Horry County State Bank posts nearly $3.7 million quarterly loss

Loris-based Horry County State Bank recorded a net loss of nearly $3.7 million during the third-quarter of this year – an 11.8 percent greater loss than the same period a year ago, due in part to a quarterly increase in loan loss reserves – according to a filing Wednesday with the U.S. Securities and Exchange Commission.

The third-quarter performance follows losses of $256,000 during the first quarter of this year and $908,000 during the second quarter.

The earnings report was nearly two weeks late because examiners with the Federal Deposit Insurance Corp. asked bank officials to recalculate the amount of money set aside for bad loans. That resulted in the bank posting a loan loss reserve of $4.5 million for the quarter that ended Sept. 30 – about 76 percent higher than the amount set aside during the same period last year.

Despite the third-quarter performance, the bank has seen an improvement in its finances during the first nine months of 2012. Horry County State Bank lost $5.2 million through Sept. 30 compared with a nearly $25 million loss for the same period last year.

Jimmy Clarkson, the bank’s chief executive officer, noted in the quarterly report that Horry County State Bank continues to struggle to raise capital as required by a consent order the bank entered into with state and federal regulators. Clarkson said the bank – which is termed “critically undercapitalized” by regulators – must raise $13.2 million to be considered adequately capitalized and $20.6 million to be considered well capitalized.

The FDIC classifies banks according to their capital ratios, which is the percentage of a bank’s capital to its risks. Adequately capitalized banks have a ratio of 8 percent or higher while well capitalized banks have a 10 percent or higher ratio. Horry County State Bank’s ratio was 4.4 percent at the end of Sept. 30.

The bank had hoped to raise capital through a stock offering this year, but investors were not interested in purchasing any shares.

“We have not had any success to date in raising this capital, and there are no assurances that we will be able to raise this capital on a timely basis, or at all,” Clarkson said in the report.

The amount of non-performing loans declined during the first nine months of this year to $52.5 million – or about 10.2 percent of assets – compared with $60.4 million for the same period a year ago. However, the percentage of loans classified as being on a watch list or worse increased to 34.5 percent of all loans by Sept. 30 compared to 32 percent at the end of last year.

“The first nine months of 2012 continue to reflect the tumultuous economic conditions which have negatively impacted our clients’ liquidity and credit quality,” Clarkson said in the report. “Concerns regarding increased credit losses from the weakening economy have negatively affected capital and earnings of most financial institutions, including our bank.”

Horry County State Bank was organized in 1987 and opened its first office in Loris the following year. The bank now has 11 branches throughout Horry County. The bank, which had $531 million in assets at the end of June, has made several efforts to cut costs including reducing its work force by one-third over a two-year period and closing three underperforming branches.