U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2001
[_] Transition Report Under Section 13
or 15(d) of the Exchange Act
For the transition period ended ______________________________________
Commission File Number 000-22734
---------------------
KS BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
North Carolina 56-1842707
- -------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
207 WEST SECOND STREET, KENLY, NC 27542
- --------------------------------------------------------------------------------
(Address of principal executive office)
(919) 284-4157
- --------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X
--------
No ____________
As of March 14, 2001, 908,834 shares of the issuer's common stock, no par value,
were outstanding.
This report contains 10 pages.
-1-
Page No.
--------
Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
March 31, 2001 and December 31, 2000.......................................... 3
Consolidated Statements of Operations
Three Months Ended March 31, 2001 and 2000.................................... 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2001 and 2000.................................... 5
Notes to Consolidated Financial Statements.................................... 6
ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................................... 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K..................................... 9
-2-
Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements
- -----------------------------
KS Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
================================================================================
March 31,
2001 December 31,
ASSETS (Unaudited) 2000*
------------- ------------
(In Thousands)
Cash and due from banks $ 638 $ 1,694
Interest-earning deposits with banks 6,174 673
Investment securities available for sale, at fair value 10,701 10,589
Investment securities held to maturity, at amortized cost 773 895
Loans receivable, net 134,116 133,312
Accrued interest receivable 1,061 1,128
Federal Home Loan Bank stock, at cost 1,008 942
Property and equipment, net 2,923 2,736
Other assets 251 328
-------- --------
TOTAL ASSETS $157,645 $152,297
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $123,856 $120,073
Advances from Federal Home Loan Bank 16,800 15,800
Accrued expenses and other liabilities 834 581
-------- --------
TOTAL LIABILITIES 141,490 136,454
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 5,000,000 shares authorized; no shares issued and outstanding - -
Common stock, 20,000,000 shares authorized;
908,834 and 905,598 shares issued and
outstanding in 2001 and 2000, respectively 4,753 4,718
Unearned ESOP shares (117) (117)
Accumulated other comprehensive income 134 36
Retained earnings, substantially restricted 11,385 11,206
-------- --------
TOTAL STOCKHOLDERS' EQUITY 16,155 15,843
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $157,645 $152,297
======== ========
* Derived from audited financial statements
See accompanying notes.
-3-
KS Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended
March 31,
----------------------
2001 2000
--------- --------
(In Thousands except
per share data)
INTEREST INCOME
Loans $2,999 $2,610
Investments and deposits in other banks 178 189
Interest-earning deposits with banks 17 17
------ ------
TOTAL INTEREST INCOME 3,194 2,816
------ ------
INTEREST EXPENSE
Deposit accounts 1,629 1,429
Advances from Federal Home Loan Bank 251 113
------ ------
TOTAL INTEREST EXPENSE 1,880 1,542
------ ------
NET INTEREST INCOME 1,314 1,274
PROVISION FOR LOAN LOSSES - 2
------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,314 1,272
------ ------
NON-INTEREST INCOME 208 115
------ ------
NON-INTEREST EXPENSE
Salaries and employee benefits 581 536
Occupancy and equipment 134 130
Other 204 184
------ ------
TOTAL NON-INTEREST EXPENSE 919 850
------ ------
INCOME BEFORE INCOME TAXES 603 537
INCOME TAXES 243 207
------ ------
NET INCOME $ 360 $ 330
====== ======
BASIC NET INCOME PER COMMON SHARE $ .41 $ .37
====== ======
DILUTED NET INCOME PER COMMON SHARE $ .40 $ .36
====== ======
DIVIDEND PER COMMON SHARE $ .20 $ .20
====== ======
See accompanying notes.
-4-
KS Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
================================================================================
Three Months Ended
March 31,
-----------------
2001 2000
-------- -------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 360 $ 330
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 74 73
Amortization, net 1 3
Release of ESOP shares 11 13
Provision for loan losses - 2
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable 67 (57)
(Increase) decrease in other assets 16 (41)
Increase in accrued expenses and other liabilities 253 39
------- -------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 782 362
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of:
Available for sale investment securities (2,750) (1,000)
Proceeds from sales, maturities and calls of:
Available for sale investment securities 2,796 58
Held to maturity investment securities 122 -
Purchase of Federal Home Loan Bank stock (66) (65)
Net increase in loans (804) (5,473)
Purchase of property and equipment (261) (38)
------- -------
NET CASH USED BY
INVESTING ACTIVITIES (963) (6,518)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 3,783 1,235
Increase in borrowed funds 1,000 4,000
Cash dividends paid (181) (184)
Proceeds from exercise of stock options 24 -
------- -------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 4,626 5,051
------- -------
NET DECREASE IN CASH
AND CASH EQUIVALENTS 4,445 (1,105)
CASH AND CASH EQUIVALENTS, BEGINNING 2,367 6,127
------- -------
CASH AND CASH EQUIVALENTS, ENDING $ 6,812 $ 5,022
======= =======
See accompanying notes.
-5-
KS Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
NOTE A - BASIS OF PRESENTATION
In management's opinion, the financial information, which is unaudited, reflects
all adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the financial information as of and for the three
month periods ended March 31, 2001 and 2000, in conformity with generally
accepted accounting principles. The financial statements include the accounts of
KS Bancorp, Inc. (the "Company") and its wholly-owned subsidiary, KS Bank, Inc.
Operating results for the three month period ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2001.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the consolidated
financial statements filed as part of the Company's 2000 annual report on Form
10-KSB. This quarterly report should be read in conjunction with such annual
report.
NOTE B - NET INCOME PER SHARE
Net income per share has been computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding during the
period. In accordance with generally accepted accounting principles, employee
stock ownership plan shares are only considered outstanding for the basic
earnings per share calculations when they are earned or committed to be
released. The weighted average number of shares outstanding or assumed to be
outstanding are summarized below:
Three months ended March 31,
----------------------------
2001 2000
------- -------
Weighted average number of common shares used
in computing basic net Income per share 887,678 901,211
Effect of dilutive stock options 20,867 25,378
------- -------
Weighted average number of common shares
and dilutive potential common shares used
in computing diluted net income per share 908,545 926,589
======= =======
NOTE C - COMPREHENSIVE INCOME
For the three months ended March 31, 2001 and 2000, total comprehensive income,
consisting of net income and unrealized securities gains and losses, net of
taxes, was $458,000 and $255,000, respectively.
-6-
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
This Quarterly Report on Form 10-QSB may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, loan demand, real estate
values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors affecting the
Company's operations, pricing, products and services.
Comparison of Financial Condition at March 31, 2001 and December 31, 2000
Consolidated total assets increased by $5.3 million during the three months
ended March 31, 2001, from $152.3 million at December 31, 2000 to $157.6 million
at March 31, 2001. This growth in total assets resulted from an increase in net
loans receivable during the quarter of $804,000 to $134.1 million and an
increase of liquid assets (in the aggregate) of $4.4 million from $13.9 million
at December 31, 2000 to $18.3 million at March 31, 2001. This growth was funded
by an increase of $1.0 in advances from the Federal Home Loan Bank and an
increase in customer deposits of $3.8 million.
Total stockholders' equity increased $312,000 from $15.8 million at December 31,
2000 to $16.1 million at March 31, 2001. This increase resulted principally from
net income of $360,000 for the three months, and unrealized gains on available
for sale investment securities during the period of $98,000 net of the regular
quarterly dividend during the period of $181,000, or $.20 per share.
Comparison of Results of Operations for the Three months ended March 31, 2001
and 2000
Net Income. Net income for the quarter ended March 31, 2001 was $360,000, or
$.41 per share, as compared with net income of $330,000, or $.37 per share, for
the three months ended March 31, 2000, an increase of $30,000. Increases in net
interest income and non-interest income for the quarter ended March 31, 2001 of
$40,000 and $93,000, respectively, were offset by an increase of $69,000 in non-
interest expenses. The provision for loan losses decreased by $2,000 during the
quarter.
Net Interest Income. Net interest income for the quarter ended March 31, 2001
increased $40,000 from an increased level of interest earning assets. The
increase in interest-earning assets occurred primarily in loans receivable and
interest-earning deposits with banks.
Provision for Loan Losses. The provision for loan losses was $0 and $2,000 for
the quarters ended March 31, 2001 and 2000, respectively. There were no net loan
charge-offs during either quarter. At March 31, 2001, nonaccrual loans
aggregated $357,000, while the allowance for loan losses stood at $489,000.
Other Income. Other income was $208,000 for the quarter ended March 31, 2001 as
compared with $115,000 for the quarter ended March 31, 2000, an increase of
$93,000.
Other Expenses. Other expenses increased to $919,000 during the quarter ended
March 31, 2001 as compared with $850,000 for the quarter ended March 31, 2000,
an increase of $69,000. The increase resulted primarily from an increase in
salaries and employee benefits of $45,000.
-7-
Provision for Income Taxes. The provision for income taxes, as a percentage of
income before income taxes, was 40.3% and 38.5% for the three months ended March
31, 2001 and 2000, respectively.
Liquidity and Capital Resources
The objective of the Company's liquidity management is to ensure the
availability of sufficient cash flows to meet all financial commitments and to
capitalize on opportunities for expansion. Liquidity management addresses KS
Bank's ability to meet deposit withdrawals on demand or at contractual maturity,
to repay borrowings as they mature, and to fund new loans and investments as
opportunities arise.
The primary sources of internally generated funds are principal and interest
payments on loans receivable and cash flows generated from operations. External
sources of funds include increases in deposits and advances from the FHLB of
Atlanta.
As a North Carolina-chartered savings bank, KS Bank must maintain liquid assets
equal to at least 10% of assets. The computation of liquidity under North
Carolina regulations allows the inclusion of mortgage-backed securities and
investments with readily marketable value, including investments with maturities
in excess of five years. KS Bank's liquidity ratio at March 31, 2001, as
computed under North Carolina regulations, was approximately 11.6%. On a
consolidated basis, liquid assets also represent approximately 11.6% of total
assets. Management believes that it will have sufficient funds available to meet
its anticipated future loan commitments as well as other liquidity needs.
As a North Carolina-chartered savings bank, KS Bank is subject to the capital
requirements of the Federal Deposit Insurance Corporation ("FDIC") and the North
Carolina Administrator of Savings Institutions ("N. C. Administrator"). The FDIC
requires state-chartered savings banks to have a minimum leverage ratio of Tier
I capital (principally consisting of common shareholders' equity, noncumulative
perpetual preferred stock, and a limited amount of cumulative perpetual
preferred stock, less certain intangible assets) to total assets of at least 3%;
provided, however, that all institutions, other than those (i) receiving the
highest rating during the examination process and (ii) not anticipating or
experiencing any significant growth, are required to maintain a ratio of 1% or
2% above the stated minimum. The FDIC also requires KS Bank to have a ratio of
total capital to risk-weighted assets of at least 8%, of which at least 4% must
be comprised of Tier I capital. The N. C. Administrator requires a net worth
equal to at least 5% of total assets. At March 31, 2001, KS Bank exceeded the
capital requirements of both the FDIC and the N. C. Administrator.
-8-
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 2001.
-9-
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KS BANCORP, INC.
Date: May 9, 2001 By: /s/ Harold T. Keen
-----------------------------------------
Harold T. Keen
President and Chief Executive Officer
Date: May 9, 2001 By: /s/ Earl W. Worley, Jr.
-----------------------------------------
Earl W. Worley, Jr.
Chief Financial Officer
-10-