KS Bancorp, Inc. (the "Company") (OTCBB: KSBI), parent company of KS Bank, Inc. (the "Bank"), reports its unaudited operating results for the quarter and twelve months ended December 31, 2013.

For the three months ended December 31, 2013, net income available to common shareholders was $153,000, or $.12 per diluted share, compared to a net income available to common shareholders of $126,000, or $.10 per diluted share, for the three months ended December 31, 2012. For the twelve months ended December 31, 2013, net income available to common shareholders was $788,000, or $.60 per diluted share, compared to $531,000, or $.41 per diluted share, for the twelve months ended December 31, 2012.

Net interest income was $2.5 million for the three months ended December 31, 2013 and December 31, 2012. Noninterest income for the three months ended December 31, 2013 was $603,000, compared to $761,000 for the same period ended December 31, 2012. Noninterest expenses decreased $117,000 from $2.9 million for the three months ended December 31, 2012, compared to $2.8 million for the three months ended December 31, 2013.

For the twelve months ended December 31, 2013, net interest income was $9.6 million, compared to $9.8 million for the twelve months ended December 31, 2012. Noninterest income decreased slightly from $2.6 million for the twelve months ended December 31, 2012 to $2.3 million for the twelve months ended December 31, 2013. The decrease in noninterest income is primarily attributable to decreased volume and fee income from presold mortgages. Additionally, the bank's gain on sale of investments decreased $298,000 to $139,000 for the twelve months ended December 31, 2013, compared to gain on sale of investments of $437,000 for the twelve months ended December 31, 2012. Noninterest expenses decreased $1.0 million from $11.5 million for the twelve months ended December 31, 2012, to $10.5 million for the twelve months ended December 31, 2013. The decrease in expenses is primarily due to the decrease in costs associated with foreclosed real estate.

The Company's unaudited consolidated total assets decreased $9.5 million to $305.4 million at December 31, 2013, compared to $314.9 million at December 31, 2012. Net loan balances decreased $3.2 million with a balance of $193.6 million at December 31, 2013, compared to $196.8 million at December 31, 2012. The Company's investment securities increased $1.9 million to $84.3 million at December 31, 2013, compared to $82.4 million at December 31, 2012. Total deposits have decreased $13.9 million to $230.1 million at December 31, 2013, compared to $244.0 at December 31, 2012. The decrease in deposits is the result of $19.5 million decrease in time deposits, which includes a $9.3 million reduction in brokered deposits. The decline in time deposits was partially offset by a $5.6 million increase in savings and demand deposit accounts. Total stockholders' equity at December 31, 2013 was $24.3 million, compared to $25.3 million at December 31, 2012. The decrease in stockholders equity is primarily attributable to the change in accumulated other comprehensive income which represents changes in the market value of the available for sale investment portfolio.

Nonperforming assets, which includes nonaccrual loans and other real estate owned (OREO), decreased $4.5 million to $7.6 million at December 31, 2013 from $12.1 million at December 31, 2012. At December 31, 2013, nonperforming assets consist of $2.9 million in OREO and $4.7 million in nonaccrual loans. For the twelve months ended December 31, 2013, the Company recorded a $161,000 expense to the provision for loan losses compared to $207,000 for the twelve months ended December 31, 2012. The allowance for loan losses at December 31, 2013 totaled $3.4 million, or 1.72% of all outstanding loans. This compares to $3.4 million, or 1.71% of all outstanding loans at December 31, 2012.

Commenting on the 2013 results, Mr. Keen stated, "The KS Bank team worked ardently to improve the Bank's net income available to shareholders. One of our goals for 2013 was to continue to reduce nonperforming assets and the bank continues to be successful in attaining this goal. Improvements in net income for 2013 are the result of the bank remaining focused on our employees, and employees committed to servicing our customers and local communities. During 2014, the Bank will be celebrating its 90th anniversary as a trusted community bank and we look forward to continuing to serve our communities and our customers."

The Company also announced today that its Board of Directors voted not to declare a dividend for the fourth quarter of 2013. The Company's profitability, capital levels and asset quality are factors that were considered in determining whether to resume dividend payments.

KS Bank continues to be well-capitalized according to regulatory standards with total risk based capital of 17.41%, tier 1 risk- based capital of 16.15%, and a leverage ratio of 10.24% at December 30, 2013. The minimum levels to be considered well capitalized for each of these ratios are 10%, 6%, and 5%, respectively.

KS Bancorp, Inc. is a Smithfield, North Carolina-based single bank holding company. KS Bank, Inc., a state-chartered savings bank, is KS Bancorp's sole subsidiary. The Bank is a full service community bank serving the citizens of eastern North Carolina since 1924 and offers a variety of financial products and services including a securities brokerage service through an affiliation with a registered broker/dealer. There are nine full service branches located in Kenly, Selma, Clayton, Garner, Goldsboro, Wilson, Wendell, Smithfield, and Four Oaks, North Carolina plus a mortgage loan office in Greenville, NC. For more information, visit www.ksbankinc.com.

This release contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Company. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management of the Company and on the information available to management at the time that these disclosures were prepared. These statements can be identified by the use of words like "expect," "anticipate," "estimate" and "believe," variations of these words and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. The Company undertakes no obligation to update any forward-looking statements.

KS Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition

   
 
Dec 31, 2013 December 31,
(unaudited) 2012*
 
(Dollars in thousands)
ASSETS
 
Cash and due from banks:
Interest-earning $ 1,442 $ 9,474
Noninterest-earning 5,737 2,075
Time Deposit 100 100
Investment securities available for sale, at fair value 84,292 82,356
Federal Home Loan Bank stock, at cost 1,953 2,149
Presold mortgages in process of settlement - 518
 
Loans 197,032 200,280
Less allowance for loan losses   (3,390 )   (3,424 )
Net loans 193,642 196,856
 
Accrued interest receivable 1,032 1,113
Foreclosed real estate and repossessions, net 2,947 6,637
Property and equipment, net 8,468 8,579
Other assets   5,834     5,082  
 
Total assets $ 305,447   $ 314,939  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Liabilities
Deposits $ 230,083 $ 243,996
Short-term borrowings 7,214 2,156
Long-term borrowings 41,248 41,248
Accrued interest payable 329 233
Accrued expenses and other liabilities   2,234     1,984  
 
Total liabilities   281,108     289,617  
 
Stockholder's Equity:
Cumulative perpetual preferred stock (Series A), no par value
4,000 shares authorized, issued and outstanding $ 3,965 $ 3,914
Cumulative perpetual preferred stock (Series B), no par value
200 shares authorized, issued and outstanding 205 213
Common stock, no par value, authorized 20,000,000 shares;
1,309,501 shares issued and outstanding in 2013 and 2012 1,607 1,607
Retained earnings, substantially restricted 19,178 18,390
Accumulated other comprehensive (loss) income   (616 )   1,198  
 
Total stockholders' equity   24,339     25,322  
 
Total liabilities and stockholders' equity $ 305,447   $ 314,939  
 
* Derived from audited financial statements
KS Bancorp, Inc and Subsidiary
Consolidated Statements of Income (Unaudited)
       
 
Three Months Ended Twelve Months Ended
Dec 31, Dec 31,

2013

2012

2013

2012

( In thousands, except per share data)
Interest and dividend income:
Loans $ 2,672 $ 2,840 $ 10,685 $ 11,365
Investment securities
Taxable 337 358 1,327 1,446
Tax-exempt 126 138 511 807
Dividends 26 23 52 49
Interest-bearing deposits   2     1     9     8  
Total interest and dividend income   3,163     3,360     12,584     13,675  
 
Interest expense:
Deposits 333 454 1,469 2,119
Borrowings   360     424     1,496     1,726  
Total interest expense   693     878     2,965     3,845  
 
Net interest income 2,470 2,482 9,619 9,830
 
Provision for loan losses   (60 )   82     161     207  
 
Net interest income after
provision for loan losses   2,530     2,400     9,458     9,623  
 
Noninterest income:
Service charges on deposit accounts 312 292 1,249 1,123
Fees from presold mortgages 61 265 481 730
Gain on sale of investments - 4 139 437
Other income   230     200     447     330  
Total noninterest income   603     761     2,316     2,620  
 
Noninterest expenses:
Compensation and benefits 1,576 1,559 5,928 6,031
Occupancy and equipment 271 268 1,046 1,042
Data processing & outside service fees 216 191 828 792
Advertising 10 13 42 48
Net foreclosed real estate 240 405 564 1,496
Other   515     509     2,051     2,070  
Total noninterest expenses   2,828     2,945     10,459     11,479  
 
Income before income taxes 305 216 1,315 764
 
Income tax (benefit)   86     24     266     (26 )
 
Net income   219     192     1,049     790  
 
Dividends on preferred stock (55 ) (55 ) (218 ) (218 )
Accretion of discount on preferred stock, net   (11 )   (11 )   (43 )   (41 )
Income available to common stockholders $ 153   $ 126   $ 788   $ 531  
 
Basic and Diluted earnings per share $ 0.12   $ 0.10   $ 0.60   $ 0.41  

KS Bancorp, Inc.
Harold T. Keen, President and Chief Executive Officer
or
Regina J. Smith, Chief Financial Officer
919-938-3101