KSBI KS Bancorp Inc (PK)

KS Bancorp, Inc. (the “Company”) (OTCBB: KSBI), parent company of KS Bank, Inc. (the “Bank”), today announced unaudited third quarter financial results for the 2009 fiscal year.

The Company reported a net loss of ($114,000), or ($0.09) per diluted share, before adjusting for the effect of dividends and accretion of discount on preferred stock for the three months ended September 30, 2009, compared to earnings of $304,000, or $0.23 per diluted share, for the same period in 2008. After adjusting for $28,000 in dividends and accretion of discount on preferred stock, the net loss available to common stockholders for the current period was ($142,000), or ($0.11) per diluted share. The decrease in earnings is primarily attributable to the provision for loan losses, which increased by $539,000 in the third quarter 2009, compared to $150,000 for the third quarter 2008. Net interest income for the three months ended September 30, 2009 was $2.3 million, compared to $2.5 million for the prior year period.

For the nine months ended September 30, 2009, the Company reported net income of $168,000, or $0.13 per diluted share, before adjusting for the effect of dividends and accretion of discount on preferred stock, compared to $1.1 million, or $0.82 per diluted share, for the nine months ended September 30, 2008. After adjusting for $28,000 in dividends and accretion on preferred stock, net income available to common stockholders was $140,000, or $.011 per diluted share, for the nine months ended September 30, 2009.

On August 21, 2009 the Company received $4.0 million Capital Purchase Plan (CPP) funds in exchange for 4,000 shares non-cumulative perpetual preferred stock (Series A) and 200 shares non-cumulative perpetual preferred stock (Series B). Although the Bank exceeded the regulatory requirements of a “well capitalized” bank as of June 30, 2009, the CPP investment enhances the Bank’s capital ratios. Prior to receiving the CPP, the Bank’s Tier 1 leverage ratio was 8.29%, the Tier 1 risk-based capital ratio was 11.86% and the total risk-based capital ratio was 13.12% as of June 30, 2009. As of September 30, 2009, the additional capital has increased the Bank’s respective ratios to 9.45%, 13.29%, and 14.54%.

The Company’s consolidated total assets increased $17.9 million to $342.7 million as of September 30, 2009, as compared to $324.8 million at December 31, 2008. Net loan balances have decreased $16.2 million from $244.3 million at December 31, 2008 to $228.1 million at September 30, 2009. Management continues to focus on the reduction of the Bank’s concentration in residential construction lending, which is the primary result of the decrease in loan balances. Total deposits were $257.0 million at September 30, 2009, compared to $242.4 at December 31, 2008, which reflects a $14.6 million increase. The reduction in loan balances, the increase in deposit balances and proceeds from the sale of preferred stock provided funds available for investments. The investment portfolio increased $28.6 million, from $54.6 million at December 31, 2008, to $83.2 million at September 30, 2009. Total stockholders’ equity increased 32.7%, from $17.7 million at December 31, 2008, to $23.5 million at September 30, 2009. The majority of the consolidated statement of financial condition growth is the result of implementing a leverage strategy designed to offset the impact of the 5% preferred stock dividend paid on the investment pursuant to the Capital Purchase Program.

Nonperforming assets, which includes nonaccrual loans and foreclosed assets, totaled $17.6 million at September 30, 2009, versus $8.5 million at December 31, 2008. The nonperforming assets consist of $6.5 million in foreclosure assets and $11.1 million in nonaccrual loans. The increase in the foreclosures is the primary result of two large relationships involving speculative construction. The nonaccrual loans consist of six large speculative construction relationships, which are secured by real estate, and the reserve requirements have been adequately adjusted. As a result of the increase of the nonperforming assets, year to date the Company has recorded $1.1 million in provision for loan losses. Net charge offs year to date are $966,000. The allowance for loan losses at September 30, 2009 totaled $3.9 million, or 1.67% of loans. Nonperforming loans and charge-offs are primarily related to our residential construction and development portfolio, which has been negatively affected by the slowing housing market. The Company believes the allowance is adequate to cover any additional losses.

Commenting on the third quarter 2009 results, Harold Keen, President and CEO, stated,

“Although, we experienced a loss in the third quarter of 2009, year to date we are able to report positive net income. KS Bank continues to be well-capitalized according to regulatory guidelines. We continue to monitor and reduce our concentration of constructions loans. Additionally, our staff continues to proactively monitor delinquencies and work with our customers to effectively resolve problem credits. Receiving the Capital Purchase Plan funds has positioned the bank for future loan growth by increasing our capital position. The leverage of the additional capital will more than compensate the additional cost.”

The Company also announced today that its Board of Directors voted not to declare a common stock dividend for the third quarter of 2009. The continued suspension of our quarterly dividend is a prudent step in preserving capital during this continuing economic downturn. The Board of Directors will continue to monitor business conditions, the Company’s profitability and capital levels, as well as asset quality in considering whether to resume cash dividend payments. The Bank continues to be well-capitalized according to regulatory guidelines, and we continue to be focused on serving the communities in which we are located.

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. 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 SubsidiaryConsolidated Statements of Financial Condition       September 30, 2009(unaudited)

December 31,

2008*

 

  (Dollars in thousands) ASSETS   Cash and due from banks: Interest-earning $ 4,967 $ 3,116 Noninterest-earning 1,442 1,550 Time Deposit 100 100 Investment securities available for sale, at fair value 83,234 54,588 Federal Home Loan Bank stock, at cost 2,998 3,008 Presold mortgages in process of settlement 655 924   Loans 231,925 248,097 Less Allowance for loan losses   (3,870 )   (3,753 ) Net loans 228,055 244,344   Accrued interest receivable 1,695 1,672 Foreclosed assets, net 6,503 2,450 Property and equipment, net 9,358 9,665 Other assets   3,728     3,371     Total assets $ 342,735   $ 324,788     LIABILITIES AND STOCKHOLDERS' EQUITY   Liabilities Deposits $ 256,994 $ 242,366 Short-term borrowings 6,220 5,084 Long-term borrowings 54,048 58,048 Accrued interest payable 440 528 Accounts payable and accrued expenses   1,512     1,032     Total liabilities   319,214     307,058     Stockholder's Equity: Non-cumulative perpetual preferred stock (Series A), no par value 4,000 shares authorized, issued and outstanding $ 4,000 $ - Non-cumulative perpetual preferred stock (Series B), no par value 200 shares authorized, issued and outstanding 200 - Common stock, no par value, authorized 20,000,000 shares; 1,309,501 shares issued and outstanding in 2008 and 2007 1,607 1,607 Retained earnings, substantially restricted 16,982 17,117 Accumulated other comprehensive income (loss)   732     (994 )   Total stockholders' equity   23,521     17,730     Total liabilities and stockholders' equity $ 342,735   $ 324,788     * Derived from audited financial statements KS Bancorp, Inc and SubsidiaryConsolidated Statements of Income (Unaudited)           Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 (In thousands, except per share data)   Interest and dividend income: Loans $ 3,486 $ 4,151 $ 10,831 $ 12,898

Investment securities

Taxable 315 298 893 908 Tax-exempt 405 349 1,126 1,032 Dividends 5 21 5 109 Interest-bearing deposits   3     5   5     39 Total interest and dividend income   4,214     4,824   12,860     14,986   Interest expense: Deposits 1,339 1,753 4,419 5,826 Borrowings   584     592   1,760     1,863 Total interest expense   1,923     2,345   6,179     7,689   Net interest income 2,291 2,479 6,681 7,297   Provision for loan losses   539     150   1,083     203   Net interest income after provision for loan losses   1,752     2,329   5,598     7,094   Noninterest income: Service charges on deposit accounts 338 341 980 1,020 Fees from presold mortgages 86 71 373 250 Gain (Loss) on sale of investments - - 104 13 Other income   45     51   146     132 Total noninterest income   469     463   1,603     1,415   Noninterest expenses: Compensation and benefits 1,381 1,495 4,214 4,516 Occupancy and equipment 261 254 779 737 Data processing & outside service fees 209 201 626 588 Advertising 23 42 54 134 Net foreclosed real estate 14 86 20 140 Other   695     392   1,769     1,137 Total noninterest expenses   2,583     2,470   7,462     7,252   Income (loss) before income taxes (362 ) 322 (261 ) 1,257   Income tax (benefit) expense   (248 )   18   (429 )   180   Net income (loss) $ (114 ) $ 304 $ 168   $ 1,077   Dividends on preferred stock (24 ) - (24 ) -   Accretion of discount on preferred stock   (4 )   -   (4 )   -   Income available to common stockholders $ (142 ) $ 304 $ 140   $ 1,077   Basic and Diluted earnings per share $ (0.11 ) $ 0.23 $ 0.11   $ 0.82   Dividends per common share $ -   $ 0.13 $ 0.13   $ 0.39