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MSB Financial Corp. Releases Fourth Quarter and Full Year Earnings

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 banks20,279 19,994
Cash and Cash Equivalents22,309 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, respectively473,405 368,007
Premises and equipment8,698 8,957
Federal Home Loan Bank of New York stock, at cost2,131 1,433
Bank owned life insurance14,197 13,784
Accrued interest receivable1,607 1,378
Other assets2,211 2,601
Total Assets$563,040 $461,646
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Non-interest bearing$36,919 $44,365
Interest bearing411,994 317,934
Total Deposits448,913 362,299
Advances from Federal Home Loan Bank of New York37,675 22,675
Advance payments by borrowers for taxes and insurance686 792
Other liabilities2,741 2,695
Total Liabilities490,015 388,461
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, respectively58 57
Paid-in capital51,068 51,809
Retained earnings23,641 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' Equity73,025 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 expense1,052 893 649
Net interest income4,325 4,190 3,300
Provision for loan losses200 490 300
Net interest income after provision for loan losses4,125 3,700 3,000
Other income211 205 205
Other expense2,824 2,822 2,417
Income before income taxes1,512 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 $44,104
Loans receivable, net of allowance for loan losses473,405 461,285 368,007
Total assets563,040 541,757 461,646
Deposits448,913 397,510 362,299
Borrowings37,675 68,375 22,675
Shareholders' equity73,025 72,540 73,185
Common Shares Dividend Data
Cash dividends$ $2,452 $
Weighted Average Common Shares Outstanding
Basic5,577 5,564 5,510
Diluted5,588 5,575 5,596
Operating Ratios
Return on average assets0.20% 0.90% 0.44%
Return on average equity1.48% 6.31% 2.62%
Average equity / average assets13.38% 14.21% 16.68%
Book value per common share (period-end)$12.66 $12.57 $12.81

Source:MSB Financial Corp.