Market Overview

Reflecting Core Franchise Strength, the little bank Reports Another Strong Quarter


For the 51st quarter in a row, the little bank (the “Company”) (OTCBB:LTLB) has reported positive net income. Unaudited operating results for the quarter ended September 30, 2012, were highlighted by continued growth in loans and non-interest income, contained expenses, and further improvement in funding and credit costs.

Total assets as of September 30, 2012 were $312.2 million, compared to total assets of $312.4 million as of December 31, 2011. Total loans, net of reserves, were $203.0 million, representing an increase of 3.07% since year-end 2011.

Year-to-date unaudited net income through the first three quarters of 2012 was $1,914,000, or 71 cents per basic share, up 12% from the $1,712,000 reported in the first three quarters of 2011. Net income in the quarter was $613,000, or 23 cents per basic share, compared to earnings of $639,000, or 24 cents per basic share for the quarter ended September 30, 2011.

The Company has consistently produced quarterly earnings and paid a common stock cash dividend throughout the down economic cycle. Due to this core franchise strength, the little bank had the opportunity subsequent to quarter end to retire a significant portion of the preferred stock it issued to the U.S. Treasury in December 2008. Further details on this transaction are presented below.

As of September 30, 2012, the little bank had 2,690,028 shares of common stock issued and outstanding.


Through the first nine months of 2012, the little bank recorded a loan-loss provision of $640,000, 25% lower than in the same period in 2011. The loss reserve grew to $4.0 million at September 30, reflecting 176% coverage of nonaccrual loans as of quarter-end.

“Containing problem asset levels and credit costs has been a key to our Company's performance during this downturn,” said Vincent R. Jones, President and CEO of the little bank. “Due to strong underwriting standards and diligent daily monitoring, the little bank has had the confidence to grow its loan portfolio this year.”

The Company has consistently reported superior credit quality metrics compared to its peers during the past several years. According to data compiled by SNL Financial LC, the little bank has had lower quarterly nonperforming assets/total assets ratios than the median for all North Carolina-chartered commercial banks and savings banks in each period since credit quality began to deteriorate broadly in the fourth quarter of 2007. The lower this ratio is, the fewer credit problems a bank has on its balance sheet.

“The core franchise strength of the little bank is rooted in its credit culture,” Jones said. “We feel our strength there is a foundation on which we build our future growth, be it through judicious expansion in our existing markets or through thoughtful acquisitions of complementary institutions in contiguous geographic markets.”


Net interest income has increased modestly in the first nine months of 2012 versus the same period in 2011, to $7,858,000 from $7,811,000. The continuing low rate environment is contributing to this effect, with added loans required to maintain consistent interest income levels while deposit interest costs continue to decline.

“Low interest rates are having an adverse effect on net interest margins for the entire industry, and we are no exception,” Jones said. “Despite growing the loan portfolio by almost 7% over the past five months, net interest income is basically flat.” The Company expects interest margins to be under stress for the near future and then begin to level off.


Mortgage origination fee income has helped to drive a 14% increase year-over-year in non-interest income through the first three quarters of 2012. Year-to-date non-interest income was $1,087,000; for the quarter, the Company reported non-interest income of $374,000. Non-interest expense through the first three quarters of 2012 was $5,354,000, up just 2% year-over-year.

“Expenses will continue to grow along with the Company, but keeping them reasonably contained is a necessary part of the business,” Jones said. “We strive daily to be as efficient as possible without sacrificing an ounce of the superior customer service we provide our communities.”


Total equity rose to $36,699,000 as of September 30, 2012. This includes $7,500,000 of preferred stock that was issued to the U.S. Treasury in December 2008 as part of the Capital Purchase Program. Recently, Treasury has begun to sell its preferred stock stakes to third-party investors as it seeks to wind down this program. The preferred stock issued by the little bank was among the stakes Treasury sought to sell in October 2012.

Due to the strength of the little bank's core franchise and overall capital base, federal regulators permitted the Company to repurchase and retire all or part of its preferred stock and warrants issued under the program. In an auction conducted on October 23, 2012, the little bank successfully bid to repurchase and retire $5,074,000 of the preferred stock and warrants. The remaining $2,801,000 was acquired by third-party investors; the little bank reserves the right to repurchase and retire some or all of that preferred stock as well.

The Company will remain “Well Capitalized” despite this preferred equity retirement. The transaction is accretive to earnings per share, since the little bank will no longer have to pay a 5% dividend on the retired preferred stock. Based on the current share count, that accretive impact equates to 10 cents per share annually. The common book value per share at September 30, 2012 was $10.75.

The little bank is headquartered in Kinston, North Carolina and currently serves the Lenoir, Wayne, Onslow, Pitt, and Craven county markets. The Bank prides itself on the special care with which it serves its customers. The Bank's website is The little bank stock can be found on the Over-the-Counter Electronic Bulletin Board trading under the symbol LTLB. This press release includes certain forward-looking statements in reliance on the “safe-harbor” provisions of The Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are subject to a number of risks and uncertainties. Actual results may differ materially from those anticipated in any such forward-looking statements. The Company undertakes no obligation to update or revise any such forward-looking statements.

the little bank

Summary of Operations (un-audited)

(000's omitted except per share data)

Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended

September 30,


September 30,


September 30,


September 30,


Interest Income $ 3,097 $ 3,325



$ 9,949
Interest Expense   503   696  


Net interest income 2,594 2,629


Provision for loan losses   220   300   640   850
Net interest income after
Provision for losses   2,374   2,329   7,218   6,961
Non-interest income 374 341 1,087 952
Non-interest expense   1,801   1,672   5,354   5,240
Income before taxes 947 998 2,951 2,673
Income taxes   334   359   1,037   961
Net Income 613 639 1,914 1,712
Preferred Stock Dividends (102) (102) (307) (307)
Accretion of Discount, net   (20)   (19)   (59)   (55)
Net Income available

for common shareholders

$ 491 $ 518 $ 1,548 $ 1,350
Net Income available

per basic common share

$ 0.18 $ 0.19 $ 0.58 $ 0.50

the little bank

Balance Sheets

(000's omitted except per share data)

September 30 December 31 September 30
2012 2011 * 2011
(un-audited) (un-audited)
Cash and due from banks $ 5,973 $ 3,522 $ 4,070
Overnight investments 13,432 13,752 7,739
Investment securities AFS 76,290 85,003 83,152
Loans 207,079 200,874 202,429
Less Allowance for loan losses   (4,040)   (3,898)   (3,770)
Net Loans 203,039 196,976 198,659
Other Assets   13,486   13,156   13,751
Total Assets $ 312,220 $ 312,409 $ 307,371
Liabilities & Stockholders' Equity
Deposits $ 250,986 $ 251,723 $ 243,660
FHLB Advances 23,000 25,000 28,000
Other liabilities   1,535   700   851
Total liabilities 275,521 277,423 272,511
Stockholders' Equity
Preferred stock, Series A & B $ 7,769 $ 7,710 $ 7,691
Common stock, no par value 24,409 24,395 23,206
Retained earnings 3,574 2,211 3,157
Accumulated other comprehensive income   947   670   806
Total stockholders' equity $ 36,699 $ 34,986 $ 34,860
Total liabilities and stockholders' equity $ 312,220 $ 312,409 $ 307,371

* Derived from audited financial statements

the little bank
Doyle M. Thigpen, Chief Financial Officer

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