LSB Corporation (NASDAQ: LSBX) (the "Company") today announced
fourth quarter 2008 net income of $3.7 million, or $0.82 per
diluted share, as compared to net income of $1.1 million, or $0.24
per diluted share, for the fourth quarter of 2007. For the twelve
months ended December 31, 2008, the Company announced a net loss of
$2.7 million, or $(0.61) per diluted share, as compared to net
income of $3.7 million, or $0.81 per diluted share for the year
ended December 31, 2007.
The largest factor in both the quarter and the annual results
were the other-than-temporary impairment write-downs of investments
in Fannie Mae and Freddie Mac preferred stock, the value of which
was adversely affected by events surrounding the September 7, 2008
appointment of a conservator for Fannie Mae and Freddie Mac. An
impairment of $9.4 million was taken in the third quarter of 2008
with a further impairment charge of $722,000 taken in the fourth
quarter of 2008. This fourth quarter impairment charge leaves the
Fannie Mae and Freddie Mac investments at minimal values, reducing
the likelihood of further write-downs of these investments into
2010. In total, these non-cash impairment charges reduced earnings
by $10.1 million on a pre-tax basis, or $(2.25) per diluted share,
for the year ended December 31, 2008. On October 3, 2008, the
Emergency Economic Stabilization Act ("EESA") was enacted with a
provision permitting banks to recognize losses related to Fannie
Mae and Freddie Mac preferred stock as ordinary losses.
Accordingly, the Company recognized tax benefits in the fourth
quarter of 2008 of $3.5 million, or $0.79 per diluted share,
related to the Company's other-than-temporary non-cash impairment
charges that were recognized on the Fannie Mae and Freddie Mac
preferred stock during the quarters ended September 30, 2008 and
December 31, 2008. On an after-tax basis, these non-cash impairment
charges reduced 2008 earnings by a total of $6.6 million, or
$(1.46) per diluted share.
Excluding the non-cash impairment charges and the related tax
benefits on the Fannie Mae and Freddie Mac preferred stock
reflected in the GAAP results above, the Company would have
recorded net income of $852,000, or $0.19 per diluted share, for
the quarter ended December 31, 2008, and net income of $3.8
million, or $0.86 per diluted share, for the twelve months ended
December 31, 2008. This compares favorably to the normalized
earnings in the fourth quarter and twelve months ended December 31,
2007 of $847,000 or $0.19 per diluted share, and $3.3 million, or
$0.71 per diluted share, respectively, excluding the settlement
gains on the pension plan recognized in that period. The normalized
non-GAAP annual net income for 2008 reflects a 17.9% improvement
over the comparable, normalized non-GAAP 2007 results.
President and CEO Gerald T. Mulligan stated, "The impairment
charges on the preferred shares of Fannie Mae and Freddie Mac mask
an otherwise encouraging continuation of earnings, deposit and loan
growth over the previous year. Retail deposits grew by $59.2
million and loans by $94.5 million during 2008. Our decision to
participate in the U.S. Treasury's Capital Purchase Program ("CPP")
reflects our willingness, and the U. S. Treasury's confidence in
us, to grow the loan portfolio by meeting the credit needs of our
local, credit-worthy customers. Normalized, non-GAAP net income in
2008 increased by 17.9%, or $583,000, over the prior year. In light
of the continuing national concern over bank credit quality, I am
pleased with the low level of non-performing loans of $2.6 million
or less than 0.58% of total loans. In addition to avoiding expenses
inherent in any credit deterioration, our challenge will be to
maintain, or even increase, our net interest margin in light of the
exceptionally low interest rate environment and the fierce
competition for retail deposits."
The largest factors responsible for the increased normalized
non-GAAP quarterly results for 2008 were the 22.5% growth in total
assets since December 31, 2007, the corresponding increase in net
interest income of $448,000 and a gain in productivity as reflected
in the better efficiency ratio for the Company. The improvement in
the normalized non-GAAP results for the year ended December 31,
2008 was attributable to an increase in net interest income of $1.5
million, an increase in other non-interest income of $194,000 and a
decrease in salaries and benefits expense of $130,000. These
factors more than offset the effects of the decline in the
Company's net interest margin and the increase in the provision for
loan losses.
The Company recorded a provision for loan losses of $450,000 in
the fourth quarter of 2008 as compared to $180,000 recorded for the
fourth quarter of 2007. The increase in the provision for loan
losses in 2008 is primarily due to the continued and sustained
corporate and retail loan growth coupled with a slight increase in
non-performing loans over 2007 levels. Annual net loan charge-offs
as a percentage of average loans totaled 5 basis points for 2008 as
compared to 4 basis points for 2007.
The Company's net interest margin decreased to 2.50% for the
twelve months ended December 31, 2008 from 2.72% for the twelve
months ended December 31, 2007. The decrease in the net interest
margin is caused by assets repricing lower more quickly than
liabilities as the general level of interest rates fall. This
downward pressure on margins has been offset in part by a shift in
the mix of assets as higher yielding loans replace investments.
Total assets increased by $139.7 million from December 31, 2007
to $761.3 million as of December 31, 2008. The 2008 increase
reflected both sustained, local loan growth and an increase in the
investment portfolio.
As of December 31, 2008, loans totaled $452.6 million, an
increase of $94.5 million from December 31, 2007. The corporate
loan portfolio increased by $64.2 million while the retail loan
portfolio increased by $30.3 million over the same period.
As of December 31, 2008, non-performing loans totaled $2.6
million as compared to $1.5 million as of December 31, 2007. The
allowance for loan losses in total and as a proportion of total
loans, equaled $5.9 million and 1.30% as of December 31, 2008,
respectively, as compared to $4.8 million and 1.34%, respectively,
as of December 31, 2007. Other real estate owned totaled $120,000
and $0 as of December 31, 2008 and December 31, 2007, respectively.
Total loan delinquencies under 90 days as of December 31, 2008,
totaled less than $500,000.
Total deposits of $408.7 million as of December 31, 2008,
increased $86.6 million, or 26.9%, from December 31, 2007. The
Bank's focus on attracting and retaining core deposits has produced
favorable results in 2008. Money market and savings accounts
increased by $29.8 million during 2008 and certificates of deposit
increased by $58.7 million, of which $27.4 million came from
increased brokered certificates of deposit, over the same period.
Total borrowed funds increased during 2008 by $41.1 million or
17.5% and totaled $276.5 million as of December 31, 2008. The
increase in total borrowed funds and deposits was used to support
the Company's balance sheet growth.
The Company also announced today a quarterly cash dividend of
$0.15 per share to be paid on February 19, 2009 to common stock
shareholders of record as of February 5, 2009. This dividend
represents a 7.95% annualized dividend yield based on the closing
stock price of $7.55 on January 28, 2009.
Under the previously approved common stock repurchase program,
the Company repurchased 154,976 shares, or approximately 3% of the
Company's outstanding common stock, at an average cost of $16.12
per share, between April 26, 2007 and June 30, 2008. As a result of
the other-than-temporary impairment charges recorded during 2008,
the Company suspended its stock repurchase program and is not
permitted to reinstate the repurchase program while the U.S.
Treasury's $15 million preferred stock investment is outstanding.
There were no stock repurchases during the fourth quarter of 2008.
The Company and the Bank continue to be "well-capitalized" under
all applicable regulatory measures at December 31, 2008.
Press releases and SEC filings can be viewed on the internet at
our website www.RiverBk.com/press-main.html or
www.RiverBk.com/stockholder-info.html, respectively.
LSB Corporation is a Massachusetts corporation that conducts all
of its operations through its sole subsidiary, River Bank (the
"Bank"). The Bank offers a range of commercial and consumer loan
and deposit products and is headquartered at 30 Massachusetts
Avenue, North Andover, Massachusetts, approximately 25 miles north
of Boston. River Bank operates 5 full-service banking offices in
Massachusetts in Andover, Lawrence, Methuen (2) and North Andover
and 1 full-service banking office in Salem, New Hampshire. The Bank
opened its new full-service banking office in Derry, New Hampshire
in January 2009.
The reader is cautioned that this press release may contain
certain statements that are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements are expressions of management's
expectations as of the date of this press release regarding future
events or trends and which do not relate to historical matters.
Such expectations may or may not be realized, depending on a number
of variable factors, including but not limited to, changes in
interest rates, changes in real estate valuations, general economic
conditions (either nationally or regionally), regulatory
considerations and competition. For more information about these
factors, please see our recent Annual Report on Form 10-K and
Quarterly Report on Form 10-Q on file with the SEC, including the
sections entitled "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." As a
result of such risk factors and uncertainties, the Company's actual
results may differ materially from such forward-looking statements.
The Company does not undertake and specifically disclaims any
obligation to publicly release updates or revisions to any such
forward-looking statements as a result of new information, future
events or otherwise.
This press release also contains certain non-GAAP financial
measures in addition to results presented in accordance with
Generally Accepted Accounting Principles ("GAAP") in both 2008 and
2007 as indicated in the table below. In an effort to provide
investors with information regarding the Company's results, the
Company has disclosed the following non-GAAP information, which
management believes provides useful information to the investor.
This information should not be viewed as a substitute for operating
results determined in accordance with GAAP, nor is it necessarily
comparable to non-GAAP information which may be presented by other
companies.
LSB Corporation
Select Financial Data
(unaudited)
Three months ended Twelve months ended
------------------- -------------------
(For the periods ended) Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2008 2007 2008 2007
-------- -------- -------- --------
Performance ratios (annualized):
Efficiency ratio 63.08% 65.84% 62.54 % 67.00%
Return (loss) on average assets 1.96% 0.70% (0.39)% 0.64%
Return (loss) on average
stockholders equity 26.08% 7.29% (4.63)% 6.35%
Net interest margin 2.39% 2.58% 2.50 % 2.72%
Interest rate spread
(int. bearing only) 2.09% 2.09% 2.14 % 2.19%
Dividends paid per share during
period $ 0.15 $ 0.14 $ 0.58 $ 0.56
-------------------
(At) Dec. 31, Dec. 31,
2008 2007
-------- --------
"Well Capitalized"
Minimums
Capital Ratios:
Stockholders' equity to
total assets N/A 9.48% 9.70%
RiverBank Tier 1 leverage
ratio 5.0% 8.18% 9.49%
Risk-Based Capital Ratio:
LSB Corporation Tier 1
risk-based 6.0% 13.30% 13.45%
RiverBank Tier 1 risk-based 6.0% 11.83% 13.14%
RiverBank total risk-based 10.0% 12.97% 14.22%
Asset Quality:
Allowance for loan losses as a percent of total loans 1.30% 1.34%
Allowance as a percent of non-performing loans 225.83% 315.82%
Non-performing loans as a percent of total loans 0.58% 0.43%
Non-performing assets as a percent of total assets 0.34% 0.24%
Per Share Data:
Book value per share $ 16.14 $ 13.35
Tangible book value per share, including, at
liquidation value, shares of fixed rate cumulative
perpetual preferred stock, Series B, liquidation
preference $1,000 per share (the "Preferred Stock")
(excludes accumulated other comp. income or loss) $ 15.40 $ 13.26
Tangible book value per share (excluding liquidation
value of Preferred Stock) $ 12.04 $ 13.26
Reconciliation Table - Non-GAAP Financial Information
(unaudited)
(Dollars in thousands, except per share data)
Three months ended Twelve months ended
------------------- -------------------
(For the periods ended) Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2008 2007 2008 2007
-------- -------- -------- --------
Net income (loss) per GAAP $ 3,668 $ 1,090 $ (2,723) $3,718
Add: Impairment of investments,
net of tax (2,816) -- 6,567 --
Less: Settlement gains on
pension, net of tax -- (243) -- (457)
-------- -------- -------- --------
Normalized net income (non-GAAP) $ 852 $ 847 $ 3,844 $ 3,261
======== ======== ======== ========
Diluted normalized earnings
per share $ 0.19 $ 0.19 $ 0.86 $ 0.71
Return on average assets,
normalized 0.46% 0.55% 0.55% 0.56%
Return on average equity,
normalized 6.06% 5.67% 6.54% 5.57%
LSB CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
(unaudited)
(At) Dec. 31, 2008 Dec. 31, 2007
------------- -------------
Residential mortgage loans $ 109,276 $ 79,743
Home equity lines and loans 23,972 23,046
Consumer loans 831 1,007
------------- -------------
Total retail loans 134,079 103,796
------------- -------------
Construction loans 61,769 47,885
Commercial real estate loans 222,977 177,968
Commercial loans 33,796 28,464
------------- -------------
Total corporate loans 318,542 254,317
------------- -------------
Total loans 452,621 358,113
------------- -------------
Allowance for loan losses (5,885) (4,810)
------------- -------------
Investments available for sale 264,561 230,596
FHLB stock 11,825 10,185
------------- -------------
Total investments 276,386 240,781
------------- -------------
Federal funds sold 6,469 56
Other assets 31,733 27,511
------------- -------------
Total assets $ 761,324 $ 621,651
============= =============
NOW accounts $ 17,239 $ 17,877
Demand deposit accounts 27,546 28,851
Savings accounts 56,251 28,452
Money market accounts 76,603 74,621
------------- -------------
Core deposits 177,639 149,801
------------- -------------
Brokered certificates of deposit 32,819 5,461
Certificates of deposit 198,205 166,821
------------- -------------
Term deposits 231,024 172,282
------------- -------------
Total deposits 408,663 322,083
------------- -------------
FHLBB long-term advances 219,228 202,378
Wholesale repurchase agreements 40,000 25,000
------------- -------------
Total long-term borrowed funds 259,228 227,378
------------- -------------
FHLBB Ideal Way advances -- 800
FHLBB short-term advances 11,000 --
Customer repurchase agreements 6,262 7,173
------------- -------------
Total short-term borrowed funds 17,262 7,973
------------- -------------
Total borrowed funds 276,490 235,351
------------- -------------
Other liabilities 4,029 3,919
------------- -------------
Total liabilities 689,182 561,353
------------- -------------
Total stockholders' equity 72,142 60,298
------------- -------------
Total liabilities and stockholders' equity $ 761,324 $ 621,651
============= =============
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(unaudited)
Three months ended Twelve months ended
------------------- -------------------
(For the periods ended) Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2008 2007 2008 2007
--------- --------- --------- ---------
Interest income $ 9,988 $ 9,304 $ 38,755 $ 35,008
Interest expense 5,668 5,432 21,880 19,681
--------- --------- --------- ---------
Net interest income 4,320 3,872 16,875 15,327
Provision for loan losses 450 180 1,285 645
--------- --------- --------- ---------
Net interest income after
provision for loan losses 3,870 3,692 15,590 14,682
Impairment of investments (722) -- (10,105) --
Settlement gains on pension -- 405 -- 762
Other non-interest income 577 566 2,116 1,922
Salary & employee benefits
expense 1,744 1,739 6,706 6,836
Other non-interest expense 1,345 1,183 5,170 4,721
--------- --------- --------- ---------
Total non-interest expense 3,089 2,922 11,876 11,557
Net income (loss) before
income taxes 636 1,741 (4,275) 5,809
Income tax expense (benefit) (3,032) 651 (1,552) 2,091
--------- --------- --------- ---------
Net income (loss) $ 3,668 $ 1,090 $ (2,723) $ 3,718
========= ========= ========= =========
Basic earnings (loss)
per share $ 0.82 $ 0.24 $ (0.61) $ 0.81
Diluted earnings (loss)
per share $ 0.82 $ 0.24 $ (0.61) $ 0.81
End of period shares
outstanding 4,470,941 4,516,561 4,470,941 4,516,561
Average shares outstanding:
Basic 4,464,332 4,527,750 4,468,484 4,575,197
Diluted 4,468,708 4,553,121 4,484,550 4,602,706
CONTACT: Gerald T. Mulligan President & CEO (978)
725-7555
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