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MSB Financial Corp. Releases Second Quarter Earnings

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MILLINGTON, N.J., July 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 six months ended June 30, 2018.

The Company reported net income of $1.2 million, or $0.23 per diluted common share, for the three months ended June 30, 2018, compared to net income of $732,000, or $0.13 per diluted common share, for the three months ended June 30, 2017. Net income for the six months ended June 30, 2018 was $2.3 million, or $0.42 per diluted common share, compared to net income of $1.3 million, or $0.23 per diluted common share, for the six months ended June 30, 2017.

Highlights for the quarter:

  • Return on average assets was 0.87% for the three months ended June 30, 2018 compared to 0.59% for the three months ended June 30, 2017 and return on average equity was 7.17% for the three months ended June 30, 2018 compared to 3.91% for the three months ended June 30, 2017.
      
  • Net interest margin decreased 11 basis points to 3.24% for the quarter ended June 30, 2018 from 3.35% for the quarter ended June 30, 2017 due to a change in deposit pricing as competition for deposits has increased.
      
  • The efficiency ratio, which is calculated by dividing non-interest expense by the sum of net interest income and non-interest income, improved to 62.49% for the quarter ended June 30, 2018 from 68.02% for the quarter ended June 30, 2017 driven by an increase in net interest income year over year.
      
  • Non-performing assets represented 0.69% of total assets at June 30, 2018 compared with 0.73% at December 31, 2017. The allowance for loan losses as a percentage of total non-performing loans was 135.53% at June 30, 2018 compared to 130.99% at December 31, 2017.
      
  • The Company's balance sheet reflected total asset growth of $38.2 million at June 30, 2018, compared to December 31, 2017, improving asset quality, and capital levels that exceeded regulatory standards for a well-capitalized institution.
      
  • The effective tax rate improved to 24.7% for the quarter ended June 30, 2018 compared to 28.6% for the quarter ended June 30, 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:   6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
Return on average assets   0.87 %   0.74 %   0.20 %   0.90 %   0.59 %
Return on average equity   7.17 %   5.65 %   1.48 %   6.31 %   3.91 %
Net interest margin   3.24 %   3.24 %   3.30 %   3.37 %   3.35 %
Net loans / deposit ratio   113.64 %   110.85 %   105.46 %   116.04 %   109.31 %
Shareholders' equity / total assets   11.39 %   12.37 %   12.97 %   13.39 %   14.79 %
Efficiency ratio   62.49 %   66.29 %   62.26 %   64.21 %   68.02 %
Book value per common share   $ 12.43     $ 12.63     $ 12.66     $ 12.57     $ 13.07  
 

Net Interest Income

Total interest income for the three months ended June 30, 2018 increased $1.0 million, or 21.4%, to $5.7 million compared to $4.7 million for the second quarter of 2017. Interest income increased in the quarter ended June 30, 2018 compared to the comparable period in 2017, primarily due to a $83.9 million increase in average loan balances. Total interest expense increased by $504,000, or 62.8%, to $1.3 million, for the three months ended June 30, 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 June 30, 2018 increased $507,000, or 12.9%, to $4.4 million compared to $3.9 million for the same three-month period in 2017. The change for the three months ended June 30, 2018 was primarily a result of an increase in average earning assets of $78.8 million. The annualized net interest spread was 3.05% and 3.18% for the three months ended June 30, 2018 and 2017, respectively. For the quarter ended June 30, 2018, the Company's annualized net interest margin decreased to 3.24% compared to 3.35% for the corresponding three-month period in 2017.

Total interest income for the six months ended June 30, 2018, increased $2.1 million, or 23.8%, to $11.2 million compared to $9.0 million for the six months ended June 30, 2017 as average earning assets increased $86.6 million year over year. Total interest expense increased by $933,000, or 62.2%, to $2.4 million for the six months ended June 30, 2018 compared to June 30, 2017 as average interest-bearing liabilities increased $67.3 million year over year and the average cost of such liabilities increased 24 basis points.

Net interest income grew $1.2 million, or 16.1%, to $8.7 million for the six months ended June 30, 2018 compared to $7.5 million for the six months ended June 30, 2017. Net interest spread and net interest margin for the six months ended June 30, 2018, declined 8 basis points respectively, to 3.06% and 3.24% compared to 3.14% and 3.32% for the six months ended June 30, 2017. Net interest income and net interest margin decreased as the Company's deposit pricing has become more competitive year over year.

Non-Interest Income and Non-Interest Expense

Non-interest income for the three months ended June 30, 2018 was $208,000, as compared to $219,000 for the same period in 2017.  Non-interest expense, which consists of salaries and employee benefits, occupancy expense, professional services and other non-interest expenses totaled $2.9 million for the quarter ended June 30, 2018 as compared to $2.8 million for the same period in 2017.

Non-interest income for the six months ended June 30, 2018 was $412,000, as compared to $406,000 for the same period in 2017.  Non-interest expense, totaled $5.9 million for the six months ended June 30, 2018 as compared to $5.5 million for the same period in 2017 with the $351,000 increase primarily attributable to salaries and employee benefits as a result of merit and infrastructure increases.

Taxes

For the three months ended June 30, 2018, the Company recorded a $407,000 tax provision compared to a provision of $293,000 for the three months ended June 30, 2017. The effective tax rate improved to 24.7% for the quarter ended June 30, 2018 compared to 28.6% for the quarter ended June 30, 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 applicable tax rate.

For the six months ended June 30, 2018, the Company recorded a $814,000 tax provision compared to a provision of $614,000 for the six months ended June 30, 2017. The effective tax rate improved to 26.4% for the six months ended June 30, 2018 compared to 32.4% for the six months ended June 30, 2017. The increase in tax provision is attributable to an increase in pre-tax income offset by a decrease in the applicable tax rate.

Earnings Summary for Period Ended June 30, 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:   6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
Net interest income   $ 4,431     $ 4,302     $ 4,325     $ 4,190     $ 3,924  
Provision for loan losses   90     90     200     490     300  
Net interest income after provision for loan losses   4,341     4,212     4,125     3,700     3,624  
Other income   208     204     211     205     219  
Other expense   2,899     2,987     2,824     2,822     2,818  
Income before income taxes   1,650     1,429     1,512     1,083     1,025  
Income taxes (benefit)   407     407     1,240     (86 )   293  
Net income   $ 1,243     $ 1,022     $ 272     $ 1,169     $ 732  
Earnings per common share:                    
Basic   $ 0.23     $ 0.19     $ 0.05     $ 0.21     $ 0.13  
Diluted   $ 0.23     $ 0.19     $ 0.05     $ 0.21     $ 0.13  
Weighted average common shares outstanding:                    
Basic   5,331,090     5,470,349     5,577,314     5,563,938     5,539,796  
Diluted   5,375,090     5,507,443     5,588,598     5,574,535     5,679,012  
                               

Statement of Condition Highlights at June 30, 2018

  • Balance sheet growth, with total assets amounting to $601.2 million at June 30, 2018, an increase of $38.2 million, or 6.79%, compared to December 31, 2017.
      
  • The Company's total gross loans receivable were $515.3 million at June 30, 2018, an increase of $36.5 million, or 7.6%, from December 31, 2017.
      
  • Securities held to maturity were $44.8 million at June 30, 2018, an increase of $6.3 million, or 16.3%, compared to December 31, 2017.
      
  • Deposits were relatively flat totaling $448.5 million at June 30, 2018 compared to $448.9 million at December 31, 2017.
      
  • Borrowings totaled $82.2 million at June 30, 2018, an increase of $44.5 million, or 118.1%, 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:   6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
Cash and due from banks   $ 1,654   $ 1,871   $ 2,030   $ 1,800   $ 1,839
Interest-earning demand deposits with banks   14,660   15,484   20,279   6,971   7,195
Securities held to maturity   44,770   36,375   38,482   40,752   42,441
Loans receivable, net of allowance   509,689   480,916   473,405   461,285   426,370
Premises and equipment   8,461   8,580   8,698   8,804   8,902
Federal home Loan Bank of New York stock, at cost   4,212   3,049   2,131   3,512   2,263
Bank owned life insurance   14,392   14,294   14,197   14,097   13,996
Accrued interest receivable   1,754   1,642   1,607   1,548   1,402
Other assets   1,657   1,816   2,211   2,988   2,690
Total assets   $ 601,249   $ 564,027   $ 563,040   $ 541,757   $ 507,098
Deposits   $ 448,512   $ 433,843   $ 448,913   $ 397,510   $ 390,063
Borrowings   82,175   58,075   37,675   68,375   38,675
Other liabilities   2,056   2,350   3,427   3,332   3,371
Shareholders' equity   68,506   69,759   73,025   72,540   74,989
Total liabilities and shareholders' equity   $ 601,249   $ 564,027   $ 563,040   $ 541,757   $ 507,098
 

Loans

At June 30, 2018, the Company's net loan portfolio totaled $509.7 million, an increase of $36.3 million, or 7.7%, compared to $473.4 million at December 31, 2017.  The allowance for loan losses amounted to $5.6 million and $5.4 million at June 30, 2018 and December 31, 2017, respectively.

At June 30, 2018, the loan portfolio primarily consisted of commercial real estate loans (40.1%) and residential mortgages (33.2%). Commercial and industrial loans represented 17.6% of the portfolio while construction loans accounted for 9.0% of the portfolio. Total loans receivable increased $36.2 million to $535.4 million at June 30, 2018 compared to $499.2 million at December 31, 2017. The increase primarily reflects a $20.7 million increase in commercial and industrial loans and an 18.0 million increase in commercial real estate loans. The increases were partially offset by a $7.1 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:   6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
Residential mortgage:                    
One-to-four family   $ 151,372   $ 154,576   $ 157,876   $ 161,679   $ 164,448
Home equity   26,174   27,051   26,803   27,409   29,021
Total residential mortgage   177,546   181,627   184,679   189,088   193,469
Commercial and multi-family real estate   214,653   195,951   196,681   184,791   153,984
Construction   48,423   49,397   43,718   36,002   29,623
Commercial and industrial   94,140   82,712   73,465   73,409   67,686
Total commercial loans   357,216   328,060   313,864   294,202   251,293
Consumer loans   608   595   618   659   434
Total loans receivable   535,370   510,282   499,161   483,949   445,196
Less:                    
Loans in process   19,594   23,398   19,868   16,864   13,315
Deferred loan fees   491   462   474   525   586
Allowance   5,596   5,506   5,414   5,275   4,925
Total loans receivable, net   $ 509,689   $ 480,916   $ 473,405   $ 461,285   $ 426,370
 

Asset Quality

At June 30, 2018, non-performing loans totaled $4.1 million, or 0.69% 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 $7.0 million at June 30, 2018, an increase of $1.6 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 1.09% at June 30, 2018 and 1.13% at December 31, 2017, respectively, while the allowance for loan losses as a percentage of non-performing loans increased to 135.53% at June 30, 2018 from 130.99% at December 31, 2017. Non-performing loans to total loans decreased to 0.80% at June 30, 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:   6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
Non-accrual loans   $ 3,430     $ 3,548     $ 3,975     $ 4,071     $ 6,916  
Loans 90 days or more past due and still accruing   699     1,266     158     374      
Total non-performing loans   $ 4,129     $ 4,814     $ 4,133     $ 4,445     $ 6,916  
                     
Non-performing assets / total assets   0.69 %   0.85 %   0.73 %   0.82 %   1.36 %
Non-performing loans / total loans   0.80 %   0.99 %   0.86 %   0.95 %   1.60 %
Net charge-offs (recoveries)   $     $ (2 )   $ 61     $ 140     $ 1  
Net charge-offs (recoveries) / average loans (annualized)   %   %   0.05 %   0.13 %   %
Allowance for loan loss / total loans   1.09 %   1.13 %   1.13 %   1.13 %   1.14 %
Allowance for loan losses / non-performing loans   135.53 %   114.37 %   130.99 %   118.69 %   71.21 %
                     
Total assets   $ 601,249     $ 564,027     $ 563,040     $ 541,757     $ 507,098  
Gross loans, including ALLL   $ 515,285     $ 486,422     $ 478,819     $ 466,560     $ 431,295  
Average loans   $ 500,959     $ 483,255     $ 472,388     $ 446,383     $ 417,065  
Allowance for loan losses   $ 5,596     $ 5,506     $ 5,414     $ 5,275     $ 4,925  
 

Deposits

Total deposits at June 30, 2018 were $448.5 million compared with $448.9 million at December 31, 2017.  Overall, deposits were relatively flat. Non-interest demand balances and savings balances increased $5.8 million and $4.1 million, respectively. Non-interest demand balances increased to $42.7 million from $36.9 million from year end while savings balances increased to $109.3 million from $105.1 million from year end. In addition, certificates of deposit (including IRA) balances increased $3.9 million to $128.2 million compared to $124.3 million from year end. Offsetting the increases were declines in money market and interest demand balances of $13.0 million and $1.2 million, respectively. Money market balances declined to $14.4 million compared to $27.4 million while interest demand balances declined to $154.0 million compared to $155.2 million from 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:   6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
Demand:                    
Non-interest bearing   $ 42,687   $ 36,751   $ 36,919   $ 40,504   $ 44,584
Interest-bearing   153,968   148,888   155,199   107,419   95,196
Savings   109,254   109,215   105,106   108,249   105,560
Money market   14,381   20,251   27,350   16,517   15,842
Time   128,222   118,738   124,339   124,821   128,881
Total deposits   $ 448,512   $ 433,843   $ 448,913   $ 397,510   $ 390,063
 

Capital

At June 30, 2018, the Company's total stockholders' equity amounted to $68.5 million, or 11.39% of total assets, compared to $73.0 million at December 31, 2017. The Company's book value per common share was $12.43 at June 30, 2018, compared to $12.66 at December 31, 2017. The decline in shareholders' equity was primarily due to the repurchase of 249,837 shares of common stock for a total of $4.5 million and the payment of a special dividend in the aggregate amount of $2.5 million, partially offset by net income of $2.3 million.

At June 30, 2018, the Bank's common equity tier 1 ratio was 11.30%, tier 1 leverage ratio was 10.33%, tier 1 capital ratio was 11.30% and the total capital ratio was 12.39%. 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 June 30, 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:   6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
Loans   $ 500,959     $ 483,255     $ 472,388     $ 446,383     $ 417,065  
Securities held to maturity   36,494     37,661     39,899     41,423     41,885  
Allowance for loan losses   (5,538 )   (5,461 )   (5,376 )   (4,922 )   (4,695 )
All other assets   38,053     38,851     41,886     38,545     38,603  
Total assets   $ 569,968     $ 554,306     $ 548,797     $ 521,429     $ 492,858  
Non-interest bearing deposits   $ 38,903     $ 36,211     $ 43,336     $ 44,970     $ 43,030  
Interest-bearing deposits   385,047     390,522     375,098     350,589     333,902  
Borrowings   74,192     53,191     53,844     47,788     37,715  
Other liabilities   2,495     1,972     3,104     3,964     3,363  
Stockholders' Equity   69,331     72,410     73,415     74,118     74,848  
Total liabilities and shareholders' equity   $ 569,968     $ 554,306     $ 548,797     $ 521,429     $ 492,858  
                     

CEO outlook:

"During the quarter the Company furthered its goals to create shareholder value and to reward stockholders by distributing a second special dividend of $0.445 per share," stated Michael Shriner, President and Chief Executive Officer.  Mr. Shriner added, "Our staff remains committed to improving earnings, and ultimately our return to shareholders, by focusing out efforts on growing the balance sheet, building new relationships, becoming more efficient and reducing the number of non-performing assets."

Mr. Shriner further commented, "I am very pleased with our growth in the second quarter, however the trend of higher short term interest rates we are experiencing will ultimately dictate where growth ends up by the fourth quarter.  Strong competition for deposits is beginning to show up in out cost of funds, which may affect the level of growth the Company achieves in the latter half of 2018."

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
June 30, 
 2018
At
December 31, 
 2017
(Dollars in thousands, except per share amounts)    
Cash and due from banks $ 1,654   $ 2,030  
Interest-earning demand deposits with banks 14,660   20,279  
Cash and Cash Equivalents 16,314   22,309  
Securities held to maturity (fair value of $43,749 and $38,255, respectively) 44,770   38,482  
Loans receivable, net of allowance for loan losses of $5,596 and $5,414, respectively 509,689   473,405  
Premises and equipment 8,461   8,698  
Federal Home Loan Bank of New York stock, at cost 4,212   2,131  
Bank owned life insurance 14,392   14,197  
Accrued interest receivable 1,754   1,607  
Other assets 1,657   2,211  
Total Assets $ 601,249   $ 563,040  
Liabilities and Stockholders' Equity    
Liabilities    
Deposits:    
Non-interest bearing $ 42,687   $ 36,919  
Interest bearing 405,825   411,994  
Total Deposits 448,512   448,913  
Advances from Federal Home Loan Bank of New York 82,175   37,675  
Advance payments by borrowers for taxes and insurance 772   686  
Other liabilities 1,284   2,741  
Total Liabilities 532,743   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; 5,513,165 and 5,768,632 issued and outstanding at June 30, 2018 and December 31, 2017, respectively 55   58  
Paid-in capital 46,688   51,068  
Retained earnings 23,450   23,641  
Unearned common stock held by ESOP (184,942 and 190,390 shares, respectively) (1,687 ) (1,742 )
Total Stockholders' Equity 68,506   73,025  
Total Liabilities and Stockholders' Equity $ 601,249   $ 563,040  
     
 


                 
MSB Financial Corp. and Subsidiaries
 
Consolidated Statements of Income
    Three Months Ended
June 30,
  Six Months Ended
 June 30,
    2018   2017   2018   2017
(in thousands except per share amounts)                
Interest Income                
Loans receivable, including fees   $ 5,436     $ 4,444     $ 10,572     $ 8,444  
Securities held to maturity   240     247     459     498  
Other   62     36     136     78  
Total Interest Income   5,738     4,727     11,167     9,020  
Interest Expense                
Deposits   935     579     1,781     1,081  
Borrowings   372     224     653     420  
Total Interest Expense   1,307     803     2,434     1,501  
Net Interest Income   4,431     3,924     8,733     7,519  
Provision for Loan Losses   90     300     180     495  
Net Interest Income after Provision for Loan Losses   4,341     3,624     8,553     7,024  
Non-Interest Income                
Fees and service charges   91     98     174     169  
Income from bank owned life insurance   98     105     195     212  
Other   19     16     43     25  
Total Non-Interest Income   208     219     412     406  
Non-Interest Expenses                
Salaries and employee benefits   1,677     1,578     3,482     3,084  
Directors compensation   122     187     244     363  
Occupancy and equipment   397     429     782     823  
Service bureau fees   77     49     144     97  
Advertising   9     5     13     8  
FDIC assessment   69     37     123     70  
Professional services   336     349     689     708  
Other   212     184     409     382  
Total Non-Interest Expenses   2,899     2,818     5,886     5,535  
Income before Income Taxes   1,650     1,025     3,079     1,895  
Income Tax Expense   407     293     814     614  
Net Income   $ 1,243     $ 732     $ 2,265     $ 1,281  
Earnings per share:                
Basic   $ 0.23     $ 0.13     $ 0.42     $ 0.23  
Diluted   $ 0.23     $ 0.13     $ 0.42     $ 0.23  
                 
 


           
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) 6/30/2018   3/31/2018   6/30/2017
(unaudited)          
Statements of Operations Data          
           
Interest income $ 5,738     $ 5,429     $ 4,727  
Interest expense 1,307     1,127     803  
Net interest income 4,431     4,302     3,924  
Provision for loan losses 90     90     300  
Net interest income after provision for loan losses 4,341     4,212     3,624  
Other income 208     204     219  
Other expense 2,899     2,987     2,818  
Income before income taxes 1,650     1,429     1,025  
Income tax expense (benefit) 407     407     293  
Net Income $ 1,243     $ 1,022     $ 732  
Earnings (per Common Share)          
Basic $ 0.23     $ 0.19     $ 0.13  
Diluted $ 0.23     $ 0.19     $ 0.13  
Statements of Condition Data (Period-End)          
Investment securities held to maturity (fair value of $43,749, $35,561, and $42,523) $ 44,770     $ 36,375     $ 42,441  
Loans receivable, net of allowance for loan losses 509,689     480,916     426,370  
Total assets 601,249     564,027     507,098  
Deposits 448,512     433,843     390,063  
Borrowings 82,175     58,075     38,675  
Stockholders' equity 68,506     69,759     74,989  
Common Shares Dividend Data          
Cash dividends $ 2,456     $     $  
Weighted Average Common Shares Outstanding          
Basic 5,331,090     5,470,349     5,539,796  
Diluted 5,375,090     5,507,443     5,679,012  
Operating Ratios          
Return on average assets 0.87 %   0.74 %   0.59 %
Return on average equity 7.17 %   5.65 %   3.91 %
Average equity / average assets 12.16 %   13.06 %   15.19 %
Book value per common share (period-end) $ 12.43     $ 12.63     $ 13.07  
                       

 

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