LXBK Lsb Bancshares (MM)

LEXINGTON, N.C., April 17 /PRNewswire-FirstCall/ -- LSB Bancshares, Inc. (NASDAQ:LXBK), parent company of Lexington State Bank, reported net income in the first quarter of 2006 of $1,741,000, or $0.20 per diluted share, compared to $2,232,000, or $0.26 per diluted share, in the first quarter of 2005. The decrease in earnings was primarily attributable to a significantly higher provision for loan losses in the first quarter of 2006 relative to the first quarter of 2005. Net interest income, which benefited both from an improvement in the net interest margin (4.92% versus 4.88%) and 5% growth in average earning assets, increased 6% to $10,955,000 in the first quarter of 2006 from $10,353,000 in the year-ago period. This increase was offset by a higher provision for loan losses, which was $1,407,000 in 2006's first quarter, up from $539,000 in the year-ago period. The higher provision for loan losses reflects an increase in charge-offs in the first quarter of 2006, as well as ongoing economic softness that is affecting the Company's customers in many of the markets served. Noninterest income was $3,199,000 in 2006's first quarter, down slightly from $3,262,000 in the year-ago level, with most of that decline due to a reduction in gains on the sale of mortgages. Noninterest expense was $10,282,000, up 5% from $9,763,000 in the first quarter of 2006. Most major areas of the balance sheet demonstrated single-digit percentage growth over the past year. Assets increased 4% to $986 million, while net loans increased 1% to $747 million. Deposits grew 10% to $843 million. Shareholders' equity, which represented 9.3% of assets, increased to $92.0 million, or $10.78 per share. Nonperforming assets, including nonaccruing loans, accruing loans more than 90 days past due, restructured loans and other real estate owned, were $7.6 million at March 31, 2006, up from $4.7 million at the year-ago date but down from $8.1 million at December 31, 2005. Included in the $7.6 million was $4.7 million in other real estate owned, much of which related to the acquisition, by means of deed-in-lieu of foreclosure, of coastal condominium units by the Bank during the second quarter of 2005. Subsequent to the end of the first quarter, $2.5 million in loans to a borrower in the furniture industry was moved to nonaccrual status as a result of the borrower's failure to satisfy the terms of a liquidation agreement. While these loans are secured, the extent of losses on the loans, if any, can not be determined as of the date of this release. The allowance for loan losses at the end of 2006's first quarter was $8.4 million, or 1.11% of loans, versus $8.1 million, or 1.09% of gross loans, at the end of 2005's first quarter. According to LSB Bancshares Chairman, President and CEO Robert F. Lowe, "Although we were gratified by many aspects of the first quarter's performance, the banking environment remains challenging. While the Bank has recently experienced sequential quarterly improvement in asset quality, pockets of economic weakness persist, as evidenced by the $2.5 million in loans that were put on nonaccrual status after the end of the quarter. We will continue to monitor our delinquencies and to work diligently to minimize any losses on those credits. Notwithstanding this increase in nonaccruing loans, it is important to note that the first quarter was marked by several positive highlights. Margins remained high and, in fact, improved slightly from the year-ago quarter; noninterest expense growth was limited to approximately 5%; and deposit growth was strong, reflecting not only higher balances by many customers but also the addition of new customer relationships as well." LSB Bancshares recently declared a quarterly cash dividend of $0.17 per share of common stock, payable on April 15, 2006, to shareholders of record on April 1, 2006. This is the same amount as in the year-ago quarter. 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. LSB The Bank is one of the largest community banks in North Carolina, with 25 offices in Davidson, Forsyth, Guilford, Randolph and Stokes counties and a mortgage origination office in Wake County. Services are also available through 31 ATMs and cash dispensers, "LSB By Net" online banking and 24-hour "LSB By Phone" banking. Common stock of the bank's parent company, LSB Bancshares, Inc., is traded on the Nasdaq National Market and is quoted under the symbol LXBK. Additional information about LSB is available on its web site, 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. 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. 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 LSB Bancshares Inc. Consolidated Balance Sheets (In thousands) March 31 2006 2005 Assets Cash and Due from Banks $40,998 $37,935 Interest-Bearing Bank Balances 999 1,358 Federal Funds Sold 22,327 17,489 Investment Securities: Held to Maturity, at Amortized Cost 29,873 29,300 Available for Sale, at Market Value 107,019 98,958 Loans 754,976 743,956 Less, Allowance for Loan Losses (8,392) (8,145) Net Loans 746,584 735,811 Premises and Equipment 19,238 17,577 Other Assets 18,713 13,633 Total Assets 985,751 952,061 Liabilities Deposits: Demand 140,526 103,165 Savings, N.O.W. and Money Market Accounts 418,174 414,482 Certificates of Deposit of less than $100,000 152,272 128,874 Certificates of Deposit of $100,000 or more 131,655 117,179 Total Deposits 842,627 763,700 Securities Sold Under Agreements to Repurchase 837 1,395 Borrowings from the Federal Home Loan Bank 43,000 90,000 Other Liabilities 7,337 7,098 Total Liabilities 893,801 862,193 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 8,528,017 Shares in 2006 and 8,554,860 Shares in 2005 42,640 42,774 Paid-In Capital 9,472 10,022 Directors' Deferred Plan (1,348) (1,285) Retained Earnings 42,715 39,370 Accumulated Other Comprehensive Loss (1,529) (1,013) Total Shareholders' Equity 91,950 89,868 Total Liabilities and Shareholders' Equity $985,751 $952,061 Memorandum: Standby Letters of Credit $5,365 $5,131 LSB Bancshares Inc. Consolidated Statements of Income (In thousands, except share data) Three Months Ended March 31 2006 2005 Interest Income Interest and Fees on Loans $14,489 $12,290 Interest on Investment Securities: Taxable 978 877 Tax Exempt 319 346 Interest-Bearing Bank Balances 82 88 Federal Funds Sold 249 81 Total Interest Income 16,117 13,682 Interest Expense Deposits 4,549 2,376 Securities Sold Under Agreements to Repurchase 5 4 Borrowings from the Federal Home Loan Bank 608 949 Total Interest Expense 5,162 3,329 Net Interest Income 10,955 10,353 Provision for Loan Losses 1,407 539 Net Interest Income After Provision for Loan Losses 9,548 9,814 Noninterest Income Service Charges on Deposit Accounts 1,592 1,553 Gains on Sales of Mortgages 78 132 Other Operating Income 1,529 1,577 Total Noninterest Income 3,199 3,262 Noninterest Expense Personnel Expense 5,723 5,334 Occupancy Expense 479 464 Equipment Depreciation and Maintenance 530 591 Other Operating Expense 3,550 3,374 Total Noninterest Expense 10,282 9,763 Income Before Income Taxes 2,465 3,313 Income Taxes 724 1,081 Net Income $1,741 $2,232 Earnings Per Share Basic $0.20 $0.26 Diluted $0.20 $0.26 Weighted Average Shares Outstanding Basic 8,528,327 8,578,604 Diluted 8,573,069 8,622,545 LSB Bancshares, Inc. Financial Highlights (In thousands, except ratios) Three Months Ended March 31 2006 2005 Change Financial Ratios: Return on average assets 0.72% 0.97% (25) BP Return on average shareholders' equity 7.59% 9.89% (230) Net Interest Margin (FTE) 4.92% 4.88% 4 Average Balances: Loans $754,682 $727,081 3.8 % Earning assets 913,339 873,542 4.6 Total assets 979,251 932,064 5.1 Interest-bearing deposits 702,253 647,356 8.5 Total deposits 829,024 739,821 12.1 Allowance for loan losses: Beginning balance $8,440 $7,962 6.0 % Provision for loan losses 1,292 539 139.7 Loans charged off (1,409) (446) 215.9 Recoveries 69 90 (23.3) Ending balance 8,392 8,145 3.0 Nonperforming assets Nonperforming Loans: Past due 90 days or more $2,038 $1,785 14.2 % Nonaccrual loans 242 545 (55.6) Restructured loans 617 795 (22.4) Total nonperforming loans 2,897 3,125 (7.3) Other real estate 4,689 1,536 205.3 Total nonperforming assets 7,586 4,661 62.8 Asset Quality Ratios Nonperforming loans to total loans 0.38% 0.42% (4) BP Nonperforming loans to total assets 0.29% 0.33% (4) Allowance for loan losses to total loans 1.11% 1.09% 2 Net charge-offs to average loans 0.18% 0.05% 13 Allowance for loan losses to nonperforming loans 2.90 X 2.61 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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