ASHEBORO, N.C., Nov. 10, 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 a net loss of $55.7 million, or $(4.87) per diluted share, for the third quarter of 2010, compared to a net loss of $68.3 million, or $(5.98) per diluted share, for the third quarter a year ago. Third quarter 2010 results include a $55.9 million provision for loan losses. For the first nine months of the year, following a $92.8 million provision for loan losses, FNB United reported a net loss of $85.8 million, or $(7.51) per diluted share, compared to a net loss of $75.7 million, or $(6.63) per diluted share, in the first nine months of 2009.
"During the third quarter, nonperforming loans increased over $61 million. The increase in the provision was attributable primarily to a broad reduction of real estate values securing our collateral-dependent impaired loans, as well as increased historical loss rates. As a result of intensive loan review, management believes the allowance for loan losses is adequate to cover probable losses inherent in the loan portfolio," said R. Larry Campbell, Interim President and CEO.
CommunityONE Bank consented to the issuance of a Consent Order by the Office of the Comptroller of the Currency on July 22, 2010, which mandates specific actions by the Bank to address certain findings from the OCC's examination and the Bank's current financial condition. The Consent Order contains various requirements, including a capital directive, more controls on future extensions of credit, and the Bank's development of various programs and procedures to improve its asset quality. The capital directive requires the Bank to achieve and maintain minimum regulatory capital levels in excess of the statutory minimums to be well-capitalized. In connection with the Consent Order, the Bank has developed a three-year strategic plan that establishes specific objectives, as outlined in the Consent Order, and is awaiting OCC approval of the plan.
In addition, on October 21, 2010, FNB United Corp. entered into a written agreement with the Federal Reserve Bank of Richmond. Pursuant to the agreement, FNB United's board of directors agreed to take appropriate steps to utilize fully FNB United's financial and managerial resources to serve as a source of strength to CommunityONE Bank, including causing the Bank to comply with the Consent Order issued by the OCC.
Campbell stated, "The Board of Directors and management fully agree with the Consent Order and the written agreement. We have a strategic capital plan that is designed to restore the capital levels at both the holding company and the bank. Further, FNB United is actively working with financial advisors, third party advisors and a team of management consultants to achieve this objective. We are regularly communicating with the OCC and Federal Reserve Bank on the plans and actions being taken to comply with capital ratios in the agreements."
Neither the Consent Order nor the written agreement with the Federal Reserve Bank affects the Bank's FDIC coverage. The Bank's customer deposits remain fully insured by the FDIC to the maximum extent allowed by law. The standard deposit insurance amount is $250,000 per depositor for each account ownership category. In addition, the Bank participates in the FDIC's Transaction Account Guarantee Program, under which the FDIC will fully guarantee until December 31, 2010, all noninterest-bearing transaction accounts, NOW accounts with interest rates of 0.25% or less and IOLTAs (lawyer trust accounts), without regard to the amount in the account. For calendar years 2011 and 2012, deposits held in noninterest-bearing transaction accounts will be fully insured, regardless of the amount in the account.
Asset Quality and Provision for Loan Losses
Nonperforming loans increased during the third quarter to $291.9 million, or 20.58% of total loans at September 30, 2010 compared to $153.9 million, or 9.76% of total loans, at September 30, 2009. Construction and development loans were 50.9% of nonperforming loans for the quarter. Nonperforming loans were $230.4 million at the end of the preceding quarter.
Provisions for loan losses were $55.9 million for the quarter ended September 30, 2010, compared to $17.5 million in the same period in 2009, with total net charge-offs of $59.6 million in the third quarter of 2010 versus $12.0 million for the same period a year ago. For the nine months ended September 30, 2010, provision for loan losses totaled $92.8 million compared to $37.1 million for the prior-year period, with 2010 year-to-date net charges-offs of $76.2 million, increasing from $29.5 million in the first nine months of 2009. FNB United's real estate owned and repossessed loan collateral was $48.9 million at September 30, 2010, compared to $42.1 million at June 30, 2010, and $24.6 million at September 30, 2009.
Nonperforming assets were $340.9 million, or 16.96% of total assets at September 30, 2010, compared to $272.5 million, or 13.47% at the end of the preceding quarter, and $178.5 million, or 8.14% a year ago. Nonperforming assets include all nonaccrual loans, all loans over 90 days delinquent and still accruing, other real estate owned, and other repossessed loan collateral. The total allowance for loan losses was $66.1 million at September 30, 2010, equal to 4.66% of loans held for investment, compared to 4.58% at June 30, 2010 and 2.69% at September 30, 2009.
Loans that were delinquent 30-89 days totaled $63.9 million, or 4.50% of total loans at September 30, 2010, compared to $19.0 million, or 1.25% of total loans at June 30, 2010, and $25.3 million, or 1.60% of total loans at September 30, 2009. The Bank had loans 90 days or more past due and still accruing, totaling $997,000 at September 30, 2010, $5.1 million at June 30, 2010 and $7.7 million at September 30, 2009.
The Bank has taken special measures to effectively manage impaired loans by adding new employees and engaging third-party contractors, all of whom are experienced in loan restorations and loan resolutions and are well equipped to resolve credit problems through forbearance, restructuring and modification agreements as well as note sales. FNB United believes adding resources in this way will help stabilize the increase in nonperforming loans and provide additional options for resolution.
Net Interest Income
Third quarter 2010 net interest income before the provision for loan losses was $11.6 million, compared to $14.0 million in the preceding quarter and $16.4 million in the third quarter a year ago. FNB United's net interest margin was 2.55% for the third quarter of 2010 compared to 3.08% in the immediate prior quarter and 3.25% in the third quarter a year ago. The reduction in the net interest margin in the third quarter 2010 of 53 basis points was primarily attributable to a reduction of 54 basis points in the average yield on commercial loans due to additional loans being put on non-accrual and the related reversal of interest income. The yield on interest earning assets declined 51 basis points compared to the previous quarter while the cost of interest-bearing liabilities increased by four basis points. For the first nine months of 2010, net interest income before the provision for loan losses was $41.3 million, compared to $45.8 million in the first nine months of 2009.
Total noninterest income was $6.5 million for the third quarter 2010, compared to $5.9 million in the previous quarter and $2.6 million in the third quarter a year ago. Mortgage loan income was $2.6 million, compared to $1.8 million for the same period in 2009. In the third quarter of 2009, the Bank incurred a $4.0 million other-than-temporary-impairment (OTTI) charge on an investment security. Noninterest income was $18.1 million for the first nine months of 2010 compared to $16.1 million in the first nine months of 2009.
Total noninterest expense was $17.1 million in the third quarter of 2010, compared to $20.3 million in the preceding quarter and $69.1 million in the third quarter a year ago. The decrease of $3.1 million in total noninterest expense from the second to the third quarters 2010 is primarily due to a decrease in expenses related to other real estate owned of $3.3 million. The third quarter of 2009 included a final goodwill impairment charge of $52.4 million. Compensation and benefit expense for the third quarter 2010 was $1 million lower than the same period a year ago due in part to the decrease in the number of full-time equivalent employees from an average of 530 in the third quarter 2009 to 505 in the third quarter 2010.
For the first nine months of 2010, total noninterest expense decreased to $52.2 million, compared to $103.5 million in the first nine months of 2009. Net of the goodwill impairment charge in 2009 and the increase in other real estate owned expenses, expenses declined $3.3 million, or 6.7%.
Loans Held for Investment
Loans held for investment were $1.42 billion at third quarter-end 2010, compared to $1.58 billion a year earlier. Home equity loans increased $7.8 million, commercial loans decreased $190.5 million and residential loans were up $14.7 million at September 30, 2010, compared to a year ago. Assets decreased 8.4% to $2.01 billion at September 30, 2010, compared to $2.19 billion a year earlier.
Total deposits increased 2.7% to $1.77 billion at September 30, 2010, compared to $1.72 billion twelve months earlier. Certificates of deposit increased 3.9% to $1.03 billion, from $996 million a year ago while other deposits increased 1.6% to $734 million at third quarter-end, compared to $726 million a year earlier.
Brokered certificates of deposits were $156.0 million at September 30, 2010, which was 8.8% of total deposits. As a result of the Consent Order described above, the Bank can no longer renew, roll-over or increase the amount of brokered deposits above the amount outstanding at the date of the Consent Order without obtaining a waiver from the OCC, which may or may not be granted.
Capital Levels and Shareholders' Equity
Shareholders' equity was $18.6 million at September 30, 2010, compared to $128.6 million a year earlier. Shareholders' equity includes the receipt of $51.5 million as a participant in the U.S. Treasury Department's Capital Purchase Program. Book value per common share was $(2.98) at third quarter-end 2010 compared to $6.71 a year earlier, and tangible book value per common share was $(3.36) at quarter-end 2010, compared to $6.26 a year earlier. At September 30, 2010, the Bank is significantly undercapitalized.
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 subsidiaries, 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.
CONTACT: FNB United Corp. Mark Severson, CFO 336.626.8351