By By MIKE VOSS
mike@wdnweb.com
Contributing Editor
First South Bancorp, the parent holding company of First South Bank with its headquarters in Washington, has suspended its quarterly dividend payment, citing an expected operating loss in the fourth quarter of 2010.
Last week, company management announced an anticipated $6.5 million loss for the final quarter of 2010.
The company expects to release its 2010 fourth-quarter operating results in mid-January.
“We are a community bank that serves communities in eastern North Carolina and we mirror the economy for local businesses,” Tom Vann, the company’s president and CEO, said in a brief telephone interview Tuesday.
“We’re optimistic on the economy improving during 2011 and for the resilience of businesses and people in the communities we serve,” Vann said.
On Sept. 23, the company’s board of directors declared a quarterly cash dividend for the quarter ending Sept. 30 of $0.09 per share, payable Oct. 28 to stockholders of record as of Oct. 4.
That dividend payment was the company’s 54th-consecutive quarterly cash dividend. The annual cash dividend rate is $0.36 per share.
“We have conducted an intensive evaluation of the credit quality of the bank’s loan portfolio and are boosting our loan loss reserves by a significant amount,” said Tom Vann, the company’s president and CEO, in a press release. “In light of the continued economic uncertainty, we recognize the financial stress some of our borrowers are facing. We feel it is prudent and wise to take a pro-active stance with regards to credit risk management and provision accordingly, so that we can get these problems behind us and move forward in a more positive manner.”
“We are moving aggressively from a position of financial strength to deal with our credit quality.
“Subsequent to these necessary provision charges, our capital levels will remain in excess of the regulatory requirements to be well capitalized. This will allow the company to move ahead in a substantive way, and hopefully expected retained earnings over the coming years will recover much of the capital expended by taking these charges.”
The decision to suspend the quarterly dividend was a difficult one, Vann said.
“While we understand how important dividends are to our shareholders, the board believes this is the prudent course of action at this time. The board considers it more prudent to suspend dividend payments at this point and maintain capital in the bank,” Vann said. “The board believes the payment of dividends in conjunction with the estimated net operating loss is a questionable use of capital. The board will continue to review the status of future dividend payments, which will depend upon the company’s financial condition, earnings, equity structure, capital needs, economic conditions and regulatory requirements.”
In the past 52 weeks, the company’s stock reached a high of $14.87 per share and a low of $5.91 per share, according to the Nasdaq website.