LXBK Lsb Bancshares (MM)

LSB Bancshares Reports 2nd Quarter Financial Results LEXINGTON, N.C., July 15 /PRNewswire-FirstCall/ -- LSB Bancshares, Inc. (NASDAQ:LXBK), parent company of Lexington State Bank, reported net income in the second quarter of 2005 of $2,430,000, or $0.28 per diluted share, compared to $2,236,000, or $0.26 per diluted share, in the second quarter of 2004. The increase in earnings was primarily due to higher net interest income, which was favorably impacted by strong growth in average earning assets and a modest recovery in the net interest margin. Net interest income increased 15% to $11,051,000 in the second quarter of 2005 from $9,647,000 in the year-ago period, and more than offset a higher provision for loan losses, which was $1,060,000 in 2005's second quarter, versus $781,000 in the second quarter of 2004. Noninterest income in the second quarter of 2005 was $3,481,000, versus $3,889,000 in 2004's second quarter, though part of the decline was due to a $292,000 nonrecurring gain on the sale of real estate in the 2004 figures. Noninterest expense increased 4% to $9,808,000 in the second quarter of 2005 from $9,468,000 in 2004's second quarter. For the six months ended June 30, 2005, net income was $4,662,000, or $0.54 per diluted share, compared to $4,389,000, or $0.51 per diluted share, in the first half of 2004. Net interest income increased 12% to $21,404,000 in the six months ended June 30, 2005 versus $19,081,000 in the year-ago period. Noninterest income for the first six months of 2005 was $6,743,000, versus $7,245,000 in the first six months of 2004, while noninterest expense increased 5% to $19,571,000 from $18,572,000 over the same respective periods. The provision for loan losses increased approximately 24% to $1,599,000 for the first half of 2005. As of June 30, 2005, total assets were approximately $989 million, an increase of 10% from the year-ago level, while deposits at that date were $790 million, reflecting growth of 11% from June 30, 2004. Net loans were $759 million at June 30, 2005, an increase of 12% from the amount at June 30, 2004. The allowance for loan losses at the end of 2005's second quarter was $8.5 million or 1.10% of loans. Shareholders' equity totaled $91.1 million, and represented an equity-to-assets ratio of 9.2%. Nonperforming assets, which includes nonaccrual loans, accruing loans more than 90 days past due, other real estate owned and renegotiated debt, totaled $7.7 million at June 30, 2005, as compared to $6.0 million at June 30, 2004. Substantially all of the increase resulted from a loan to a long-term customer of the Bank, secured by condominiums in a coastal community. Upon default by the customer, during the second quarter the Bank acquired the condominiums, by means of a deed-in-lieu of foreclosure, and booked this asset in other real estate owned in the amount of $3.0 million. Since acquiring the condominiums, the Bank has learned that some of the condominiums were damaged by water intrusion problems resulting from construction and design defects and storm damage. With the help of appropriate experts, the Bank is aggressively and thoroughly evaluating the extent and cause of the water intrusion problems, the repairs that will be required to keep the problems from recurring, the parties responsible for the problems and possible remedies available to the Bank. At this time, it is not possible to determine the extent of additional loss that will be incurred by the Bank. Commenting on the results, LSB Bancshares Chairman, President and CEO Robert F. Lowe stated, "One of the areas we have been most pleased with has been the acceleration in the growth of our balance sheet. Our total assets have nearly exceeded the $1 billion milestone, which reflects that many of our strategic growth initiatives are succeeding. The strong balance sheet growth has fueled an acceleration in net interest income growth, and cost saving initiatives, such as our Lexington branch consolidation, has allowed much of this increase in net interest income to flow through to the bottom line." LSB Bancshares recently declared a quarterly dividend of $0.17 per share, which will be paid July 15, 2005 to shareholders of record as of July 1, 2005. This level of dividend represents a 6% increase from the level at the year-ago date. 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 the bank's parent company, LSB Bancshares, Inc., is traded on the National Market and is quoted electronically under the NASDAQ symbol LXBK. The LSB website, which links online banking users to LSB By Net, is http://www.lsbnc.com/. Market makers include: Davenport & Company LLC; Friedman Billings Ramsey & Co.; FTN Midwest Research Secs.; Goldman, Sachs & Co.; Keefe, Bruyette & Woods, Inc.; Morgan Keegan & Co., Inc.; Morgan Stanley & Co., Inc.; Moors & Cabot, Inc.; The Robinson Humphrey Co.; Sandler O'Neill & Partners, and Schwab Capital Markets. NOTE: For more information, please contact Monty J. Oliver, EVP & Chief Financial Officer @ 336-242-6207 or 336-248-6500 or 1-800-876-6505, ext. 207 This news release contains forward-looking statements as defined by federal securities laws. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results could differ materially from current projections. Please refer to LSB's filings with the Securities and Exchange Commission for a summary of important factors that could affect LSB's forward-looking statements. LSB undertakes no obligation to revise these statements following the date of the news release. LSB Bancshares Inc. Consolidated Balance Sheets (In thousands) June 30 2005 2004 Assets Cash and Due from Banks $44,327 $46,522 Interest-Bearing Bank Balances 1,920 1,723 Federal Funds Sold 17,390 18,768 Investment Securities: Held to Maturity, at Amortized Cost 29,392 30,740 Available for Sale, at Market Value 102,369 93,422 Loans 767,281 687,736 Less, Allowance for Loan Losses (8,466) (8,112) Net Loans 758,815 679,624 Premises and Equipment 17,922 16,884 Other Assets 17,192 12,392 Total Assets 989,327 900,075 Liabilities Deposits: Demand 123,573 89,699 Savings, N.O.W. and Money Market Accounts 395,473 414,263 Certificates of Deposit of less than $100,000 138,587 119,549 Certificates of Deposit of $100,000 or more 132,554 91,519 Total Deposits 790,187 715,030 Securities Sold Under Agreements to Repurchase 964 1,134 Borrowings from the Federal Home Loan Bank 101,000 90,000 Other Liabilities 6,073 4,642 Total Liabilities 898,224 810,806 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 8,547,988 Shares in 2005 and 8,579,468 Shares in 2004 42,740 42,897 Paid-In Capital 9,750 10,397 Directors' Deferred Plan (1,286) (1,174) Retained Earnings 40,346 37,349 Accumulated Other Comprehensive Income (447) (200) Total Shareholders' Equity 91,103 89,269 Total Liabilities and Shareholders' Equity $989,327 $900,075 Memorandum: Standby Letters of Credit $5,380 $5,366 LSB Bancshares Inc. Consolidated Statements of Income (In thousands, except share data) Three Months Ended Six Months Ended June 30 June 30 2005 2004 2005 2004 Interest Income Interest and Fees on Loans $13,509 $10,848 $25,799 $21,442 Interest on Investment Securities: Taxable 879 771 1,756 1,591 Tax Exempt 368 372 714 754 Interest-Bearing Bank Balances 105 37 193 86 Federal Funds Sold 100 39 181 85 Total Interest Income 14,961 12,067 28,643 23,958 Interest Expense Deposits 2,946 1,597 5,322 3,242 Securities Sold Under Agreements to Repurchase and Federal Funds Purchased 1 2 5 5 Borrowings from the Federal Home Loan Bank 963 821 1,912 1,630 Total Interest Expense 3,910 2,420 7,239 4,877 Net Interest Income 11,051 9,647 21,404 19,081 Provision for Loan Losses 1,060 781 1,599 1,292 Net Interest Income After Provision for Loan Losses 9,991 8,866 19,805 17,789 Noninterest Income Service Charges on Deposit Accounts 1,700 1,835 3,253 3,506 Gains on Sales of Mortgages 146 147 278 257 Other Operating Income 1,635 1,907 3,212 3,482 Total Noninterest Income 3,481 3,889 6,743 7,245 Noninterest Expense Personnel Expense 5,352 4,962 10,686 10,109 Occupancy Expense 456 420 920 880 Equipment Depreciation and Maintenance 576 554 1,167 1,093 Other Operating Expense 3,424 3,532 6,798 6,490 Total Noninterest Expense 9,808 9,468 19,571 18,572 Income Before Income Taxes 3,664 3,287 6,977 6,462 Income Taxes 1,234 1,051 2,315 2,073 Net Income $2,430 $2,236 $4,662 $4,389 Earnings Per Share Basic $0.28 $0.26 $0.54 $0.51 Diluted $0.28 $0.26 $0.54 $0.51 Weighted Average Shares Outstanding Basic 8,559,262 8,587,482 8,570,943 8,570,431 Diluted 8,593,894 8,623,383 8,610,089 8,624,437 LSB Bancshares, Inc. Financial Highlights (In thousands, except ratios) Three Months Ended June 30 2005 2004 Change Financial Ratios: Return on average assets 1.01% 1.00% 1 BP Return on average shareholders' equity 10.65% 9.76% 89 Net Interest Margin (FTE) 4.88% 4.80% 8 Average Balances: Loans $757,637 $688,551 10.0 % Earning assets 901,955 823,063 9.6 Total assets 963,300 884,631 8.9 Interest-bearing deposits 658,491 622,578 5.8 Total deposits 771,273 711,221 8.4 Allowance for loan losses: Beginning balance $8,145 $8,224 (1.0)% Provision for loan losses 1,060 781 35.7 Loans charged off (896) (1,122) (20.1) Recoveries 157 229 (31.4) Ending balance 8,466 8,112 4.4 Six Months Ended June 30 2005 2004 Change Financial Ratios: Return on average assets 0.99% 1.01% (2)BP Return on average shareholders' equity 10.27% 9.80% 47 Net Interest Margin (FTE) 4.93% 4.76% 17 Average Balances: Loans $742,435 $679,186 9.3 % Earning assets 887,818 820,800 8.2 Total assets 947,742 877,139 8.0 Interest-bearing deposits 652,954 622,148 5.0 Total deposits 755,628 706,842 6.9 Allowance for loan losses: Beginning balance $7,962 $7,846 1.5 % Provision for loan losses 1,599 1,292 23.8 Loans charged off (1,342) (1,564) (14.2) Recoveries 247 538 (54.1) Ending balance 8,466 8,112 4.4 Nonperforming assets Nonperforming Loans: Past due 90 days or more $2,037 $2,052 (0.7)% Nonaccrual loans 584 1,632 (64.2) Restructured loans 789 1,000 (21.1) Total nonperforming loans 3,410 4,684 (27.2) Other real estate 4,274 1,300 228.8 Total nonperforming assets 7,684 5,984 28.4 Asset Quality Ratios Nonperforming loans to total loans 0.44% 0.87% (43)BP Nonperforming loans to total assets 0.34% 0.66% (32) Allowance for loan losses to total loans 1.10% 1.18% (8) Net charge-offs to average loans 0.15% 0.15% - Allowance for loan losses to nonperforming loans 2.48 X 1.73 X BP-- Denotes Basis Points DATASOURCE: LSB Bancshares, Inc. Contact: Monty J. Oliver, EVP & Chief Financial Officer of LSB Bancshares, Inc., +1-336-242-6207, or +1-336-248-6500, or +1-800-876-6505, ext. 207 Web site: http://www.lsbnc.com/

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