Third Quarter Data for Atlantic Southern Bank (ASFN)

The FDIC data for third quarter 2009 has been updated so I’d like to show you how Atlantic Southern (ASFN) is doing. My initial impression is that the deterioration has definitely slowed down, and in some areas there may be some stabilization or even some improvement.

The chart below compares the two most recent quarters for ASFN to the last two quarters of Security Bank (a former competitor of ASFN’s in the middle Georgia area) before they were taken over. (click for larger size)

Performance Ratios

First, net interest margin declined by thirty basis points. Second, returns on assets and equity are still negative, but they are less negative. Third, net charge-offs to loans has increased by a factor of approximately six. If I were an investor in ASFN, I would be asking about the likelihood of additional future charge-offs and whether the bank will have enough loss provisions set aside in the event of further deterioration of their loan portfolios.

Condition Ratios

The loss allowance to noncurrent loans decreased by about 230 basis points, suggesting to me noncurrent loans increased while the bank did not add to their loss allowance reserves. I would be asking if the bank has any money it can be setting aside for loss allowance. If not, get out of the stock while you still can!

Also, the noncurrent ratios both increased meaning more of the loans in their portfolio are now classified as noncurrent. These ratios are still a far cry from Security Bank’s before they were taken over, but I would keep a close eye on them to see if they keep increasing or if they look to be stabilizing.

Finally, the capital ratios declined all across the board. Judging just the third quarter data, Atlantic Southern has fallen from “Well Capitalized” to “Adequately Capitalized” as defined by the FDIC. I bet they didn’t include that in their press release!

Summary

In all fairness, Atlantic Southern might be stabilizing, but it is still too early to tell. I would wait to see what the next quarters of data look like before further modifying my opinion that Atlantic Southern will eventually be taken over. If the data shows further, slight deterioration, I think that would suggest Atlantic Southern is going to experience a slow and painful death. If the data does not change or it improves, I’ll give Atlantic Southern a 50-50 shot at staying alive past 2010.