Waccamaw Bankshares, Inc. Announces Financial Results for the Third Quarter of 2010

WHITEVILLE, N.C., Nov. 16, 2010 /PRNewswire-FirstCall/ -- "While we were disappointed with the results for the quarter, we are encouraged by the improved financial performance being reported in 2010. Our earnings continue to be reduced by our provision for loan losses but the real estate markets consistently reflect signs of stabilization of real estate values," commented, Jim Graham, President and CEO of Waccamaw Bankshares, Inc.

Third Quarter 2010 Results. For the three months ended September 30, 2010, we reported a net loss to common shareholders of $(742,996), or $(.12) per diluted common share, compared to net income of $331,038, or .06 per diluted share for the same period in 2009, a decrease of $1,074,034 in net income. The Company had a slight decrease in net interest income in the third quarter of 2010 as compared to the second quarter of 2009. A decrease in loan market interest rates, coupled with a $13,590,405 increase in nonaccrual loans, accounted for a $1,176,791 decrease in interest income. This decrease in interest income was partially offset by a $579,557 decrease in interest expense which resulted from a decrease in deposit rates. For the nine-month period ended September 30, 2010, we reported a net loss of $(582,334), or $(.10) per diluted common share, as compared to a net loss of $(1,714,198), or $(.31) per share, for the same period in 2009.

On September 30, 2010, our assets totaled $566,067,090 compared to $533,221,072 on December 31, 2009. Net loans were $301,395,076 compared to $340,020,798 on December 31, 2009. Total deposits on September 30, 2010, were $466,186,200 compared to $433,537,959 at the end of 2009. Stockholders' equity after adjustments for unrealized losses on securities available for sale as required by SFAS No. 115 increased by $2,591,317. At September 30, 2010, tangible book value per share was $2.62, as compared to $3.05 at December 31, 2009.  For more information, see the consolidated balance sheets, the consolidated statements of income, and the consolidated statements of cash flows below.

Loans and Asset Quality.  We continue to maintain a loan portfolio dominated by real estate and commercial loans diversified among various industries.

There has been a decrease of $38.6 million in the loan portfolio over the last nine months.  The allowance for loan losses on September 30, 2010, was $9,412,813 or 3.03% of period end loans compared to $10,148,927 and 2.90% at December 31, 2009. The allowance for loan losses at September 30, 2010 represented 22.66% of impaired loans compared to 24.41% at December 31, 2009. At September 30, 2010 the Bank had loans totaling $36,397,107 in nonaccrual status as compared to $26,010,130 at December 31, 2009. The increase in non-accrual loans includes increases in six non-performing commercial real estate loans. On September 30, 2010, Waccamaw Bank entered into an Asset Purchase and Sale Agreement with Augusta Holdings, LLC ("Augusta") pursuant to which the Bank sold non-accrual commercial and construction and development loans to Augusta, without recourse, for $11,220,136, with no loss to the Bank. The largest non-accrual loan relationship totaled $4,263,370, with the average balance for the one hundred nine non-accrual loans totaling $333,918. At September 30, 2010 there was $3,762,398 in net charge-offs compared to $2,482,575 at September 30, 2009. The result of the above Sale Agreement with "Augusta" resulted in a recovery of three loan relationships totaling $3,408,183 less an estimated reserve of the Purchase Agreement of $1,250,000. There was $12,548 in repossessed assets at September 30, 2010 and $1,600 in repossessed assets at September 30, 2009. At September 30, 2010 there was $10,265,824 in other real estate owned compared to $5,453,713 at September 30, 2009.

Deposits.  Deposits on September 30, 2010, were $466,186,200 compared to $433,537,959 on December 31, 2009. Interest-bearing accounts represented 92.7% of total deposits at September 30, 2010 and 92.4% of total deposits at December 31, 2009. The significant increase in deposits was the result of the Bank taking advantage of low deposit interest rates in the brokered CD market, purchasing brokered CDs of approximately $40,000,000 in the first quarter of 2010.

Investments.  

Investments in available for sale securities of $98,020,910 consisted of corporate securities, single issue trust preferred securities, municipal securities, and mortgage backed securities (MBS) at September 30, 2010.

The Bank maintains a portfolio of securities as part of its asset/liability and liquidity management programs which emphasize effective yields and maturities to match its needs. The composition of the investment portfolio is examined periodically and appropriate realignments are initiated to meet liquidity and interest rate sensitivity needs for the Bank.

Held to maturity securities are bonds, notes and debentures for which the Bank has the positive intent and ability to hold to maturity and which are reported at cost, adjusted by premiums and discounts that are recognized in interest income using the interest method over the period to maturity or to call dates. At September 30, 2010 and at December 31, 2009, the Bank had no investments classified as held to maturity. Available for sale securities are reported at fair value and consist of bonds, notes, debentures and certain equity securities not classified as trading securities or as held to maturity securities.

Unrealized holding gains and losses, net of tax, on available for sale securities are reported as a net amount in a separate component of stockholders' equity. Realized gains and losses on the sale of available for sale securities are determined using the specific-identification method. Premiums and discounts are recognized in interest income using the interest method over the period to maturity or to call dates.

Declines in the fair value of individual held to maturity and available for sale securities below cost that are other than temporary are reflected as write-downs of the individual securities to fair value. Related write-downs are included in earnings as realized losses. For the nine month period ended September 30, 2010, there were no impairment write-downs. For the nine month period ended September 30, 2009, the Company wrote down $2,156,820 in two single issue trust preferred securities and $152,656 of stock in Silverton Bank.

Stockholders Equity.  Waccamaw Bankshares, Inc. maintains a strong capital position which exceeds all capital adequacy requirements of Federal regulatory authorities. Total stockholders' equity at September 30, 2010 was $19,745,748 compared to $17,154,431 at December 31, 2009. This $2,591,317 increase was primarily due to unrealized gains on securities available for sale increasing $1,750,144, net of tax, operating loss of $582,334 and the sale of $2,393,801 of common stock through a rights offering to shareholders pursuant to a prospectus dated June 17, 2010.  The per share book value of our common stock as of September 30, 2010 was $2.64.  The per share tangible book value of our common stock as of September 30, 2010 was $2.62.  The Company and the Bank exceed all capital requirements under the applicable federal regulations.  As of September 30, 2010, the Company's Tier 1 risk-weighted capital ratio and total capital ratio were 8.3% and 9.3%, respectively.   At September 30, 2010, the Bank's capital ratios were as follows: Tier 1 leverage ratio, 5.9%, Tier 1 risk-based capital ratio, 8.5% and total risk-based ratio, 10.5%. These capital ratios were sufficient at September 30, 2010 to classify the Bank as “well capitalized” in accordance with the FDIC’s regulatory capital rules.

Waccamaw Bank, the primary subsidiary of Waccamaw Bankshares, Inc., is a state chartered bank operating seventeen offices in Whiteville, Wilmington, Shallotte (2), Sunset Beach, Oak Island, Holden Beach, Chadbourn, Tabor City, Southport (2) and Elizabethtown, North Carolina. Offices in South Carolina include Little River, Conway (2), Myrtle Beach, and Heath Springs.  In addition to primary banking operations, the Bank's Investment Group provides consumer investment and insurance services. Common stock of Waccamaw Bankshares, Inc. is listed on the NASDAQ Market and trades under the symbol WBNK.  Additional corporate information, product descriptions, and online services can be located on the Bank's website at http://www.waccamawbank.com.

Information in the press release contains "forward-looking statements." These statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, the effects of future economic conditions, governmental fiscal and monetary policies, legislative and regulatory changes, the risks of changes in interest rates and the effects of competition.  Additional factors that could cause actual results to differ materially are discussed in Waccamaw Bankshares, Inc.'s recent filings with the Securities Exchange Commission, including but not limited to its Annual Report on Form 10-K and its other periodic reports.  

SOURCE Waccamaw Bankshares, Inc.