Banking company has profit

The owner of Southcoast Community Bank posted a $304,000 third-quarter profit while reporting a sizable jump in the volume of problem assets on its balance sheet.

The earnings for the three months ended Sept. 30 compared to an $889,000 loss a year ago, when Southcoast Financial Corp. took hefty write-downs on its investments in government-seized mortgage financiers Fannie Mae and Freddie Mac.

The Mount-Pleasant-based company also reported a sharp rise in so-called non-performing assets, which it defines as foreclosed real estate, bad loans and loans 90 days or more late but still accruing payments.

Those more than doubled since last fall to about $32 million, or 6.24 percent of total assets.

The jump reflected "the continuing decline of conditions in the Charleston market" since the third quarter of 2008, Southcoast said in a statement.

"What we're seeing right now is some stability," said L. Wayne Pearson, chairman and chief executive officer.

Pearson said Tuesday that the 10-branch community bank is working to reduce problem assets, stressing that its capital levels far exceed regulatory requirements.

"The strength of the company is that it's well-capitalized," he said.

Through the first nine months of the year, Southcoast's profit is up 64 percent to $1.03 million.

The bank said it added $1 million to its loan-loss reserves in the latest quarter, bringing the total to $6.7 million.

In response to the financial and credit crisis, Southcoast has been shrinking its balance sheet. For instance, it has decided not to renew some high-yielding deposit accounts as they matured, helping to cut interest payments by about a third to $2.6 million in the most recent quarter.

At the same time, the bank's loan portfolio is smaller, reducing interest revenue by 21 percent to $6 million.

Also, overhead expenses fell 17 percent to $3.2 million.

Southcoast's total assets at Sept. 30 were about $510 million, down about 6 percent from a year ago.