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MSB Financial Corp. Releases Third Quarter Earnings

MILLINGTON, N.J., Oct. 31, 2017 (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 nine months ended September 30, 2017.

The Company reported net income of $1.2 million, or $0.21 per diluted common share, for the three months ended September 30, 2017, compared to net income of $301,000, or $0.05 per diluted common share, for the three months ended September 30, 2016. Net income for the nine months ended September 30, 2017 was $2.5 million, or $0.44 per diluted common share, compared to net income of $683,000, or $0.12 per diluted common share, for the nine months ended September 30, 2016.

On August 4, 2017, certain directors, executive officers and directors emeriti executed options to purchase 212,468 shares of Common Stock at a per share exercise price of $9.4323. In lieu of issuing shares of Common Stock upon the exercise of such options, the Company made a cash payment to such optionees equal to the excess of the closing price of the Common Stock on the Nasdaq Stock Market on August 4, 2017 of $17.30 over the per share exercise price of such options of $9.4323 multiplied by the number of options being exercised. An aggregate of $1.7 million was paid to the optionees. In addition, the transaction resulted in approximately a $406,000 tax benefit to the Company during the quarter which resulted in a net tax benefit of $86,000 for the quarter ended September 30, 2017 as compared to a net income tax expense of $146,000 for the quarter ended September 30, 2016. The options were issued in 2008 and were related to the Company’s conversion from a Mutual Holding Company to a minority owned, public Bank Holding Company.

Growth in net interest income and margin reflect growth in commercial loans
Net interest income for the three months ended September 30, 2017 increased $1.3 million, or 44.8%, to $4.2 million compared to $2.9 million for the third quarter of 2016. For the nine months ended September 30, 2017, net interest income grew $3.0 million, or 34.5%, to $11.7 million compared to $8.7 million for the nine months ended September 30, 2016. Net interest margin for the three months ended September 30, 2017 was 3.37% compared to 3.05% for the same period in 2016 while for the nine months ended September 30, 2017, net interest margin was 3.34%, an improvement of 23 basis points, compared to 3.11% for the nine months ended September 30, 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.

Commercial loan growth year to date
At September 30, 2017, the Company’s net loan portfolio totaled $461.3 million, an increase of $93.3 million or 25.4%, compared to $368.0 million at December 31, 2016. Commercial real estate loans increased $60.1 million or 48.2% while commercial and industrial loans increased $28.2 million or 62.2% from December 31, 2016 as the Company continues to focus on the origination of commercial relationships. Additionally, construction loans, net of loans in process, increased $9.1 million or 91.4% from December 31, 2016.

The following table summarizes loan balances and composition at September 30, 2017 and December 31, 2016:

At At
September 30, December 31,
(In thousands) 2017 2016
Residential mortgage:
One-to-four family $161,679 33.4% $160,534 42.3%
Home equity 27,409 5.7 32,262 8.5
Total residential mortgage 189,088 39.1 192,796 50.8
Commercial and multi-family real estate 184,791 38.2 124,656 32.8
Construction 36,002 7.4 16,554 4.4
Commercial and industrial 73,409 15.2 45,246 11.9
Total commercial loans 294,202 60.8 186,456 49.1
Consumer loans 659 0.1 446 0.1
Total loans receivable 483,949 100.0% 379,698 100.0%
Less:
Loans in process 16,864 6,557
Deferred loan fees 525 658
Allowance 5,275 4,476
Total loans receivable, net $461,285 $368,007

Credit quality
Overall credit quality improved quarter over quarter. Total delinquent loans (including nonperforming delinquent loans) were $6.1 million at September 30, 2017, a reduction of $2.7 million from June 30, 2017. Total nonperforming loans were $4.4 million at September 30, 2017 compared to $6.9 million at June 30, 2017. The allowance for loan losses as a percentage of total loans was 1.13% and 1.14% at September 30, 2017 and June 30, 2017, respectively, while the allowance for loan losses as a percentage of non-performing loans increased to 118.69% at September 30, 2017 from 71.21% at June 30, 2017. Non-performing loans to total loans declined to 0.95% at September 30, 2017 from 1.60% at June 30, 2017.

Consumer deposit growth during the year
Total deposits at September 30, 2017 were $397.5 million compared with $362.3 million at December 31, 2016. Overall, deposits increased by $35.2 million, or 9.7% with growth occurring across substantially all product types. Most of the growth occurred in the certificates of deposit as the Company utilized a deposit listing service to bring in $19.6 million in institutional funds. In addition, other deposit categories grew as a result of a promotional campaign implemented during the second quarter that attracted new deposits.

The following table summarizes deposit balances and composition at September 30, 2017 and December 31, 2016:

At At
(Dollars in thousands) September 30, 2017 December 31, 2016
Noninterest demand $40,504 10.19% $44,365 12.25%
Interest demand 107,419 27.02 99,879 27.57
Savings 108,249 27.23 103,163 28.47
Money Market 16,517 4.16 11,265 3.11
Total demand deposits 272,689 68.60 258,672 71.40
Certificates of Deposit 124,821 31.40 103,627 28.60
Total Deposits $397,510 100.00% $362,299 100.00%


CEO outlook:

“Our management team and staff have worked extremely hard to ensure the Company meets its strategic goals for 2017, and our 3rd quarter results further validate these efforts,” stated Michael A. Shriner, President and Chief Executive Officer. Mr. Shriner added, “Deposit and loan growth are up, the diversification of the loan portfolio continues, and earnings have improved significantly since the beginning of the year. We were pleased to be able to pay the $0.425 special dividend in September.”

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 and our continued ability to manage cybersecurity risks.

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


MSB FINANCIAL CORP
(In Thousands, except for per share amount)(Unaudited)
Statement of Financial Condition Data:09/30/201712/31/2016
Total assets$541,757$461,646
Cash and cash equivalents8,77121,382
Loans receivable, net461,285368,007
Securities held to maturity40,75244,104
Deposits397,510362,299
Federal Home Loan Bank advances68,37522,675
Total stockholders' equity72,54073,185
Stock Information:
Number of shares of common stock outstanding5,7695,714
Book value per share of common stock$12.57$12.81
Closing market price$17.85$14.70




Summary of Operations:
(In Thousands, except for per share amounts)
(Unaudited)
For the three months
ended September 30,
(Unaudited)
For the nine months
ended September 30,
2017 2016

2017


2016
Total interest income$5,083 $3,510 $14,103 $10,261
Total interest expense893 566 2,394 1,598
Net interest income4,190 2,944 11,709 8,663
Provision for loan losses490 180 985 500
Net interest income after provision for loan losses3,700 2,764 10,724 8,163
Non-interest income205 183 611 836
Non-interest expense2,822 2,500 8,357 7,973
Income before taxes1,083 447 2,978 1,026
Income tax (benefit) expense(86) 146 528 343
Net income$1,169 $301 $2,450 $683
Net income per common share - basic$0.21 $0.05 $0.44 $0.12
Net income per common share - diluted$0.21 $0.05 $0.44 $0.12
Weighted average number of shares - basic5,564 5,588 5,541 5,692
Weighted average number of shares - diluted5,575 5,670 5,545 5,768
Performance Ratios:
Return on average assets annualized0.90% 0.29% 0.66% 0.23%
Return on average common equity annualized6.31% 1.62% 4.40% 1.20%
Net interest margin3.37% 3.05% 3.34% 3.11%
Efficiency ratio64.21% 79.95% 67.83% 83.94%
Operating expenses / average assets annualized2.16% 2.45% 2.27% 2.72%


For the three months ended
09/30/201709/30/2016
Average Balance Sheet
(In Thousands)
Average
Balance
Interest
Income/Expense
YieldAverage
Balance

Interest
Income/Expense
Yield
Interest-earning assets:
Loans receivable $446,383 $4,769 4.27% $305,405 $3,177 4.16%
Securities held to maturity 41,423 264 2.55 47,293 276 2.33
Other interest-earning assets 9,526 50 2.10 33,412 57 0.68
Total interest-earning assets 497,332 5,083 4.09 386,110 3,510 3.64
Allowance for loan loss (4,922) (3,905)
Non-interest-earning assets 29,019 26,133
Total non-interest-earning assets 24,097 22,228
Total Assets $521,429 $408,338
Interest-bearing liabilities:
Demand & money market $118,084 $118 0.40% $81,020 $60 0.30%
Savings and club deposits 106,950 73 0.27 103,166 57 0.22
Certificates of deposit 125,555 431 1.37 89,365 266 1.19
Total interest-bearing deposits 350,589 622 0.71 273,551 383 0.56
Federal Home Loan Bank advances 47,788 271 2.27 22,675 183 3.23
Total interest-bearing liabilities 398,377 893 0.90 296,226 566 0.76
Non-interest-bearing deposit 44,970 34,455
Other non-interest-bearing liabilities 3,964 3,430
Total Liabilities 447,311 334,111
Equity 74,118 74,227
Total Liabilities and Equity $521,429 $408,338
Net Interest Spread 4,190 3.19% 2,944 2.88%
Net Interest Margin 3.37% 3.05%
Ratio of Interest Earning Assets to Interest Bearing Liabilities 124.84% 130.34%


For the nine months ended
09/30/201709/30/2016
Average Balance Sheet
(In Thousands)
Average
Balance
Interest
Income/Expense
Yield
Average
Balance
Interest
Income/Expense
Yield
Interest-earning assets:
Loans receivable $415,512 $13,213 4.24% $287,688 $9,097 4.22%
Securities held to maturity 42,190 762 2.41 62,215 1,038 2.22
Other interest-earning assets 10,156 128 1.68 21,136 126 0.79
Total interest-earning assets 467,858 14,103 4.02 371,039 10,261 3.69
Allowance for loan loss (4,715) (3,749)
Non-interest-earning assets 28,791 23,215
Total non-interest-earning assets 24,076 19,466
Total Assets $491,934 $390,505
Interest-bearing liabilities:
Demand & money market $110,116 $315 0.38% $63,224 $118 0.25%
Savings and club deposits 105,237 193 0.24 103,298 171 0.22
Certificates of deposit 118,378 1,195 1.35 86,512 747 1.15
Total interest-bearing deposits 333,731 1,703 0.68 253,034 1,036 0.55
Federal Home Loan Bank advances 38,563 691 2.39 25,026 562 2.99
Total interest-bearing liabilities 372,294 2,394 0.86 278,060 1,598 0.77
Non-interest-bearing deposit 41,966 32,687
Other non-interest-bearing liabilities 3,377 3,664
Total Liabilities 417,637 314,411
Equity 74,297 76,094
Total Liabilities and Equity $491,934 $390,505
Net Interest Spread 11,709 3.16% 8,663 2.92%
Net Interest Margin 3.34% 3.11%
Ratio of Interest Earning Assets to Interest Bearing Liabilities 125.67% 133.44%


Source:MSB Financial Corp.