New Century Bancorp Inc. of Dunn, N.C., has lost money in two straight quarters and has been slapped with an enforcement order for lax underwriting, but its chief executive said that it has addressed regulators' concerns, and that it is already on the road back to profitability.
The $550 million-asset, two-bank holding company said last week that it lost $274,000 in the third quarter, compared with a $1.1 million profit a year earlier. In the second quarter it lost $197,000, versus a $1.3 million profit a year earlier.
New Century also disclosed in its earnings report that it has entered a memorandum of understanding with the Federal Deposit Insurance Corp. and the North Carolina Office of the Commissioner of Banks.
William L. Hedgepeth 2nd, who was promoted to president and chief executive in April when John Q. Shaw Jr., the holding company's founder and CEO, retired, said that the problems stemmed from lenders at one of the subsidiary banks who were "just not doing the right thing."
Mr. Hedgepeth said that the lenders have been replaced, and that the company has overhauled its credit administration department. Its chief credit officer has resigned, and Mr. Hedgepeth said it is searching for a successor.
New Century said its third-quarter nonperforming assets nearly tripled from a year earlier, to $6.7 million. Most of the credit issues were isolated to the loan portfolio of its New Century Bank in Dunn, Mr. Hedgepeth said. Credit quality at the other unit, New Century Bank South in Fayetteville, appears to be sound, though there is some concern about how drought conditions in southeastern North Carolina could affect agricultural loans.
Mr. Hedgepeth had been the president of New Century Bank South before becoming the parent's president and CEO. One of his first moves after the promotion was to hire Credit Risk Management LLC of Raleigh to review loan portfolios at both banks. The firm has done three reviews, including one last week.
"We brought them in in August, and it was better then it was in May," and last week the credit quality "was better than it was in August," he said. "We feel we've identified all the problems" in the portfolios.
Mr. Hedgepeth also said that he believes his company's problems are under control, and that the fourth quarter is shaping up to be "normal."
