Welcome


George Bernard Shaw once said: People are always blaming their circumstances for what they are. I don’t believe in circumstances. The people who get on in this world are the people who get up and look for the circumstances they want, and, if they can’t find them, make them.  
 
In 2010, we are taking a page out of Mr. Shaw’s book—creating the circumstances we want in spite of a difficult economy.  We started off 2010 with news of growth. The addition of North State Bank Mortgage enables us to offer value-added mortgage services to existing and new customers, and it was immediately accretive to earnings. As the year goes forward, we will continue to look for sound, strategic ways to grow the bank as we offer more to our customers.  
 
North State Bancorp reported net income for first quarter 2010 of $514,000 compared to $833,000 for first quarter 2009, a decrease of $319,000 or 38.3%.   Both net income results include gains on security sales—$232,000 or $143,000 net of taxes for the quarter ending March 31, 2010, and $464,000 or $285,000 net of taxes for the same period in 2009.   
 
The year-to-year decrease in earnings for first quarter 2010 is principally a result of higher reserves for possible loan losses; higher FDIC insurance premiums; and expenses related to Other Real Estate Owned (OREO) by the bank, including write-downs on the value of foreclosed properties.  Diluted earnings per share were $0.07 for first quarter 2010 compared to $0.11 for first quarter 2009. Net interest income increased $330,000 or 6.5% from $5.1 million for first quarter 2009 to $5.4 million in 2010.     
 
Total assets for the Company as of March 31, 2010, were $701.1 million compared to $720.6 million as of March 31, 2009, a decrease of $19.5 million.  Total deposits and total loans as of March 31, 2010, were $628.1 million and $518.4 million, respectively, compared to total deposits and total loans as of March 31, 2009, of $642.6 million and $549.6 million, respectively.  The reduction in total assets and total deposits is the result of the Company’s continuing efforts to reduce non-core fundings, which decreased $42.3 million in a year-to-year comparison from March 31, 2009, to March 31, 2010.  Core deposits, which primarily include demand deposit, money market and time deposit account for our customers, increased by $27.8 million, or 6.7%, over the same period. The reduction in total loans is a result of both the Company’s focus on banking customers who seek a mutually beneficial banking relationship, as well as the impact of the recession on overall loan demand.
 
We were proud to report earnings for first quarter. But there is a story behind the numbers—one we believe reveals the true fabric of our company:   
 
•  North State Bank is well-capitalized and, moreover, has a plan for deploying capital to grow the bank in the right way—sound, smart, profitable growth, not growth for growth’s sake.  
 
•  Asset quality continues to challenge earnings.  These are tough times.  People—including many of our customers—are struggling and may continue to do so for some time to come.  The key is to work with them in a mutually beneficial relationship.   
 
•  If ever a time called for strong leadership, commitment and passion—this is it.  We are grateful we focused on leadership at all levels of our organization before we even opened our doors for business and we continue that focus today.  It prepared us for today’s challenges.  Our people have a deep understanding of our customers and what they are trying to accomplish, as well as knowledge of our Bank and what we are trying to accomplish.  That is a strong combination.  
 
•  Core earnings are strong, especially given the impact of the recession, giving us the opportunity to build capital and, at the same time, reserve against potential problem loans if and when they surface.
 
  We are celebrating our 10th anniversary in business. While one day we would have been seen as a young company, in the fast-paced world of today, ten years is a long time.  But, we’re just getting started.  While we look back on our progress, at the same time, we look forward to what is in front of us—more challenges, more opportunities, and greater success.  Many thanks go to those who have been with us all along and also to those who have joined us on our journey.   As always, we thank you, our shareholders and customers, for your continued support.


Very cordially,

 

Larry D. Barbour
President and Chief Executive Officer