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Assets continue to grow for Atlantic Southern Bank

POSTED: August 15, 2008 5:01 a.m.

Atlantic Southern Financial Group, Inc. (NASDAQ Global Market:  ASFN) announced the financial results for the six months ended June 30 and the second quarter of 2008.  

Net earnings
For the second quarter of 2008, net earnings were $708,000 compared to $2,058,000 a year earlier. Diluted earnings per share decreased to $.16 from $.46 a year ago. Compared with the second quarter of 2007, the company’s net earnings decreased $1,350,000, or 66 percent, and the diluted earnings per share decreased $.30, or 65 percent. The decrease in the second quarter net earnings is attributable to a decrease in net interest income and an increase in non-interest expense due to the bank’s continued focus on branch expansion.  

“Earnings continue to be impacted by compression in our net interest margin. Since the fourth quarter of 2007, our cost of funds has decreased by 80 basis points. However, our net interest margin remains under pressure and decreased by 113 basis points to 2.87 percent when comparing the second quarter of 2008 to the second quarter of 2007,” said President and CEO Mark Stevens. “Because of the rapid decreases in interest rate cuts by the Federal Reserve, our interest rates on earning assets decreased at a much faster pace than the interest rates paid on our liabilities. Although the margin pressure resulted in a decrease in net interest income of $1.1 million from the second quarter of 2007 to the second quarter of 2008, our loan volume increased at a very healthy pace.

“Non interest expense increased by $663,000 when compared to the second quarter of 2007. This increase is a result of our strategic plan to enter new markets, build additional retail centers, and strengthen our management infrastructure by adding some key positions to help manage our growth and expansion.

“Asset quality declined slightly as we now have $7.8 million in non accrual loans and other real estate owned. However, as compared to our peers, our asset quality remains very manageable. Our non accrual loans consist principally of one large loan secured by real estate and timber in the central Georgia market. Our other real estate owned consists principally of one larger coastal loan secured by residential real estate. We continue to monitor our loan portfolio and believe our systems and policies in place are adequate to quickly identify any problems. Our exposure to residential real estate still remains relatively low and appears to be performing better in our markets than in the Atlanta metro area,” Stevens said.

“We increased non interest income by 35 percent. We had additional earnings from bank owned life insurance that was purchased in January 2008. Our wealth management division has proven to be successful and is off to a good start. We plan to expand our wealth management division to all of our markets as we continue to explore opportunities to increase our non interest income,” Stevens said.

Balance sheet
Total assets at June 30 were $979,573,000, an increase of 15 percent, or $127,093,000, from Dec. 31, 2007.  

At June 30, total gross loans were $793.1 million, up $95.7 million or 14 percent, from Dec. 31, 2007. Total deposits on June 30 were $835.3 million, an increase of $130.1 million, or 18 percent, from Dec. 31, 2007.  

“The first six months of 2008 proved to be aggressive as our assets grew by $127.1 million,” Stevens said. “The growth primarily was the result of loan growth in our central Georgia region.”

Our loan growth was not a result of relaxing our underwriting standards. In fact, we have actually tightened our underwriting criteria as we maneuver through this current credit cycle. We are changing our focus as we move forward from loan growth to obtaining core deposits and reducing our cost of funds. Part of our strategy is to lock in deposit rates for a longer period in anticipation of interest rates increasing.”

Asset quality
The company’s nonperforming assets increased approximately $2.3 million, or 41 percent, to approximately $7.8 million as of June 30 as compared to $5.5 million as of Dec. 31, 2007. This increase mainly consists of a $2.6 million loan collateralized by land and timber being placed on non-accrual in April. All non-accrual loans are well collateralized and the company does not anticipate any losses. All other real estate owned properties are being actively marketed for sale and the company is continuously monitoring these properties in order to minimize any losses.  

As a result of the increase in non-accrual loans, the total nonperforming assets increased to 0.98 percent of total loans plus other real estate owned as of June 30 compared to 0.79 percent as of Dec. 31. Net charge-offs annualized for the six months ended June 30 were 0.13 percent of average loans compared to 0.11 percent as of Dec. 31, 2007.

On June 30, the allowance for loan loss amounted to $9.7 million or 1.23 percent of total loans outstanding compared to $8.9 million or 1.27 percent of total loans outstanding at Dec. 31, 2007. Provision for loan loss increased $756 thousand to approximately $1.3 million for the six months ended June 30, 2008 from $592 thousand for the same period ended June 30, 2007.  

"Although we have had tremendous loan growth during the second quarter, we have performed a thorough analysis of our allowance for loan loss and believe that the allowance is adequate to absorb potential losses,” Stevens said.

“Asset quality declined slightly, but we believe our net charge offs will remain very nominal. Our past dues remain low as we continue our aggressive stance on identifying problem credits."

About Atlantic Southern Financial Group, Inc. and Atlantic Southern Bank
With headquarters in Macon, Atlantic Southern Financial Group, Inc., operates nine banking locations in the middle Georgia markets of Macon and Warner Robins, six locations in the coastal markets of Savannah, Darien, Brunswick and St. Simons Island, one location in the south Georgia market of Valdosta and one location in the northeast Florida market of Jacksonville, Fla. The company specializes in commercial real estate and small business lending.


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