KS Bancorp, Inc. (KSBI) Announces Fourth Quarter 2012 Financial Results

SMITHFIELD, N.C.--(BUSINESS WIRE)-- KS Bancorp, Inc. (the "Company") (OTCBB: KSBI), parent company of KS Bank, Inc. (the "Bank"), reports its unaudited operating results for the quarter ended December 31, 2012 and for the twelve months ended December 31, 2012.

For the quarter ended December 31, 2012, the Company reported net income available to common shareholders of $126,000, or $.10 per diluted share, compared to an income of $188,000 or $.14 per diluted share, for the three months ended December 31, 2011. The decrease in earnings is primarily attributable to the income tax expense of $24,000 for the three months ended December 31, 2012, compared to a tax benefit of $34,000 for the three months ended December 31, 2011.


Net income available to common shareholders for the twelve months ended December 31, 2012 increased 244.8% to $531,000, or $.41 per diluted share, from net income available to common shareholders of $154,000, or $.12 per diluted share, for the twelve months ended December 31, 2011. Comparing the twelve months December 31, 2012 to the twelve months ended December 31, 2011, the increase in earnings is primarily attributable to a reduction in the provision for loan loss expense. The Bank experienced improvements in asset quality, as well as a reduction in charge off loans during 2012. For the twelve months ended December 31, 2012, the expense for the provision for loan losses was $207,000, compared to $1.5 million for the twelve months ended December 31, 2011.

For the twelve months ended December 31, 2012, net interest income was $9.8 million, compared to $10.2 million for the twelve months ended December 31, 2011. Noninterest income increased to $2.6 million for the period ended December 31, 2012, compared to $1.6 million for the same period ended December 31, 2011. In 2012, the Bank opened a mortgage origination office in Greenville, NC, which contributed to the increase in the fee income. Fees from presold mortgages increased $611,000 during the twelve months ended December 31, 2012, from $119,000 at December 31, 2011, to $730,000 at December 31, 2012. Noninterest expenses increased $1.0 million to $11.5 million during the twelve months ended December 31, 2012, compared to $10.5 million at December 31, 2011. The increase in expenses is primarily due to the costs associated with foreclosed real estate and an increase in compensation and benefits as a result of the opening of the Greenville mortgage office.

The Company's unaudited consolidated total assets decreased $8.0 million to $314.9 million at December 31, 2012, compared to $322.9 million at December 31, 2011. The decrease in the balance sheet is primarily due to a reduction in investment and borrowings. The Company's investment securities decreased $9.0 million to $82.3 million at December 31, 2012, compared to $91.3 million at December 31, 2011. Total borrowings decreased $6.7 million from $50.1 million at December 31, 2011, to $43.4 million at December 31, 2012. Total deposits have decreased $2.5 million to $244.0 million at December 31, 2012, compared to $246.5 million at December 31, 2011. Although there was a decline in deposits, there was an increase of $19.4 million in core checking and savings accounts from $100.1 million at December 31, 2011 to $119.5 million at December 31, 2012. In 2012, the Bank continued to shift its deposit mix from more costly time deposits to less costly funding of demand deposits. Net loan balances increased $1.5 million with a balance of $196.9 million at December 31, 2012, compared to $195.4 million at December 31, 2011. Total stockholders' equity increased $1.0 million from $24.3 million at December 31, 2011, to $25.3 million at December 31, 2012.

Nonperforming assets, which includes nonaccrual loans and other real estate owned (OREO), decreased $7.8 million from $19.9 million at December 31, 2011, to $12.1 million at December 31, 2012. The nonperforming assets on December 31, 2012 consist of $6.6 million in OREO and $5.5 million in nonaccrual loans. Net charge offs for the twelve months ended December 31, 2012 were $260,000, compared to net charge offs of $1.0 million for the twelve months ended December 31, 2011. The allowance for loan losses at December 31, 2012 totaled $3.4 million, or 1.71% of all outstanding loans.

Commenting on the 2012 results, Mr. Keen stated, "The KS Bank team worked ardently to improve the Bank's nonperforming assets. In 2013, the Bank will continue to focus on mitigating its nonperforming assets. Reporting an improvement in net income from prior year is the result of the bank remaining focused on our employees, and employees committed to servicing our customers and local communities."

The Company also announced today that its Board of Directors voted not to declare a dividend for the fourth quarter of 2012. The continued suspension of the quarterly dividend is to further the Company's efforts to preserve capital. The Company's profitability, capital levels and asset quality are factors that are considered in determining whether to resume dividend payments.

KS Bank continues to be well-capitalized according to federal regulatory standards with total risk based capital of 16.70%, tier 1 risk- based capital of 15.45%, and a leverage ratio of 9.66% at December 31, 2012. The minimum levels to be considered well capitalized for each of these ratios are 10%, 6%, and 5%, respectively.

KS Bancorp, Inc. is a Smithfield, North Carolina-based single bank holding company. KS Bank, Inc., a state-chartered savings bank, is KS Bancorp's sole subsidiary. The Bank is a full service community bank serving the citizens of eastern North Carolina since 1924 and offers a variety of financial products and services including a securities brokerage service through an affiliation with a registered broker/dealer. There are nine full service branches located in Kenly, Selma, Clayton, Garner, Goldsboro, Wilson, Wendell, Smithfield, and Four Oaks, North Carolina plus a mortgage servicing location in Greenville, NC. For more information, visit www.ksbankinc.com.

This release contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Company. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management of the Company and on the information available to management at the time that these disclosures were prepared. These statements can be identified by the use of words like "expect," "anticipate," "estimate" and "believe," variations of these words and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. The Company undertakes no obligation to update any forward-looking statements.

KS Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
         
 
December 31, 2012 December 31,
(unaudited) 2011*
 
(Dollars in thousands)
ASSETS
 
Cash and due from banks:
Interest-earning $ 9,474 $ 1,182
Noninterest-earning 2,075 3,929
Time Deposit 100 100
Investment securities available for sale, at fair value 82,316 91,375
Federal Home Loan Bank stock, at cost 2,149 2,596
Presold mortgages in process of settlement 518 809
 
Loans 200,280 198,847
Less Allowance for loan losses   (3,424 )   (3,477 )
Net loans 196,856 195,370
 
Accrued interest receivable 1,113 1,316
Foreclosed assets, net 6,637 11,696
Property and equipment, net 8,579 8,825
Other assets   5,122     5,734  
 
Total assets $ 314,939   $ 322,932  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Liabilities
Deposits $ 243,996 $ 246,464
Short-term borrowings 2,156 6,933
Long-term borrowings 41,248 43,248
Accrued interest payable 233 275
Accounts payable and accrued expenses   1,984     1,696  
 
Total liabilities   289,617     298,616  
 
Stockholder's Equity:
Cumulative perpetual preferred stock (Series A), no par value
4,000 shares authorized, issued and outstanding $ 3,914 $ 3,866
Cumulative perpetual preferred stock (Series B), no par value
200 shares authorized, issued and outstanding 213 219
Common stock, no par value, authorized 20,000,000 shares;
1,309,501 shares issued and outstanding in 2010 and 2009 1,607 1,607
Retained earnings, substantially restricted 18,389 17,859
Accumulated other comprehensive income   1,199     765  
 
Total stockholders' equity   25,322     24,316  
 
Total liabilities and stockholders' equity $ 314,939   $ 322,932  
 
* Derived from audited financial statements
KS Bancorp, Inc and Subsidiary
Consolidated Statements of Income (Unaudited)
           
 
Three Months Ended Twelve Months Ended
December 31, December 31,

2012

2011

2012

2011

( In thousands, except per share data)
Interest and dividend income:
Loans $ 2,840 $ 2,941 $ 11,365 $ 12,128
Investment securities
Taxable 358 386 1,446 1,468
Tax-exempt 138 292 807 1,434
Dividends 23 5 49 23
Interest-bearing deposits   1     -     8     4  
Total interest and dividend income   3,360     3,624     13,675     15,057  
 
Interest expense:
Deposits 454 657 2,119 2,875
Borrowings   424     482     1,726     1,975  
Total interest expense   878     1,139     3,845     4,850  
 
Net interest income 2,482 2,485 9,830 10,207
 
Provision for loan losses   82     150     207     1,483  
 
Net interest income after
provision for loan losses   2,400     2,335     9,623     8,724  
 
Noninterest income:
Service charges on deposit accounts 292 284 1,123 1,170
Fees from presold mortgages 265 47 730 119
Gain on sale of investments 4 218 437 140
Other income   200     30     330     145  
Total noninterest income   761     579     2,620     1,574  
 
Noninterest expenses:
Compensation and benefits 1,559 1,443 6,031 5,692
Occupancy and equipment 268 243 1,042 993
Data processing & outside service fees 191 194 792 795
Advertising 13 10 48 69
Net foreclosed real estate 405 356 1,496 971
Other   509     450     2,070     1,941  
Total noninterest expenses   2,945     2,696     11,479     10,461  
 
Income (loss) before income taxes 216 218 764 (163 )
 
Income tax expense (benefit)   24     (34 )   (26 )   (573 )
 
Net income   192     252     790     410  
 
Dividends on preferred stock (55 ) (54 ) (218 ) (218 )
Accretion of discount on preferred stock, net   (11 )   (10 )   (41 )   (38 )
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