ASB Bancorp Reports Fourth Quarter Results

ASHEVILLE, N.C., Jan. 31, 2012/PRNewswire/ -- ASB Bancorp, Inc. (the "Company") (NASDAQ GM: ASBB), the holding company for Asheville Savings Bank, S.S.B. (the "Bank"), announced today its operating results for the three months and year ended December 31, 2011. The Company was incorporated on May 12, 2011by the Bank to be the Bank's holding company upon completion of the Bank's conversion from the mutual to stock form of organization, which occurred on October 11, 2011.  The Company reported a net loss of $711,000, or $(0.14)per share, for the three months ended December 31, 2011and net income of $1.2 million, or $0.23per share, for the year ended December 31, 2011. The loss for the fourth quarter was primarily caused by higher loan and foreclosed property loss provisions that were principally attributable to lower valuations of real estate held as collateral for collateral dependent impaired loans and held in the foreclosed property portfolio.

"While we are disappointed with the fourth quarter loss, we are pleased with the overall improved results over last year," said Suzanne S. DeFerie, President and Chief Executive Officer. "We believe that our diligence in the re-evaluation of our non-performing assets, which resulted in additional write-downs during the quarter, will ultimately provide more normalized earnings.  Our local market economic indicators have begun to show slight improvements; however, we remain diligent in monitoring real estate valuations for consistent indications of a positive trend, particularly in the commercial segment of the market."

Balance Sheet Review

Total assets increased $40.9 million, or 5.5%, to $790.9 millionat December 31, 2011from $750.0 millionat December 31, 2010, primarily due to $53.9 millionin proceeds from the sale of common stock, net of issuance expenses, that were partially offset by an $11.5 millionreduction in deposits. Cash and cash equivalents also increased $48.1 million, or 198.5%, to $72.3 millionat December 31, 2011from $24.2 millionat December 31, 2010due to the receipt of proceeds from the issuance of stock in the conversion. Investment securities increased $67.7 million, or 37.3%, to $249.1 millionat December 31, 2011from $181.4 millionat December 31, 2010, primarily due to the reinvestment of proceeds from loan repayments and prepayments that were not replaced by new loan originations. Loans receivable, net of deferred fees, decreased $67.1 million, or 13.4%, to $432.9 millionat December 31, 2011from $500.0 millionat December 31, 2010as loan repayments, prepayments, and foreclosures continued to outpace new loan originations.

Deposits decreased $11.5 million, or 1.9%, to $608.2 millionat December 31, 2011from $619.8 millionat December 31, 2010. During 2011, core deposits, which exclude certificates of deposit, increased $17.3 million, or 5.2%, to $349.7 millionat December 31, 2011from $332.4 millionat December 31, 2010as a result of the Company's continued focus on increasing these types of deposits. Certificates of deposit decreased $28.9 million, or 10.0%, to $258.5 millionat December 31, 2011compared to $287.4 millionat December 31, 2010.

Asset Quality

The provision for loan losses totaled $2.0 millionfor the fourth quarter of 2011 compared to $4.1 millionfor the fourth quarter of 2010. The decrease in the provision was due to the combination of fewer charge-offs in the loan portfolio, a decline in impaired loans, and lower loan balances as compared to the fourth quarter of 2010. The provision for loan losses for the fourth quarter of 2011 was significantly higher than the provisions for loan losses for the previous three quarters of 2011 primarily because of lower valuations of real estate that serves as collateral for collateral dependent impaired loans and held in the foreclosed property portfolio.

The provision for loan losses totaled $3.8 millionfor the year ended December 31, 2011compared to $22.4 millionfor the year ended December 31, 2010. The decrease in the provision was due to the combination of fewer charge-offs in the loan portfolio, a decline in impaired loans, and lower loan balances. The allowance for loan losses totaled $10.6 million, or 2.45% of total loans at December 31, 2011compared to $12.7 million, or 2.54% of total loans, at December 31, 2010. The Company charged off $5.8 millionin loans, net of recoveries, during 2011 compared to $18.7 millionin loans charged off, net of recoveries, during 2010.

Nonperforming assets totaled $28.7 million, or 3.63% of total assets, at December 31, 2011, compared to $24.1 million, or 3.21% of total assets, at December 31, 2010. Nonperforming assets included $20.6 millionin nonperforming loans and $8.1 millionin foreclosed real estate at December 31, 2011, compared to $13.4 millionand $10.7 million, respectively, at December 31, 2010. As of December 31, 2011, nonperforming loans included six commercial land development loans that totaled $14.7 million, one commercial mortgage in the amount of $833,000, five commercial and industrial loans that totaled $2.6 million, eleven residential mortgages that totaled $1.9 million, and five home equity loans that totaled $440,000. As of December 31, 2011, the nonperforming loans had specific reserves of $1.0 million. Foreclosed real estate at December 31, 2011included eighteen properties with a total carrying value of $8.1 million.

During the fourth quarter of 2011, one loan for the construction of a mixed-use retail, commercial office, and residential condominium project located in western North Carolinamigrated from a performing troubled debt restructure loan to a nonaccruing loan.  As of December 31, 2011, the primary loan had a balance of $8.6 million, and the Bank loaned an additional $2.3 millionloan to a third party associated with the borrower's Chapter 11 bankruptcy plan for the purpose of facilitating a debtor in possession loan. The debtor in possession loan, which totaled $2.9 million, has a superior position to the Bank's primary loan. The court dismissed the bankruptcy, the loan stopped performing and the Bank is in the process of repurchasing the debtor in possession note and proceeding to foreclosure. The project has 8 retail condominiums of which 4 have been leased, 11 commercial office condominiums of which 3 have sold, and 29 residential condominiums of which one has sold.

Income Statement Analysis

Net interest income decreased $263,000, or 5.2%, to $4.7 millionfor the fourth quarter of 2011 compared to $5.0 millionfor the fourth quarter of 2010. The net interest margin decreased 23 basis points to 2.51% for the quarter ended December 31, 2011compared to 2.74% for the quarter ended December 2010. Interest and dividend income decreased $832,000, or 11.0%, for the fourth quarter of 2011 compared to the fourth quarter of 2010, primarily resulting from a 59 basis point decrease in the average yield on interest-earning assets that was partially offset by an increase in average interest-earning assets of $29.5 million. Interest expense decreased $569,000, or 22.0%, for the fourth quarter of 2011 compared to the fourth quarter of 2010, primarily resulting from a 34 basis point decline in the average rate paid on interest-bearing deposits coupled with a $27.7 milliondecrease in average interest-bearing deposits.

For the year ended December 31, 2011, net interest income decreased $1.3 million, or 6.0%, to $20.1 millioncompared to $21.4 millionfor the year ended December 31, 2010. The net interest margin decreased 15 basis points to 2.79% in 2011 from 2.94% in 2010. Interest and dividend income decreased $4.1 million, or 12.4%, to $28.7 millionin 2011 from $32.8 millionin 2010, primarily resulting from a 54 basis point decrease in the average yield on interest-earning assets. Interest expense decreased $2.8 million, or 24.5%, to $8.6 millionin 2011 from $11.4 millionin 2010, principally attributable to a 46 basis point reduction in the average rate paid on interest-bearing deposits and, to a lesser extent, a $12.4 milliondecrease in average interest-bearing deposits.

Noninterest income increased $511,000, or 28.0%, to $2.3 millionfor the three months ended December 31, 2011compared to $1.8 millionfor the three months ended December 31, 2010, primarily due to higher gains from sales of securities that were partially offset by lower gains from sales of residential mortgage loans and lower deposit overdraft fees. For the year ended December 31, 2011, noninterest income increased $266,000, or 3.5%, to $7.9 millionfrom $7.7 millionfor the year ended December 31, 2010, primarily due to higher gains from sales of securities and higher loan prepayment fees that were partially offset by lower deposit fees and lower gains from sales of residential mortgage loans.

Noninterest expense increased $584,000, or 10.2%, to $6.3 millionfor the three months ended December 31, 2011from $5.7 millionfor the three months ended December 31, 2010. The increase was primarily attributable to increases in foreclosed property, compensation and professional expenses that were partially offset by lower deposit insurance expense. For the year ended December 31, 2011, noninterest expense increased $314,000, or 1.4%, to $22.5 millionfrom $22.2 millionfor the year ended December 31, 2010, primarily attributable to increases in compensation, foreclosed property, professional service and data processing expenses that were partially offset by lower deposit insurance and advertising expenses.

ASB Bancorp, Inc. is a North Carolinacorporation with one wholly-owned subsidiary, Asheville Savings Bank. The Bank is a North Carolinachartered savings bank with a community focus offering traditional financial services through 13 full-service banking centers located in Buncombe, Madison, McDowell, Henderson, and Transylvaniacounties in Western North Carolina.

This news release, as well as other written communications made from time to time by the Company and its subsidiaries and oral communications made from time to time by authorized officers of the Company, may contain statements relating to the future results of the Company (including certain projections and business trends) that are considered "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 (the PSLRA). Such forward-looking statements may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," "intend" and "potential." For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the PSLRA.

The Company cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: prevailing economic and geopolitical conditions; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting the Company's operations, pricing, products and services and other factors that may be described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission. The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

Contact:	Suzanne S. DeFerie
	Chief Executive Officer
	[phone]

	Selected Financial Condition Data
			December 31,
	(dollars in thousands)		2011		2010		% change
	Total assets		$     790,868		$     749,965		5.5%
	Cash and cash equivalents		72,327		24,234		198.5%
	Investment securities		249,081		181,393		37.3%
	Loans receivable, net of deferred fees		432,883		500,003		-13.4%
	Allowance for loan losses		(10,627)		(12,676)		16.2%
	Deposits		608,236		619,757		-1.9%
	FHLB advances		60,000		60,000		0.0%
	Total equity		115,571		62,881		83.8%

	Selected Operating Data
			Three Months Ended						Year Ended
			December 31,						December 31,
	(dollars in thousands, except per share data)		2011		2010		% change		2011		2010		% change
	Interest and
	dividend income		$         6,760		$         7,592		-11.0%		$       28,734		$       32,815		-12.4%
	Interest expense		2,013		2,582		-22.0%		8,642		11,444		-24.5%
	Net interest income		4,747		5,010		-5.2%		20,092		21,371		-6.0%
	Provision for loan losses		1,974		4,110		-52.0%		3,785		22,419		-83.1%
	Net interest income (loss)
	after provision for
	loan losses		2,773		900		208.1%		16,307		(1,048)		1656.0%
	Noninterest income		2,337		1,826		28.0%		7,949		7,683		3.5%
	Noninterest expense		6,297		5,713		10.2%		22,481		22,167		1.4%
	Income (loss) before
	income tax provision		(1,187)		(2,987)		60.3%		1,775		(15,532)		111.4%
	Income tax
	provision (benefit)		(476)		(1,188)		59.9%		588		(6,074)		109.7%
	Net income (loss)		$          (711)		$       (1,799)		60.5%		$         1,187		$       (9,458)		112.6%
	Net income (loss) per share
	Basic		$         (0.14)		n/a		n/a		$           0.23		n/a		n/a
	Diluted		$         (0.14)		n/a		n/a		$           0.23		n/a		n/a
	Weighted average shares
	outstanding (1)
	Basic		5,104,019		-				5,104,019		-
	Diluted		5,104,019		-				5,104,019		-
	(1) Weighted average shares outstanding used in the calculation of basic and diluted earnings per share were
	calculated from October 12, 2011, the date on which the Company's stock began trading, through
	December 30, 2011.

	Selected Average Balances and Yields/Costs
			Three Months Ended December 31,
			2011				2010
			Average		Yield/		Average		Yield/
	(dollars in thousands)		Balance		Cost		Balance		Cost
	Interest-earning deposits with banks		$       64,849		0.25%		$       21,066		0.26%
	Loans receivable		449,036		4.80%		527,481		4.86%
	Investment securities		70,452		2.44%		55,537		2.61%
	Mortgage-backed and similar securities		168,030		2.06%		118,669		2.52%
	Other interest-earning assets		3,883		1.33%		3,970

	Selected Asset Quality Data
			Three Months Ended				Year Ended
	Allowance for Loan Losses		December 31,				December 31,
	(in thousands)		2011		2010		2011		2010
	Allowance for loan losses, beginning of period		$       10,873		$       16,883		$       12,676		$         8,994
	Provision for loan losses		1,974		4,110		3,785		22,419
	Charge-offs		(2,316)		(8,339)		(6,134)		(18,864)
	Recoveries		96		22		300		127
	Net charge-offs		(2,220)		(8,317)		(5,834)		(18,737)
	Allowance for loan losses, end of period		$       10,627		$       12,676		$       10,627		$       12,676
	Allowance for loan losses as a percent of:
	Total loans		2.45%		2.54%		2.45%		2.54%
	Total nonperforming loans		51.53%		94.43%		51.53%		94.43%

	Nonperforming Assets		December 31,
	(dollars in thousands)		2011		2010		% change
	Nonperforming Loans:
	Nonaccruing Loans (1)
	Commercial:
	Commercial mortgage		$            833		$         3,810		-78.1%
	Commercial construction and land development		14,695		5,205		182.3%
	Commercial and industrial		2,595		377		588.3%
	Total commercial		18,123		9,392		93.0%
	Non-commercial:
	Residential mortgage		1,922		3,194		-39.8%
	Non-commercial construction and land development		110		553		-80.1%
	Revolving mortgage		440		191		130.4%
	Consumer		27		94		-71.3%
	Total non-commercial		2,499		4,032		-38.0%
	Total nonaccruing loans (1)		20,622		13,424		53.6%
	Total loans past due 90 or more days
	and still accruing		-		-		0.0%
	Total nonperforming loans		20,622		13,424		53.6%
	Foreclosed real estate		8,125		10,650		-23.7%
	Total nonperforming assets		28,747		24,074		19.4%
	Performing troubled debt restructurings (2)		1,142		15,233		-92.5%
	Performing troubled debt restructurings and
	total nonperforming assets		$       29,889		$       39,307		-24.0%
	Nonperforming loans as a percent of total loans		4.76%		2.68%
	Nonperforming assets as a percent of total assets		3.63%		3.21%
	Performing troubled debt restructurings and
	total nonperforming assets to total assets		3.78%		5.24%
	(1) Nonaccruing loans include nonaccruing troubled debt restructurings.
	(2) Performing troubled debt restructurings exclude nonaccruing troubled debt restructurings.

	Foreclosed Real Estate				Year Ended December 31,
	(dollars in thousands)				2011		2010

	Selected Performance Ratios
			Three Months Ended				Year Ended
			December 31,				December 31,
			2011		2010		2011		2010
	Return on average assets (1)		-0.35%		-0.94%		0.15%		-1.25%
	Return on average equity (1)		-2.14%		-10.68%		1.44%		-13.01%
	Interest rate spread (1)(2)		2.26%		2.55%		2.60%		2.73%
	Net interest margin (1)(3)		2.51%		2.74%		2.79%		2.94%
	Efficiency ratio (4)		88.50%		83.41%		79.90%		76.18%
	(1) Ratios are annualized.
	(2) Represents the difference between the weighted average yield on average interest-earning assets and the
	weighted average cost on average interest-bearing liabilities. Tax exempt income is reported on a tax
	equivalent basis using a federal marginal tax rate of 34%.
	(3) Represents net interest income as a percent of average interest-earning assets. Tax exempt income is
	reported on a tax equivalent basis using a federal marginal tax rate of 34%.
	(4) Represents noninterest expenses divided by the sum of net interest income, on a tax equivalent basis
	using a federal marginal tax rate of 34%, and noninterest income.

	Quarterly Data
		Three Month Periods Ended
	(dollars in thousands,		December 31,		September 30,		June 30,		March 31,		December 31,
	except per share data)		2011		2011		2011		2011		2010
	Income Statement Data:
	Interest and dividend income		$         6,760		$         7,090		$         7,502		$         7,382		$         7,592
	Interest expense		2,013		2,120		2,205		2,304		2,582
	Net interest income		4,747		4,970		5,297		5,078		5,010
	Provision for loan losses		1,974		730		424		657		4,110
	Net interest income after
	provision for loan losses		2,773		4,240		4,873		4,421		900
	Noninterest income		2,337		2,004		1,928		1,680		1,826
	Noninterest expense		6,297		5,322		5,630		5,232		5,713
	Income (loss) before income
	tax provision		(1,187)		922		1,171		869		(2,987)
	Income tax provision (benefit)		(476)		351		429		284		(1,188)
	Net income (loss)		$          (711)		$            571		$            742		$            585		$       (1,799)
	Per Share Data:
	Net income (loss) per share - Basic		$         (0.14)		n/a		n/a		n/a		n/a
	Net income (loss) per share - Diluted		$         (0.14)		n/a		n/a		n/a		n/a
	Book value per share		$         20.69		n/a		n/a		n/a		n/a
	Average shares outstanding basic		5,104,019		n/a		n/a		n/a		n/a
	Average shares outstanding diluted		5,104,019		n/a		n/a		n/a		n/a
	Ending shares outstanding		5,584,551		n/a		n/a		n/a		n/a
			As Of		As Of		As Of		As Of		As Of
			December 31,		September 30,		June 30,		March 31,		December 31,
	(dollars in thousands)		2011		2011		2011		2011		2010*
	Ending Balance Sheet Data:
	Total assets		$     790,868		$     798,748		$     755,143		$     750,709		$     749,965
	Cash and cash equivalents		72,327		75,402		25,825		26,436		24,234
	Investment securities		249,081		235,285		225,802		204,316		181,393
	Loans receivable, net of deferred fees		432,883		450,263		467,599		484,729		500,003
	Allowance for loan losses		(10,627)		(10,873)		(12,353)		(12,632)		(12,676)
	Deposits		608,236		615,555		616,463		616,586		619,757
	Escrowed stock order funds		-		49,063		-		-		-
	FHLB advances		60,000		60,000		60,000		60,000		60,000
	Total equity		115,571		67,681		65,547		63,295		62,881
	Asset Quality:
	Nonperforming loans		$       20,622		$       11,565		$       11,070		$       14,190		$       13,424
	Nonperforming assets		28,747		22,262		20,588		24,696		24,074
	Nonperforming loans to total loans		4.76%		2.57%		2.37%		2.93%		2.68%
	Nonperforming assets to total assets		3.63%		2.79%		2.73%		3.29%		3.21%
	Allowance for loan losses		$       10,627		$       10,873		$       12,353		$       12,632		$       12,676
	Allowance for loan losses to total loans		2.45%		2.41%		2.64%		2.61%		2.54%
	Allowance for loan losses to
	nonperforming loans		51.53%		94.02%		111.59%		89.02%		94.43%
	* Ending balance sheet data as of December 31, 2010 were derived from audited consolidated financial statements.

SOURCE ASB Bancorp, Inc.