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Peoples Federal Bancshares, Inc. Announces Fourth Quarter and Fiscal 2012 Financial Results

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BRIGHTON, Mass., Oct. 31, 2012 (GLOBE NEWSWIRE) -- Peoples Federal Bancshares, Inc. (the "Company") (Nasdaq: PEOP), the holding company for Peoples Federal Savings Bank (the "Bank"), announced fourth quarter loss and year to date earnings for the fiscal year ending September 30, 2012.

For the three months ended September 30, 2012, the Company reported a net loss of $323,000 or ($0.05) per share, basic, as compared to net income of $567,000, or $0.09 per share, basic and diluted, for the three months ended June 30, 2012 and as compared to $559,000, or $0.09 per share, basic and diluted, for the three months ended September 30, 2011. For the fiscal year ended September 30, 2012, the Company reported net income of $1.7 million, or $0.26 per share, basic and diluted, as compared to net income of $3.1 million or $0.47 per share, basic and diluted, for the same period last year.

The fiscal fourth quarter loss and reduced annual income versus fiscal 2011 resulted primarily from the Company establishing a valuation allowance of $991,000 during the quarter ended September 30, 2012, against a deferred tax asset which was created due to a charitable contribution made in conjunction with the Company's initial public offering in 2010. A valuation allowance is established against deferred tax assets when, based upon the available evidence, including historical and projected taxable income, management determines that it is more likely than not that some or all of the deferred tax asset will not be realized.

Net interest and dividend income for the three months ended September 30, 2012 totaled $4.3 million as compared to $4.2 million for the three months ended September 30, 2011. For the three months ended September 30, 2012, the Company's net interest rate spread and net interest rate margin decreased to 3.06% and 3.26%, respectively, compared to 3.12% and 3.35%, respectively, for the same 2011 period. Decreases in both the Company's net interest rate spread and net interest margin reflect declining interest rates and the increase in average balances of total interest-bearing liabilities, offset by increases in average balances of total interest-earning assets. The Company's ratio of total interest-bearing assets to total interest-bearing liabilities improved to 1.32x from 1.30x for the three months ended September 30, 2012 compared to the same 2011 period. 

Non-interest income totaled $562,000 for the three months ended September 30, 2012 as compared to $299,000 for the three months ended September 30, 2011. Non-interest expense totaled $3.7 million for the three months ended September 30, 2012 as compared to $3.4 million for the three months ended September 30, 2011, primarily due to increased expenses in salaries and employee benefits that increased to $2.5 million from $2.3 million. Included in salaries and employee benefits for the quarter ended September 30, 2012 were expenses of $333,000 related to the equity incentive plan adopted in February 2012. Other non-interest expense increases included professional fees, which increased to $133,000 from $130,000, occupancy expense, which increased to $238,000 from $231,000, data processing expense, which increased to $211,000 from $201,000, advertising expense, which increased to $110,000 from $94,000, and deposit insurance expense, which increased to $75,000 from $62,000. Equipment expense and other expense decreased slightly during the comparable three month periods ended September 30, 2012 and 2011.     

Net interest and dividend income for the fiscal year ended September 30, 2012 totaled $17.0 million as compared to $16.4 million for the fiscal year ended September 30, 2011. For the fiscal year ended September 30, 2012, the Company's net interest rate spread and net interest rate margin increased to 3.12% and 3.32%, respectively, compared to 3.05% and 3.31%, respectively, for the same 2011 period. Increases in both the Company's net interest rate spread and net interest margin reflect the increase in average balances of total interest-earning assets, offset by declining interest rates and the increase in average balances of total interest-bearing liabilities. The Company's ratio of total interest-bearing assets to total interest-bearing liabilities decreased slightly to 1.31x from 1.32x for the fiscal year ended September 30, 2012 compared to the same 2011 period.

Non-interest income totaled $1.8 million for the fiscal year ended September 30, 2012 as compared to $1.7 million for the fiscal year ended September 30, 2011. Non-interest expense totaled $14.1 million for the fiscal year ended September 30, 2012 as compared to $12.8 million for the fiscal year ended September 30, 2011, primarily due to increased expenses in salaries and employee benefits that increased to $9.6 million from $8.3 million. Included in salaries and employee benefits for the fiscal year ended September 30, 2012 were expenses of $889,000 related to the equity incentive plan adopted in February 2012. Other non-interest expense increases include occupancy expense, which increased to $920,000 from $857,000, data processing expense, which increased to $811,000 from $749,000, advertising expense, which increased to $558,000 from $240,000, and equipment expense, which increased to $437,000 from $436,000. These increases were offset in part by decreases in deposit insurance expense, which decreased to $251,000 from $400,000, professional fees expense, which decreased to $488,000 from $574,000, and other expense, which decreased to $1.1 million from $1.2 million.

Since September 30, 2011, total assets have increased by $16.6 million, or 3.0%, to $570.8 million.  Net loans increased $43.6 million, or 10.7% during fiscal 2012.  The increase in loans was due to an increase in residential real estate, commercial loans and consumer loans, offset by a decrease in commercial real estate loans and construction loans. Cash and cash equivalents decreased by $25.5 million, to $36.2 million at September 30, 2012 from $61.7 million at September 30, 2011, as we continue to deploy cash and cash equivalents into loans and investment securities.  Federal Home Loan Bank borrowings increased by $15.0 million, or 83.3%, from September 30, 2011, as the Company took advantage of low interest rates.  Deposits increased to $416.7 million at September 30, 2012 from $412.6 million at September 30, 2011. At September 30, 2012, total stockholders' equity was $110.5 million, a decrease of $5.2 million from $115.7 million at September 30, 2011. The decrease resulted primarily from the repurchase of 527,996 shares of the Company's common stock totaling $8.0 million, in the open market as part of the Company's previously announced stock repurchase plan, expense related to the Company grant of 281,700 shares of restricted stock awards to its Board of Directors and certain employees of the Company and aggregate payment of $181,000 in dividends paid during 2012. The decrease in stockholders' equity was offset primarily by net income of $1.7 million, equity incentive shares earned of $889,000 and ESOP stock released and committed to be released of $441,000, for the year ended September 30, 2012. 

Non-performing assets totaled $5.2 million, or 0.92% of total assets, at September 30, 2012, as compared to $3.3 million, or 0.59% of total assets at September 30, 2011. Classified loans decreased to $9.6 million as of September 30, 2012 compared to $12.6 million at September 30, 2011. The Company recorded a $540,000 provision for loan losses during the year ended September 30, 2012, reflecting the overall increase in total loans along with the qualitative and quantitative changes within each loan portfolio segment.    

Certain statements herein constitute "forward-looking statements" and actual results may differ from those contemplated by these statements.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts.  They often include words like "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could" or "may."  Certain factors that could cause actual results to differ materially from expected results include changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the businesses in which Peoples Federal Bancshares, Inc. is engaged and changes in the securities market.  The Company disclaims any intent or obligation to update any forward-looking statements, whether in response to new information, future events or otherwise.

PEOPLES FEDERAL BANCSHARES, INC. AND SUBSIDIARY
     
CONSOLIDATED BALANCE SHEETS
     
  September 30,
  2012 2011
  (In thousands, except share data)
ASSETS    
Cash and due from banks  $ 6,713  $ 9,462
Interest-bearing demand deposits with other banks   27,378  44,255
Federal funds sold  48  9
Federal Home Loan Bank - overnight deposit  2,102  8,003
Total cash and cash equivalents  36,241  61,729
Securities available-for-sale  21,653  28,452
Securities held-to-maturity (fair values of $26,746 and $19,925)  25,921  19,713
Federal Home Loan Bank stock (at cost)   4,014  4,339
Loans   454,925  410,794
Allowance for loan losses   (3,891)  (3,371)
Loans, net   451,034  407,423
Premises and equipment, net  3,577  3,818
Cash surrender value of life insurance policies  19,364  18,713
Accrued interest receivable   1,589  1,527
Deferred income tax asset, net  5,116  5,739
Other assets   2,318  2,736
Total assets  $ 570,827  $ 554,189
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Deposits:    
Non-interest bearing  $ 49,165  $ 38,483
Interest-bearing  367,583  374,162
Total deposits  416,748  412,645
Short-term borrowings  8,000  --
Long-term debt  25,000  18,000
Accrued expenses and other liabilities  10,541  7,842
Total liabilities  460,289  438,487
     
Stockholders' equity:    
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued  --  --
Common stock, $0.01 par value; 100,000,000 shares authorized; 6,726,904 shares issued and outstanding at September 30, 2012 and 7,141,500 shares issued at September 30, 2011  67  71
Additional paid-in capital  63,909  69,437
Retained earnings  55,153  53,677
Accumulated other comprehensive income   113  56
Unearned restricted shares; 244,140 shares at September 30, 2012  (3,777)  --
Unearned compensation - ESOP  (4,927)  (5,213)
Treasury stock, at cost; 168,300 shares at September 30, 2011  --  (2,326)
Total stockholders' equity  110,538  115,702
Total liabilities and stockholders' equity  $ 570,827  $ 554,189
         
PEOPLES FEDERAL BANCSHARES, INC. AND SUBSIDIARY
         
CONSOLIDATED STATEMENTS OF OPERATIONS
         
  Three Months Ended
September 30,
Years Ended
September 30,
  2012 2011 2012 2011
  (Unaudited)
  (Dollars in thousands, except share data)
Interest and dividend income:        
Interest and fees on loans  $ 4,857  $ 4,932  $ 19,323  $ 20,048
Interest on debt securities:        
Taxable  191  164  914  400
Other interest  14  33  73  132
Dividends on equity securities  5  3  19  10
Total interest and dividend income  5,067  5,132  20,329  20,590
         
Interest expense:        
Interest on deposits  627  844  2,755  3,445
Interest on Federal Home Loan Bank advances  155  134  564  745
Total interest expense  782  978  3,319  4,190
Net interest and dividend income  4,285  4,154  17,010  16,400
Provision for loan losses  165  65  540  405
Net interest and dividend income, after provision for loan losses  4,120  4,089  16,470  15,995
         
Non-interest income:        
Customer service fees  210  204  838  809
Loan servicing (costs) fees  (5)  (37)  2  40
Net gain on sales of mortgage loans  120  42  169  178
Increase in cash surrender value of life insurance  161  146  651  543
Other income (loss)  76  (56)  173  150
Total non-interest income  562  299  1,833  1,720
         
Non-interest expense:        
Salaries and employee benefits   2,540  2,251  9,587  8,322
Occupancy expense  238  231  920  857
Equipment expense  104  116  437  436
Professional fees  133  130  488  574
Advertising expense  110  94  558  240
Data processing expense  211  201  811  749
Deposit insurance expense  75  62  251  400
Other expense  264  276  1,074  1,209
Total non-interest expense  3,675  3,361  14,126  12,787
Income before income taxes  1,007  1,027  4,177  4,928
Provision for income taxes   1,330  468  2,520  1,857
Net (loss) income   $ (323)  $ 559  $ 1,657  $ 3,071
         
Weighted-average shares outstanding:        
Basic  5,982,123  6,576,421  6,175,042  6,579,784
Diluted  5,982,123  6,576,421  6,183,718  6,579,784
         
Earnings (loss) per common share:        
Basic  $ (0.05)  $ 0.09  $ 0.26  $ 0.47
Diluted  $ (0.05)  $ 0.09  $ 0.26  $ 0.47

The following tables set forth average assets, liability and equity account balances, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

  Three Months Ended September 30,
  2012 2011
  Average
Outstanding
Balance

Interest
Earned/
Paid

Average
Yield/
Rate (1)

Average
Outstanding
Balance

Interest
Earned/
Paid

Average
Yield/
Rate (1)

  (Unaudited)
  (Dollars in thousands)
Interest-earning assets:            
Loans (2)  $ 441,232  $ 4,857 4.40%  $ 402,587  $ 4,932 4.90%
Taxable securities (3)  51,701  191  1.48  37,601  164  1.74
Other interest-earning assets  29,321  14  0.19  51,061  33  0.26
FHLB stock  4,014  5  0.50  4,339  3  0.28
Total interest-earning assets  526,268  5,067  3.85  495,588  5,132  4.14
Non-interest-earning assets  36,992      49,819    
Total assets  $ 563,260      $ 545,407    
             
Interest-bearing liabilities:            
Deposits:            
Savings   $ 49,616  18  0.15  $ 47,602  35  0.29
Money market accounts  153,091  236  0.62  148,388  325  0.88
NOW accounts  37,447  7  0.07  35,278  17  0.19
Term certificates  128,186  366  1.14  132,255  467  1.41
Total deposits  368,340  627  0.68  363,523  844  0.93
FHLB advances  28,979  155  2.14  19,141  134  2.80
Total interest-bearing liabilities  397,319  782  0.79  382,664  978  1.02
Demand deposits  45,791      37,911    
Other non-interest-bearing liabilities  9,017      7,957    
Total non-interest-bearing liabilities  54,808      45,868    
Total liabilities  452,127      428,532    
Stockholders' equity  111,133      116,875    
Total liabilities and stockholders' equity  $ 563,260      $ 545,407    
             
Net interest income    $ 4,285      $ 4,154  
Net interest rate spread (4)     3.06%     3.12%
Net interest-earning assets (5)  $ 128,949      $ 112,924    
Net interest margin (6)     3.26%     3.35%
Ratio of total interest-earning assets to total interest-bearing liabilities  1.32 x      1.30 x    
             
(1) Yields are annualized.            
(2) Average loans include non-accrual loans and are net of average deferred loan fees/costs.            
(3) Average balances are presented at average amortized cost.            
(4) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.        
(5) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.            
(6) Net interest margin represents net interest income divided by average total interest-earning assets.            
   
  Years Ended September 30,
  2012 2011
  Average
Outstanding
Balance

Interest
Earned/
Paid

Average
Yield/
Rate

Average
Outstanding
Balance

Interest
Earned/
Paid

Average
Yield/
Rate

  (Dollars in thousands)
Interest-earning assets:            
Loans (1)  $ 422,198  $ 19,323 4.58%  $ 394,920  $ 20,048 5.08%
Taxable securities (2)  56,856  914  1.61  30,175  400  1.33
Other interest-earning assets  28,864  73  0.25  65,629  132  0.20
FHLB stock  4,155  19  0.46  4,339  10  0.23
Total interest-earning assets  512,073  20,329  3.97  495,063  20,590  4.16
Non-interest-earning assets  44,030      41,521    
Total assets  $ 556,103      $ 536,584    
             
Interest-bearing liabilities:            
Deposits:            
Savings   $ 48,675  90  0.18  $ 46,944  213  0.45
Money market accounts  153,789  1,066  0.69  145,228  1,292  0.89
NOW accounts  36,724  40  0.11  34,165  64  0.19
Term certificates  130,326  1,559  1.20  126,111  1,876  1.49
Total deposits  369,514  2,755  0.75  352,448  3,445  0.98
FHLB advances  22,716  564  2.48  24,016  745  3.10
Total interest-bearing liabilities  392,230  3,319  0.85  376,464  4,190  1.11
Demand deposits  41,816      35,837    
Other non-interest-bearing liabilities  8,762      8,003    
Total non-interest-bearing liabilities  50,578      43,840    
Total liabilities  442,808      420,304    
Stockholders' equity  113,295      116,280    
Total liabilities and stockholders' equity  $ 556,103      $ 536,584    
             
Net interest income    $ 17,010      $ 16,400  
Net interest rate spread (3)     3.12%     3.05%
Net interest-earning assets (4)  $ 119,843      $ 118,599    
Net interest margin (5)     3.32%     3.31%
Ratio of total interest-earning assets to total interest-bearing liabilities  1.31 x      1.32 x    
             
(1) Average loans include non-accrual loans and are net of average deferred loan fees/costs.          
(2) Average balances are presented at average amortized cost.            
(3) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.    
(4) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.        
(5) Net interest margin represents net interest income divided by average total interest-earning assets.        
CONTACT: Maurice H. Sullivan, Jr. Chairman and Chief Executive Officer (617) 254-0707
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