DUNN, N.C., Oct. 29 /PRNewswire-FirstCall/ --
-- Bank adds to provision for loan losses to cover losses resulting from the alleged fraud -- Core business of the bank is positive, as FDIC data reveals deposit market share increases -- New Century Bank remains #1 in deposit market share in its headquarters city, Dunn, NC
Late in third quarter 2010, New Century Bancorp President and CEO William L. Hedgepeth II issued a statement concerning an apparent fraud against New Century Bank by a former director. In anticipation of a loss resulting from the alleged fraud, New Century Bancorp (the "Company" - Nasdaq: NCBC), the holding company for New Century Bank, added $10.7 million to its provision for loan losses, for a total addition to the provision for the quarter of $12.5 million. As a result, the Company reported a loss for the quarter ended September 30, 2010.
New Century Bancorp's net loss was ($6.6) million for the quarter ended September 30, 2010, compared to a net loss of ($369,000) for the same period in 2009. For the nine month period ended as of the same date, the Company reported a net loss of ($5.1) million compared to a net loss of ($214,000) for the nine months ended September 30, 2009. Basic and diluted losses per share were ($0.96) and ($0.05), respectively, for third quarter 2010 and third quarter 2009, and were ($0.74) and ($0.03), respectively, for the nine month periods ended September 30, 2010, and September 30, 2009.
As of September 30, 2010, the Company held total assets of $643.1 million, total deposits of $548.9 million and total loans of $467.9 million. As of September 30, 2009, these figures stood at total assets of $636.8 million, total deposits of $533.4 million, and total loans of $472.6 million, for changes, on a year-to-year basis of an increase in assets of 0.99%, an increase in deposits of 2.91% and a decrease in loans of (0.99%), due to the charge-off related to the alleged fraud, as well as overall soft loan demand that is being experienced by all banks.
Hedgepeth commented on the results, saying, "Our Company was on track for a successful 2010, having reported net earnings through June 30, 2010, of more than $1.6 million. To be faced with this alleged fraud and a potential loss that could exceed $10.0 million is difficult. To our shareholders and customers, as well as other friends of our Company, we reiterate these key points:
-- The apparent fraud is an isolated incident and is not indicative of the overall quality of New Century Bank's loan portfolio. Over the past few years, we have worked hard to improve the credit culture at our bank, using a disciplined approach to lending and maintaining policies and procedures to protect the bank, our customers, and our shareholders. -- Although it was not discovered until August 2010, the apparent fraud was committed over a period of many years, with the majority of the loans involved having been outstanding for years. -- The loans involved were annually reviewed, both internally and externally, and each time were deemed "satisfactory." In the circumstances surrounding this alleged fraud, it has become clear that for personal reasons the individual involved was committed to the deception, using apparently falsified financial documents, including falsified business receivables, and not disclosing certain assets and liabilities. All of this made detection of the fraud extremely difficult. -- Other local and out-of-state banks held loans with the individual who committed the alleged fraud. Each bank involved deemed the loans to be sound and the related companies to be profitable. -- Loans to directors are generally sound and profitable loans, as directors are typically successful, reputable business and community leaders who are well-known and respected, and who also have significant deposit relationships with the bank. Also because of their responsibility to shareholders to protect their investment, as well as because of the directors' own relationship with and investment in the bank, directors have a vested interest in the health, well-being and success of the bank -- We are committed to employing every legal remedy available to us in recovering losses due to this apparent fraud."
New Century remains well-capitalized and deposits held by the bank are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per depositor.
Hedgepeth also said, "In spite of addressing this alleged fraud, we remain in a strong capital position. The regulatory standard for a bank to be considered "well capitalized" is 10.00%, and New Century is well-capitalized at 12.57%. We are meeting this challenge head on and from a position of strength, determined to maintain our focus on serving our customers, communities and shareholders.
"According to FDIC market share data as of June 30, 2010, New Century Bank gained market share in Dunn, our headquarters city, allowing us to maintain the position of #1 in deposit market share in Dunn - a position we have held for 8 straight years. In addition, we gained deposit market share in Harnett and Cumberland counties, as well as the town of Lillington. Based on deposit market share, we are now the largest community bank in Harnett, Cumberland, Sampson, and Wayne counties. These results show the strength of our overall customer and deposit growth strategy and reflect the hard work of our staff in gaining and keeping customer relationships.
"It is the firm belief of our management team that we will return to positive earnings in the near future. On behalf of everyone at New Century, I again express our deep appreciation for the continued support of our loyal customers and shareholders. Our focus is on being everything a community bank can and should be in the markets we serve: offering our customers a safe, sound place to conduct business; our employees a great environment in which to work; our communities a partner that is invested in making each community individually, and southeastern North Carolina as a whole, a better place to live and work--in many ways, including supporting non-profits and other organizations; and, our shareholders a good return on their investment in us. New Century employs more than 140 people with a total payroll, including benefits, of $7.0 million for the first three quarters of 2010, which has an annualized economic impact in our markets of nearly $10 million. We enjoy being part of the fabric of the communities we serve."
Customers and shareholders who have any questions are asked to contact the bank's management at the Dunn headquarters.
New Century Bank has offices in Dunn, Clinton, Fayetteville (2), Goldsboro, Lillington, Lumberton, Pembroke, and Raeford, as well as a loan production office in Greenville, NC.
The information as of and for the quarter and nine months ended September 30, 2010 as presented is unaudited. This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements regarding certain of our goals and expectations with respect to earnings, earnings per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (ii) statements preceded by, followed by or that include the words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan," "projects," "outlook" or similar expressions. The actual results might differ materially from those projected in the forward-looking statements for various reasons, including, but not limited to, our ability to manage growth, our limited operating history, substantial changes in financial markets, regulatory changes, changes in interest rates, loss of deposits and loan demand to other savings and financial institutions, and changes in real estate values and the real estate market. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Company's SEC filings, including its periodic reports under the Securities Exchange Act of 1934, as amended, copies of which are available upon request from the Company.
New Century Bancorp, Inc. Selected Financial Information and Other Data ($ in thousands, except per share data) At or for the three months ended -------------------------------- September June 30, March 31, 30, 2010 2010 2010 ---------- --------- ---------- Summary of Operations: Total interest income $8,428 $8,524 $8,333 Total interest expense 2,439 2,434 2,446 ----- ----- ----- Net interest income 5,989 6,090 5,887 Provision for loan losses 12,457 639 1,270 ------ --- ----- Net interest income after provision (6,468) 5,451 4,617 Noninterest income 648 670 667 Goodwill Impairment - - - Noninterest expense 4,746 4,497 4,606 ----- ----- ----- Income (loss) before income taxes (10,566) 1,624 678 Provision for income taxes (benefit) (3,955) 549 221 ------ --- --- Net income (loss) $(6,611) $1,075 $457 ======= ====== ==== Share and Per Share Data: Earnings (loss) per share -basic $(0.96) $0.16 $0.07 Earnings (loss) per share - diluted (0.96) 0.16 0.07 Book value per share 7.22 8.19 8.03 Tangible book value per share 7.11 8.08 7.91 Ending shares outstanding 6,913,636 6,891,784 6,837,952 Weighted average shares outstanding: Basic 6,908,466 6,846,437 6,837,952 Diluted 6,908,466 6,862,095 6,845,714 Selected Performance Ratios: Return on average assets -3.97% 0.66% 0.30% Return on average equity -46.47% 7.69% 3.34% Net interest margin 3.85% 4.00% 4.08% Efficiency ratio (1) 71.51% 66.52% 70.28% Period End Balance Sheet Data: Loans, net of unearned income $467,876 $490,883 $496,448 Total Earning Assets 594,425 619,867 602,436 Goodwill and other intangible assets 737 776 814 Total Assets 643,185 663,001 642,883 Deposits 548,866 566,031 542,348 Short term debt 20,138 20,138 21,744 Long term debt 18,372 18,372 18,372 Shareholders' equity 49,906 56,442 54,934 Selected Average Balances: Gross Loans $486,453 $493,396 $483,665 Total Earning Assets 617,217 610,290 585,277 Goodwill and other intangible assets 756 794 832 Total Assets 660,032 651,861 625,307 Deposits 560,942 553,067 531,115 Short term debt 20,736 20,736 21,802 Long term debt 18,372 18,372 13,972 Shareholders' equity 56,441 56,093 55,533 Asset Quality Ratios: Nonperforming loans $9,678 $13,885 $18,956 Other real estate owned 3,812 3,215 2,680 Allowance for loan losses 8,081 10,006 11,232 Nonperforming loans (2) to period-end loans 2.07% 2.83% 3.82% Allowance for loan losses to period- end loans 1.73% 2.04% 2.26% Delinquency Ratio (3) 1.23% 0.75% 0.45% Net loan charge- offs to average loans 13.57% 1.39% 0.05% ----- ---- ---- At or for the three months ended -------------------------------- December 31, September 30, 2009 2009 ------------- -------------- Summary of Operations: Total interest income $8,433 $8,258 Total interest expense 2,821 3,170 ----- ----- Net interest income 5,612 5,088 Provision for loan losses 995 2,377 --- ----- Net interest income after provision 4,617 2,711 Noninterest income 766 777 Goodwill Impairment 8,674 - Noninterest expense 4,796 4,075 ----- ----- Income (loss) before income taxes (8,087) (587) Provision for income taxes (benefit) 141 (218) --- ---- Net income (loss) $(8,228) $(369) ======= ===== Share and Per Share Data: Earnings (loss) per share - basic $(1.20) $(0.05) Earnings (loss) per share - diluted (1.20) (0.05) Book value per share 7.96 9.22 Tangible book value per share 7.83 7.82 Ending shares outstanding 6,837,952 6,837,742 Weighted average shares outstanding: Basic 6,837,863 6,837,292 Diluted 6,837,863 6,837,292 Selected Performance Ratios: Return on average assets -5.09% -0.23% Return on average equity -51.24% -2.30% Net interest margin 3.74% 3.54% Efficiency ratio (1) 75.20% 69.48% Period End Balance Sheet Data: Loans, net of unearned income $481,176 $472,578 Total Earning Assets 588,536 591,973 Goodwill and other intangible assets 853 9,565 Total Assets 630,635 636,810 Deposits 540,262 533,350 Short term debt 20,564 25,693 Long term debt 12,372 12,372 Shareholders' equity 54,409 63,013 Selected Average Balances: Gross Loans $476,845 $469,668 Total Earning Assets 595,250 570,059 Goodwill and other intangible assets 9,451 9,584 Total Assets 641,254 634,312 Deposits 538,643 532,427 Short term debt 23,498 23,020 Long term debt 12,372 12,372 Shareholders' equity 63,710 63,588 Asset Quality Ratios: Nonperforming loans $15,965 $16,003 Other real estate owned 2,530 2,346 Allowance for loan losses 10,359 10,317 Nonperforming loans (2) to period-end loans 3.32% 3.39% Allowance for loan losses to period-end loans 2.15% 2.18% Delinquency Ratio (3) 0.41% 1.61% Net loan charge-offs to average loans 0.79% 0.49% ---- ---- At or for the nine months ended ------------------------------- September 30, September 30, September 30, 2010 2009 2008 -------------- -------------- -------------- Summary of Operations: Total interest income $25,285 $24,483 $26,886 Total interest expense 7,318 10,302 13,382 ----- ------ ------ Net interest income 17,967 14,181 13,504 Provision for loan losses 14,366 4,477 2,141 ------ ----- ----- Net interest income after provision 3,601 9,704 11,363 Noninterest income 1,975 2,449 1,717 Goodwill Impairment - - - Noninterest expense 13,842 12,581 12,359 ------ ------ ------ Income (loss) before income taxes (8,266) (428) 721 Provision for income taxes (benefit) (3,186) (214) 248 ------ ---- --- Net income (loss) $(5,080) $(214) $473 ======= ===== ==== Share and Per Share Data: Earnings (loss) per share - basic $(0.74) $(0.03) $0.07 Earnings (loss) per share - diluted (0.74) (0.03) 0.07 Book value per share 7.22 9.22 9.03 Tangible book value per share 7.11 7.82 7.61 Ending shares outstanding 6,913,636 6,837,742 6,827,649 Weighted average shares outstanding: Basic 6,864,543 6,833,494 6,808,914 Diluted 6,864,543 6,833,494 6,869,419 Selected Performance Ratios: Return on average assets -1.05% -0.05% 0.11% Return on average equity -12.12% -0.45% 1.01% Net interest margin 3.97% 3.31% 3.26% Efficiency ratio (1) 69.41% 75.65% 81.20% Period End Balance Sheet Data: Loans, net of unearned income $467,876 $472,578 $457,784 Total Earning Assets 594,425 591,973 547,965 Goodwill and other intangible assets 737 9,565 9,719 Total Assets 643,185 636,810 596,457 Deposits 548,866 533,350 501,823 Short term debt 20,138 25,693 17,896 Long term debt 18,372 12,372 12,372 Shareholders' equity 49,906 63,013 61,653 Selected Average Balances: Gross Loans $487,847 $469,109 $449,362 Total Earning Assets 604,379 572,684 552,240 Goodwill and other intangible assets 794 9,622 9,776 Total Assets 646,134 626,903 597,303 Deposits 548,483 524,204 502,603 Short term debt 21,178 24,023 17,593 Long term debt 16,920 12,372 12,372 Shareholders' equity 56,026 63,542 62,187 Asset Quality Ratios: Nonperforming loans $9,678 $16,003 $9,148 Other real estate owned 3,812 2,346 677 Allowance for loan losses 8,081 10,317 7,140 Nonperforming loans (2) to period- end loans 2.07% 3.39% 2.00% Allowance for loan losses to period- end loans 1.73% 2.18% 1.56% Delinquency Ratio (3) 1.23% 1.61% 0.34% Net loan charge- offs to average loans 4.56% 0.86% 1.09% ---- ---- ---- (1) Efficiency ratio is calculated as non-interest expenses divided by the sum of net interest income and non-interest income. (2) Nonperforming loans consist of non-accrual loans and restructured loans. (3) Delinquency Ratio includes 30-89 days past due and excludes non-accrual loans. http://www.newcenturybanknc.com/
New Century Bancorp
CONTACT: Lisa F. Campbell, Executive Vice President, Chief Operating
Officer and Chief Financial Officer, +1-910-892-7080;
lisac@newcenturybanknc.com
Web Site: http://www.newcenturybanknc.com/
