North State Bancorp Reports Third Quarter 2010 Earnings

Company reports 109% increase in quarterly profits.

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Nov 15, 2010, 02:18 ET

RALEIGH, N.C., Nov. 15, 2010 /PRNewswire-FirstCall/ -- North State Bancorp (OTC Bulletin Board: NSBC the "Company"), the holding company for North State Bank, reported net income for third quarter 2010 of $339,000 compared to $161,000 for the third quarter 2009, an increase of $178,000 of 110.6%. Net income results for the third quarter of 2010 include gains on security sales which were $108,000 or $66,000 net of taxes for the quarter ended September 30, 2010. The year-to-year increase in earnings for third quarter 2010 also is principally a result of significantly higher non-interest income (an increase of $1.4 million) and higher net interest margins (an increase of $691,000). Diluted earnings per share were $.05 for the third quarter 2010 compared to $.02 for third quarter 2009. For the nine-month period ended September 30, 2010, net income was $1.2 million, a decrease of $324,000 or 21.8% from net income of $1.5 million reported for the nine-month period ended September 30, 2009. Diluted earnings per share were $.16 for the nine months ended September 30, 2010, compared to $.20 for the same period in 2009.

Total assets for the Company as of September 30, 2010 were $633.4 million compared to $710.8 million as of September 30, 2009, a decrease of $77.4 million. Total deposits and total loans as of September 30, 2010 were $559.5 million and $501.6 million, respectively, compared to total deposits and total loans as of September 30, 2009 of $633.6 million and $534.1 million, respectively. The reduction in total assets and total deposits is the result of the Company's intentional and continuing efforts to reduce non-core fundings, which decreased $99.4 million in a year-to-year comparison from September 30, 2009, to September 30, 2010. Core deposits, which primarily include demand deposit, money market and time deposit accounts for our customers, increased by $25.3 million over the same period. The reduction in total loans is a result of both the Company's intense focus on only banking customers who seek a mutually beneficial banking relationship, as well as the impact of the recession on overall loan demand.

Larry D. Barbour, president and CEO stated, "We are pleased to report these positive earnings in a difficult economy. The growth in earnings for the third quarter of 2010 is a direct result of deliberate changes in our balance sheet, principally the reduction in non-core fundings, the addition of Affiliated Mortgage which we acquired in February of 2010, changes within our Wealth Management division and our prudent control over non-interest expenses. North State Bank remains committed to expanding relationships with current customers, as well as pursuing new customers who seek a mutually beneficial banking relationship.

"Our success in growing core deposits has been due in large part to the success of CommunityPLUS, a division of North State Bank specifically focused on serving the needs of community association management firms. Since forming this division, deposits held in these accounts have increased dramatically – from $112.0 million at December 31, 2008 to $180.4 million or 61.1% as of September 30, 2010."

Founded in 2000, North State Bank is a full-service community bank, serving Wake and New Hanover Counties through seven full-service offices.

North State Bancorp is listed on the OTC electronic bulletin board under the symbol "NSBC."

www.northstatebank.com

This news release contains forward-looking statements. The actual results might differ materially from those projected in the forward-looking statements for various reasons, including changes in real estate values and the real estate market, economic conditions, regulatory changes, changes in interest rates, substantial changes in financial markets, our ability to manage growth and loss of deposits and loan demand to other savings and financial institutions. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Company's SEC filings, including its periodic reports under the Securities Exchange Act of 1934, as amended, copies of which are available upon request from the Company.

North State Bancorp Selected Financial Information and Other Data (Unaudited)
		As of or for the Three Months Ended				As of or for the Nine Months Ended
		September 30,				September 30,
		2010		2009		2010		2009
		(Dollars in thousands, except per share)
Earnings Summary:
	Total interest income	$ 7,853		$ 8,384		$ 23,242		$ 25,492
	Total interest expense	1,770		2,992		5,898		9,585
	Net interest income	6,083		5,392		17,344		15,907
	Provision for loan losses	2,166		1,840		5,028		3,624
	Net interest income after provision for loan losses	3,917		3,552		12,316		12,283
	Noninterest income	1,572		194		2,883		964
	Noninterest expense	4,895		3,453		13,175		10,714
	Income before income taxes	594		293		2,024		2,533
	Income taxes	255		132		861		1,046
	Net income	$ 339		$ 161		$ 1,163		$ 1,487

Share and Per Share Data:
	Earnings per share - basic	$ 0.05		$ 0.02		$ 0.16		$ 0.21
	Earnings per share - diluted	$ 0.05		$ 0.02		$ 0.16		$ 0.20
	Book value per share	$ 5.11		$ 5.10		$ 5.11		$ 5.10
	Weighted average shares outstanding:
	Basic	7,427,967		7,178,513		7,340,889		7,176,862
	Diluted	7,434,933		7,330,886		7,374,736		7,324,056

Financial Condition Period End:
	Cash, federal funds sold and due from banks	$ 44,204		$ 131,086		$ 44,204		$ 131,086
	Investment securities	20,360		25,972		20,360		25,972
	Loans - available for sale	44,204		-		44,204		-
	Loans	501,597		534,066		501,597		534,066
	Less allowance for loan losses	8,237		7,394		8,237		7,394
	Other assets	31,301		27,021		31,301		27,021
	Total assets	$ 633,429		$ 710,751		$ 633,429		$ 710,751

	Deposits	$ 559,455		$ 633,615		$ 559,455		$ 633,615
	Other borrowings	32,667		36,367		32,667		36,367
	Other liabilities	3,348		4,129		3,348		4,129
	Shareholders' equity	37,959		36,640		37,959		36,640
	Total liabilities and shareholders' equity	$ 633,429		$ 710,751		$ 633,429		$ 710,751

Financial Condition Average Balances:
	Cash, federal funds sold and due from banks	$ 54,032		$ 112,518		$ 84,825		$ 109,222
	Investment securities	21,286		26,590		22,614		26,858
	Loans - available for sale	33,983		-		20,467		-
	Loans	504,517		541,627		513,208		546,345
	Less allowance for loan losses	8,424		7,866		8,326		7,208
	Other assets	30,941		26,452		31,140		24,268
	Total assets	$ 636,335		$ 699,321		$ 663,928		$ 699,485

	Deposits	$ 562,346		$ 620,878		$ 589,996		$ 621,330
	Other borrowings	32,787		36,505		33,247		37,018
	Other liabilities	2,903		4,785		2,921		4,299
	Shareholders' equity	38,299		37,153		37,764		36,838
	Total liabilities and shareholders' equity	$ 636,335		$ 699,321		$ 663,928		$ 699,485

Performance Ratios:
	Return on average assets	0.21%		0.09%		0.23%		0.28%
	Return on average equity	3.51%		1.72%		4.12%		5.40%
	Net interest margin (1)	4.05%		3.25%		3.74%		3.20%
	Efficiency ratio	63.95%		61.82%		65.14%		63.51%

Asset Quality Ratios:
	Net loan charge-offs to average loans	-0.48%		-0.33%		-1.05%		-0.48%
	Nonperforming loans to period-end loans	2.69%		3.03%		2.69%		3.03%
	Nonperforming assets to total assets	2.69%		2.85%		2.69%		2.85%
	Ratio of allowance for loan losses to nonperforming loans	0.61	x	0.46	x	0.61	x	0.46	x
	Allowance for loan losses to period-end loans	1.64%		1.38%		1.64%		1.38%

Other Data:
	Average equity to average assets	6.02%		5.31%		5.69%		5.27%
	Total shareholders' equity to assets	5.99%		5.16%		5.99%		5.16%
	Number of offices:
	Full service banking offices	7		7		7		7
	Loan production offices	1		1		1		1
	Number of employees (FTEs)	114		100		114		100

Core Earnings (2):
	GAAP stated earnings	$ 339		$ 161		$ 1,163		$ 1,487
	Net gains on sale of investment securities	108		-		340		464
	Provision for loan losses	2,166		1,840		5,028		3,624
	OREO expenses	577		-		1,368		42
	Taxes	255		132		861		1,046
	Non-GAAP core earnings before tax	$ 3,229		$ 2,133		$ 8,080		$ 5,735
(1)Excludes nonaccrual loans (2)We define core earnings as operating income before securities gains (losses), loan loss reserves, OREO (other real estate owned) write-downs and taxes. Core earnings is considered a non-GAAP financial measure. Core earnings do not represent, and should not be considered as, an alternative to net income, as determined in accordance with GAAP. Our definition of core earnings might not be comparable to similarly titled measures by other companies. We believe that the presentation of core earnings is useful to investors because it provides important information of our operating performance exclusive of non-recurring expenses of loan loss reserves and OREO write-downs as well as taxes.