- Net income of $1.6 million, boosted by strong mortgage banking results
- Net interest margin expands 14 basis points to 3.21% compared with the fiscal 2012 fourth quarter
- Mortgage banking revenue remains strong in lower interest rate environment
- Company achieves its 12th consecutive quarterly improvement in key asset quality metrics
- Core operating results continue to improve and reflect the impact of the business transformation
- Capital ratios improve and continue to exceed prescribed regulatory levels
SOLON, Ohio, Oct. 24, 2012 (GLOBE NEWSWIRE) -- PVF Capital Corp. (Nasdaq:PVFC), the parent company of Park View Federal Savings Bank, announced net income of $1.6 million, or $0.06 basic and diluted earnings per share, for the fiscal 2013 first quarter ended September 30, 2012. This improvement compares with a net loss of $0.8 million, or $0.03 basic and diluted loss per share, for the prior-year quarter and net income of $0.8 million, or $0.03 basic and diluted loss per share, for the fiscal 2012 fourth quarter ended June 30, 2012.
Robert J. King, Jr., President and Chief Executive Officer, commented, "We continue to make progress across the board with our mortgage banking activities, asset quality improvement and transformation to a stronger commercial, small-business and relationship-oriented bank. The improvement in our balance sheet and our continued compliance with the prescribed capital levels will enable us to remain on track to deliver long-term profitable growth."
Net Interest Income Continues to Improve
Net interest income improved during the quarter ended September 30, 2012, totaling $5.8 million and increasing $0.1 million, or 2.2%, from the fiscal 2012 fourth quarter ended June 30, 2012. This improvement over the prior quarter is attributable to the continued strategic improvement in the mix of average earning assets which resulted in a higher earning asset yield, while the Company was able to continue to lower its funding costs in this low interest rate environment.
Compared with the year-ago quarter ended September 30, 2011, net interest income for the current quarter increased $0.6 million, or 12.3%. This was accomplished with a smaller but more efficient balance sheet as compared to a year ago, reflecting the Company's successful multi-year strategic plan to strengthen and diversify its balance sheet and improve its risk profile.
Despite the impact of low interest rates on earning asset yields, the Company's strategy allowed it to improve its net interest margin for the period ended September 30, 2012 to 3.21%, compared with 3.07% and 2.80% for the quarters ended June 30, 2012 and September 30, 2011, respectively.
Mortgage Banking Revenues Increase, Improving Non-interest Income
Non-interest income totaled $3.3 million for the quarter ended September 30, 2012, an increase of $1.6 million, or 96.9%, from the quarter ended September 30, 2011. This improvement is the result of growth in net revenue from mortgage banking activities, which totaled $3.1 million, an increase of $2.1 million from the year-ago quarter. Under the lower interest rate environment, the Company capitalized upon its significant residential mortgage origination capabilities, resulting in an increase of $2.2 million from the prior-year period in the gain on sale of mortgages. Included in the mortgage banking results, and partially offsetting the strong gain on sale revenue, is a $0.6 million charge to the impairment valuation allowance recognized against the carrying value of the Company's capitalized mortgage servicing rights. This charge results from the fact that the majority of mortgage lending activities in the current environment continues to involve refinancing, which is highly correlated to interest rate movements and levels, and negatively impacts the fair value of mortgage servicing rights. Partially offsetting the higher mortgage banking revenues are higher credit-related costs associated with other real estate owned, which increased $0.3 million from a year ago and totaled $0.3 million. The credit-related costs resulted from updated valuations on other real estate owned and losses on property dispositions. Also, the Company did not sell the guaranteed portions on its Small Business Administration ("SBA") loan originations during the quarter. This compares with SBA gains of $0.2 million in the year-ago quarter. As of September 30, 2012, the Company has $3.1 million of SBA loans which are closed and fully funded, as the Company continues to build and grow this business.
In comparison with the fourth quarter of fiscal 2012, non-interest income increased $0.2 million, primarily due to higher mortgage banking revenues of $0.1 million, offset by lower SBA gains of $0.2 million, and lower credit-related costs of $0.5 million in the current period.
Asset Quality Steadily Improves
For the 12th consecutive quarter, the Company continued to make progress with respect to its multi-year strategic plan to improve the Bank's balance sheet and reduce problem assets. During the quarter, nonperforming loans decreased $2.0 million, or 10.2%, to $17.9 million, compared with the fourth quarter of fiscal 2012, while other real estate owned decreased $0.5 million to $7.2 million, resulting in total nonperforming assets of $25.1 million. This was a decrease of $2.5 million, or 9.2%, compared with total nonperforming assets of $27.6 million at June 30, 2012, and a decline of $30.8 million, or 55.1%, compared with a year ago.
As was previously announced during the quarter, the Office of the Comptroller of the Currency terminated Park View Federal Savings Bank's regulatory order which had been in place since October 2009. The Company continues to exceed the asset quality metrics established by the terminated regulatory order. The classified assets to core capital plus general valuation allowance ratio improved to 44.7% at September 30, 2012, compared with 63.5% at the end of the prior-year quarter. The Company also reduced its level of classified assets plus special mention assets to core capital plus general valuation allowance ratio to 51.7% at September 30, 2012, versus 81.9% a year ago.
The provision for loan losses totaled $1.1 million for the current quarter compared with $1.5 million for each of the quarters ended June 30, 2012 and September 30, 2011. The lower provision level in the current quarter reflects the continued progress in improving overall asset quality and reducing the level of problem loans.
The allowance for loan losses at September 30, 2012 is $16.1 million, or 2.9% of total loans. This compares with an allowance of $16.1 million, or 2.9% of total loans, at June 30, 2012, and $29.6 million, or 5.2% of total loans, at September 30, 2011. The allowance's coverage of nonperforming loans improved to 90.3% at September 30, 2012, compared with 80.7% at June 30, 2012, and 61.6% at September 30, 2011.
Non-interest Expense Stable
Non-interest expense totaled $6.5 million for the current quarter, compared with $6.6 million for the fiscal 2012 fourth quarter and $6.2 million for the year-ago quarter. The Company continues to manage its expense level while improving the quality of its balance sheet and developing the infrastructure and personnel necessary to transform the business and operations.
Pre-tax, Pre-credit Provision Income Improves Sequentially
One metric that management believes is useful in analyzing performance is pre-tax, pre-credit provision income, which adjusts earnings to exclude provision expense, credit-related charges involving the valuation and disposition of other real estate owned, and securities gains or losses. In addition, earnings are adjusted for items identified by management to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management at the time to be infrequent or short-term in nature, which management believes may distort the Company's underlying performance trends. The pre-tax, pre-credit provision income for the quarter ended September 30, 2012 was $3.0 million, compared with income of $2.8 million for the quarter ended June 30, 2012, and income of $0.6 million for the prior-year quarter.
A reconciliation of net earnings reported under generally accepted accounting principles ("GAAP") to pre-tax, pre-credit provision income (a non-GAAP metric) for the current and trailing four quarters ended September 30, 2012, is as follows (dollars in millions):
| Sept. 30, |
| June 30, |
| March 31, |
| Dec. 31, |
| Sept. 30, |
|Net income (loss)||$ 1.6||$ 0.8||$ 0.4||$ (1.8)||$ (0.8)|
|Federal income tax provision (benefit)||0.0||(0.2)||0.0||0.0||0.0|
|Pre-tax income (loss)||1.6||0.6||0.4||(1.8)||(0.8)|
|Provision for loan losses||1.1||1.5||2.0||2.0||1.5|
|Loss/write-down (gain) on real estate owned||0.3||0.7||0.6||1.2||(0.1)|
|Pre-tax, pre-credit provision income||$ 3.0||$ 2.8||$ 3.0||$ 1.4||$ 0.6|
Pre-tax, pre-credit provision income improved by approximately $0.2 million compared with the June 30, 2012 period, as a result of higher net interest income of $0.1 million, lower non-interest expense of $0.1 million and higher mortgage banking revenue of $0.1 million, partially offset by lower SBA gains of $0.2 million.
Bank Capital Ratios Strengthen
The Bank's capital ratios have continued to exceed the requirements prescribed under the recently terminated regulatory order. As of September 30, 2012, the ratio of tier one (core) capital to adjusted total assets stood at 9.16% and total risk-based capital to risk-weighted assets was 13.34%. The requirements under the recently terminated regulatory order were 8.00% and 12.00%, respectively.
About PVF Capital Corp.
Park View Federal is a wholly-owned subsidiary of PVF Capital Corp. and operates 16 full-service offices located throughout the Greater Cleveland area. For additional information, visit our web site at parkviewfederal.com. PVF Capital Corp.'s common shares trade on the NASDAQ Capital Market under the symbol PVFC.
Use of Non-GAAP Financial Measures
This release includes certain financial information determined by methods other than in accordance with GAAP. One non-GAAP performance metric that management believes is useful in analyzing underlying performance trends is pre-tax, pre-credit provision income. This is the level of earnings adjusted to exclude the impact of:
- provision expense and credit related charges involving the valuation and disposition of other real estate owned, which are excluded because its absolute level is elevated and volatile in times of economic stress;
- available-for-sale and other securities gains/losses, which are excluded because in times of economic stress securities market valuations may also become particularly volatile; and
- certain items identified by management to be outside of ordinary banking activities, and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management at the time to be infrequent or short-term in nature, which management believes may distort the Company's underlying performance trends.
Non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. The Company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the comparable GAAP financial measures, and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. While the Company believes that non-GAAP financial measures provide useful supplemental information to investors, there are very significant limitations associated with their use. Non-GAAP financial measures are not prepared in accordance with GAAP, may not be reported by all of the Company's competitors and may not be directly comparable to similarly titled measures of the Company's competitors due to potential differences in the exact methods of calculation. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.
Cautionary Note on Forward-Looking Statements
This press release contains statements that are forward-looking, as that term is defined by the Private Securities Litigation Act of 1995 or the Securities and Exchange Commission in its rules, regulations and releases. The Company intends that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectation regarding important risk factors including, but not limited to, interest rate changes, real estate values, continued softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Company's business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Company's periodic reports and registration statements filed with the Securities and Exchange Commission. Accordingly, actual results may differ from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by the Company or any other person that results expressed therein will be achieved. This press release contains time-sensitive information that reflects management's best analysis only as of the date of this document. The Company does not undertake an obligation to publicly update or revise any forward-looking statements to reflect new events, information or circumstances, or otherwise. Further information concerning issues that could materially affect financial performance related to forward-looking statements can be found in the Company's periodic filings with the Securities and Exchange Commission.
|PVF CAPITAL CORP.|
|CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION|
|September 30,||June 30,|
|Cash and amounts due from financial institutions||$ 16,903,187||$ 5,840,608|
|Total cash and cash equivalents||114,575,442||120,110,140|
|Securities available for sale||38,280,551||38,658,044|
|Loans receivable held for sale, net||19,765,946||25,062,786|
|Loans receivable, net of allowance of $16,135,640 and $16,052,865, respectively||543,186,276||541,627,515|
|Office properties and equipment, net||7,286,062||7,237,165|
|Real estate owned, net||7,232,119||7,733,578|
|Federal Home Loan Bank stock||12,811,100||12,811,100|
|Bank-owned life insurance||23,696,129||23,648,663|
|Prepaid expenses and other assets||12,289,670||14,560,882|
|Total assets||$ 779,123,295||$ 791,449,873|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Non-interest-bearing deposits||$ 57,769,225||$ 51,786,588|
|Long-term advances from the Federal Home Loan Bank||35,000,000||35,000,000|
|Advances from borrowers for taxes and insurance||6,955,246||4,469,292|
|Accrued expenses and other liabilities||17,167,777||24,224,709|
|Serial preferred stock, $.01 par value, 1,000,000 shares authorized; none issued||--||--|
|Common stock, $.01 par value, 65,000,000 shares authorized; 26,392,195 and 26,217,796 shares issued||263,922||262,178|
|Additional paid-in capital||101,297,166||100,897,560|
|Retained earnings (accumulated deficit)||(24,568,768)||(26,119,855)|
|Accumulated other comprehensive income (loss)||(324,804)||(472,116)|
|Treasury stock at cost, 472,725 shares, respectively||(3,837,147)||(3,837,147)|
|Total stockholders' equity||72,830,369||70,730,621|
|Total liabilities and stockholders' equity||$ 779,123,295||$ 791,449,873|
|PVF CAPITAL CORP.|
|CONSOLIDATED STATEMENT OF OPERATIONS|
|Three Months Ended|
|Interest and dividends income|
|Loans||$ 6,986,437||$ 7,104,267|
|Federal Home Loan Bank stock dividends||135,374||127,760|
|Federal funds sold and interest-bearing deposits||68,295||92,498|
|Total interest and dividends income||7,411,575||7,398,463|
|Total interest expense||1,596,434||2,221,487|
|Net interest income||5,815,141||5,176,976|
|Provision for loan losses||1,050,000||1,500,000|
|Net interest income after provision for loan losses||4,765,141||3,676,976|
|Service charges and other fees||180,392||178,818|
|Gain on sale of mortgage loans||4,031,121||1,827,435|
|Income (loss) from mortgage servicing fees||(904,874)||(817,270)|
|Gain (loss) on sale of SBA loans||(3,686)||221,218|
|Increase in cash surrender value of bank-owned life insurance||47,466||62,699|
|Gain (loss) on real estate owned||(17,881)||140,112|
|Provision for real estate owned losses||(233,719)||(69,400)|
|Total non-interest income||3,291,019||1,671,119|
|Compensation and benefits||3,109,759||2,894,698|
|Office occupancy and equipment||569,589||598,910|
|Professional and legal||120,000||115,000|
|Real estate owned and collection expense||385,504||613,859|
|Total non-interest expense||6,505,073||6,193,870|
|Income (loss) before federal income taxes||1,551,087||(845,775)|
|Federal income tax provision (benefit)||--||(25,178)|
|Net income (loss)||$ 1,551,087||$ (820,597)|
|Basic earnings (loss) per share||$ 0.06||$ (0.03)|
|Diluted earnings (loss) per share||$ 0.06||$ (0.03)|
|At or for the three months ended|
|(dollars in thousands except per share data)||September 30,||June 30,||March 31,||December 31,||September 30,|
|Balance Sheet Data:||2012||2012||2012||2011||2011|
|Total assets||$ 779,123||$ 791,450||$ 806,472||$ 794,823||$ 780,013|
|Allowance for loan losses||16,136||16,053||16,914||17,515||29,553|
|Loans receivable held for sale, net||19,766||25,063||16,386||8,221||12,857|
|Cash and cash equivalents||114,575||120,110||134,496||151,850||150,272|
|Securities available for sale||38,281||38,658||40,908||22,595||7,805|
|Other nonperforming assets||7,232||7,734||9,552||9,995||7,925|
|Tangible common equity ratio||9.35%||8.94%||8.65%||8.67%||9.05%|
|Book value per share||$2.81||$2.74||$2.70||$2.69||$2.75|
|Common shares outstanding at period end||25,919,470||25,820,424||25,820,424||25,669,718||25,669,718|
|Interest income||$ 7,412||$ 7,428||$ 7,540||$ 7,481||$ 7,399|
|Net interest income before provision for loan losses||5,815||5,691||5,679||5,426||5,177|
|Provision for loan losses||1,050||1,500||2,016||1,966||1,500|
|Net interest income after provision for loan losses||4,765||4,191||3,663||3,460||3,677|
|Income (loss) before federal income taxes||1,551||632||420||(1,757)||(846)|
|Federal income tax expense (benefit)||--||(194)||--||--||(25)|
|Net income (loss)||$ 1,551||$ 826||$ 420||$ (1,757)||$ (821)|
|Basic earnings (loss) per share||$ 0.06||$ 0.03||$ 0.02||$ (0.07)||$ (0.03)|
|Diluted earnings (loss) per share||$ 0.06||$ 0.03||$ 0.02||$ (0.07)||$ (0.03)|
|Return on average assets||0.78%||0.41%||0.21%||(0.89%)||(0.42%)|
|Return on average equity||8.79%||4.71%||2.42%||(10.07%)||(4.63%)|
|Net interest margin||3.21%||3.07%||3.10%||2.97%||2.80%|
|Interest rate spread||3.15%||2.99%||3.04%||2.90%||2.70%|
|Stockholders' equity to total assets (all tangible)||9.35%||8.94%||8.65%||8.67%||9.05%|
|Asset Quality Ratios:|
|Nonperforming assets to total assets||3.22%||3.49%||4.10%||5.07%||7.17%|
|Nonperforming loans to total loans||3.19%||3.57%||4.18%||5.37%||8.45%|
|Allowance for loan losses to total loans||2.88%||2.88%||3.00%||3.11%||5.20%|
|Allowance for loan losses to nonperforming loans||90.32%||80.67%||71.85%||57.78%||61.60%|
|Net charge-offs to average loans, annualized||0.67%||1.64%||1.86%||9.90%||1.33%|
|Park View Federal Regulatory Capital Ratios:|
|Ratio of tangible capital to adjusted total assets||9.16%||8.74%||8.55%||8.23%||8.62%|
|Ratio of tier one (core) capital to adjusted total assets||9.16%||8.74%||8.55%||8.23%||8.62%|
|Ratio of tier one risk-based capital to risk-weighted assets||12.08%||11.83%||11.66%||11.25%||11.68%|
|Ratio of total risk-based capital to risk-weighted assets||13.34%||13.10%||12.93%||12.52%||12.95%|