LXBK Lsb Bancshares (MM)

LEXINGTON, N.C., July 17 /PRNewswire-FirstCall/ -- LSB Bancshares, Inc. (NASDAQ:LXBK), parent company of Lexington State Bank, reported net income in the second quarter of 2006 of $1,546,000, or $0.18 per diluted share, compared to $2,430,000, or $0.28 per diluted share, in the second quarter of 2005. As is discussed more fully below, the decrease in earnings was primarily due to a $1 million write-down on other real estate owned. Net interest income, which was affected by a lower net interest margin, decreased 1% to $10,951,000 in the second quarter of 2006 from $11,051,000 in the year-ago period. The provision for loan losses was $611,000 in 2006's second quarter, versus $1,060,000 in the second quarter of 2005. Noninterest income, benefiting from an 8% increase in service charges on deposit accounts, grew 3% to $3,586,000, versus $3,481,000 in 2005's second quarter. Noninterest expense, which included the $1 million write-down mentioned above, increased 19% to $11,688,000 in the second quarter of 2006 from $9,808,000 in 2005's second quarter. The above mentioned $1 million write-down, which reduced the carrying value from $3 million to $2 million, related to the previously disclosed condominium development in a coastal community that was acquired during the second quarter of 2005 through a deed-in-lieu of foreclosure. At the end of the second quarter of 2006, the Bank discovered for the first time that a portion of the condominium development assets had not been conveyed to the Bank as the Bank had previously been advised. The Bank is actively pursuing recovery of the losses incurred with this project. The above mentioned write-down also affected six-month results. For the six months ended June 30, 2006, net income was $3,287,000, or $0.38 per diluted share, compared to $4,662,000, or $0.54 per diluted share, in the first half of 2005. Net interest income increased 2% to $21,906,000 in the six months ended June 30, 2006 versus $21,404,000 in the year-ago period. Noninterest income for the first six months of 2006 was $6,785,000, versus $6,743,000 in the first six months of 2005, while noninterest expense increased 12% to $21,970,000 from $19,571,000 over the same respective periods. The provision for loan losses increased approximately 26% to $2,018,000 for the first half of 2006. As of June 30, 2006, total assets were approximately $986 million, essentially unchanged from the year-ago level, while deposits at that date were $829 million, reflecting growth of 5% from June 30, 2005. Net loans were $748 million at June 30, 2006, down 1% from the amount at June 30, 2005. The allowance for loan losses at the end of 2006's second quarter was $8.5 million or 1.12% 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 $8.9 million at June 30, 2006, versus $7.7 million at June 30, 2005. Commenting on the results, LSB Bancshares Chairman, President and CEO Robert F. Lowe stated, "The second quarter was challenging on several fronts. Margins remained tight, which restrained net interest income growth. Additionally, the write-down on the condominium development increased the pressure on noninterest expense. Lowe added, "We continue to work diligently to improve earnings momentum through our strategic plan. Having recently celebrated the groundbreaking of our new Archdale Office, we are confident in our long-term prospects and expanding market opportunities. Consistent with that outlook, your Board of Directors recently extended the Company's stock repurchase plan through May 31, 2008, and authorized the Company to repurchase a total of 400,000 shares under that extended program." LSB Bancshares recently declared a quarterly dividend of $0.17 per share, which will be paid July 15, 2006 to shareholders of record as of July 1, 2006. This level of dividend is the same amount as the level at the year-ago date. 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 and is quoted electronically under the Nasdaq 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) June 30 2006 2005 Assets Cash and Due from Banks $38,118 $44,327 Interest-Bearing Bank Balances 1,220 1,920 Federal Funds Sold 17,118 17,390 Investment Securities: Held to Maturity, at Amortized Cost 27,610 29,392 Available for Sale, at Market Value 116,832 102,369 Loans 756,845 767,281 Less, Allowance for Loan Losses (8,502) (8,466) Net Loans 748,343 758,815 Premises and Equipment 19,622 17,922 Other Assets 17,407 17,192 Total Assets 986,270 989,327 Liabilities Deposits: Demand 149,653 123,573 Savings, N.O.W. and Money Market Accounts 396,558 395,473 Certificates of Deposit of less than $100,000 136,932 138,587 Certificates of Deposit of $100,000 or more 145,568 132,554 Total Deposits 828,711 790,187 Securities Sold Under Agreements to Repurchase 909 964 Borrowings from the Federal Home Loan Bank 59,000 101,000 Other Liabilities 6,558 6,073 Total Liabilities 895,178 898,224 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 8,507,355 Shares in 2006 and 8,547,988 Shares in 2005 42,537 42,740 Paid-In Capital 9,146 9,750 Directors' Deferred Plan (1,361) (1,286) Retained Earnings 42,815 40,346 Accumulated Other Comprehensive Loss (2,045) (447) Total Shareholders' Equity 91,092 91,103 Total Liabilities and Shareholders' Equity $986,270 $989,327 Memorandum: Standby Letters of Credit $5,206 $5,380 LSB Bancshares Inc. Consolidated Statements of Income (In thousands, except share data) Three Months Ended Six Months Ended June 30 June 30 2006 2005 2006 2005 Interest Income Interest and Fees on Loans $15,017 $13,509 $29,506 $25,799 Interest on Investment Securities: Taxable 1,137 879 2,115 1,756 Tax Exempt 306 368 625 714 Interest-Bearing Bank Balances 83 105 165 193 Federal Funds Sold 223 100 472 181 Total Interest Income 16,766 14,961 32,883 28,643 Interest Expense Deposits 5,119 2,946 9,668 5,322 Securities Sold Under Agreements to Repurchase and Federal Funds Purchased 2 1 7 5 Borrowings from the Federal Home Loan Bank 694 963 1,302 1,912 Total Interest Expense 5,815 3,910 10,977 7,239 Net Interest Income 10,951 11,051 21,906 21,404 Provision for Loan Losses 611 1,060 2,018 1,599 Net Interest Income After Provision for Loan Losses 10,340 9,991 19,888 19,805 Noninterest Income Service Charges on Deposit Accounts 1,843 1,700 3,435 3,253 Gains on Sales of Mortgages 101 146 179 278 Other Operating Income 1,642 1,635 3,171 3,212 Total Noninterest Income 3,586 3,481 6,785 6,743 Noninterest Expense Personnel Expense 5,545 5,352 11,268 10,686 Occupancy Expense 478 456 957 920 Equipment Depreciation and Maintenance 535 576 1,065 1,167 Other Operating Expense 5,130 3,424 8,680 6,798 Total Noninterest Expense 11,688 9,808 21,970 19,571 Income Before Income Taxes 2,238 3,664 4,703 6,977 Income Taxes 692 1,234 1,416 2,315 Net Income $1,546 $2,430 $3,287 $4,662 Earnings Per Share Basic $0.18 $0.28 $0.39 $0.54 Diluted $0.18 $0.28 $0.38 $0.54 Weighted Average Shares Outstanding Basic 8,518,434 8,559,262 8,522,718 8,570,943 Diluted 8,549,643 8,593,894 8,560,576 8,610,089 LSB Bancshares, Inc. Financial Highlights (In thousands, except ratios) Three Months Ended June 30 2006 2005 Change Financial Ratios: Return on average assets 0.63% 1.01% (38)BP Return on average shareholders' equity 6.65% 10.65% (400) Net Interest Margin (FTE) 4.83% 4.98% (15) Average Balances: Loans $755,220 $757,637 (0.3)% Earning assets 918,984 901,955 1.9 Total assets 985,937 963,300 2.3 Interest-bearing deposits 689,215 658,491 4.7 Total deposits 830,437 771,273 7.7 Allowance for loan losses: Beginning balance $8,392 $8,145 3.0 % Provision for loan losses 611 1,060 (42.4) Loans charged off (1,153) (896) 28.7 Recoveries 652 157 315.3 Ending balance 8,502 8,466 0.4 Six Months Ended June 30 2006 2005 Change Financial Ratios: Return on average assets 0.67% 0.99% (32)BP Return on average shareholders' equity 7.11% 10.27% (316) Net Interest Margin (FTE) 4.87% 4.93% (6) Average Balances: Loans $754,952 $742,435 1.7 % Earning assets 916,176 887,818 3.2 Total assets 982,612 947,742 3.7 Interest-bearing deposits 695,698 652,954 6.5 Total deposits 829,734 755,628 9.8 Allowance for loan losses: Beginning balance $8,440 $7,962 6.0 % Provision for loan losses 2,018 1,599 26.2 Loans charged off (2,698) (1,342) 101.0 Recoveries 742 247 200.4 Ending balance 8,502 8,466 0.4 Nonperforming assets Nonperforming Loans: Past due 90 days or more $1,534 $2,037 (24.7)% Nonaccrual loans 2,956 584 406.2 Restructured loans 612 789 (22.4) Total nonperforming loans 5,102 3,410 49.6 Other real estate 3,755 4,274 (12.1) Total nonperforming assets 8,857 7,684 15.3 Asset Quality Ratios Nonperforming loans to total loans 0.67% 0.44% 23 BP Nonperforming loans to total assets 0.52% 0.34% 18 Allowance for loan losses to total loans 1.12% 1.10% 2 Net charge-offs to average loans 0.26% 0.15% 11 Allowance for loan losses to nonperforming loans 1.67 X 2.48 X BP-- Denotes Basis Points DATASOURCE: LSB Bancshares, Inc. Contact: Monty J. Oliver, EVP & CFO 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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