FNB United Corp., the holding company for CommunityONE Bank, has reported a fourth quarter 2009 net operating loss of $28 million.

During the quarter, FNB United recognized a provision for loan losses of $24.7 million and increased the deferred tax assets valuation reserve by $16.3 million.

Adjusting for dividends paid to the U.S. Treasury on the preferred stock issued in the Capital Purchase Program, the resulting fourth quarter 2009 loss attributable to common shareholders was $28.8 million, or $2.53 per diluted share.

During the fourth quarter of 2008, FNB United recognized a provision for loan losses of $15.5 million and charged off goodwill of $56.0 million. As a result, the company reported a net loss of $60.6 million, or $5.31 per diluted share, for the fourth quarter of 2008.

"The economy made 2009 a difficult year for many customers and their community banks in North Carolina, and it is very disappointing to report a loss," said Michael C. Miller, president and CEO. "Our losses in 2009 have been created by substantial provisions to our allowance for loan losses resulting from the housing slowdown and decline in real estate values and our aggressive approach to get these issues behind us.

"The reserves we've set aside have increased our allowance for loan losses to 3.16 percent of total loans, compared to 2.19 percent a year earlier.

"Nevertheless, we are encouraged about the future. We believe our core operating performance will be sufficient to sustain us through these difficult economic times as we also seek partial or full recovery of loans charged down and realization of future tax benefits.

"Retail deposit growth was a highlight again in the fourth quarter as we continued to gain attractively priced core deposits. The success of our three new offices in Greensboro, Seven Lakes and Cornelius, the effectiveness of our sales culture and our exceptional customer service have helped expand our customer base. Systemwide, we grew total deposits by over $207 million year-over-year, of which half of the growth came in the form of core deposits such as demand, NOW and money market accounts."

For the year, FNB United reported a net operating loss of $23.1 million, compared with a $2.7 million loss in 2008.

On the isse of credit quality, Miller said, "The prolonged downturn in the residential real estate market, and its resulting impact on contractors, developers, and property values, has adversely affected our loan portfolio and required additional reserves for loan losses. We have been aggressively and proactively identifying and working out potential problem loans in response.

"In particular, the residential land development and construction loan portfolios have been reviewed in depth during 2009, both internally and with assistance of independent loan review analysts. This initiative and scrutiny have done much toward early recognition of actual and potential losses, and are reflected in our levels of nonperforming loans and robust loan loss reserve during this challenging economy."

Nonperforming loans increased to $174.4 million, or 11.2 percent of total loans, as of Dec. 31, compared with 9.8 percent three months earlier. Nonperforming loans were $153.9 million at the end of the preceding quarter and $96 million a year ago.

In 2009, the company initiated a number of stimulus loan programs for the purpose of reducing the level of nonperforming assets.

"Mortgage lending was the bright spot for 2009," Miller said.

CommunityONE originated an additional $263 million in 1-4 family loans, its most successful year ever. Out of more than 5,000 loans serviced for the bank's portfolio or for Fannie Mae, only 15 homes are currently in process of foreclosure, a news release said.

"We've been working hard to keep families in their homes, and I credit the successful efforts by our staff in assisting these homeowners," said Miller.

Total deposits increased 13.7 percent to $1.72 billion as of Dec. 31, compared with $1.51 billion a year earlier.

FNB United remains well-capitalized for regulatory purposes, the news release said.

In October 2009, FNB United announced that it would temporarily discontinue its regular quarterly cash dividend on common stock to conserve capital.

In February 2009, FNB United received $51.5 million as a participant in the U.S. Treasury Department's Capital Purchase Program. FNB United issued 51,500 shares of senior preferred stock and a related warrant for 2,207,143 shares of FNB United common stock to the U.S. Treasury. To date, FNB United has paid $2.9 million in dividends on the senior preferred stock to the U.S. Treasury.

FNB United's net interest margin was 3.26 percent for the fourth quarter of 2009 compared with 3.25 percent for the immediate prior quarter and 3.08 percent for the fourth quarter a year ago. For the year, the net interest margin was 3.18 percent compared with 3.4 percent for 2008.

"The net interest margin was negatively affected during the quarter due primarily to the reversal of previously accrued interest," Miller said. "The drag on nonperforming loans, including the reversals, continues to weigh on net interest income and inhibit our net interest margin. We are well-positioned, however, in the event of rate increases in coming quarters."