KSBI KS Bancorp Inc (PK)

KS Bancorp, Inc. (the “Company”) (OTCBB: KSBI), parent company of KS Bank, Inc. (the “Bank”), reported financial results for the third quarter of 2011.

For the three-month period ended September 30, 2011, the Company reported unaudited net loss available to common shareholders of ($454,000), or ($.35) per diluted share compared to a net income available to common shareholders of $224,000, or $.17 per diluted share, for the three months ended September 30, 2010. During the third quarter, the real estate markets the Bank serves continued to see a decline in real estate values. As a result of these declines, the Bank expensed $285,000 for write downs of other real estate owned (OREO) to fair market value. Additionally, the Bank added one loan to its impaired loan valuation that has an impairment of $642,000, resulting in an increase to the provision for loan losses for the three months ended September 30, 2011. For the nine months ended September 30, 2011, the Company reported net loss available to common shareholders of ($34,000), or ($.03) per diluted share, compared to a net income available to common shareholders of $681,000, or $.52 per diluted share, for the nine months ended September 30, 2010.

For the nine months ended September 30, 2011, net interest income declined $225,000 to $7.7 million, compared to $7.9 million earned during the nine months ended September 30, 2010. Noninterest income reported for the nine months ended September 30, 2011 was $1.0 million, compared to $2.2 million for the nine months ended September 30, 2010. The decrease in noninterest income is primarily attributable to the $830,000 gain on sale of investments for the nine months ended September 30, 2010, compared to a ($78,000) loss on sale of investments for the nine months ended September 30, 2011. Noninterest expenses decreased $511,000, or 6.2%, to $7.8 million for the nine months ended September 30, 2011, compared to $8.3 million for the nine months ended September 30, 2010.

The Company’s unaudited consolidated total assets decreased $9.0 million to $326.6 million at September 30, 2011, compared to $335.6 million at December 31, 2010. Net loan balances decreased $19.8 million from $215.3 million at December 31, 2010, to $195.5 million at September 30, 2011. The Company’s investment securities increased $4.3 million to $91.7 million at September 30, 2011, compared to $87.4 million at December 31, 2010. Total deposits decreased $1.9 million to $249.6 million at September 30, 2011, compared to $251.5 million at December 31, 2010. During the nine months ending September 30, 2011, savings accounts, demand accounts and money market accounts had a combined increase of $12.5 million, while certificates of deposit decreased $14.4 million. Total borrowings decreased $9.7 million from $60.1 million at December 31, 2010, to $50.4 million at September 30, 2011. Total stockholders’ equity increased $2.0 million from $22.1 million at December 31, 2010, to $24.1 million at September 30, 2011. The increase in stockholders equity in primarily attributable to the change in accumulated other comprehensive income.

Nonperforming assets, which includes nonaccrual loans and OREO, have increased $6.8 million from $15.6 million at December 31, 2010 to $22.4 million at September 30, 2011. The nonperforming assets at September 30, 2011 consist of $12.5 million in other real estate owned and $9.9 million in nonaccrual loans. For both the nine months ended September 30, 2011 and September 30, 2010, the Company recorded a $1.3 million expense to the provision for loan losses. Net charge offs for the first nine months of 2011 were $1.0 million, compared to net charge offs of $1.2 million for the nine months ended September 30, 2010. The allowance for loan losses at September 30, 2011 totaled $4.3 million, or 2.16% of all outstanding loans.

The Company also announced today that its Board of Directors voted not to declare a dividend for the third quarter of 2011. 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 regulatory standards with total risk based capital of 15.69%, tier 1 risk based capital of 14.43%, and a leverage ratio of 8.81% at September 30, 2011. 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. 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       September 30, 2011 December 31, (unaudited) 2010*   (Dollars in thousands) ASSETS   Cash and due from banks: Interest-earning $ 6,735 $ 1,861 Noninterest-earning 1,078 1,428 Time Deposit 100 100 Investment securities available for sale, at fair value 91,742 87,375 Federal Home Loan Bank stock, at cost 2,743 2,978 Presold mortgages in process of settlement 138 129   Loans 199,840 219,363 Less Allowance for loan losses   (4,328 )   (4,041 ) Net loans 195,512 215,322   Accrued interest receivable 1,350 1,663 Foreclosed assets, net 12,498 7,889 Property and equipment, net 8,859 9,151 Other assets   5,844     7,703     Total assets $ 326,599   $ 335,599     LIABILITIES AND STOCKHOLDERS' EQUITY   Liabilities Deposits $ 249,650 $ 251,531 Short-term borrowings 7,178 11,886 Long-term borrowings 43,248 48,248 Accrued interest payable 256 316 Accounts payable and accrued expenses   2,089     1,487     Total liabilities   302,421     313,468     Stockholder's Equity: Cumulative perpetual preferred stock (Series A), no par value 4,000 shares authorized, issued and outstanding 3,854 3,822 Cumulative perpetual preferred stock (Series B), no par value 200 shares authorized, issued and outstanding 221 226 Common stock, no par value, authorized 20,000,000 shares; 1,309,501 shares issued and outstanding in 2011 and 2010 1,607 1,607 Retained earnings, substantially restricted 17,671 17,704 Accumulated other comprehensive income (loss)   825     (1,228 )   Total stockholders' equity   24,178     22,131     Total liabilities and stockholders' equity $ 326,599   $ 335,599     * Derived from audited financial statements   KS Bancorp, Inc and Subsidiary Consolidated Statements of Income (Unaudited)         Three Months Ended Nine Months Ended September 30, September 30, 2011 2010 2011 2010 ( In thousands, except per share data) Interest and dividend income: Loans $ 2,988 $ 3,398 $ 9,187 $ 10,473

Investment securities

Taxable 396 333 1,082 1,159 Tax-exempt 306 456 1,142 1,417 Dividends 6 4 18 9 Interest-bearing deposits   2     3     4     5   Total interest and dividend income   3,698     4,194     11,433     13,063     Interest expense: Deposits 700 1,106 2,218 3,475 Borrowings   484     543     1,493     1,641   Total interest expense   1,184     1,649     3,711     5,116     Net interest income 2,514 2,545 7,722 7,947   Provision for loan losses   786     616     1,333     1,294     Net interest income after provision for loan losses   1,728     1,929     6,389     6,653     Noninterest income: Service charges on deposit accounts 299 344 886 989 Fees from presold mortgages 26 87 72 188 Gain (Loss) on sale of investments (59 ) 830 (78 ) 830 Other income   34     55     115     183   Total noninterest income   300     1,316     995     2,190     Noninterest expenses: Compensation and benefits 1,365 1,367 4,249 4,300 Occupancy and equipment 422 263 750 787 Data processing & outside service fees 20 203 601 637 Advertising 21 14 59 37 Net foreclosed real estate 485 660 615 895 Other   461     548     1,491     1,620   Total noninterest expenses   2,774     3,055     7,765     8,276     Income (loss) before income taxes (746 ) 190 (381 ) 567   Income tax benefit   (356 )   (98 )   (539 )   (304 )   Net income (loss)   (390 )   288     158     871     Dividends on preferred stock (55 ) (55 ) (164 ) (164 ) Accretion of discount on preferred stock, net   (9 )   (9 )   (28 )   (26 ) Income (loss) available to common stockholders $ (454 ) $ 224   $ (34 ) $ 681     Basic and Diluted earnings (loss) per share $ (0.35 ) $ 0.17   $ (0.03 ) $ 0.52