Four Oaks Fincorp, Inc. (OTCBB:FOFN) (the “Company”), the holding
company for Four Oaks Bank & Trust Company (the “Bank”), today announced
the results for the second quarter ended June 30, 2012. Net income for
the second quarter and six months ended June 30, 2012 was $29,000 and
$581,000, respectively, compared to a net loss of $1.3 million and $2.4
million for the same periods of 2011, respectively. During the three and
six months ended June 30, 2012, $39,000 and $286,000, respectively, was
released from the allowance for loan losses and recognized in earnings
as a negative provision for loan losses compared to $2.5 million and
$5.1 million, respectively, provision for loan losses recognized for the
three and six months ended June 30, 2011. The release of a portion of
the allowance for loan losses previously provided for is a result of
declines in historical losses and outstanding loan balances. The Company
had $2.4 million in net charge-offs recognized during the six months
ended June 30, 2012 as compared to $5.3 million in net charge-offs
recognized for the same period in 2011. Nonaccrual loans were $52.1
million at June 30, 2012, a decrease from $57.0 million at June 30, 2011
and $60.1 million at December 31, 2011. Decreases in the loan balances
of $102.7 million compared to June 30, 2011 and decreased levels of
nonperforming assets and charge-offs, kept our allowance for loan losses
(ALLL) as a percentage of gross loans at 3.32% or $18.4 million and
$21.9 million as of June 30, 2012 and 2011, respectively. Outstanding
loans declined $48.5 million from December 31, 2011 to June 30, 2012.
ALLL of $21.1 million at December 31, 2011 was 3.34% of gross loans. At
June 30, 2012, 42.1% or $7.8 million of the ALLL represents specific
reserves on impaired loans as compared to 34.9% or $7.6 million at June
30, 2011 and 34.8% or $7.4 million at December 31, 2011. Management
believes the June 30, 2012 allowance for loan losses is adequate to
absorb probable losses inherent in the loan portfolio. We believe the
strengthened internal controls related to the identification and
valuation of impaired loans that we put in place during 2011 resulted in
more timely recognition of impaired assets resulting in more effective
resolution of the issues. In 2012 our focus is directed to moving
impaired assets off of our balance sheet.
The Bank is well capitalized at June 30, 2012, with total risk based
capital of 10.95%, tier 1 risk based capital of 9.68%, and leverage
ratio of 5.53%. At June 30, 2011, the Bank had total risk based capital
of 10.01%, tier 1 risk based capital of 8.74%, and leverage ratio of
5.79%. The Company had total risk based capital of 11.49%, tier 1 risk
based capital of 7.92%, and leverage ratio of 4.52% at June 30, 2012, as
compared to 10.62%, 7.46%, and 4.97%, respectively, at June 30, 2011. We
continue actively assessing our alternatives for preserving and
improving capital, which may include increasing tangible common equity
and regulatory capital, reducing our balance sheet, or other strategies.
Asset Quality:
Total nonperforming assets were $67.4 million or 7.5% of total assets at
June 30, 2012, as compared to $66.9 million or 7.1% of total assets at
June 30, 2011, and $72.0 million or 7.9% of total assets at December 31,
2011. Nonperforming loans declined to $52.1 million at June 30, 2012
from $57.0 million at June 30, 2011 and $60.2 million at December 31,
2011. Foreclosed assets totaled $15.2 million at June 30, 2012, up from
$9.9 million at June 30, 2011, due to $14.8 million of additions, $6.2
million of sales, and $3.0 million in write-downs from declining real
estate valuations. Foreclosed assets were $12.2 million at December 31,
2011. Troubled debt restructurings (TDRs) totaled $41.0 million at June
30, 2012, and are comprised of $30.4 million which were included in
nonaccrual loans and $10.6 million which were performing loans. This
compares to total TDRs at June 30, 2011 of $53.5 million comprised of
$33.2 million non-performing TDRs which were included in nonaccrual
loans and $20.3 million which were performing loans. We are in
substantial compliance with the written agreement in place with our
regulators, which calls for the Company to reduce problem assets and
concentrations of credit, while also increasing capital.
Net Interest Income and Net Interest Margin:
Net interest income after the provision for loan losses totaled $5.4
million and $11.4 million for the three and six months ended June 30,
2012, respectively, as compared to $6.8 million and $13.8 million for
the same periods in 2011. Net interest margin annualized for the quarter
and six months ended June 30, 2012 was 2.47% and 2.59%, respectively, as
compared to 2.95% and 3.01% as of June 30, 2011. Our net interest margin
declined due to the decrease in gross loans, the early calls of brokered
deposits requiring recognition of the remaining unamortized premium, and
lower yields on investments. The effect of these factors more than
offset the benefit of lower interest expense which declined to $3.2
million and $6.4 million for the second quarter and six months ended
June 30, 2012, respectively, as compared to $3.7 million and $7.3
million for the same periods ended June 30, 2011.
Non-Interest Income:
Non-interest income for the second quarter and six months ended June 30,
2012, increased $635,000 and $456,000, respectively, to $2.0 million and
$3.2 million from $1.4 million and $2.7 million for the same periods
ended June 30, 2011, primarily due to an increase in gains on sales of
investment securities available for sale, and an increase in other
non-interest income from premiums on sale of the guaranteed portion of
SBA loans.
Non-Interest Expense
Non-interest expense totaled $7.6 million and $14.4 million for the
second quarter and six months ended June 30, 2012, respectively, as
compared to $6.9 million and $13.7 million for the same period in 2011.
Our full time equivalent employees decreased to 192 at June 30, 2012
from 202 at June 30, 2011. Reduction of staff and other cost cutting
initiatives resulted in lower expenses, but increased collection
expenses and carrying costs of foreclosed properties, along with
increased costs of insurance and professional fees, offset the reduction
of other expenses.
Balance Sheet and Capital
Total assets of $904.2 million at June 30, 2012 decreased 1.4% compared
to $916.6 million at December 31, 2011. Net cash, cash equivalents, and
investments of $317.1 million at June 30, 2012 increased 11.4% compared
to $284.8 million at December 31, 2011. Net loans of $535.3 million at
June 30, 2012 decreased 7.9% compared to $581.1 million at December 31,
2011. Total deposits of $731.5 million at June 30, 2012 decreased 1.9%
compared to $745.9 million at December 31, 2011. Total shareholders’
equity was $30.7 million at June 30, 2012, an increase of 3.3% compared
to $29.7 million at December 31, 2011. Book value per share at June 30,
2012 was $3.95 as compared to $3.87 at December 31, 2011.
Chairman, President, and Chief Executive Officer, Ayden R. Lee, Jr.
states, “We are pleased to report positive net income for the second
quarter of 2012. We will strive to continue this positive trend in
future quarters as we continue to improve our asset quality. Thanks to
all who participated in our centennial celebrations which have been
great opportunities to express our appreciation to our customers,
shareholders, and staff.”
With $904.2 million in total assets as of June 30, 2012, the Company,
through its wholly owned subsidiary, Four Oaks Bank & Trust Company,
offers a broad range of financial services through its sixteen offices
in Four Oaks, Clayton, Smithfield, Garner, Benson, Fuquay-Varina,
Wallace, Holly Springs, Harrells, Zebulon, Dunn, Rockingham, Southern
Pines, and Raleigh, North Carolina. Four Oaks Fincorp, Inc. trades
through its market makers under the symbol of FOFN.
Information in this press release may contain forward-looking
statements. These statements involve risks and uncertainties that
could cause actual results to differ materially, including without
limitation, our ability to comply with the Written Agreement we entered
with the Federal Reserve Bank of Richmond and the North Carolina Office
of the Commissioner of Banks in May 2011, the effects of future economic
conditions, governmental fiscal and monetary policies, legislative and
regulatory changes, the risks of changes in interest rates on the level
and composition of deposits, the effects of competition from other
financial institutions, our ability to raise capital and continue as a
going concern, the failure of assumptions underlying the establishment
of the allowance for loan losses, our ability to maintain an effective
internal control environment, and the low trading volume of the
Company’s common stock. Additional factors that could cause
actual results to differ materially are discussed in the Company’s
filings with the Securities and Exchange Commission, including without
limitation its Annual Report on Form 10-K, its Quarterly Reports on Form
10-Q, and its Current Reports on Form 8-K. The Company does not
undertake a duty to update any forward-looking statements in this press
release.
