KS Bancorp, Inc. (KSBI) Announces Fourth Quarter 2010 Financial Results

KS Bancorp, Inc. (the "Company”) (OTCBB: KSBI), parent company of KS Bank, Inc. (the "Bank”), announced unaudited net income available to common shareholders of $258,000, or $.20 per diluted shared, for the three months ended December 31, 2010, compared to a net loss of ($426,000), or ($.33) per diluted share, for the three months ended December 31, 2009. The Company reported net income available to common shareholders of $940,000, or $.72, per diluted share for the twelve months ended December 31, 2010, compared to a net loss of ($286,000), or ($.22) per diluted share, for the same period in 2009.

For the twelve months ended December 31, 2010, net interest income increased 13.1% to $10.5 million, compared to $9.3 million for the period ended December 31, 2009. The increase is primarily the result of the increase in net interest margin from 2.99% for the twelve months ended December 31, 2009, compared to 3.31% for the same period in 2010. Non-interest income increased $597,000 from $2.1 million for the twelve month period ended December 31, 2009, to $2.7 million for the same period ended December 31, 2010. The increase is primarily the result of an $856,000 gain on sale of investments during the twelve months ended December 31, 2010 compared to a $104,000 gain in the same period in 2010. For the twelve months ended December 31, 2010, non-interest expenses increased $690,000 to $10.9 million, compared to $10.2 million for the same period ending December 31, 2009. The increase in noninterest expenses is primarily attributable to the ongoing expenses of other real estate owned (OREO).

The Company’s unaudited consolidated total assets decreased $13.2 million to $335.6 million as of December 31, 2010, as compared to $348.8 million at December 31, 2009. Net loan balances decreased $11.8 million from $227.1 million at December 31, 2009, compared to $215.3 million at December 31, 2010. The Company’s investment securities remain constant at $87.3 million at December 31, 2009 and December 31, 2010. Total deposits decreased $7.6 million to $251.5 million at December 31, 2010, compared to $259.1 at December 31, 2009. Although total deposits decreased, there has been a change in the deposit mix. There was an increase of $14.7 million, or 19.7%, in checking, savings and money market accounts for the twelve months ended December 31, 2010. Time deposits decreased $22.4 million, or 12.15%, from $184.3 million at December 31, 2009 to $161.9 million at December 31, 2010. Total borrowings decreased $5.6 million from $65.7 million at December 31, 2009 to $60.1 million at December 31, 2010. Total stockholders’ equity had a decrease of $220,000 from $22.3 million at December 31, 2009 to $22.1 million at December 31, 2010.

Nonperforming assets, which includes nonaccrual loans and OREO, have increased $348,000 from $15.3 million at December 31, 2009 to $15.6 million at December 30, 2010. The nonperforming assets consist of $7.9 million in other real estate owned and $7.7 million in nonaccrual loans. For the twelve months ended December 31, 2010, the Company recorded a $1.6 million expense to the provision for loan losses compared to $2.2 million for the twelve months ended December 31, 2009. Net charge offs for the 2010 fiscal year were $1.5 million. The allowance for loan losses at December 31, 2010 totaled $4.0 million, or 1.84% of all outstanding loans.

The Company also announced today that its Board of Directors voted not to declare a dividend for the fourth quarter of 2010. The continued suspension of the quarterly dividend is to further the Company’s efforts to preserve capital in this current economic environment. The Company’s profitability, capital levels and asset quality are factors that are 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 15.79%, tier 1 risk- based capital of 14.53%, and a leverage ratio of 9.26% at December 31, 2010. This is an increase from total risk based capital of 14.14%, tier 1 risk- based capital of 12.88%, and a leverage ratio of 8.74% at December 31, 2009. The minimum levels to be considered well capitalized for each of these ratios are 10%, 6%, and 5%, respectively.

Commenting on the fourth quarter 2010 results, Harold Keen, President and CEO, stated, "Reflecting on 2010, the economy continued to present challenges for our customers and new opportunities for our Bank. Given the current state of the economy, we are pleased to report positive earnings for the quarter, as well as for the year. KS Bank remains committed to the success of our customers and the communities we serve. Looking forward to 2011, a new year brings new opportunities and challenges, especially in this economic environment; however, the Board of Directors, management, and staff will continue to proactively embrace both the opportunities and challenges during 2011.”

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. 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.