating expense / Average assets | 2.90% | 3.04% | 3.00% |
| Efficiency ratio (other operating expense / revenue before provision) | 71.89% | 74.34% | 78.92% |
| Return on average assets | (0.84%) | (5.20%) | (1.11%) |
| Return on average equity | (17.57%) | (87.35%) | (13.34%) |
| Average equity / Average assets | 4.76% | 5.96% | 8.31% |
| Tier 1 leverage | 5.5% * | 5.7% | 9.0% |
| Tier 1 risk-based capital | 6.8% * | 6.9% | 10.2% |
| Total risk-based capital | 10.4% * | 10.3% | 12.5% |
| * Estimate | |||
| ADDITIONAL FINANCIAL INFORMATION | |||
| (Dollars in thousands) | |||
| As of / For the Quarters Ended | |||
| NONPERFORMING ASSETS | March 31, 2010 | December 31, 2009 | March 31, 2009 |
| Loans on nonaccrual status | $ 196,405 | $ 167,507 | $ 113,178 |
| Loans more than 90 days delinquent, still on accrual | 4,236 | 7,085 | 5,634 |
| Total nonperforming loans | 200,641 | 174,592 | 118,812 |
| Real estate owned (OREO)/Repossessed assets | 41,438 | 35,238 | 9,155 |
| Total nonperforming assets | $ 242,079 | $ 209,830 | $ 127,967 |
| Total nonperforming assets/Total assets | 11.91% | 9.99% | 5.94% |
| CHANGE IN THE | |||
| ALLOWANCE FOR LOAN LOSSES | March 31, 2010 | December 31, 2009 | March 31, 2009 |
| Balance, beginning of period | $ 49,461 | $ 42,349 | $ 34,720 |
| Provision | 9,490 | 24,657 | 14,059 |
| Recoveries of loans previously charged off | 451 | 414 | 606 |
| Loans charged-off | (3,507) | (17,959) | (10,812) |
| Net (charge-offs)/recoveries | (3,056) | (17,545) | (10,206) |
| Balance, end of period | $ 55,895 | $ 49,461 | $ 38,573 |
| Net chargeoffs/Average loans outstanding (annualized) | 0.80% | 2.97% | 2.58% |
| Allowance for loan losses/Loans held for investment | 3.61% | 3.16% | 2.44% |
| DEPOSITS | March 31, 2010 | December 31, 2009 | March 31, 2009 |
| Noninterest-bearing | $ 156,780 | $ 152,522 | $ 143,145 |
| Interest-bearing transaction deposits: | |||
| Checking | 232,835 | 226,696 | 195,428 |
| Money Market | 335,602 | 326,958 | 303,753 |
| Savings | 43,782 | 40,723 | 39,990 |
| Total interest-bearing transaction deposits | 612,219 | 594,377 | 539,171 |
| Interest-bearing time deposits | 914,282 | 975,229 | 924,379 |
| Total deposits | $ 1,683,281 | $ 1,722,128 | $ 1,606,695 |