LXBK Lsb Bancshares (MM)

LEXINGTON, N.C., Jan. 22 /PRNewswire-FirstCall/ -- LSB Bancshares, Inc. (NASDAQ:LXBK), parent company of Lexington State Bank, reported net income in the fourth quarter of 2006 of $338,000, or $0.04 per diluted share, compared to $2,475,000, or $0.29 per diluted share, for the fourth quarter of 2005. The decline in earnings was primarily due to lower net interest income, a higher provision for loan losses and higher noninterest expense. Net interest income decreased 6% to $10,430,000 in the fourth quarter of 2006 from $11,089,000 in the year-ago period, and was negatively affected by a decline in the net interest margin to 4.55% in 2006's fourth quarter from 4.87% in the year-ago quarter. The provision for loan losses, which was $2,927,000 in the fourth quarter of 2006, versus $905,000 in the year-ago quarter, reflected the previously disclosed write-down of certain credits at the Bank and at Peoples Finance Company of Lexington, Inc. ("Peoples Finance"), the Bank's finance subsidiary. Finally, earnings were negatively affected by a 10% increase in noninterest expense to $11,154,000 in the fourth quarter of 2006. Noninterest income in the fourth quarter of 2006 was $3,938,000, an 8% increase from $3,651,000 in the year-ago period. Included in 2006's fourth quarter noninterest income was a gain of approximately $509,000 from granting an easement on some of the Bank's property in King, NC to the Department of Transportation. Noninterest expense included a one-time charge of approximately $590,000 related to freezing the Company's defined benefit plan, as well as an additional $166,000 from the write-down of certain assets. The freezing of the defined benefit plan is expected to result in ongoing expense savings of as much as $750,000 per year for the Company. For the twelve months ended December 31, 2006, net income was $6,000,000, or $0.71 per diluted share, compared to $9,637,000, or $1.12 per diluted share, in 2005. Net interest income decreased 1% to $43,128,000 in the twelve months ended December 31, 2006 from the year-ago period. The provision for loan losses was $5,510,000 in 2006, up from $3,219,000 in 2005, while noninterest income for 2006 increased approximately 4% from the level in the prior year. Noninterest expense in 2006 was up 9%, or 5% excluding $1,166,000 in write-downs and the $590,000 charge from freezing the defined benefit plan. Balance sheet growth was generally modest over the past year. As of December 31, 2006, total assets were approximately $986 million, up 1% from the year-ago level, while net loans were $750 million, essentially unchanged from the year-ago level. Deposits decreased 1% to $818 million, although the Bank did achieve 20% growth in demand deposits, which are typically one of the less expensive types of deposit. Nonperforming assets, including nonaccruing loans, accruing loans more than 90 days past due, restructured loans and other real estate owned, totaled $9.9 million at December 31, 2006, versus $8.1 million at the year-ago date. The reserve for loan losses at the end of 2006 was $9.6 million, or 1.26% of loans, versus $8.4 million, or 1.12% of loans, at the end of 2005. Shareholders' equity totaled $88.9 million, and represented an equity-to- assets ratio of 9.0%. According to LSB Bancshares Chairman, President and CEO Robert F. Lowe, "The year 2006 was a challenging one for LSB Bancshares. While we are obviously disappointed with the write-downs and the decline in earnings, we have taken a number of steps to tighten our credit discipline and to position the Bank for stronger results going forward. We also finished the year well capitalized and with a particularly solid reserve position." LSB Bancshares recently declared a quarterly cash dividend of $0.17 per share of common stock, payable on January 15, 2007, to shareholders of record on January 1, 2007. This is the same amount as the period one year ago. LSB Bancshares, Inc. is the parent company of Lexington State Bank. Lexington State Bank, which opened on July 5, 1949, is a community bank based in the Piedmont region of North Carolina. The Bank owns two subsidiaries: LSB Investment Services, Inc., which offers non-deposit, non-insured investment alternatives such as mutual funds and annuities; and Peoples Finance Co. of Lexington, Inc., which offers small loans and dealer financing. Common stock of LSB Bancshares, Inc. is traded on the Nasdaq Stock Market under the symbol "LXBK." The LSB website, which links online banking users to LSB by internet, is http://www.lsbnc.com/. Market makers include: Davenport & Company LLC; Friedman Billings Ramsey & Co.; FTN Financial Securities Corp.; Goldman Sachs & Co.; Keefe, Bruyette & Woods, Inc.; Morgan Keegan & Co., Inc.; Morgan Stanley & Co., Inc.; Moors & Cabot, Inc.; SunTrust Robinson Humphrey; Sandler O'Neill & Partners, and Schwab Capital Markets. Information in this press release contains forward-looking statements. These statements are identified by words such as "expects," "anticipates," "should," or other similar statements about future events. These forward- looking statements involve estimates, assumptions by management, risks, and uncertainties that could cause actual results to differ materially from current projections, including without limitations, the effects of future economic conditions, legislative and regulatory changes, and the effects of competition. Additional factors that could cause actual results to differ materially from those anticipated by forward-looking statements are discussed in LSB's filings with the Securities and Exchange Commission, including without limitation, its annual report on Form 10-K, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. LSB undertakes no obligations to revise these statements following the date of this news release. CONTACT: Monty J. Oliver, EVP & CFO; 336-242-6207 or 336-248-6500 or 1- 800-876-6505, ext 207. LSB Bancshares Inc. Consolidated Balance Sheets (In thousands) December 31 2006 2005 Assets Cash and Due from Banks $45,486 $45,600 Interest-Bearing Bank Balances 1,008 1,385 Federal Funds Sold 6,845 16,355 Investment Securities: Held to Maturity, at Amortized Cost 29,893 27,427 Available for Sale, at Market Value 117,236 100,732 Loans 759,978 755,398 Less, Allowance for Loan Losses (9,564) (8,440) Net Loans 750,414 746,958 Premises and Equipment 19,848 19,358 Other Assets 15,437 17,980 Total Assets $986,167 $975,795 Liabilities Deposits: Demand $158,109 $131,515 Savings, N.O.W. and Money Market Accounts 376,292 409,928 Certificates of Deposit of less than $100,000 144,089 140,700 Certificates of Deposit of $100,000 or more 139,193 140,030 Total Deposits 817,683 822,173 Securities Sold Under Agreements to Repurchase 948 1,657 Borrowings from the Federal Home Loan Bank 73,000 53,000 Unfunded Projected Pension Benefit Obligation 176 - Other Liabilities 5,420 7,136 Total Liabilities 897,227 883,966 Shareholders' Equity Preferred Stock, Par Value $.01 Per Share: Authorized 10,000,000 shares; None Issued - - Common Stock, Par Value $5 Per Share: Authorized 50,000,000 Shares; Issued 8,422,610 Shares in 2006 and 8,524,033 Shares in 2005 42,113 42,620 Paid-In Capital 8,177 9,430 Directors' Deferred Plan (1,390) (1,334) Retained Earnings 42,669 42,424 Accumulated Other Comprehensive Income (2,629) (1,311) Total Shareholders' Equity 88,940 91,829 Total Liabilities and Shareholders' Equity $986,167 $975,795 Memorandum: Standby Letters of Credit $4,242 $5,831 LSB Bancshares Inc. Consolidated Statements of Income (In thousands, except share data) Three Months Ended Twelve Months Ended December 31 December 31 2006 2005 2006 2005 Interest Income Interest and Fees on Loans $15,381 $14,508 $60,396 $54,568 Interest on Investment Securities: Taxable 1,216 938 4,528 3,610 Tax Exempt 314 306 1,237 1,386 Interest-Bearing Bank Balances 95 55 350 340 Federal Funds Sold 147 195 812 521 Total Interest Income 17,153 16,002 67,323 60,425 Interest Expense Deposits 5,737 4,140 21,057 13,120 Securities Sold Under Agreements to Repurchase and Federal Funds Purchased 3 3 12 12 Borrowings from the Federal Home Loan Bank 983 770 3,126 3,594 Total Interest Expense 6,723 4,913 24,195 16,726 Net Interest Income 10,430 11,089 43,128 43,699 Provision for Loan Losses 2,927 905 5,510 3,219 Net Interest Income After Provision for Loan Losses 7,503 10,184 37,618 40,480 Noninterest Income Service Charges on Deposit Accounts 1,651 1,789 6,884 6,816 Gains on Sales of Mortgages 97 171 390 554 Other Operating Income 2,190 1,691 7,016 6,422 Total Noninterest Income 3,938 3,651 14,290 13,792 Noninterest Expense Personnel Expense 5,729 5,297 22,497 21,426 Occupancy Expense 470 493 1,922 1,867 Equipment Depreciation and Maintenance 566 541 2,206 2,263 Other Operating Expense 4,389 3,781 16,699 14,214 Total Noninterest Expense 11,154 10,112 43,324 39,770 Income Before Income Taxes 287 3,723 8,584 14,502 Income Taxes (51) 1,248 2,584 4,865 Net Income $338 $2,475 $6,000 $9,637 Earnings Per Share Basic $0.04 $0.29 $0.71 $1.13 Diluted $0.04 $0.29 $0.71 $1.12 Weighted Average Shares Outstanding Basic 8,430,371 8,523,548 8,580,621 8,547,282 Diluted 8,449,102 8,562,563 8,509,679 8,587,537 LSB Bancshares, Inc. Financial Highlights (In thousands, except ratios) Three Months Ended December 31 2006 2005 Change Financial Ratios: Return on average assets 0.14% 1.01% (87) BP Return on average shareholders' equity 1.44% 10.60% (916) Net Interest Margin (FTE) 4.55% 4.87% (32) Average Balances: Loans $757,908 $760,505 (0.3)% Earning assets 917,802 912,049 0.6 Total assets 982,918 975,802 0.7 Interest-bearing deposits 659,301 682,577 (3.4) Total deposits 810,703 809,496 0.1 Allowance for loan losses: Beginning balance $8,461 $8,684 (2.6)% Provision for loan losses 2,927 905 223.4 Loans charged off (1,983) (1,262) 42.9 Recoveries 159 113 (21.2) Ending balance 9,564 8,440 14.6 Twelve Months Ended December 31 2006 2005 Change Financial Ratios: Return on average assets 0.61% 1.00% (39) BP Return on average shareholders' equity 6.47% 10.49% (402) Net Interest Margin (FTE): 4.75% 4.91% (16) Average Balances: Loans $756,088 $752,420 0.5% Earning assets 917,072 900,664 1.8 Total assets 982,486 963,888 1.9 Interest-bearing deposits 682,310 666,952 2.3 Total deposits 822,869 780,562 5.4 Allowance for loan losses: Beginning balance $8,440 $7,962 6.0% Provision for loan losses 5,510 3,219 71.2 Loans charged off (5,447) (3,239) 68.2 Recoveries 1,061 498 112.9 Ending balance 9,564 8,440 13.3 Nonperforming assets Nonperforming Loans: Past due 90 days or more $2,103 $1,911 10.0% Nonaccrual loans 3,686 929 296.8 Restructured loans 133 856 (84.5) Total nonperforming loans 5,922 3,696 60.2 Other real estate 3,969 4,391 (9.6) Total nonperforming assets 9,891 8,087 22.3 Asset Quality Ratios Nonperforming loans to total loans 0.78% 0.49% 29 BP Nonperforming loans to total assets 0.60% 0.38% 22 Allowance for loan losses to total loans 1.26% 1.12% 14 Net charge-offs to average loans 0.58% 0.36% 22 Allowance for loan losses to nonperforming loans 1.61 X 2.28 X BP-- Denotes Basis Points DATASOURCE: LSB Bancshares, Inc. Contact: Monty J. Oliver, EVP & CFO of LSB Bancshares, Inc., +1-336-248-6500, Ext. 207, or +1-800-876-6506, Ext. 207 Web site: http://www.lsbnc.com/

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