First South Bancorp Inc (FSBK, Financial) filed Quarterly Report for the period ended 2009-06-30.
First South Bancorp Inc. serves as the holding company for First South Bank. First South Bancorp Inc has a market cap of $126.6 million; its shares were traded at around $13 with a P/E ratio of 16.1 and P/S ratio of 1.8. The dividend yield of First South Bancorp Inc stocks is 6.1%. First South Bancorp Inc had an annual average earning growth of 13% over the past 5 years.
Interest Income. Interest income declined to $12.4 million and $25.0 million for the three and six months ended June 30, 2009, from $15.2 million and $31.6 million for the three and six months ended June 30, 2008. This decline is due primarily to current economic conditions, the decline in interest rates due to the prior year Federal Reserve rate cuts, and a decline in the volume of average interest-earning assets between the respective periods. Average interest-earning assets were $816.2 million and $814.8 million for the three and six months ended June 30, 2009, compared to $851.5 million and $855.8 million for the three and six months ended June 30, 2008, reflecting a slow down in loan origination volume and an increase in other real estate owned. The yield on average interest-earning assets was 6.1% for both the three and six months ended June 30, 2009, compared to 7.2% and 7.4% for the three and six months ended June 30, 2008.
Interest Expense. Interest expense on deposits and borrowings declined to $4.5 million and $9.2 million for the three and six months ended June 30, 2009, from $6.0 million and $12.8 million for the three and six months ended June 30, 2008, reflecting a decrease in interest rates between the respective periods and relative changes in the volume of average interest-bearing liabilities. The effective cost of funds was 2.3% for both the three and six months ended June 30, 2009, compared to 3.0% and 3.1% for the three and six months ended June 30, 2008. The Company was able to improve its cost of funds by the combination of deposit repricing, and the rollover of time deposits and the repositioning of borrowings within the lower interest rate environment. Average deposits and borrowings were $784.6 million and $783.5 million for the three and six months ended June 30, 2009, compared to $814.3 million and $818.4 million for the three and six months ended June 30, 2008.
Net Interest Income. Net interest income declined to $7.9 million and $15.8 million for the three and six months ended June 30, 2009, from to $9.2 million and $18.8 million for the three and six months ended June 30, 2008. The interest rate spread (the difference between the effective yield on average earning assets and the effective cost of average deposits and borrowings) was 3.8% for both the three and six months ended June 30, 2009, compared to 4.2% and 4.3% for the three and six months ended June 30, 2008. The net yield on interest-earning assets (net interest income divided by average interest-earning assets) was 3.9% for both the three and six months ended June 30, 2009, compared to 4.3% and 4.4% for the three and six months ended June 30, 2008. The decline in interest rate spread and net yield on interest-earning assets is a direct result of those same events impacting interest income and interest expense.
The FDIC requires the Bank to meet a minimum leverage capital requirement of Tier I capital (consisting of retained earnings and common stockholder s equity, less any intangible assets) to assets ratio of 4%. The FDIC also requires the Bank to meet a ratio of total capital to risk-weighted assets of 8%, of which at least 4% must be in the form of Tier I capital. The North Carolina Office of the Commissioner of Banks requires the Bank to maintain a capital surplus of not less than 50% of common capital stock. The Bank was in compliance with all regulatory capital requirements at June 30, 2009 and December 31, 2008.
As has most of the banking industry, the Bank has experienced intense price competition for both loans and deposits. This has been a contributing factor to net interest margin compression in the three and six months ended June 30, 2009, which has been significantly influenced by the Federal Reserve s 4.0% rate cuts since between December 31, 2007 and December 31, 2008. The Bank is an asset-sensitive bank and consequently, the Federal Reserve s aggressive series of rate cuts has caused an immediate downward pricing of its loan portfolio, while outpacing the ability to reduce its funding cost as rapidly. With the current federal funds rate at 0% to 0.25%, it is not foreseeable that interest rates can decline farther. Over the remainder of 2009, the Bank anticipates some improvement in its net interest margin as maturing time deposits begin to reprice at lower rates, although there are no guarantees or assurances.
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First South Bancorp Inc. serves as the holding company for First South Bank. First South Bancorp Inc has a market cap of $126.6 million; its shares were traded at around $13 with a P/E ratio of 16.1 and P/S ratio of 1.8. The dividend yield of First South Bancorp Inc stocks is 6.1%. First South Bancorp Inc had an annual average earning growth of 13% over the past 5 years.
Highlight of Business Operations:
Key performance ratios are return on average assets (ROA), return on average equity (ROE), and efficiency. ROA was .8% and .9% for the three and six months ended June 30, 2009, compared to 1.3% and 1.5% for the three and six months ended June 30, 2008. ROE was 8.0% and 9.1% for the three and six months ended June 30, 2009, compared to 13.7% and 15.8% for the three and six months ended June 30, 2008. The Company s efficiency ratio was 58.6% and 57.2% for the three and six months ended June 30, 2009, compared to 49.1% and 48.8% for the three and six months ended June 30, 2008.Interest Income. Interest income declined to $12.4 million and $25.0 million for the three and six months ended June 30, 2009, from $15.2 million and $31.6 million for the three and six months ended June 30, 2008. This decline is due primarily to current economic conditions, the decline in interest rates due to the prior year Federal Reserve rate cuts, and a decline in the volume of average interest-earning assets between the respective periods. Average interest-earning assets were $816.2 million and $814.8 million for the three and six months ended June 30, 2009, compared to $851.5 million and $855.8 million for the three and six months ended June 30, 2008, reflecting a slow down in loan origination volume and an increase in other real estate owned. The yield on average interest-earning assets was 6.1% for both the three and six months ended June 30, 2009, compared to 7.2% and 7.4% for the three and six months ended June 30, 2008.
Interest Expense. Interest expense on deposits and borrowings declined to $4.5 million and $9.2 million for the three and six months ended June 30, 2009, from $6.0 million and $12.8 million for the three and six months ended June 30, 2008, reflecting a decrease in interest rates between the respective periods and relative changes in the volume of average interest-bearing liabilities. The effective cost of funds was 2.3% for both the three and six months ended June 30, 2009, compared to 3.0% and 3.1% for the three and six months ended June 30, 2008. The Company was able to improve its cost of funds by the combination of deposit repricing, and the rollover of time deposits and the repositioning of borrowings within the lower interest rate environment. Average deposits and borrowings were $784.6 million and $783.5 million for the three and six months ended June 30, 2009, compared to $814.3 million and $818.4 million for the three and six months ended June 30, 2008.
Net Interest Income. Net interest income declined to $7.9 million and $15.8 million for the three and six months ended June 30, 2009, from to $9.2 million and $18.8 million for the three and six months ended June 30, 2008. The interest rate spread (the difference between the effective yield on average earning assets and the effective cost of average deposits and borrowings) was 3.8% for both the three and six months ended June 30, 2009, compared to 4.2% and 4.3% for the three and six months ended June 30, 2008. The net yield on interest-earning assets (net interest income divided by average interest-earning assets) was 3.9% for both the three and six months ended June 30, 2009, compared to 4.3% and 4.4% for the three and six months ended June 30, 2008. The decline in interest rate spread and net yield on interest-earning assets is a direct result of those same events impacting interest income and interest expense.
The FDIC requires the Bank to meet a minimum leverage capital requirement of Tier I capital (consisting of retained earnings and common stockholder s equity, less any intangible assets) to assets ratio of 4%. The FDIC also requires the Bank to meet a ratio of total capital to risk-weighted assets of 8%, of which at least 4% must be in the form of Tier I capital. The North Carolina Office of the Commissioner of Banks requires the Bank to maintain a capital surplus of not less than 50% of common capital stock. The Bank was in compliance with all regulatory capital requirements at June 30, 2009 and December 31, 2008.
As has most of the banking industry, the Bank has experienced intense price competition for both loans and deposits. This has been a contributing factor to net interest margin compression in the three and six months ended June 30, 2009, which has been significantly influenced by the Federal Reserve s 4.0% rate cuts since between December 31, 2007 and December 31, 2008. The Bank is an asset-sensitive bank and consequently, the Federal Reserve s aggressive series of rate cuts has caused an immediate downward pricing of its loan portfolio, while outpacing the ability to reduce its funding cost as rapidly. With the current federal funds rate at 0% to 0.25%, it is not foreseeable that interest rates can decline farther. Over the remainder of 2009, the Bank anticipates some improvement in its net interest margin as maturing time deposits begin to reprice at lower rates, although there are no guarantees or assurances.
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