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MSB Financial Corp. Releases First Quarter Earnings

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MILLINGTON, N.J., May 01, 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 months ended March 31, 2018. 

The Company reported net income of $1.0 million, or $0.19 per diluted common share, for the three months ended March 31, 2018, compared to net income of $549,000, or $0.10 per diluted common share, for the three months ended March 31, 2017. The increase in net income was primarily attributable to the combined effects of an increase of net interest income of $707,000 and a decrease of $105,000 in the provision for loan losses, offset by an increase in non-interest expenses of $270,000.

Highlights for the quarter:

  • Return on average assets was 0.74% for the three months ended March 31, 2018 compared to 0.48% for the three months ended March 31, 2017 and return on average equity was 5.65% for the three months ended March 31, 2018 compared to 2.97% for the three months ended March 31, 2017.

  • Net interest margin decreased 5 basis points to 3.24% for the quarter ended March 31, 2018 from 3.29% for the quarter ended March 31, 2017 due to a change deposit pricing.

  • The efficiency ratio which is calculated by calculated by dividing non-interest expense by the sum of net interest income and non-interest income, improved to 66.29% for the quarter ended March 31, 2018 from 71.83% for the quarter ended March 31, 2017 driven by an increase in net interest income year over year.

  • Non-performing assets were at 0.64% of total assets at March 31, 2018 compared with 0.73% at December 31, 2017. The allowance for loan losses as a percentage of total non-performing loans was 153.24% at March 31, 2018 compared to 130.99% at December 31, 2017.

  • The Company's balance sheet reflected total asset growth of $1.0 million at March 31, 2018, compared to December 31, 2017, combined with improving asset quality, and capital levels that exceeded regulatory standards for a well-capitalized institution.

  • During the quarter, the Company repurchased 244,537 shares of common stock for a total of $4.4 million as part of it's stock repurchase plan. The average price paid per share was $17.92.

  • The effective tax rate improved to 28.5% for the quarter ended March 31, 2018 compared to 36.9% for the quarter ended March 31, 2017 primarily due to the passage of the Tax Cuts and Jobs Act.
                     
Selected Financial Ratios                    
(unaudited; annualized where applicable)                    
                     
As of or for the quarter ended:   3/31/2018
    12/31/2017
    9/30/2017
    6/30/2017
    3/31/2017
 
Return on average assets   0.74 %   0.20 %   0.90 %   0.59 %   0.48 %
Return on average equity   5.65 %   1.48 %   6.31 %   3.91 %   2.97 %
Net interest margin   3.24 %   3.30 %   3.37 %   3.35 %   3.29 %
Loans / deposit ratio   110.85 %   105.46 %   116.04 %   109.31 %   112.26 %
Shareholders' equity / total assets   12.37 %   12.97 %   13.39 %   14.79 %   15.37 %
Efficiency ratio   66.29 %   62.26 %   64.21 %   68.02 %   71.83 %
Book value per common share   $ 12.63     $ 12.66     $ 12.57     $ 13.07     $ 12.93  
                                         

Net Interest Income

Total interest income for the three months ended March 31, 2018 increased $1.1 million, or 26.5%, to $5.4 million compared to $4.3 million for the first quarter of 2017. Interest income increased in the quarter ended March 31, 2018 compared to the comparable period in 2017, primarily due to a $100.9 million increase in average loan balances. Total interest expense increased by $429,000, or 61.5%, to $1.1 million, for the three months ended March 31, 2018 compared to the same period in 2017 due to a mix of higher deposit rates and average deposit balances.

Net interest income for the three months ended March 31, 2018 increased $707,000, or 19.7% to $4.3 million compared to $3.6 million for the same three-month period in 2017. The change for the three months ended March 31, 2018 was primarily a result of an increase in average earning assets of $94.4 million. The annualized net interest spread was 3.07% and 3.12% for the three months ended March 31, 2018 and 2017, respectively. For the quarter ended March 31, 2018, the Company's annualized net interest margin decreased to 3.24% compared to 3.29% for the corresponding three-month period in 2017.

Other Income and Other Expense

Other income for the three months ended March 31, 2018 was $204,000, as compared to $187,000 for the same period in 2017.  Other expense, which consists of salaries and employee benefits, occupancy expense, professional services and other non-interest expenses totaled $3.0 million for the quarter ended March 31, 2018 as compared to $2.7 million for the same period in 2017 with the $270,000 increase primarily attributable to salaries and employee benefits as a result of merit and infrastructure increases.

Taxes

For the three months ended March 31, 2018, the Company recorded a $407,000 tax provision compared to a provision of $321,000 for the three months ended March 31, 2017. The effective tax rate improved to 28.5% for the quarter ended March 31, 2018 compared to 36.9% for the quarter ended March 31, 2017. As a result of the passage of the Tax Cuts and Jobs Act on December 22, 2017, the federal tax rate for corporations was reduced to 21% during 2018. The increase in tax provision is attributable to an increase in pre-tax income offset by a decrease in the effective tax rate.  

Earnings Summary for Period Ended March 31, 2018

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:   3/31/2018   12/31/2017   9/30/2017
    6/30/2017   3/31/2017
Net interest income   $ 4,302   $ 4,325   $ 4,190     $ 3,924   $ 3,595
Provision for loan losses   90   200   490     300   195
Net interest income after provision for loan losses   4,212   4,125   3,700     3,624   3,400
Other income   204   211   205     219   187
Other expense   2,987   2,824   2,822     2,818   2,717
Income before income taxes   1,429   1,512   1,083     1,025   870
Income taxes (benefit)   407   1,240   (86 )   293   321
Net income   $ 1,022   $ 272   $ 1,169     $ 732   $ 549
Earnings per common share:                    
Basic   $ 0.19   $ 0.05   $ 0.21     $ 0.13   $ 0.10
Diluted   $ 0.19   $ 0.05   $ 0.21     $ 0.13   $ 0.10
Weighted average common shares outstanding:                    
Basic   5,470,349   5,577,314   5,563,938     5,539,796   5,519,849
Diluted   5,507,443   5,588,598   5,574,535     5,679,012   5,613,387
                       

Statement of Condition Highlights at March 31, 2018

  • Balance sheet growth, with total assets amounting to $564.0 million at March 31, 2018, an increase of $1.0 million, or 0.18%, compared to December 31, 2017.

  • The Company's total gross loans receivable were $486.4 million at March 31, 2018, an increase of $7.6 million, or 1.6%, from December 31, 2017.

  • Securities held to maturity were $36.4 million at March 31, 2018, a decrease of $2.1 million, or 5.5%, compared to December 31, 2017.

  • Deposits totaled $433.8 million at March 31, 2018, a decrease of $15.1 million, or 3.4%, compared to December 31, 2017.

  • Borrowings totaled $58.1 million at March 31, 2018, an increase of $20.4 million, or 54.1%, compared to $37.7 million at December 31, 2017.

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

             
Condensed Consolidated Statements of Condition (unaudited)            
                     
(in thousands)                    
At:   3/31/2018   12/31/2017   9/30/2017   6/30/2017   3/31/2017
Cash and due from banks   $ 1,871   $ 2,030   $ 1,800   $ 1,839   $ 2,051
Interest-earning demand deposits with banks   15,484   20,279   6,971   7,195   9,198
Securities held to maturity   36,375   38,482   40,752   42,441   42,716
Loans receivable, net of allowance   480,916   473,405   461,285   426,370   398,447
Premises and equipment   8,580   8,698   8,804   8,902   8,918
Federal home Loan Bank of New York stock, at cost   3,049   2,131   3,512   2,263   2,626
Bank owned life insurance   14,294   14,197   14,097   13,996   13,891
Accrued interest receivable   1,642   1,607   1,548   1,402   1,277
Other assets   1,816   2,211   2,988   2,690   2,784
Total assets   $ 564,027   $ 563,040   $ 541,757   $ 507,098   $ 481,908
Deposits   $ 433,843   $ 448,913   $ 397,510   $ 390,063   $ 354,931
Borrowings   58,075   37,675   68,375   38,675   49,175
Other liabilities   2,350   3,427   3,332   3,371   3,735
Shareholders' equity   69,759   73,025   72,540   74,989   74,067
Total liabilities and shareholders' equity   $ 564,027   $ 563,040   $ 541,757   $ 507,098   $ 481,908
 

Loans

At March 31, 2018, the Company's net loan portfolio totaled $480.9 million, an increase of $7.5 million, or 1.6%, compared to $473.4 million at December 31, 2017.  The allowance for loan losses amounted to $5.5 million and $5.4 million at March 31, 2018 and December 31, 2017, respectively.

At March 31, 2018, the loan portfolio primarily consisted of commercial real estate loans (38.4%) and residential mortgages (35.6%). Commercial and industrial loans represented 16.2% of the portfolio while construction loans accounted for 9.7% of the portfolio. Total loans receivable increased $11.1 million to $510.3 million at March 31, 2018 compared to $499.2 million at December 31, 2017. The increase primarily reflects a $9.2 million increase in commercial and industrial loans and a $5.7 million increase in construction loans. The increases were partially offset by a $3.2 million 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:   3/31/2018   12/31/2017   9/30/2017   6/30/2017   3/31/2017
Residential mortgage:                              
One-to-four family   $ 154,576   $ 157,876   $ 161,679   $ 164,448   $ 160,153
Home equity   27,051   26,803   27,409   29,021   30,493
Total residential mortgage   181,627   184,679   189,088   193,469   190,646
Commercial and multi-family real estate   195,951   196,681   184,791   153,984   141,193
Construction   49,397   43,718   36,002   29,623   31,978
Commercial and industrial   82,712   73,465   73,409   67,686   54,887
Total commercial loans   328,060   313,864   294,202   251,293   228,058
Consumer loans   595   618   659   434   394
Total loans receivable   510,282   499,161   483,949   445,196   419,098
Less:                    
Loans in process   23,398   19,868   16,864   13,315   15,394
Deferred loan fees   462   474   525   586   631
Allowance   5,506   5,414   5,275   4,925   4,626
Total loans receivable, net   $ 480,916   $ 473,405   $ 461,285   $ 426,370   $ 398,447
 

Asset Quality

At March 31, 2018, non-performing loans totaled $3.6 million, or 0.64% of total assets, compared with $4.1 million, or 0.73% of total assets, at December 31, 2017. Total delinquent loans (including nonperforming delinquent loans) were $6.4 million at March 31, 2018, an increase of $1.0 million from December 31, 2017 due to an increase in loans past due 30-59 days.  The allowance for loan losses as a percentage of total loans was 1.13% at March 31, 2018 and December 31, 2017, respectively, while the allowance for loan losses as a percentage of non-performing loans increased to 153.24% at March 31, 2018 from 130.99% at December 31, 2017. Non-performing loans to total loans declined to 0.74% at March 31, 2018 from 0.86% at December 31, 2017.

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:   3/31/2018
    12/31/2017
    9/30/2017
    6/30/2017
    3/31/2017
 
Non-accrual loans   $ 3,548     $ 3,975     $ 4,071     $
6,916     $
7,405  
Loans 90 days or more past due and still accruing   45     158     374         34  
Total non-performing loans   $ 3,593     $ 4,133     $ 4,445     $ 6,916     $ 7,439  
                     
Non-performing assets / total assets   0.64 %   0.73 %   0.82 %   1.36 %   1.54 %
Non-performing loans / total loans   0.74 %   0.86 %   0.95 %   1.60 %   1.84 %
Net charge-offs (recoveries)   $ (2 )   $ 61     $ 140     $ 1     $ 45  
Net charge-offs (recoveries) / average loans (annualized)   %   0.05 %   0.13 %   %   0.05 %
Allowance for loan loss / total loans   1.13 %   1.13 %   1.13 %   1.14 %   1.15 %
Allowance for loan losses / non-performing loans   153.24 %   130.99 %   118.69 %   71.21 %   62.19 %
                     
Total assets   $ 564,027     $ 563,040     $ 541,757     $ 507,098     $ 481,908  
Total net loans receivable, excluding ALLL   $ 486,422     $ 478,819     $ 466,560     $ 431,295     $ 403,073  
Average loans   $ 483,255     $ 472,388     $ 446,383     $ 417,065     $ 382,386  
Allowance for loan losses   $ 5,506     $ 5,414     $ 5,275     $ 4,925     $ 4,626  
                                         

Deposits

Total deposits at March 31, 2018 were $433.8 million compared with $448.9 million at December 31, 2017.  Overall, deposits decreased by $15.1 million, or 3.4%, with declines occurring across all product types except savings. The declines were a result of a few large depositors utilizing funds from their accounts. Money market and interest demand balances declined $7.1 million and $6.3 million, respectively. Money market balances declined to $20.3 million compared to $27.4 million at December 31, 2017 while interest demand balances declined to $148.9 million compared to $155.2 million at December 31, 2017. In addition, certificate of deposit (including IRA) balances declined $5.6 million to $118.7 million compared to $124.3 million from year-end. Savings balances increased $4.1 million to $109.2 million from $105.1 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:   3/31/2018   12/31/2017   9/30/2017   6/30/2017   3/31/2017
Demand:                              
Non-interest bearing   $ 36,751   $ 36,919   $ 40,504   $ 44,584   $ 38,970
Interest-bearing   148,888   155,199   107,419   95,196   89,159
Savings   109,215   105,106   108,249   105,560   104,956
Money market   20,251   27,350   16,517   15,842   13,950
Time   118,738   124,339   124,821   128,881   107,896
Total deposits   $ 433,843   $ 448,913   $ 397,510   $ 390,063   $ 354,931
 

Capital

At March 31, 2018, the Company's total shareholders' equity amounted to $69.8 million, or 12.37% of total assets, compared to $73.0 million at December 31, 2017. The Company's book value per common share was $12.63 at March 31, 2018, compared to $12.66 at December 31, 2017. The decline in shareholders' equity was primarily due to the repurchase of 244,537 shares of common stock for a total of $4.4 million partially offset by net income of $1.0 million.

At March 31, 2018, the Bank's common equity tier 1 ratio was 11.43%, tier 1 leverage ratio was 10.38%, tier 1 capital ratio was 11.43% and the total capital ratio was 12.53%. 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 March 31, 2018, 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:   3/31/2018
    12/31/2017
    9/30/2017
    6/30/2017
    3/31/2017
 
Loans   $ 483,255     $ 472,388     $ 446,383     $ 417,065     $ 382,386  
Securities held to maturity   37,661     39,899     41,423     41,885     43,285  
Allowance for loan losses   (5,461 )   (5,376 )   (4,922 )   (4,695 )   (4,524 )
All other assets   38,851     41,886     38,545     38,603     39,702  
Total assets   $ 554,306     $ 548,797     $ 521,429     $ 492,858     $ 460,849  
Non-interest bearing deposits   $ 36,211     $ 43,336     $ 44,970     $ 43,030     $ 37,821  
Interest-bearing deposits   390,522     375,098     350,589     333,902     316,324  
Borrowings   53,191     53,844     47,788     37,715     29,992  
Other liabilities   1,972     3,104     3,964     3,363     2,789  
Shareholders' equity   72,410     73,415     74,118     74,848     73,923  
Total liabilities and shareholders' equity   $ 554,306     $ 548,797     $ 521,429     $ 492,858     $ 460,849  
                     

CEO outlook:

"Growth during the first quarter was tempered due to an increase in competition for quality loans and deposits," stated Michael Shriner, President and Chief Executive Officer.  Mr. Shriner added, "Our Management Team and Board of Directors are very conscious of the current state of the commercial real estate market and remain committed to growing the Company in a safe and sound manner, which sometimes means taking a pass on a proposed project."

Mr. Shriner further stated "the Company continues to strengthen other areas, including the Company's overall risk profile, which was evident in the reduction of Non-Performing Loans/Total Loans from 1.84% to .74% over the past twelve months."

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
March 31,
2018
At
December 31, 
2017
(Dollars in thousands, except per share amounts)            
Cash and due from banks $ 1,871   $ 2,030  
Interest-earning demand deposits with banks            15,484   20,279  
  Cash and Cash Equivalents 17,355   22,309  
Securities held to maturity (fair value of $35,561 and $38,255, respectively) 36,375   38,482  
Loans receivable, net of allowance for loan losses of $5,506 and $5,414, respectively 480,916   473,405  
Premises and equipment 8,580   8,698  
Federal Home Loan Bank of New York stock, at cost 3,049   2,131  
Bank owned life insurance 14,294   14,197  
Accrued interest receivable 1,642   1,607  
Other assets 1,816   2,211  
Total Assets $ 564,027   $ 563,040  
  Liabilities and Stockholders' Equity    
Liabilities    
Deposits:    
Non-interest bearing $ 36,751   $ 36,919  
Interest bearing 397,092   411,994  
Total Deposits 433,843   448,913  
Advances from Federal Home Loan Bank of New York 58,075   37,675  
Advance payments by borrowers for taxes and insurance 772   686  
Other liabilities 1,578   2,741  
Total Liabilities 494,268   490,015  
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; 5,524,095
and 5,768,632 issued; 5,524,095 and 5,768,632 outstanding, respectively
55   58  
Paid-in capital 46,756   51,068  
Retained earnings 24,663   23,641  
Unearned common stock held by ESOP (187,666 and 190,390 shares, respectively) (1,715 (1,742 )
Total Stockholders' Equity 69,759   73,025  
  Total Liabilities and Stockholders' Equity $ 564,027   $ 563,040  
     



         
MSB Financial Corp. and Subsidiaries
 
Consolidated Statements of Income
    Three Months Ended
March 31,
    2018   2017
(in thousands except per share amounts)        
Interest Income        
Loans receivable, including fees   $ 5,136   $ 4,000
Securities held to maturity   219   251
Other   74   42
Total Interest Income   5,429   4,293
Interest Expense        
Deposits   846   502
Borrowings   281   196
Total Interest Expense   1,127   698
Net Interest Income   4,302   3,595
Provision for Loan Losses   90   195
Net Interest Income after Provision for Loan Losses   4,212   3,400
Non-Interest Income        
Fees and service charges   83   71
Income from bank owned life insurance   97   107
Other   24   9
Total Non-Interest Income   204   187
Non-Interest Expenses        
Salaries and employee benefits   1,805   1,506
Directors compensation   122   176
Occupancy and equipment   385   394
Service bureau fees   67   48
Advertising   4   3
FDIC assessment   54   33
Professional services   353   359
Other   197   198
Total Non-Interest Expenses   2,987   2,717
Income before Income Taxes   1,429   870
Income Tax Expense   407   321
Net Income   $ 1,022   $ 549
Earnings per share:        
Basic   $ 0.19   $ 0.10
Diluted   $ 0.19   $ 0.10
         



           
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) 3/31/2018   12/31/2017   3/31/2017
(unaudited)          
Statements of Operations Data          
           
Interest income $ 5,429     $ 5,377     $ 4,293  
Interest expense 1,127     1,052     698  
 Net interest income 4,302     4,325     3,595  
Provision for loan losses 90     200     195  
 Net interest income after provision for loan losses 4,212     4,125     3,400  
Other income 204     211     187  
Other expense 2,987     2,824     2,717  
Income before income taxes 1,429     1,512     870  
Income tax expense (benefit) 407     1,240     321  
 Net Income $ 1,022     $ 272     $ 549  
Earnings (per Common Share)          
Basic $ 0.19     $ 0.05     $ 0.10  
Diluted $ 0.19     $ 0.05     $ 0.10  
Statements of Condition Data (Period-End)          
Investment securities held to maturity (fair value of $35,561, $38,255, and $42,614) $ 36,375     $ 38,482     $ 42,716  
Loans receivable, net of allowance for loan losses 480,916     473,405     398,447  
Total assets 564,027     563,040     481,908  
Deposits 433,843     448,913     354,931  
Borrowings 58,075     37,675     49,175  
Shareholders' equity 69,759     73,025     74,067  
Common Shares Dividend Data          
Cash dividends $     $     $  
Weighted Average Common Shares Outstanding          
Basic 5,470,349     5,577,314     5,519,849  
Diluted 5,507,443     5,588,598     5,613,387  
Operating Ratios          
Return on average assets 0.74 %   0.20 %   0.48 %
Return on average equity 5.65 %   1.48 %   2.97 %
Average equity / average assets 13.06 %   13.38 %   16.04 %
Book value per common share (period-end) $ 12.63     $ 12.66     $ 12.93  

 

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