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LSB Financial Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 16, 2011 02:20PM
LSB Financial Corp. (LSBI) filed Quarterly Report for the period ended 2011-03-31.
Highlight of Business Operations:
In these extraordinary economic times, we find ourselves in a community that to some extent has been sheltered from the worst effects of the slowdown. The Greater Lafayette area enjoys diverse employment including major manufacturers such as Subaru/Toyota, Caterpillar, and Wabash National; a strong education sector with Purdue University and a large local campus of Ivy Tech Community College; government offices of Lafayette, West Lafayette and Tippecanoe County; a growing high-tech presence with the Purdue Research Park, and the growth of a new medical corridor spurred by the building of two new hospitals. The area wasn t immune to the effects of the recession but there are signs of recovery. Based on a report from Greater Lafayette Commerce, manufacturing employment is slowly returning to pre-recession levels, healthcare facility growth is continuing at a record pace and Purdue University continues an aggressive construction agenda. Capital investments announced and/or made in 2010 totaled $640 million compared to $341 million in 2009 and $593 million in 2008. Wabash National, the area s second largest industrial employer, reported fourth quarter operating results which were the best since 2007 and noted that forecasts for 2011 showed “an approximate increase of 30 to 60 percent over 2010 levels.” Subaru, the area s largest industrial employer and producer of the Subaru Legacy, Outback and Tribeca, announced the addition of 100 full-time production positions. In addition, Nanshan America will be opening a plant in Lafayette in 2011 employing 200 people and a new psychiatric hospital has announced it will open in Lafayette and employ 135. In the education sector, Purdue s West Lafayette 2010-2011 enrollment was up slightly from last year to just under 40,000 students and Ivy Tech s enrollment set a record with over 8,000 students. The Purdue Research Park includes 100 high-tech and life science businesses, has more than 3,700 employees earning an average annual wage of $54,000 and has about 364,000 square feet of incubation space, making it the largest business incubator complex in the state. The Tippecanoe County unemployment rate peaked at 10.6% in July 2009 but by March 2011 had improved to 6.9% compared to 8.5% for Indiana and 8.8% nationally.
Our total assets decreased $8.1 million, or 2.17%, during the three months from December 31, 2010 to March 31, 2011. Primary components of this decrease were a $7.0 million decrease in net loans receivable including loans held for sale and a $912,000 decrease in cash and short-term investments and a $416,000 decrease in other assets. Management attributes the decrease in loans to an increase in residential mortgage loan activity due to the ongoing interest of residential borrowers in refinancing their mortgages to lower, fixed rate mortgages in response to continuing low interest rates. Many of these loans are sold on the secondary market. In addition demand for commercial loans continues to be slow. A $6.5 million decrease in deposits was generally due to an increased willingness by Bank customers to forego the safety of FDIC deposit insurance coverage and search for higher returns from more risky investments. Because of the slower loan demand the Bank was willing to allow these rate-sensitive funds to leave the Bank. We also reduced Federal Home Loan Bank advances from $22.5 million at December 31, 2010 to $20.5 million at March 31, 2011.
Non-performing assets, which include non-accruing loans and foreclosed assets, increased slightly from $18.1 million at December 31, 2010 to $18.7 million at March 31, 2011. Non-performing loans at March 31, 2011 comprised $10.0 million or 54.01% of one- to four-family or multi-family residential real estate loans, $8.5 million or 45.45% of loans on land or commercial property, and $258,000 or 1.38% of commercial business loans. Non-performing assets also include $1.0 million in foreclosed assets. At March 31, 2011, our allowance for loan losses equaled 2.03% of
Shareholders equity increased from $35.6 million at December 31, 2010 to $35.8 million at March 31, 2011, an increase of $228,000, or 0.64%, primarily as a result of net income of $205,000. Shareholders equity to total assets was 9.84% at March 31, 2011 compared to 9.57% at December 31, 2010.
General. Net income for the three months ended March 31, 2011 was $205,000, a decrease of $327,000, or 61.47%, from the three months ended March 31, 2010. The decrease was primarily due to a $742,000 or 170.97% increase in the provision for loan losses and a $176,000 or 7.29% increase in non-interest expenses partially offset by a $416,000 or 14.11% increase in net interest income and a $177,000 decrease in taxes.
Net Interest Income. Net interest income for the three months ended March 31, 2011 increased $416,000 or 14.11%, over the same period in 2010. This increase was due to a 51 basis point increase in our net interest margin (net interest income divided by average interest-earning assets) from 3.45% for the three months ended March 31, 2010 to 3.96% for the three months ended March 31, 2011 and by a $9.3 million increase in average net interest-earning assets. The increase in net interest margin is primarily due to the 68 basis point decrease in the average rate on interest-bearing liabilities from 2.03% for the three months ended March 31, 2010 to 1.35% for th
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