Chester Valley Bancorp Inc. Reports Fourth Quarter Earnings
DOWNINGTOWN, Pa., July 29 /PRNewswire-FirstCall/ -- Chester Valley
Bancorp Inc. (NASDAQ:CVAL) announces that the Company posted
earnings of $1.1 million or $0.20 per diluted share for its fourth
quarter ended June 30, 2005. For the year ended June 30, 2005, the
Company posted earnings of $4.4 million or $0.83 per diluted share.
Excluding one-time charges of $1.6 million related to a prepayment
penalty paid on the early extinguishments of $21.0 million of
Federal Home Loan Bank Borrowings and $759 thousand in merger and
integration charges related to the Company's proposed merger with
Willow Grove Bancorp, the Company's pre-tax operating income
(income before income taxes excluding gains or losses on the sale
of investment securities) increased 7.0% to $7.8 million for the
year ended June 30, 2005 from $7.3 million for the year ended June
30, 2004. As previously disclosed in a Form 8-K filed with the
Securities and Exchange Commission, the Company prepaid
approximately $21.0 million in Federal Home Loan Bank Borrowings
with an average cost of 5.95%, resulting in a prepayment penalty of
approximately $1.6 million. Coincident with the repayment of the
borrowings, the Company sold approximately $10.7 million in
residential mortgage loans with an average yield of approximately
5.23%. At the time of the repayment, a rise in market interest
rates resulted in an approximate $500 thousand reduction in the
prepayment penalty as compared to December 31, 2004 and therefore
the company elected to repay the borrowings, as it was contemplated
as part of the merger and would be beneficial to future operations
on a stand-alone basis. On January 21, 2005, the Company announced
it signed a definitive agreement with Willow Grove Bancorp, Inc. to
combine their companies and their respective subsidiary banks,
Willow Grove Bank and First Financial Bank. The merger was approved
by each company's shareholders at special meetings held on June 14,
2005. The closing is expected to occur shortly after final approval
by the Office of Thrift Supervision. It is anticipated that closing
will occur sometime during the third calendar quarter. For more
information about the proposed merger, please refer to the
Company's joint proxy/prospectus filed with the Securities and
Exchange Commission on April 28, 2005. Donna Coughey commented, "We
are excited that the merger was approved by both company's
shareholders and the combined management team has been working
diligently to ensure that the integration will go smoothly. In
fact, both Companies took advantage of market conditions in the
quarter ended June 30, 2005 to begin the restructuring of the
combined company's balance sheet. We continue to believe that the
need for locally managed, community-oriented banking has never been
greater. Together, Willow Grove Bancorp and Chester Valley Bancorp
will serve some of the fastest-growing and most attractive markets
in Southeastern Pennsylvania. We will form the foundation of a
super-community bank that provides a broad range of consumer and
commercial banking products, have a higher legal lending limit, and
an expanded branch and ATM network to serve our customers. We look
forward to the completion of the transaction and a new era in
banking in Southeastern Pennsylvania." At June 30, 2005, total
assets increased to $668.6 million as compared to total assets of
$642.1 million at June 30, 2004, or 4.1%. At June 30, 2005, net
loans receivable increased by $45.7 million or 11.6% to $440.9
million as compared to $395.1 million at June 30, 2004. The growth
continues to be concentrated in construction and commercial loans
as loans receivable, excluding single-family residential mortgages,
increased 21.1% at June 30, 2005 as compared to June 30, 2004. In
anticipation of the closing of the merger with Willow Grove Bancorp
and the required de-leveraging of the balance sheet, during the
quarter ended June 30, 2005, with the exception of required bank
stock investments, the Company reclassified its held to maturity-
investment security portfolio to available for sale. The decline in
longer- term market interest rates permitted the Company to sell
approximately $42.7 million of longer duration investment
securities at a net gain of approximately $65 thousand. The
proceeds are being maintained in cash and cash equivalents pending
the closing of the merger. The loan growth was funded primarily
through deposit growth, both from our existing branch network and
as a result of the Avondale and Firstrust branch acquisitions. As
in the prior quarters, the Company continues to have a large amount
in undisbursed closed construction and commercial loans available
for future funding. These aggregate $46.2 million at June 30, 2005.
Additionally, at June 30, 2005, the pipeline remains strong at
approximately $38.6 million, mostly in commercial and construction
loans. The loans are at various stages of the commitment and
customer acceptance process. The ultimate closing of these loans is
dependent upon a number of factors including but not limited to:
(a) competition within the marketplace; (b) changes in interest
rates during the process; and (c) other factors impacting the
customer. At June 30, 2005, the Company's non-performing assets to
total assets declined to 0.47% from 0.52% at March 31, 2005.
Additionally, the allowance for loan losses to non-performing loans
increased to 218.9% at June 30, 2005 from 200.0% at March 31, 2005.
The improved credit quality measurements were attributed primarily
to improvement in the balance of classified loans. While earnings
were negatively impacted by the above noted charges, the Company
reported net interest income of $5.6 million and $21.3 million for
the three and twelve months ended June 30, 2005, respectively. This
compares to $5.0 million and $19.2 million for the comparable
periods ended June 30, 2004, respectively. For the fifth
consecutive sequential quarter, the net interest margin (computed
on a fully tax equivalent basis) increased to 3.64% during the
quarter from 3.52% for the quarter ended March 31, 2005. The latest
quarterly increase was achieved despite the Company maintaining
large cash balances as a result of the above noted liquidation
within the investment security portfolio. Non-interest income
declined by approximately $152 thousand for the quarter ended June
30, 2005 as compared to the quarter ended June 30, 2004. The
decline was due largely to a reduction in gains on the sale of
loans resulting from a reduced volume of loan sales, as well as a
reduced levels of service charges and fees resulting from a lower
level of prepayment fees received on commercial loan pay-offs.
Operating expenses increased for the quarter ended June 30, 2005 as
compared to the quarter ended June 30, 2004, due primarily to the
aforementioned merger and integration costs. Additionally, legal
expenses increased by approximately $239 thousand due to services
provided in relation to the Company's complying with the subpoena
from the Securities and Exchange Commission as previously disclosed
in the Form 8-K filed with the Securities and Exchange Commission
on March 10, 2005. Additionally, compensation and benefits
increased as a result of normal salary increases for the year as
well as the Company's significant investment in its future. On a
yearly comparison, the Bank hired six lending and private-banking
relationship managers who became available as a result of the
consolidation within the local community banking market experienced
over the last twelve months. In addition, the Bank expanded its
branch network through the Coatesville and Avondale branch
acquisitions from PNC National Bank in March 2004 and December
2004, respectively. Additionally, in August 2004, the Bank opened a
loan production office in Plymouth Meeting, Montgomery County,
Pennsylvania, an area that was largely impacted by the
aforementioned consolidation. As with other institutions, the
Company has incurred increased costs related to the implementation
of the final rules of Section 404 of the Sarbanes-Oxley Act of
2002. The Company also announced that its Board of Directors, at
its July 27, 2005 meeting, declared a $0.105 cash dividend on each
share of common stock of the Company payable on August 17, 2005 to
shareholders of record at the close of business on August 5, 2005.
Chester Valley Bancorp Inc. is the parent company of both First
Financial Bank and Philadelphia Corporation for Investment
Services. First Financial's executive offices are located in
Downingtown, Pennsylvania, with branches in Exton, Frazer,
Thorndale, Westtown, Airport Village, Brandywine Square, Devon,
Kennett Square, Eagle Square, Coatesville, Avondale and West
Chester. Philadelphia Corporation has offices in Wayne and
Philadelphia. Additionally, the Company will open a fourteenth
branch in Oxford, Chester County, Pennsylvania. Chester Valley
Bancorp stock is traded on the NASDAQ market under the symbol
"CVAL." Forward-Looking Statements. A number of the matters
discussed in this message that are not historical or current facts
deal with potential future circumstances and developments, in
particular, information regarding the combined company, including
expected synergies resulting from the merger of Willow Grove
Bancorp and Chester Valley Bancorp, future banking plans, and
whether and when the transactions contemplated by the merger
agreement will be consummated. The discussion of such matters is
qualified by the inherent risks and uncertainties surrounding
future expectations generally, and also may materially differ from
actual future experience involving any one or more of such matters.
Such risks and uncertainties include: the result of the review of
the proposed merger by various regulatory agencies, and any
conditions imposed on the new company in connection with
consummation of the merger; satisfaction of various conditions to
the closing of the merger contemplated by the merger agreement; and
the risks that are described from time to time in Willow Grove
Bancorp's and Chester Valley Bancorp's respective reports filed
with the SEC, including each company's annual report on Form 10-K
for the year ended June 30, 2004 and quarterly report on Form 10-Q
for the quarter ended March 31, 2005. This message speaks only as
of its date, and Willow Grove Bancorp and Chester Valley Bancorp
each disclaims any duty to update the information herein.
Additional Information and Where to Find It. In connection with the
proposed merger, a registration statement on Form S-4 was filed
with the SEC on March 28, 2005. WILLOW GROVE BANCORP AND CHESTER
VALLEY BANCORP SHAREHOLDERS ARE ENCOURAGED TO READ THE REGISTRATION
STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC,
INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS THAT ARE A PART OF
THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE MERGER. The final joint proxy
statement/prospectus was mailed to shareholders of Willow Grove
Bancorp and Chester Valley Bancorp. Shareholders will be able to
obtain the documents free of charge at the SEC's website,
http://www.sec.gov/, from Willow Grove Bancorp by calling
Christopher E. Bell or from Chester Valley Bancorp by calling
Joseph Crowley. Participants In Solicitation. Willow Grove Bancorp,
Chester Valley Bancorp and their respective directors and executive
officers and other members of management and employees may be
deemed to be participants in the solicitation of proxies in respect
of the merger. Information concerning persons who may be considered
participants in the solicitation of Willow Grove Bancorp's
shareholders is set forth in the proxy statement dated October 8,
2004, for Willow Grove Bancorp's 2004 annual meeting of
shareholders as filed with the SEC on Schedule 14A. Information
concerning persons who may be considered participants in the
solicitation of Chester Valley Bancorp's shareholders is set forth
in the proxy statement dated September 10, 2004, for Chester Valley
Bancorp's 2004 annual meeting of shareholders as filed with the SEC
on Schedule 14A. Additional information regarding the interests of
participants of Willow Grove Bancorp and Chester Valley Bancorp in
the solicitation of proxies in respect of the merger is included in
the registration statement and joint proxy statement/prospectus
filed with the SEC. CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in
Thousands) June 30, June 30, 2005 2004 Assets Cash in banks $12,032
$12,844 Interest-bearing deposits 33,554 15,352 Total cash and cash
equivalents 45,586 28,196 Trading account securities 22 8
Investment securities available for sale 139,898 130,089 Investment
securities held to maturity (fair value - June 30, 2005, $6,433
June 30, 2004, $57,779) 6,433 59,384 Loans held for sale 1,968 538
Loans receivable 448,190 401,965 Deferred fees (400) (508)
Allowance for loan losses (6,940) (6,331) Loans receivable, net
440,850 395,126 Accrued interest receivable 2,865 2,652 Property
and equipment - net 14,152 13,009 Bank owned life insurance 5,631
5,414 Real estate owned - 54 Goodwill 2,437 1,171 Intangible assets
856 384 Other assets 7,888 6,083 Total Assets $668,586 $642,108
Liabilities and Stockholders' Equity Liabilities: Deposits $451,361
$427,103 Securities sold under agreements to repurchase 27,072
27,216 Advance payments by borrowers for taxes and insurance 1,198
1,433 Federal Home Loan Bank advances 120,158 120,963 Trust
preferred securities 10,310 10,310 Accrued interest payable 834 679
Other liabilities 2,230 2,147 Total Liabilities 613,163 589,851
Stockholders' Equity: Preferred stock - $1.00 par value; 5,000,000
shares authorized; none issued - - Common stock - $1.00 par value;
10,000,000 shares authorized; 5,182,698(1) and 4,876,484 shares
issued and outstanding at June 30, 2005 and June 30, 2004,
respectively 5,183 4,876 Additional paid-in capital(1) 41,871
36,247 Retained earnings - partially restricted 10,704 13,303
Treasury stock (612(1) and 583 shares at June 30, 2005 and June 30,
2004, respectively, at cost) (13) (13) Accumulated other
comprehensive income (loss) (2,322) (2,156) Total Stockholders'
Equity 55,423 52,257 Total Liabilities and Stockholders' Equity
$668,586 $642,108 (1) Common stock, additional paid in capital and
treasury stock have been adjusted to reflect the effects of the 5%
stock dividend paid in September 2004 CHESTER VALLEY BANCORP INC.
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in
Thousands, Except for Per Share Amounts) Three Months Ended June
30, 2005 2004 INTEREST INCOME: Loans $6,766 $5,724 Mortgage-backed
securities 411 390 Interest-bearing deposits 131 19 Investment
securities: Taxable 1,227 1,156 Non-taxable 254 345 Total interest
income 8,789 7,634 INTEREST EXPENSE: Deposits 1,488 1,304
Securities sold under agreements to repurchase 141 28 Short-term
borrowings 58 84 Long-term borrowings 1,516 1,264 Total interest
expense 3,203 2,680 NET INTEREST INCOME 5,586 4,954 Provision for
loan losses 144 115 Net interest income after provision for loan
losses 5,442 4,839 OTHER INCOME: Investment services income 1,029
1,051 Service charges and fees 770 830 Gain on the sale of: Loans
held for sale 57 137 Securities available for sale 65 56 Other 116
115 Total other income 2,037 2,189 OPERATING EXPENSES: Salaries and
employee benefits 3,176 2,881 Occupancy and equipment 816 719 Data
processing 286 246 Advertising 63 92 Deposit insurance premiums 15
16 Merger and integration charges 320 - Other 1,353 943 Total
operating expenses 6,029 4,897 Income before income taxes 1,450
2,131 Income tax expense 352 539 NET INCOME $1,098 $1,592 EARNINGS
PER SHARE (1) Basic $0.21 $0.31 Diluted $0.20 $0.30 DIVIDENDS PER
SHARE PAID DURING PERIOD (1) $0.11 $0.10 WEIGHTED AVERAGE SHARES
OUTSTANDING (1) Basic 5,173,100 5,108,238 Diluted 5,406,343
5,278,433 (1) Earnings per share, dividends per share and weighted
average shares outstanding have been restated to reflect the
effects of the 5% stock dividend paid in September 2004 CHESTER
VALLEY BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS (Dollars in Thousands, Except for Per Share Amounts)
Twelve Months Ended June 30, 2005 2004 INTEREST INCOME: Loans
$25,046 $23,406 Mortgage-backed securities 1,628 1,535
Interest-bearing deposits 205 66 Investment securities: Taxable
5,132 3,196 Non-taxable 1,284 1,665 Total interest income 33,295
29,868 INTEREST EXPENSE: Deposits 5,563 5,300 Securities sold under
agreements to repurchase 342 107 Short-term borrowings 328 214
Long-term borrowings 5,744 5,097 Total interest expense 11,977
10,718 NET INTEREST INCOME 21,318 19,150 Provision for loan losses
614 971 Net interest income after provision for loan losses 20,704
18,179 OTHER INCOME: Investment services income 4,231 4,255 Service
charges and fees 3,414 3,073 Gain on the sale of: Loans held for
sale 339 237 Securities available for sale 355 1,068 Other 462 453
Total other income 8,801 9,086 OPERATING EXPENSES: Salaries and
employee benefits 12,120 10,836 Occupancy and equipment 3,166 2,895
Data processing 1,082 983 Advertising 340 260 Deposit insurance
premiums 62 62 Merger and integration charges 759 - Debt prepayment
fees 1,608 - Other 4,613 3,904 Total operating expenses 23,750
18,940 Income before income taxes 5,755 8,325 Income tax expense
1,336 2,015 NET INCOME $4,419 $6,310 EARNINGS PER SHARE (1) Basic
$0.86 $1.24 Diluted $0.83 $1.20 DIVIDENDS PER SHARE PAID DURING
PERIOD (1) $0.42 $0.40 WEIGHTED AVERAGE SHARES OUTSTANDING (1)
Basic 5,149,321 5,082,744 Diluted 5,355,922 5,268,083 (1) Earnings
per share, dividends per share and weighted average shares
outstanding have been restated to reflect the effects of the 5%
stock dividend paid in September 2004 CHESTER VALLEY BANCORP INC.
AND SUBSIDIARIES FINANCIAL HIGHLIGHTS Three Months Ended Twelve
Months Ended June 30, June 30, 2005 2004 2005 2004 Average interest
rate spread (2) 3.56% 3.31% 3.47% 3.38% Net yield on average
interest-earning assets (2) 3.64% 3.41% 3.54% 3.46% Ratio of
average interest- earning assets to average interest-bearing
liabilities 1.03 x 1.04 x 1.03 x 1.04 x Non-performing assets to
total assets 0.47% 0.66% 0.47% 0.66% Allowance for loan loss to
total loans 1.57% 1.60% 1.57% 1.60% Return on equity 8.00% 12.10%
8.12% 12.27% Return on assets 0.65% 1.00% 0.67% 1.03% Book value
per common share (1) $10.70 $10.21 $10.70 $10.21 Closing price of
common stock at end of period (1) $25.00 $20.46 $25.00 $20.46
Number of full-service offices at end of period 13 11 13 11 (1) Per
share amounts have been restated to reflect the effects of the 5%
stock dividend paid in September 2004. (2) Percentages are
presented on a taxable equivalent basis. This release contains
financial information determined by methods other than in
accordance with generally accepted accounting principles ("GAAP").
The Company's Management uses these non-GAAP measures in its
analysis of the Company's performance. These non-GAAP measures
consist of adjusting net interest income determined in accordance
with GAAP to include the tax equivalent adjustments of loan and
investment security income as well as adjusting pre-tax income to
excluded security gains, one-time charges for merger and related
expenses and debt repayment fees. Management believes that the
presentation including the adjustments provides useful
supplementation information essential to the proper understanding
of the operating results of the Company's business. These
disclosures should not be viewed as a substitute for operating
results determined in accordance with GAAP, nor are they
necessarily comparable to non-GAAP performance measures, which may
be presented by other companies. Reconciliation of Non-GAAP
Information The following details the tax equivalent adjustments in
the above table: Three Months Ended June 30, 2005 2004 Interest Tax
Adjusted Interest Tax Adjusted Income Adjustment Income Income
Adjustment Income (Dollars in thousands) Loans $6,766 $33 $6,799
$5,724 $15 $5,739 Investments 2,023 99 2,122 1,910 129 2,039 Total
$8,789 $132 $8,921 $7,634 $144 $7,778 Twelve Months Ended June 30,
2005 2004 Interest Tax Adjusted Interest Tax Adjusted Income
Adjustment Income Income Adjustment Income (Dollars in thousands)
Loans $25,046 $100 $25,146 $23,406 $61 $23,467 Investments 8,249
483 8,732 6,462 622 7,084 Total $33,295 $583 $33,878 $29,868 $683
$30,551 Reconciliation of Non-GAAP Information The following table
details the adjustments made to pre-tax income. Twelve Months Ended
June 30, 2005 2004 Variance % Change (Dollars in thousands) As
reported Pre-tax income $5,755 $8,325 $(2,570) -30.9% Security
gains (355) (1,068) 713 -66.8% Merger and related expenses 759 -
759 100.0% Debt prepayment fees 1,608 - 1,608 100.0% Adjusted
pre-tax income $7,767 $7,257 $510 7.0% DATASOURCE: Chester Valley
Bancorp Inc. CONTACT: Joseph T. Crowley, Treasurer & Chief
Financial Officer, Chester Valley Bancorp Inc., +1-610-269-9700
ext. 3085 Web site: http://www.ffbonline.com/
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