Waccamaw Bankshares, Inc. Announces Financial Results for the Third Quarter of 2010

WHITEVILLE, NC – November 16, 2010 – While we were disappointed with the resultsfor the quarter, we are encouraged by the improved financialperformance being reported in 2010. Our earnings continue to be reducedby our provision for loan losses but the real estate marketsconsistently reflect signs of stabilization of real estate values,commented, Jim Graham, President and CEO of Waccamaw Bankshares, Inc.

Second Quarter 2010 Results. For the three months ended September 30, 2010, we reported a net loss to common shareholders of $(742,996), or $(.12) per diluted common share, compared to net income of $331,038, or .06 per diluted share for the same period in 2009, a decrease of $1,074,034in net income. The Company had a slight decrease in net interest incomein the third quarter of 2010 as compared to the second quarter of 2009.A decrease in loan market interest rates, coupled with a $1,319,650 increase in nonaccrual loans, accounted for a $1,176,791 decrease in interest income. This decrease in interest income was partially offset by a $579,557 decrease in interest expense which resulted from a decrease in deposit rates. For the nine-month period ended September 30, 2010, we reported a net loss of $(582,334), or $(.10) per diluted common share, as compared to a net loss of $(1,714,198), or $(.31) per share, for the same period in 2009.

On September 30, 2010, our assets totaled $566,067,090 compared to $533,221,072 on December 31, 2009. Net loans were $301,395,076 compared to $340,020,798 on December 31, 2009. Total deposits on September 30, 2010, were $466,186,200 compared to $433,537,959at the end of 2009. Stockholders’ equity after adjustments forunrealized losses on securities available for sale as required by SFASNo. 115 increased by $2,591,317. At September 30, 2010, tangible book value per share was $2.64, as compared to $3.05 at December 31, 2009. For more information, see the consolidated balance sheets, theconsolidated statements of income, and the consolidated statements ofcash flows below.

Loans and Asset Quality.  We continue to maintain a loan portfolio dominated by real estate and commercial loans diversified among various industries.

There has been very little change in the composition of the loan portfolio over the last nine months.

The allowance for loan losses on September 30, 2010, was $9,412,813 or 3.03% of period end loans compared to $10,148,927 and 2.90% at December 31, 2009. The allowance for loan losses at September 30, 2010 represented 22.66% of impaired loans compared to 24.41% at December 31, 2009. At September 30, 2010 the Bank had loans totaling $36,397,107 in nonaccrual status as compared to $26,010,130 at December 31, 2009. The increase in non-accrual loans includes increases in six non-performing commercial real estate loans. On September 30, 2010,Waccamaw Bank entered into an Asset Purchase and Sale Agreement withAugusta Holdings, LLC (Augusta) pursuant to which the Bank soldnon-accrual commercial and construction and development loans toAugusta, without recourse, for $11,220,136, with no loss to the Bank. The largest non-accrual loan relationship totaled $4,263,370, with the average balance for the one hundred nine non-accrual loans totaling $333,918. At September 30, 2010 there was $3,762,398 in net charge-offs compared to $2,482,575 at September 30, 2009. The result of the above Sale Agreement with Augusta resulted in a recovery of three loan relationships totaling $3,408,183 less an estimated reserve of the Purchase Agreement of $1,250,000. There was $12,548 in repossessed assets at September 30, 2010 and $1,600 in repossessed assets at September 30, 2009. At September 30, 2010 there was $10,265,824 in other real estate owned compared to $5,453,713 at September 30, 2009.

Deposits.  Deposits on September 30, 2010, were $466,186,200 compared to $433,537,959 on December 31, 2009. Interest-bearing accounts represented 92.7% of total deposits at September 30, 2010 and 92.4% of total deposits at December 31, 2009.The significant increase in deposits was the result of the Bank takingadvantage of low deposit interest rates in the brokered CD market,purchasing brokered CDs of approximately $40,000,000 in the first quarter of 2010.

Investments.  The Bank maintains a portfolio of securities as part of itsasset/liability and liquidity management programs which emphasizeeffective yields and maturities to match its needs. The composition ofthe investment portfolio is examined periodically and appropriaterealignments are initiated to meet liquidity and interest ratesensitivity needs for the Bank.

Held to maturity securities are bonds, notes and debentures forwhich the Bank has the positive intent and ability to hold to maturityand which are reported at cost, adjusted by premiums and discounts thatare recognized in interest income using the interest method over theperiod to maturity or to call dates. At September 30, 2010 and at December 31, 2009,the Bank had no investments classified as held to maturity. Availablefor sale securities are reported at fair value and consist of bonds,notes, debentures and certain equity securities not classified astrading securities or as held to maturity securities.

Unrealized holding gains and losses, net of tax, on available forsale securities are reported as a net amount in a separate component ofstockholders’ equity. Realized gains and losses on the sale ofavailable for sale securities are determined using thespecific-identification method. Premiums and discounts are recognizedin interest income using the interest method over the period tomaturity or to call dates.

Declines in the fair value of individual held to maturity andavailable for sale securities below cost that are other than temporaryare reflected as write-downs of the individual securities to fairvalue. Related write-downs are included in earnings as realized losses.For the nine month period ended September 30, 2010, there were no impairment write-downs. For the nine month period ended September 30, 2009, the Company wrote down $2,156,820 in two single issue trust preferred securities and $152,656 of stock in Silverton Bank.

Stockholders Equity.  Waccamaw Bankshares, Inc. maintains astrong capital position which exceeds all capital adequacy requirementsof Federal regulatory authorities. Total stockholders’ equity at September 30, 2010 was $19,745,748 compared to $17,154,431 at December 31, 2009. This $2,591,317 increase was primarily due to unrealized gains on securities available for sale increasing $1,750,144, net of tax, operating loss of $582,334 and the sale of $2,393,801 of common stock through a rights offering to shareholders pursuant to a prospectus dated June 17, 2010.  The per share book value of our common stock as of September 30, 2010 was $2.64.  The per share tangible book value of our common stock as of September 30, 2010 was $2.62.  The Company and the Bank exceed all capital requirements under the applicable federal regulations.  As of September 30, 2010, the Company’s Tier 1 risk-weighted capital ratio and total capital ratio were 8.3% and 9.3%, respectively.   At September 30, 2010,the Bank’s capital ratios were as follows: Tier 1 leverage ratio, 5.9%,Tier 1 risk-based capital ratio, 8.5% and total risk-based ratio,10.5%.. These capital ratios were sufficient at June 30, 2010, and December 31, 2009, to classify the Bank as well capitalized in accordance with the FDIC’s regulatory capital rules. 

Waccamaw Bank

Waccamaw Bank, the primary subsidiary of Waccamaw Bankshares, Inc., is a state chartered bank operating seventeen offices in Whiteville, Wilmington, Shallotte (2), Sunset Beach, Oak Island, Holden Beach, Chadbourn, Tabor City, Southport (2) and Elizabethtown, North Carolina. Offices in South Carolina include Little River, Conway (2), Myrtle Beach, and Heath Springs. In addition to primary banking operations, the Bank’s Investment Groupprovides consumer investment and insurance services. Common stock ofWaccamaw Bankshares, Inc. is listed on the NASDAQ Market and tradesunder the symbol WBNK.  Additional corporate information, productdescriptions, and online services can be located on the Bank’s websiteat http://www.waccamawbank.com.