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MSB Financial Corp. Releases Fourth Quarter and Full Year Earnings

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MILLINGTON, N.J., Jan. 31, 2018 (GLOBE NEWSWIRE) -- MSB Financial Corp. (NASDAQ:MSBF) (the "Company"), parent company of Millington Bank, reported today the results of its operations for the three and twelve months ended December 31, 2017.

The Company reported net income of $272,000, or $0.05 per diluted common share, for the three months ended December 31, 2017, compared to net income of $478,000, or $0.09 per diluted common share, for the three months ended December 31, 2016. Net income for the full 2017 year was $2.7 million, or $0.49 per diluted common share, compared to net income of $1.2 million, or $0.20 per diluted common share, for the full year of 2016.

During the fourth quarter of 2017, the Company recorded additional tax provision of $678,000, or $0.12 per diluted common share, due to the revaluation of the Company's deferred tax asset as a result of the passage of the Tax Cuts and Jobs Act on December 22, 2017 which significantly reduced corporate tax rates.  The impact of the change was the primary reason for the decrease in earnings for the fourth quarter. Excluding the additional tax provision, net income would have been $950,000, or $0.17 per diluted common share.

Highlights for the quarter:

  • Net interest margin improved 11 basis points to 3.30% for the quarter ended December 31, 2017 from 3.19% for the quarter ended December 31, 2016.

  • Efficiency ratio improved to 62.3% for the quarter ended December 31, 2017 from 69.0% for the quarter ended December 31, 2016 driven by an increase in net interest income year over year.

  • Non-performing assets were at 0.73% of total assets at December 31, 2017 compared with 1.51% at December 31, 2016. The allowance for loan losses as a percentage of total non-performing loans was 130.99% at December 31, 2017 compared to 64.13% at December 31, 2016.

  • The Company's balance sheet reflected total asset growth of $101.4 million at December 31, 2017, compared to December 31, 2016, combined with improving asset quality, and capital levels that exceeded regulatory standards for a well-capitalized institution.
                     
Selected Financial Ratios                    
(unaudited; annualized where applicable)                    
                     
As of or for the quarter ended:   12/31/2017
    9/30/2017
    6/30/2017
    3/31/2017
    12/31/2016
 
Return on average assets   0.20 %   0.90 %   0.59 %   0.48 %   0.44 %
Return on average equity   1.48 %   6.31 %   3.91 %   2.97 %   2.62 %
Net interest margin   3.30 %   3.37 %   3.35 %   3.29 %   3.19 %
Loans / deposit ratio   105.46 %   116.04 %   109.31 %   112.26 %   101.58 %
Shareholders' equity / total assets   12.97 %   13.39 %   14.79 %   15.37 %   15.85 %
Efficiency ratio   62.26 %   64.21 %   68.02 %   71.83 %   68.96 %
Book value per common share   $ 12.66     $ 12.57     $ 13.07     $ 12.93     $ 12.81  
                                         

Net Interest Income

Total interest income for the three months ended December 31, 2017 increased $1.4 million, or 36.2%, to $5.4 million compared to $3.9 million for the fourth quarter of 2016. Interest income increased in the quarter ended December 31, 2017 compared to the comparable period in 2016, primarily due to a $128.7 million increase in average loan balances. Total interest expense increased by $403,000, or 62.1%, to $1.1 million, for the three months ended December 31, 2017 compared to the same period in 2016.

Net interest income for the three months ended December 31, 2017 increased $1.0 million, or 31.1% to $4.3 million compared to the same three month period in 2016. The change for the three months ended December 31, 2017 was primarily a result of an increase in average earning assets of $110.7 million. The annualized net interest spread was 3.12% and 3.02% for the three months ended December 31, 2017 and 2016, respectively. For the quarter ended December 31, 2017, the Company's annualized net interest margin increased to 3.30% compared to 3.19% for the corresponding three month period in 2016.

Total interest income for the year ended December 31, 2017, increased $5.3 million, or 37.1%, to $19.5 million compared to $14.2 million for the year ended December 31, 2017 as average earning assets increased $100.3 million year over year. Total interest expense increased by $1.2 million, or 53.4%, to $3.4 million for the year ended December 31, 2017 compared to 2016 as average interest-bearing liabilities increased $97.1 million year over year.

Net interest income grew $4.1 million, or 34.0%, to $16.0 million for the year ended December 31, 2017 compared to $12.0 million for the year ended December 31, 2016. Net interest spread and net interest margin for the year ended December 31, 2017, improved 21 and 20 basis points respectively, to 3.15% and 3.33% compared to 2.94% and 3.13% for the year ended December 31, 2016. Net interest income and net interest margin continue to increase due primarily to the growth in the Company's commercial real estate and commercial loan portfolios.

Earnings Summary for Period Ended December 31, 2017

The following table presents condensed consolidated statements of income data for the periods indicated.

Condensed Consolidated Statements of Income (unaudited)            
                     
(dollars in thousands, except for per share data)

 
                   
For the quarter ended:   12/31/2017
    9/30/2017
    6/30/2017
    3/31/2017
    12/31/2016
 
Net interest income   $ 4,325     $ 4,190     $ 3,924     $ 3,595     $ 3,300  
Provision for loan losses   200     490     300     195     300  
Net interest income after provision for loan losses   4,125     3,700     3,624     3,400     3,000  
Other income   211     205     219     187     205  
Other expense   2,824     2,822     2,818     2,717     2,417  
Income before income taxes   1,512     1,083     1,025     870     788  
Income taxes (benefit)   1,240     (86 )   293     321     310  
Net income   $ 272     $ 1,169     $ 732     $ 549     $ 478  
Earnings per common share:                    
Basic   $ 0.05     $ 0.21     $ 0.13     $ 0.10     $ 0.09  
Diluted   $ 0.05     $ 0.21     $ 0.13     $ 0.10     $ 0.09  
Weighted average common shares outstanding:                    
Basic   5,577     5,564     5,540     5,520     5,510  
Diluted   5,588     5,575     5,679     5,614     5,596  
                               

Statement of Condition Highlights at December 31, 2017

  • Balance sheet growth, with total assets amounting to $563.0 million at December 31, 2017, an increase of $101.4 million, or 22.0%, compared to December 31, 2016.

  • The Company's total gross loans receivable were $499.2 million at December 31, 2017, an increase of $119.5 million, or 31.5%, from December 31, 2016.

  • Securities held to maturity were $38.5 million at December 31, 2017, a decrease of $5.6 million, or 12.8%, compared to December 31, 2016.

  • Deposits totaled $448.9 million at December 31, 2017, an increase of $86.6 million, or 23.9%, compared to December 31, 2016.

  • Borrowings totaled $37.7 million at December 31, 2017, an increase of $15.0 million, or 66.2%, compared to $22.7 million at December 31, 2016.

The following table presents condensed consolidated statements of condition data as of the dates indicated.

Condensed Consolidated Statements of Condition (unaudited)            
                     
(in thousands)                    
                                         
At:   12/31/2017
    9/30/2017
    6/30/2017
    3/31/2017
    12/31/2016
 
Cash and due from banks   $ 2,030     $ 1,800     $ 1,839     $ 2,051     $
1,388  
Interest-earning demand deposits with banks   20,279     6,971     7,195     9,198     19,994  
Securities held to maturity   38,482     40,752     42,441     42,716     44,104  
Loans receivable, net of allowance   473,405     461,285     426,370     398,447     368,007  
Premises and equipment   8,698     8,804     8,902     8,918     8,957  
Federal home Loan Bank of New York stock, at cost   2,131     3,512     2,263     2,626     1,433  
Bank owned life insurance   14,197     14,097     13,996     13,891     13,784  
Accrued interest receivable   1,607     1,548     1,402     1,277     1,378  
Other assets   2,211     2,988     2,690     2,784     2,601  
Total assets   $ 563,040     $ 541,757     $ 507,098     $ 481,908     $ 461,646  
Deposits   $ 448,913     $ 397,510     $ 390,063     $ 354,931     $ 362,299  
Borrowings   37,675     68,375     38,675     49,175     22,675  
Other liabilities   3,427     3,332     3,371     3,735     3,487  
Shareholders' equity   73,025     72,540     74,989     74,067     73,185  
Total liabilities and shareholders' equity   $ 563,040     $ 541,757     $ 507,098     $ 481,908     $ 461,646  
                                         

Loans

At December 31, 2017, the Company's net loan portfolio totaled $473.4 million, an increase of $105.4 million, or 28.6%, compared to $368.0 million at December 31, 2016.  The allowance for loan losses amounted to $5.4 million and $4.5 million at December 31, 2017 and December 31, 2016, respectively.

At the end of 2017, the loan portfolio primarily consisted of commercial real estate loans (39.4%) and residential mortgages (37.0%). Commercial and industrial loans represented 14.7% of the portfolio while construction loans accounted for 8.8% of the portfolio. Total loans receivable increased $119.5 million to $499.2 million at December 31, 2017 compared to $379.7 million at December 31, 2016. The increase primarily reflects a $72.0 million increase in commercial real estate loans, a $28.2 million increase in commercial and industrial loans and a $27.2 million increase in construction loans. The increases were partially offset by an $8.1 decrease in residential mortgages as the Company continues to focus on commercial lending.

The following table shows the composition of the Company's loan portfolio as of the dates indicated.

Loans (unaudited)                    
                     
(dollars in thousands)                    
                     
At quarter ended:   12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016  
Residential mortgage:                                        
One-to-four family   $ 157,876     $ 161,679     $ 164,448     $ 160,153     $ 160,534  
Home equity   26,803     27,409     29,021     30,493     32,262  
Total residential mortgage   184,679     189,088     193,469     190,646     192,796  
Commercial and multi-family real estate   196,681     184,791     153,984     141,193     124,656  
Construction   43,718     36,002     29,623     31,978     16,554  
Commercial and industrial   73,465     73,409     67,686     54,887     45,246  
Total commercial loans   313,864     294,202     251,293     228,058     186,456  
Consumer loans   618     659     434     394     446  
Total loans receivable   499,161     483,949     445,196     419,098     379,698  
Less:                    
Loans in process   19,868     16,864     13,315     15,394     6,557  
Deferred loan fees   474     525     586     631     658  
Allowance   5,414     5,275     4,925     4,626     4,476  
Total loans receivable, net   $ 473,405     $ 461,285     $ 426,370     $ 398,447     $ 368,007  
                                         

Asset Quality

At December 31, 2017, non-performing loans totaled $4.1 million, or 0.73% of total assets compared with $7.0 million, or 1.51% of total assets at December 31, 2016. Total delinquent loans (including nonperforming delinquent loans) were $5.4 million at December 31, 2017, a reduction of $6.5 million from December 31, 2016. The allowance for loan losses as a percentage of total loans was 1.13% and 1.20% at December 31, 2017 and December 31, 2016, respectively, while the allowance for loan losses as a percentage of non-performing loans increased to 130.99% at December 31, 2017 from 64.13% at December 31, 2016. Non-performing loans to total loans declined to 0.86% at December 31, 2017 from 1.87% at December 31, 2016.

The following table presents the components of non-performing assets and other asset quality data for the periods indicated.

                     
(dollars in thousands, unaudited)                    
                     
As of or for the quarter ended:   12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016  
Non-accrual loans   $ 3,975     $ 4,071     $ 6,916     $ 7,405     $ 6,980  
Loans 90 days or more past due and still accruing   158     374         34      
Total non-performing loans   $ 4,133     $ 4,445     $ 6,916     $ 7,439     $ 6,980  
                     
Non-performing assets / total assets   0.73 %   0.82 %   1.36 %   1.54 %   1.51 %
Non-performing loans / total loans   0.86 %   0.95 %   1.60 %   1.85 %   1.87 %
Net charge-offs (recoveries)   $ 61     $ 140     $ 1     $ 45     $ (132 )
Net charge-offs (recoveries) / average loans (annualized)   0.05 %   0.13 %   %   0.05 %   (0.15 )%
Allowance for loan loss / total loans   1.13 %   1.13 %   1.14 %   1.15 %   1.20 %
Allowance for loan losses / non-performing loans   130.99 %   118.67 %   72.21 %   62.19 %   64.13 %
                     
Total assets   $ 563,040     $ 541,757     $ 507,098     $ 481,908     $ 461,646  
Total net loans receivable, excluding ALLL   $ 478,819     $ 466,560     $ 431,295     $ 403,073     $ 372,483  
Average loans   $ 472,388     $ 446,383     $ 417,065     $ 382,386     $ 343,684  
Allowance for loan losses   $ 5,414     $ 5,275     $ 4,925     $ 4,626     $ 4,476  

Deposits

Total deposits at December 31, 2017 were $448.9 million compared with $362.3 million at December 31, 2016.  Overall, deposits increased by $86.6 million, or 23.9% with growth occurring across all product types. Interest-bearing demand balances and certificate of deposit (including IRA) balances increased $55.3 million and $20.7 million, respectively, year over year. Interest-bearing demand balances grew to $155.2 million compared to $99.9 million at December 31, 2016 while certificates of deposit balances grew to $124.3 million compared to $103.6 million at December 31, 2016. Money Market balances increased by $16.1 million to $27.4 million from $11.3 million at December 31, 2016. Savings balances increased $1.9 million to $105.1 million from $103.2 million at the prior year end. Offsetting these increases was a decrease in non-interest demand deposits of $7.5 million to $36.9 million from $44.4 million at the prior year end.

The following table shows the composition of the Company's deposits as of the dates indicated.

Deposits (unaudited)                    
                     
(dollars in thousands)                    
                     
At quarter ended:     12/31/2017       9/30/2017       6/30/2017       3/31/2017       12/31/2016  
Demand:                                        
Non-interest bearing   $ 36,919     $ 40,504     $ 44,584     $ 38,970     $ 44,365  
Interest-bearing   155,199     107,419     95,196     89,159     99,879  
Savings   105,106     108,249     105,560     104,956     103,163  
Money market   27,350     16,517     15,842     13,950     11,265  
Time   124,339     124,821     128,881     107,896     103,627  
Total deposits   $ 448,913     $ 397,510     $ 390,063     $ 354,931     $ 362,299  

Capital

At December 31, 2017, the Company's total shareholders' equity amounted to $73.0 million, or 12.97% of total assets, compared to $73.2 million at December 31, 2016. The Company's book value per common share was $12.66 at December 31, 2017, compared to $12.81 at December 31, 2016. During the year, the Company paid a $0.425 per share special dividend to shareholders.

At December 31, 2017, the Bank's common equity tier 1 ratio was 11.98%, tier 1 leverage ratio was 10.72%, tier 1 capital ratio was 11.98% and the total capital ratio was 13.10%. At December 31, 2016, the Bank's common equity tier 1 ratio was 15.66%, tier 1 leverage ratio was 12.72%, tier 1 capital ratio was 15.66% and the total capital ratio was 16.91%. At December 31, 2017, the Bank was in compliance with all applicable regulatory capital requirements.

The following table sets forth the Company's consolidated average statements of condition for the periods presented.

Condensed Consolidated Average Statements of Condition (unaudited)
                     
(dollars in thousands)                    
                     
For the quarter ended:   12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016  
Loans   $ 472,388     $ 446,383     $ 417,065     $ 382,386     $ 343,684  
Securities held to maturity   39,899     41,423     41,885     43,285     44,426  
Allowance for loan losses   (5,376 )   (4,922 )   (4,695 )   (4,524 )   (4,193 )
All other assets   41,886     38,545     38,603     39,702     53,915  
Total assets   $ 548,797     $ 521,429     $ 492,858     $ 460,849     $ 437,832  
Non-interest bearing deposits   $ 43,336     $ 44,970     $ 43,030     $ 37,821     $ 38,014  
Interest-bearing deposits   375,098     350,589     333,902     316,324     300,726  
Borrowings   53,844     47,788     37,715     29,992     22,675  
Other liabilities   3,104     3,964     3,363     2,789     3,374  
Shareholders' equity   73,415     74,118     74,848     73,923     73,043  
Total liabilities and shareholders' equity   $ 548,797     $ 521,429     $ 492,858     $ 460,849     $ 437,832  
                     

CEO outlook:

"The success of our Company over the past 24 months would not have been possible without the hard work and dedication of our entire staff and Board of Directors," stated Michael A. Shriner, President and Chief Executive Officer.  Mr. Shriner added, "Not only did we push past $500 million in assets and returned to shareholders a $0.425 special dividend in 2017, our Lending Department achieved two consecutive years of $100 million in loan growth, an accomplishment our Company will not soon forget.  Our Company will continue to pursue loan portfolio growth but not at the expense of asset quality."

Mr. Shriner further added, "Like most financial institutions, we were required to revalue our deferred tax asset as a result of the passage of the Tax Cuts and Jobs Act.  While this negatively impacted our results in the last quarter, going forward we will benefit from the significant reduction in tax rates."

Forward Looking Statement Disclaimer

The foregoing release may contain forward-looking statements concerning the financial condition, results of operations and business of the Company. We caution that such statements are subject to a number of uncertainties and actual results could differ materially, and, therefore, readers should not place undue reliance on any forward-looking statements. Factors that may cause actual results to differ from those contemplated include our continued ability to grow the loan portfolio, the impact of the passage of the Tax Cuts and Jobs Act and our continued ability to manage cybersecurity risks.

Contact: Michael A. Shriner, President & CEO  
(908) 647-4000  
  mshriner@millingtonbank.com  
     


     
MSB Financial Corp. and Subsidiaries
 
Consolidated Statements of Financial Condition
  At
December 31,
2017
  At
December 31,
2016
(Dollars in thousands, except per share amounts)            
Cash and due from banks $ 2,030   $ 1,388  
Interest-earning demand deposits with banks 20,279   19,994  
Cash and Cash Equivalents 22,309   21,382  
Securities held to maturity (fair value of $38,255 and $43,894, respectively) 38,482   44,104  
Loans receivable, net of allowance for loan losses of $5,414 and $4,476, respectively 473,405   368,007  
Premises and equipment 8,698   8,957  
Federal Home Loan Bank of New York stock, at cost 2,131   1,433  
Bank owned life insurance 14,197   13,784  
Accrued interest receivable 1,607   1,378  
Other assets 2,211   2,601  
Total Assets $ 563,040   $ 461,646  
Liabilities and Stockholders' Equity    
Liabilities    
Deposits:    
Non-interest bearing $ 36,919   $ 44,365  
Interest bearing 411,994   317,934  
Total Deposits 448,913   362,299  
Advances from Federal Home Loan Bank of New York 37,675   22,675  
Advance payments by borrowers for taxes and insurance 686   792  
Other liabilities 2,741   2,695  
Total Liabilities 490,015   388,461  
Stockholders' Equity    
Preferred stock, par value $0.01; 1,000,000 shares authorized; no shares issued or outstanding    
Common stock, par value $0.01; 49,000,000 shares authorized; 5,768,632 and 5,714,182 issued; 5,768,632 and 5,714,182 outstanding, respectively 58   57  
Paid-in capital 51,068   51,809  
Retained earnings 23,641   23,370  
Unearned common stock held by ESOP (190,390 and 201,316 shares, respectively) (1,742 ) (1,929 )
Accumulated other comprehensive loss   (122 )
Total Stockholders' Equity 73,025   73,185  
Total Liabilities and Stockholders' Equity $ 563,040   $ 461,646  
     
     


                 
MSB Financial Corp. and Subsidiaries
 
Consolidated Statements of Income
    Three Months Ended
December 31,
  Year Ended
 December 31,
    2017   2016   2017   2016
(in thousands except per share amounts)                
Interest Income                
Loans receivable, including fees   $ 5,065     $ 3,648     $ 18,278     $ 12,745  
Securities held to maturity   249     255     1,011     1,293  
Other   63     46     191     172  
Total Interest Income   5,377     3,949     19,480     14,210  
Interest Expense                
Deposits   747     465     2,450     1,501  
Borrowings   305     184     996     746  
Total Interest Expense   1,052     649     3,446     2,247  
Net Interest Income   4,325     3,300     16,034     11,963  
Provision for Loan Losses   200     300     1,185     800  
Net Interest Income after Provision for Loan Losses   4,125     3,000     14,849     11,163  
Non-Interest Income                
Fees and service charges   86     85     342     333  
Income from bank owned life insurance   100     109     413     316  
Other   25     11     67     392  
Total Non-Interest Income   211     205     822     1,041  
Non-Interest Expenses                
Salaries and employee benefits   1,579     1,423     6,240     5,729  
Directors compensation   192     122     743     458  
Occupancy and equipment   403     390     1,620     1,454  
Service bureau fees   65     113     229     752  
Advertising   12     13     24     41  
FDIC assessment   53     (13 )   184     198  
Professional services   297     240     1,347     1,100  
Other   223     129     794     658  
Total Non-Interest Expenses   2,824     2,417     11,181     10,390  
Income before Income Taxes   1,512     788     4,490     1,814  
Income Tax Expense   1,240     310     1,768     653  
Net Income   $ 272     $ 478     $ 2,722     $ 1,161  
Earnings per share:                
Basic   $ 0.05     $ 0.09     $ 0.49     $ 0.21  
Diluted   $ 0.05     $ 0.09     $ 0.49     $ 0.20  
                 
                 


           
MSB Financial Corp. and Subsidiaries    
           
Selected Quarterly Financial and Statistical Data          
  Three Months Ended
(in thousands, except for share and per share data) (annualized where applicable) 12/31/2017   9/30/2017   12/31/2016
(unaudited)          
Statements of Operations Data          
                       
Interest income $ 5,377     $ 5,083     $ 3,949  
Interest expense 1,052     893     649  
Net interest income 4,325     4,190     3,300  
Provision for loan losses 200     490     300  
Net interest income after provision for loan losses 4,125     3,700     3,000  
Other income 211     205     205  
Other expense 2,824     2,822     2,417  
Income before income taxes 1,512     1,083     788  
Income tax expense (benefit) 1,240     (86 )   310  
Net Income $ 272     $ 1,169     $ 478  
Earnings (per Common Share)          
Basic $ 0.05     $ 0.21     $ 0.09  
Diluted $ 0.05     $ 0.21     $ 0.09  
Statements of Condition Data (Period-End)          
Investment securities held to maturity (fair value of $38,255, $40,794 and $43,894) $ 38,482     $ 40,752     $ 44,104  
Loans receivable, net of allowance for loan losses 473,405     461,285     368,007  
Total assets 563,040     541,757     461,646  
Deposits 448,913     397,510     362,299  
Borrowings 37,675     68,375     22,675  
Shareholders' equity 73,025     72,540     73,185  
Common Shares Dividend Data          
Cash dividends $     $ 2,452     $  
Weighted Average Common Shares Outstanding          
Basic 5,577     5,564     5,510  
Diluted 5,588     5,575     5,596  
Operating Ratios          
Return on average assets 0.20 %   0.90 %   0.44 %
Return on average equity 1.48 %   6.31 %   2.62 %
Average equity / average assets 13.38 %   14.21 %   16.68 %
Book value per common share (period-end) $ 12.66     $ 12.57     $ 12.81  

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