First South Bancorp in Washington, N.C., is purging a series of bad loans.
The $707 million-asset company said Friday that it would sell $46.5 million in problem loans to Emerald Portfolio for $25.1 million. First South said a separate pact gives Emerald an option to buy the majority of First South's foreclosed real estate.
The loan sale would result in a pretax charge of $17.6 million, while the real estate deal would lower pre-tax earnings by $5.2 million.
"We realize that the loss generated from this asset sale represents a significant use of capital," Bruce Elder, First South's chief executive, said in a press release. "After careful consideration of the financial ramifications, management and the board … concluded that the benefits derived from the improved asset quality position achieved from an accelerated disposition plan, outweighed the initial impacts of the transaction on our institution."
First South lost $12.9 million in the fourth quarter, primarily because of loan losses, after earning $441,000 a year earlier.
