American Community Bancshares, Inc. Announces Fourth Quarter and Full Year 2008 Results

Wed. February 11, 2009; Posted: 04:00 PM

Fourth Quarter 2008 Highlights:

-- Total annualized loan growth of 6% from the third quarter of 2008

-- Net interest margin of 2.76%, a decrease of 62 basis points from 3.38% in the third quarter 2008, and a decrease of 125 basis points from 4.01% in the fourth quarter of 2007

-- Nonperforming loans of 1.82% of total loans, compared to 0.93% at the end of the third quarter of 2008 and 0.44% at the end of the fourth quarter of 2007

-- Provision for loan losses of $2.8 million, up $1.4 million from the third quarter of 2008, and up $2.4 million from $471,000 in the fourth quarter of 2007

-- Allowance for loan losses equal to 2.13% of total loans compared to 1.74% at the end of the third quarter of 2008 and 1.46% at the end of the fourth quarter of 2007

-- Net loss of $934,000, or $0.14 per diluted share

Full Year 2008 Highlights:

-- Well-capitalized, with Tier 1, total capital, and leverage ratios of 11.38%, 12.64%, and 9.45%, respectively

-- Total loans grew 9% on a year-over-year basis, with total deposit growth of 7%

-- Net loss of $2.7 million for the full year ended December 31, 2008, or $0.41 per diluted share

The fourth quarter 2008 net loss of $934,000, or $0.14 per diluted share resulted primarily from a $1.4 million increase, to $2.8 million, in the provision for loan losses compared to the third quarter of 2008. Also impacting the results was a 14% decrease in net interest income, mainly due to a decrease in the net interest margin of 62 basis points to 2.76% in the fourth quarter of 2008, compared to 3.38% in the third quarter of 2008. The decrease in the net interest margin was principally the result of the 175 basis point decrease in the Fed Funds rate during the fourth quarter of 2008, which had a more immediate impact on loan yields than on deposit costs. Fourth quarter 2008 results also included a $128,000 other than temporary impairment charge related to investments in Federal home Loan Mortgage Corporation ("Freddie Mac") and Federal National Mortgage Association ("Fannie Mae") preferred stock.

The Company's net loss for the year ended December 31, 2008 was $2.7 million, or $0.41 per diluted share, compared with net income of $5.0 million, or $0.72 per diluted share for the year ended December 31, 2007. The net loss for the full year 2008 was due to several factors, including a $2.9 million other than temporary impairment charge related to investments in Freddie Mac and Fannie Mae preferred stock, a $593,000 loss on a supplemental executive retirement plan investment also related to Freddie Mac and Fannie Mae preferred stock, a $4.0 million increase in the provision for loan losses compared to the prior year, and merger-related expenses of $472,000. Also impacting full year 2008 results was a decrease of 91 basis points in the net interest margin to 3.32% from 4.23% for the year ended December 31, 2007. The decrease in the net interest margin during 2008 was primarily due to the 400 basis point decrease in the Fed Funds rate that occurred during 2008 as well as interest income reversals on an increased level of nonaccrual loans.

Randy P. Helton, President and Chief Executive Officer commented, "Despite the current economic environment, American Community continues to have a solid business model. In the fourth quarter of 2008, we increased our loan loss reserves significantly over the first three quarters of the year in recognition of an increase in nonperforming assets during the quarter and in light of the continuing softness in the economic environment. The loan loss reserve to loans at December 31, 2008 was 2.13%, up from 1.74% as of September 30, 2008. Even during the current credit cycle our nonperforming assets as a percentage of total assets continue to outperform our peers, while our reserves as a percentage of loans are actually considerably stronger than our peers due to our conservative approach to managing asset quality.

"We believe the actions taken in the fourth quarter leave us well-positioned for our upcoming successful merger with Yadkin Valley Financial. Our capital position remains strong, and we remain well-capitalized for regulatory purposes.

"Looking forward, we see a number of opportunities for disciplined loan and deposit growth across our footprint, and look forward to the new chapter in our future with Yadkin Valley Financial. Over the past several months, we have been working diligently to ensure a smooth and successful integration of the two companies. I am most pleased that our core team of seasoned bankers remains intact and ready for business as part of the Yadkin Valley franchise. We have planned extensive employee training in early March, and expect the full systems conversion to occur in early June. Together, we will work to successfully weather the challenges ahead of us."

FOURTH QUARTER 2008 FINANCIAL HIGHLIGHTS

The provision for loan losses increased $1.4 million to $2.8 million from $1.4 million in the third quarter of 2008. On a year-over-year basis, the loan loss provision increased $2.4 million from $471,000. The linked quarter and year-over-year increases in the loan loss provision were primarily due to the increase in nonperforming loans and net charge-offs as well as growth in the loan portfolio.

Nonperforming loans (including restructured loans of $745,000) totaled $7.8 million or 1.82% of total loans, an increase of $3.9 million compared to $3.9 million or 0.93% of total loans in the third quarter of 2008. The increase in nonperforming loans was primarily due to a $3.7 million increase in nonperforming residential construction loans to $4.0 million from $279,000 in the third quarter of 2008. A breakdown of nonperforming loans, by loan type, consisted of the following at the end of the fourth quarter of 2008, compared to the third quarter of 2008 and the fourth quarter of 2007 (in thousands of dollars):

Non-performing loans Dec. 31, Sept. 30, Dec. 31, 2008 2008 2007 % of % of % of # Total # Total # Total Loan Type Loans Balance Loans Loans Balance Loans Loans Balance Loans 1-4 Family Construction 9 $4,005 0.94% 2 $279 0.07% - $- 0.00% Raw Land 4 241 0.06% 2 635 0.15% - - 0.00% Commercial Real Estate 9 914 0.22% 6 414 0.10% 4 262 0.07% Commercial & Industrial 7 303 0.07% 6 260 0.06% 10 341 0.09% Residential 1-4 Family - Permanent 8 1,373 0.32% 7 812 0.19% 4 557 0.14% HELOC 2 175 0.04% 1 600 0.14% 2 111 0.03% Personal Loans 9 186 0.04% 5 75 0.02% 8 106 0.03% Commercial Leases 10 440 0.10% 17 835 0.20% 5 345 0.08% Other 1 147 0.03% - - 0.00% - - 0.00% Total 59 $7,784 1.82% 46 $3,910 0.93% 33 $1,722 0.44%

Loans 30-89 days past due totaled $3.8 million in the fourth quarter of 2008, an increase of $1.7 million compared to $2.1 million in the third quarter of 2008. The increase in loans 30-89 days past due was predominantly concentrated within the residential construction portfolio.

Total loans increased to $427.5 million in the fourth quarter 2008, or 6% on an annualized basis due to increases in 1-4 family mortgages, home equity lines, and C&I loan balances. On a year-over-year basis, loans increased $34.5 million or 9% also due to higher balances in most loan categories.

Deposits of $429.4 million were essentially unchanged compared to the third quarter of 2008 mainly due to a $10.0 million decrease in brokered CDs, which was offset by a $14.3 million increase in CDs and a slight increase in interest-bearing checking balances. On a year-over-year basis, deposits increased by 7% due to increases in CD and interest checking balances. While brokered CD balances increased significantly year-over-year, they remain a relatively small part of the Company's funding base at 8% of total deposits, up from 3% a year earlier.

American Community remains well capitalized for regulatory purposes. As of the fourth quarter of 2008, Tier 1, total capital, and leverage ratios were 11.38%, 12.64%, and 9.45%, respectively, compared to 11.74%, 12.99%, and 10.02% in the third quarter of 2008. The Company's tangible equity as a percentage of tangible assets was 7.82%, compared to 7.78% in the third quarter of 2008.

About American Community Bancshares

American Community Bancshares, headquartered in Charlotte, NC is the holding company for American Community Bank. American Community Bank is a full service community bank, headquartered in Monroe, NC with nine North Carolina offices located in the fast growing Union and Mecklenburg counties and four South Carolina offices located in York and Cherokee counties. The Bank provides a wide assortment of traditional banking and financial services offered with a high level of personal attention. American Community Bancshares website is www.americancommunitybank.com. American Community Bancshares stock is traded on the NASDAQ Capital Market under the symbol "ACBA".

Information in this press release contains "forward-looking statements." These statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, the effects of future economic conditions, governmental fiscal and monetary policies, legislative and regulatory changes, the risks of changes in interest rates and the effects of competition. Additional factors that could cause actual results to differ materially are discussed in American Community Bancshares's recent filings with the Securities and Exchange Commission, including but not limited to its Annual Report on Form 10-K and its other periodic reports.

American Community Bancshares, Inc. (Amounts in thousands except share and per share data) (Unaudited) Consolidated Balance Sheet December 31, September 30, June 30, 2008 2008 2008 Assets Cash and due from banks $13,809 $15,968 $16,078 Interest-earning deposits with banks 894 8,720 749 Investment securities 73,030 73,538 77,563 Loans 427,492 421,141 412,881 Allowance for loan losses (9,124) (7,316) (6,390) Net loans 418,368 413,825 406,491 Accrued interest receivable 2,032 2,173 2,148 Bank premises and equipment 7,125 7,293 8,434 Foreclosed real estate - 77 - Non-marketable equity securities at cost 2,980 2,980 3,039 Goodwill 9,838 9,838 9,838 Other assets 7,603 6,433 5,510 Total assets $535,679 $540,845 $529,850 Liabilities and stockholders' equity Deposits Non-interest bearing $48,826 $50,693 $52,278 Interest bearing 380,578 378,591 364,268 Total deposits 429,404 429,284 416,546 Borrowings 53,017 57,921 58,140 Accrued expenses and other liabilities 1,976 2,142 393 Total liabilities 484,397 489,347 475,079 Total stockholders' equity 51,282 51,498 54,771 Total liabilities and stockholders' equity $535,679 $540,845 $529,850 Ending shares outstanding 6,633,169 6,574,600 6,542,091 Book value per share $7.73 $7.83 $8.37 Average Balances: Loans $415,480 $408,037 $407,925 Earning assets 498,598 488,193 489,032 Total assets 542,106 529,524 525,587 Interest-bearing deposits 383,515 361,391 360,784 Stockholders' equity 51,624 53,918 55,346 American Community Bancshares, Inc. (Amounts in thousands except share and per share data) (Unaudited) Consolidated Balance Sheet March 31, December 31, 2008 2007 (a) Assets Cash and due from banks $16,126 $14,346 Interest-earning deposits with banks 682 930 Investment securities 79,521 76,782 Loans 404,954 392,959 Allowance for loan losses (6,095) (5,740) Net loans 398,859 387,219 Accrued interest receivable 2,398 2,640 Bank premises and equipment 8,605 8,694 Foreclosed real estate - - Non-marketable equity securities at cost 2,814 2,119 Goodwill 9,838 9,838 Other assets 5,308 3,027 Total assets $524,151 $505,595 Liabilities and stockholders' equity Deposits Non-interest bearing $53,439 $54,459 Interest bearing 357,701 345,335 Total deposits 411,140 399,794 Borrowings 55,709 49,504 Accrued expenses and other liabilities 1,807 2,273 Total liabilities 468,656 451,571 Total stockholders' equity 55,495 54,024 Total liabilities and stockholders' equity $524,151 $505,595 Ending shares outstanding 6,542,091 6,502,288 Book value per share $8.48 $8.31 Average Balances: Loans $389,144 $379,191 Earning assets 471,071 462,078 Total assets 513,398 499,430 Interest-bearing deposits 351,699 344,619 Stockholders' equity 55,069 53,366 (a) Derived from audited consolidated financial statements American Community Bancshares, Inc. Consolidated Income Statements (Amounts in thousands except share and per share data) (Unaudited) Year ended December 31, December 31, 2008 2007 Total interest income $30,411 $35,426 Total interest expense 14,699 16,193 Net interest income 15,712 19,233 Provision for loan losses 4,999 1,033 Net interest income after provision for loan loss 10,713 18,200 Non-interest income Service charges on deposit accounts 2,317 2,419 Mortgage banking operations 259 326 Realized gains on sale of securities - 20 Gain/loss on derivatives 331 214 Loss on SERP investment (593) - Other 172 412 Total non-interest income 2,486 3,391 Non-interest expense Salaries and employee benefits 7,078 6,893 Occupancy and equipment 2,280 2,194 Other than temporary impairment of investment securities 2,881 76 Merger related expenses 472 - Other 4,498 4,539 Total non-interest expense 17,209 13,702 Income (loss) before income taxes (4,010) 7,889 Provision (benefit) for income taxes (1,353) 2,869 Net income (loss) $(2,657) $5,020 Net income (loss) per share Basic $(0.41) $0.74 Diluted $(0.41) $0.72 Weighted average number of shares outstanding Basic 6,555,255 6,779,635 Diluted 6,555,255 6,938,259 Return (loss) on average equity -4.92% 9.15% Return (loss) on average assets -0.50% 1.01% Net interest margin 3.32% 4.23% Efficiency ratio 94.57% 60.56% Allowance for loan losses to total loans 2.13% 1.46% Net charge-offs to avg loans (annualized) 0.40% 0.25% Nonperforming loans to total loans 1.82% 0.44% Nonperforming assets to total assets 1.45% 0.34% American Community Bancshares, Inc. Consolidated Income Statements (Amounts in thousands except share and per share data) (Unaudited) December 31, September 30, June 30, Three months ended 2008 2008 2008 Total interest income $7,082 $7,572 $7,569 Total interest expense 3,629 3,568 3,629 Net interest income 3,453 4,004 3,940 Provision for loan losses 2,837 1,441 296 Net interest income after provision for loan loss 616 2,563 3,644 Non-interest income Service charges on deposit accounts 525 593 597 Mortgage banking operations 35 43 95 Realized gains on sale of securities - - - Gain/loss on derivatives 211 (4) (148) Loss on SERP investment (106) (397) (72) Other (24) 51 68 Total non-interest income 641 286 540 Non-interest expense Salaries and employee benefits 1,823 1,873 1,639 Occupancy and equipment 516 566 614 Other than temporary impairment of investment securities 128 2,753 - Merger related expenses 73 399 - Other 1,155 1,109 1,190 Total non-interest expense 3,695 6,700 3,443 Income (loss) before income taxes (2,438) (3,851) 741 Provision (benefit) for income taxes (1,504) (653) 257 Net income (loss) $(934) $(3,198) $484 Net income (loss) per share Basic $(0.14) $(0.49) $0.07 Diluted $(0.14) $(0.49) $0.07 Weighted average number of shares outstanding Basic 6,603,816 6,561,132 6,542,091 Diluted 6,603,816 6,561,132 6,613,633 Return (loss) on average equity -7.20% -23.53% 3.46% Return (loss) on average assets -0.69% -2.40% 0.36% Net interest margin 2.76% 3.38% 3.23% Efficiency ratio 114.35% 156.18% 76.85% Allowance for loan losses to total loans 2.13% 1.74% 1.55% Net charge-offs to avg loans (annualized) 0.99% 0.50% 0.00% Nonperforming loans to total loans 1.82% 0.93% 0.52% Nonperforming assets to total assets 1.45% 0.74% 0.42% American Community Bancshares, Inc. Consolidated Income Statements (Amounts in thousands except share and per share data) (Unaudited) March 31, December 31, Three months ended 2008 2007 Total interest income $8,188 $8,737 Total interest expense 3,873 4,068 Net interest income 4,315 4,669 Provision for loan losses 425 471 Net interest income after provision for loan loss 3,890 4,198 Non-interest income Service charges on deposit accounts 602 613 Mortgage banking operations 86 83 Realized gains on sale of securities - - Gain/loss on derivatives 272 132 Loss on SERP investment (18) - Other 77 73 Total non-interest income 1,019 901 Non-interest expense Salaries and employee benefits 1,743 1,724 Occupancy and equipment 584 505 Other than temporary impairment of investment securities - - Merger related expenses - - Other 1,044 1,132 Total non-interest expense 3,371 3,361 Income (loss) before income taxes 1,538 1,738 Provision (benefit) for income taxes 547 626 Net income (loss) $991 $1,112 Net income (loss) per share Basic $0.15 $0.17 Diluted $0.15 $0.17 Weighted average number of shares outstanding Basic 6,513,526 6,502,288 Diluted 6,623,392 6,652,452 Return (loss) on average equity 7.24% 8.26% Return (loss) on average assets 0.78% 0.88% Net interest margin 3.76% 4.01% Efficiency ratio 63.20% 60.34% Allowance for loan losses to total loans 1.51% 1.46% Net charge-offs to avg loans (annualized) 0.07% 0.10% Nonperforming loans to total loans 0.60% 0.44% Nonperforming assets to total assets 0.47% 0.34%

SOURCE American Community Bancshares, Inc.

http://www.americancommunitybank.com

For full details for ACBA click here.

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