Security Bank Corp. went deep into the red in the third quarter, hurt by a $26 million provision for loan losses, $4 million of losses on sales of other real estate owned and a decrease in net interest income due to higher levels of problem credits.

The Macon, Ga.-based bank company had a net loss of $19.7 million and a loss per share of 85 cents, compared with net income of $600,000 and earnings of 3 cents a share in the third quarter of 2007.

Third-quarter net interest income fell 47 percent to $12 million.

Nonperforming assets were $238 million, or 13.3 percent of total loans plus other real estate owned. This compares with 11.3 percent at the end of the second quarter of 2008 and 3 percent at the end of the third quarter in 2007.

On a sequential basis, loans declined 12 percent annualized with a 4 percent drop decline in the middle and coastal Georgia markets, a 12 percent dip in the Atlanta market and a 26 percent fall in Security Real Estate Services Inc., the company’s real estate and development lender and traditional mortgage originator.

Construction and acquisition and development loans were down more than $200 million year to date through Sept. 30.

“For well over a year, we have been diligently identifying problem credits and taking measures to appropriately value these credits through charge-offs and by more than doubling our allowance for loan losses,” said Tony E. Collins, interim CEO, in a prepared statement. “These problem credits primarily have been, and continue to be, focused in the residential real estate market, which has experienced a significant decline in growth over this period as financial market conditions deteriorated. Nonperforming assets are expected to remain elevated for the remainder of 2008 as we do not anticipate an improvement in the residential real estate market near term.”

Total deposits rose 10 percent to $2.4 billion, while total assets increased 6 percent to $2.89 billion.

To control expenses, Security Bank said it will cut 26 positions, or 5 percent of its workforce, to save about $1.6 million. Including attrition, Security Bank has trimmed its workforce by 22 percent in 2008.

Security Bank (NASDAQ: SBKC) operates six community banks with offices in middle Georgia, coastal Georgia and north metro Atlanta.