Four Oaks Fincorp, Inc. Announces 2013 Second Quarter And Year To Date Results

Four Oaks Fincorp, Inc. (OTCBB:FOFN) (the “Company”), the holding company for Four Oaks Bank & Trust Company (the “Bank”), today announced the results for the second quarter and six months ended June 30, 2013. The net loss for the second quarter and six months ended June 30, 2013 was $104,000 and $27,000, respectively, compared to net income of $29,000 and $581,000 for the same periods of 2012, respectively. The provision for loan losses for the six months ended June 30, 2013 of $35,000 was greater than the negative provision of $286,000 for the same period in 2012. The Company had $2.5 million in net charge-offs recognized during the six months ended June 30, 2013 as compared to $2.4 million in net charge-offs recognized for the same period in 2012. Nonaccrual loans were $34.0 million at June 30, 2013, a decrease of $2.0 million from $36.0 million at December 31, 2012. The allowance for loan losses (ALLL) as a percentage of gross loans was 2.87% at June 30, 2013 compared to 3.32% at December 31, 2012. The decrease in the ALLL as a percentage of gross loans occurred primarily due to the decrease in the specific reserves on impaired loans which decreased from $5.4 million at December 31, 2012 to $1.4 million at June 30, 2013. The ALLL percentage for loans not considered impaired actually increased from 2.54% at December 31, 2012 to 2.86% at June 30, 2013. Management believes the June 30, 2013 allowance for loan losses is adequate to absorb probable losses inherent in the loan portfolio. We believe the strengthened internal controls related to the identification and valuation of impaired loans that we put in place during 2011 and 2012 resulted in more timely recognition of impaired assets resulting in more effective resolution of those assets. In 2013 our focus is directed to moving impaired assets off of our balance sheet.

The Bank was well capitalized at June 30, 2013, with total risk based capital of 10.95%, tier 1 risk based capital of 9.68%, and leverage ratio of 5.58%. At June 30, 2012, the Bank had total risk based capital of 10.95%, tier 1 risk based capital of 9.68%, and leverage ratio of 5.53%. The Company had total risk based capital of 10.82%, tier 1 risk based capital of 6.38%, and leverage ratio of 3.68% at June 30, 2013, as compared to 11.49%, 7.92%, and 4.52%, respectively, at June 30, 2012. We continue actively assessing our alternatives for preserving and improving capital, which may include increasing tangible common equity and regulatory capital, reducing our balance sheet, or other strategies.

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