Things aren’t getting any better for First National Bancshares.
The embattled parent of First National Bank of the South posted a staggering loss of $20 million for the quarter ended June 30, continuing the Spartanburg, SC-based company’s struggles.
That represents a loss per share of $3.18. First National’s stock, by comparison, is currently trading for $1.15 a share.
Provisions for loan losses rose to $18 million, compared to $943,000 during the same period in 2008. As of June 30, First National had $116.6 million in nonperforming assets, up from $12 million a year earlier.
First National is struggling to keep its head above water. The company actually earned $189,000 during the second quarter of 2008, but lost $44.8 million overall last year and another $1.36 million during the first three months of 2009.
Last month, company shareholders approved increasing the number of authorized common shares from 10 million to 100 million.
The move was taken to help the bank raise additional capital to absorb the potential losses associated with the disposition of subsidiary First National Bank of the South’s nonperforming assets and to increase capital levels to meet the standards set forth by the Office of the Comptroller of the Currency.
Also, the company said in its Friday filing with the US Securities and Exchange Commission that while it’s working to achieve the capital levels imposed under the OCC consent order, it does not anticipate achieving those levels by Aug. 25 deadline.
Cleveland Fed Senior Research Economist Yuliya Demyanyk exposes 10 myths surrounding subprime mortgages.
Top of the list: Subprime mortgages went only to borrowers with impaired credit.
Subprime mortgages went to all kinds of borrowers, not only to those with impaired credit. A loan can be labeled subprime not only because of the characteristics of the borrower it was originated for, but also because of the type of lender that originated it, features of the mortgage product itself, or how it was securitized.
Specifically, if a loan was given to a borrower with a low credit score or a history of delinquency or bankruptcy, lenders would most likely label it subprime. But mortgages could also be labeled subprime if they were originated by a lender specializing in high-cost loans—although not all high-cost loans are subprime. Also, unusual types of mortgages generally not available in the prime market, such as “2/28 hybrids,” which switch to an adjustable interest rate after only two years of a fixed rate, would be labeled subprime even if they were given to borrowers with credit scores that were sufficiently high to qualify for prime mortgage loans.
The process of securitizing a loan could also affect its subprime designation. Many subprime mortgages were securitized and sold on the secondary market. Securitizers rank ordered pools of mortgages from the most to the least risky at the time of securitization, basing the ranking on a combination of several risk factors, such as credit score, loan-to-value and debt-to-income ratios, etc. The most risky pools would become a part of a subprime security. All the loans in that security would be labeled subprime, regardless of the borrowers’ credit scores.
The myth that subprime loans went only to those with bad credit arises from overlooking the complexity of the subprime mortgage market and the fact that subprime mortgages are defined in a number of ways—not just by the credit quality of borrowers. One of the myth’s byproducts is that examples of borrowers with good credit and subprime loans have been seen as evidence of foul play, generating accusations that such borrowers must have been steered unfairly and sometimes fraudulently into the subprime market.
Demyanyk points out that on inspection many of the most popular explanations for the subprime crisis are incorrect. “Empirical research shows that the causes of the subprime mortgage crisis and its magnitude were more complicated than mortgage interest rate resets, declining underwriting standards, or declining home values. Nor were its causes unlike other crises of the past.”
The subprime crisis was building for years before showing any signs and was fed by lending, securitization, leveraging, and housing booms, she adds.
(Hat tip: Cafe Hayek)
CommunitySouth Financial Corp. revealed Friday that subsidiary CommunitySouth Bank & Trust has entered into a memorandum of understanding with the SC State Board of Financial Institutions and the Federal Deposit Insurance Corp.
According to information filed with the US Securities and Exchange Commission, Easely, SC-based CommunitySouth entered into a memorandum of understanding with the SC banking commissioner and the regional banking director of the FDIC’s Atlanta Office on June 29.
The memorandum requires the bank to:
- Submit a capital plan to the supervisory authorities for maintaining a “well-capitalized” designation;
- Develop specific plans and proposals for the reduction and improvement of assets which are subject to adverse classification and past due loans;
- Implement a plan to decrease the concentration of commercial real estate loans;
- Develop and implement an improved loan review program; and
- Review overall liquidity objectives and develop plans and procedures aimed at improving liquidity and reducing reliance on volatile liabilities to fund longer-term assets.
South Carolina’s only minority owned bank continues to lose money.
South Carolina Community Bank lost $166,000 during the three months ended June 30 and has now posted a deficit of more than $200,000 through the first half of 2009, according to Federal Financial Institutions Examination Council information.
Columbia-based SC Community Bank recorded provisions for loan and lease losses of $299,000 during the most recent three-month period, according to FFIEC call reports. That’s up sharply from $88,000 a year ago.
Closely held SC Community Bank lost $534,000 in 2008.
Greer Bancshares reported a net loss of $155,368 for the three months ended June 30, compared to a net gain of $257,274 during the same period a year earlier, according to information filed with the US Securities and Exchange Commission.
Greer Bancshares, the South Carolina-based parent of Greer State Bank, attributed the drop to narrower net interest margin, larger loan loss provisions, a substantial increase in FDIC insurance costs and costs associated with participating in the TARP program.
Also, loan-loss provisions rose sharply for the $470 million company, to $1,370,426 during the second quarter of 2009 from $454,690 a year earlier.
Shares in Greer Bancshares were unchanged Thursday at $7.02.