MSB Financial Corp. Releases First Quarter Earnings
May 04 2020 - 4:00PM
MSB Financial Corp. (NASDAQ: MSBF) (the
“Company”), parent company of Millington Bank, reported today the
results of its operations for the three months ended March 31,
2020.
The Company reported net income of $533,000, or
$0.11 per diluted common share, for the three months ended
March 31, 2020, compared to net income of $514,000, or $0.10
per diluted common share, for the three months ended March 31,
2019. The three months ended March 31, 2020 were
impacted by approximately $525,000 in merger related expenses
associated with the Company's previously disclosed pending merger
with Kearny Financial Corp. that would not be part of normal
operating expenses. Adjusting for the merger related
expenses, net income for the three months ended March 31, 2020
would have been $1.0 million or $0.20 per diluted share. The
three months ended March 31, 2019 were impacted by
approximately $862,000 in additional professional expenses year
over year in connection with the first audit of the Company's
internal control over financial reporting. As the Company
previously disclosed, in connection with the December 31, 2018
audit, management and outside auditors identified certain material
weaknesses in internal control. While none of these material
weaknesses resulted in any misstatement or material change to the
reported results, they did cause the scope of the audit and
consequently the related expense to increase significantly.
Adjusting for the expense associated with the change in procedures,
net income for the three months ended March 31, 2019 would
have been $1.1 million or $0.21 per diluted share.
Highlights for the quarter:
- Return on average assets was 0.36% for the three months ended
March 31, 2020 and March 31, 2019, while return on
average equity was 3.22% for the three months ended March 31,
2020, compared to 3.05% for the three months ended March 31,
2019.
- Net interest margin decreased three basis points to 3.16% for
the quarter ended March 31, 2020, from 3.19% for the quarter
ended March 31, 2019. Contributing to the decrease in
net interest margin was higher average interest earning
assets.
- The efficiency ratio, which is calculated by dividing
non-interest expense by the sum of net interest income and
non-interest income, was 76.39% for the quarter ended
March 31, 2020, as compared to 83.83% for the quarter ended
March 31, 2019.
- Non-performing assets represented 0.57% of total assets at
March 31, 2020, compared with 0.68% at December 31, 2019.
The allowance for loan losses as a percentage of total
non-performing loans was 175.44% at March 31, 2020, compared
to 147.38% at December 31, 2019.
- The Company’s balance sheet at March 31, 2020 reflected an
increase in total assets of $7.3 million compared to
December 31, 2019, due to increases in net loans receivable
offset by a decrease in cash and cash equivalents.
- The effective tax rate increased to 39.4% for the quarter ended
March 31, 2020, compared to 31.1% for the quarter ended
March 31, 2019. The increase in tax rate was due to the
nondeductible portion of the merger related expenses.
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Selected Financial
Ratios |
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(unaudited; annualized
where applicable) |
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As of or for the quarter ended: |
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3/31/2020 |
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12/31/2019 |
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9/30/2019 |
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6/30/2019 |
|
3/31/2019 |
Return on average assets |
|
0.36 |
% |
|
0.86 |
% |
|
0.77 |
% |
|
0.85 |
% |
|
0.36 |
% |
Return on average equity |
|
3.22 |
% |
|
7.71 |
% |
|
6.79 |
% |
|
7.28 |
% |
|
3.05 |
% |
Net interest margin |
|
3.16 |
% |
|
3.16 |
% |
|
3.12 |
% |
|
3.21 |
% |
|
3.19 |
% |
Net loans / deposit ratio |
|
116.90 |
% |
|
107.46 |
% |
|
106.56 |
% |
|
118.62 |
% |
|
113.10 |
% |
Shareholders' equity / total
assets |
|
11.00 |
% |
|
11.02 |
% |
|
10.86 |
% |
|
11.42 |
% |
|
11.77 |
% |
Efficiency ratio |
|
76.39 |
% |
|
64.50 |
% |
|
64.30 |
% |
|
62.97 |
% |
|
83.83 |
% |
Book value per common share |
|
$ |
12.74 |
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$ |
12.61 |
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$ |
12.35 |
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$ |
12.64 |
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$ |
12.46 |
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CEO Outlook
"Our first quarter efforts were focused on the
operational impact of CODIV-19," stated Michael Shriner, President
and Chief Executive Officer. Mr. Shriner added, "I am pleased
to say that we implemented our business continuity plan quickly and
effectively and we continued to operate without impact to our
customers." Mr. Gallaway, Chairman of the Board of Directors
added “I am proud of what our team has been able to accomplish in
the face of adversity, providing service to our communities in the
form of normal operations while concurrently fulfilling voluminous
requests for the SBA Payroll Protection Program and loan referral
requests all while remaining in compliance with State Executive
Orders.”
Mr. Shriner further stated “although it is still
too early to determine the ultimate impact of COVID-19 on the loan
portfolio, we determined a gradual increase to the provision for
loan losses was appropriate. We will continue to monitor the impact
and make additional provisions as necessary.”
Non-GAAP Financial Measures
This release references adjusted net income,
which is a non-GAAP (Generally Accepted Accounting Principles)
financial measure. Adjusted net income for March 31,
2020 is derived from GAAP net income less the $525,000 in merger
related expenses that would not be part of normal operating
expenses and tax effected at a rate of 31% for the portion of
expense that was allowable for deduction. Adjusted net income
for March 31, 2019 is derived from GAAP net income less the
$862,000 in additional expenses associated with the expanded audit
scope and identification of material weaknesses and tax effected at
a rate of 31%. We believe the presentation of adjusted net
income is appropriate as it better enables an investor to analyze
the performance of our core business year over year without the
impact of unusual items.
The following tables reconcile adjusted net
income to net income and adjusted diluted earnings per share to
diluted earnings per share:
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Three months ended March 31, |
|
2020 |
|
2019 |
(dollars in thousands) |
|
|
|
Net income |
$ |
533 |
|
|
$ |
514 |
|
Merger related expenses |
525 |
|
|
— |
|
Professional expenses
associated with increased audit scope and identification of
material weaknesses |
— |
|
|
862 |
|
Tax adjustment using an
assumed tax rate of 31% |
(66 |
) |
|
(267 |
) |
Adjusted net income |
$ |
992 |
|
|
$ |
1,109 |
|
|
Three Months Ended March 31, |
(In Thousands, Except Per
Share Data) |
2020 |
|
2019 |
Numerator: |
|
|
|
Net income |
$ |
992 |
|
|
$ |
1,109 |
|
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Denominator: |
|
|
|
Weighted average common
shares |
5,018 |
|
|
5,198 |
|
Dilutive potential common
shares |
23 |
|
|
39 |
|
Weighted average fully diluted shares |
5,041 |
|
|
5,237 |
|
|
|
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Earnings per share: |
|
|
|
Dilutive |
$ |
0.20 |
|
|
$ |
0.21 |
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Forward Looking Statement
Disclaimer
This release may contain forward-looking
statements. Such forward-looking statements are subject to risks
and uncertainties which may cause actual results to differ
materially from those currently anticipated due to a number of
factor. Factors that may cause actual results to differ from those
contemplated include our ability to reduce interest rates on
deposits; our ability to reduce our funding costs; our ability to
continue to use funding sources like short-term brokered deposits;
our ability to reduce our nonperforming loans; our continued
ability to grow the loan portfolio; the impact of the passage of
the Tax Cuts and Jobs Act; our continued ability to manage
cybersecurity risks; our continued ability to successfully
remediate our identified internal control weaknesses; and our
ability to control expenses. Therefore, readers should not place
undue reliance on any forward-looking statements. MSB Financial
Corp. does not undertake, and specifically disclaims, any
obligations to publicly release the results of any revisions that
may be made to any forward-looking statements to reflect the
occurrence of anticipated or unanticipated events or circumstances
after the date of such circumstance.
Contact: |
Michael A. Shriner, President
& CEO |
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(908) 647-4000 |
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mshriner@millingtonbank.com |
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MSB Financial Corp. and Subsidiaries |
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Consolidated Statements of Financial
Condition |
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At March 31, 2020 |
At December 31, 2019 |
(Dollars in thousands, except
per share amounts) |
|
|
Cash and due from banks |
$ |
1,242 |
|
$ |
1,296 |
|
Interest-earning demand deposits with banks |
9,834 |
|
17,157 |
|
Cash and Cash Equivalents |
11,076 |
|
18,453 |
|
Securities held to maturity (fair value of $34,818 and $35,696,
respectively) |
35,092 |
|
35,827 |
|
Loans receivable, net of allowance for loan losses of $5,965 and
$5,655, respectively |
522,941 |
|
508,022 |
|
Premises and equipment |
7,876 |
|
8,020 |
|
Federal Home Loan Bank of New York stock, at cost |
4,301 |
|
2,848 |
|
Bank owned life insurance |
14,571 |
|
14,480 |
|
Accrued interest receivable |
1,741 |
|
1,650 |
|
Other assets |
2,837 |
|
3,786 |
|
Total Assets |
$ |
600,435 |
|
$ |
593,086 |
|
Liabilities and Stockholders' Equity |
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Liabilities |
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Deposits: |
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Non-interest bearing |
$ |
45,856 |
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$ |
47,935 |
|
Interest bearing |
401,520 |
|
424,817 |
|
Total Deposits |
447,376 |
|
472,752 |
|
Advances from Federal Home Loan Bank of New York |
83,875 |
|
51,575 |
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Advance payments by borrowers for taxes and insurance |
776 |
|
722 |
|
Other liabilities |
2,375 |
|
2,662 |
|
Total Liabilities |
534,402 |
|
527,711 |
|
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;
5,184,914 issued and outstanding at March 31, 2020 and December 31,
2019, respectively |
52 |
|
52 |
|
Paid-in capital |
41,955 |
|
41,857 |
|
Retained earnings |
25,522 |
|
24,989 |
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Unearned common stock held by ESOP (165,844 and 168,538 shares,
respectively) |
(1,496 |
) |
(1,523 |
) |
Total Stockholders' Equity |
66,033 |
|
65,375 |
|
Total Liabilities and Stockholders' Equity |
$ |
600,435 |
|
$ |
593,086 |
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MSB Financial Corp. and Subsidiaries |
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Consolidated Statements of Income |
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Three months ended March 31, |
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2020 |
|
2019 |
(in thousands except
per share amounts) |
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Interest
Income |
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Loans receivable, including fees |
|
$ |
5,929 |
|
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$ |
5,691 |
|
Securities held to maturity |
|
228 |
|
|
285 |
|
Other |
|
71 |
|
|
132 |
|
Total Interest Income |
|
6,228 |
|
|
6,108 |
|
Interest
Expense |
|
|
|
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Deposits |
|
1,385 |
|
|
1,126 |
|
Borrowings |
|
297 |
|
|
559 |
|
Total Interest Expense |
|
1,682 |
|
|
1,685 |
|
Net Interest Income |
|
4,546 |
|
|
4,423 |
|
Provision for Loan
Losses |
|
250 |
|
|
— |
|
Net Interest Income after Provision for Loan
Losses |
|
4,296 |
|
|
4,423 |
|
Non-Interest
Income |
|
|
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Fees and service charges |
|
122 |
|
|
72 |
|
Income from bank owned life insurance |
|
95 |
|
|
94 |
|
Other |
|
19 |
|
|
24 |
|
Total Non-Interest Income |
|
236 |
|
|
190 |
|
Non-Interest
Expenses |
|
|
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Salaries and employee benefits |
|
1,731 |
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|
1,728 |
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Directors compensation |
|
132 |
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|
129 |
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Occupancy and equipment |
|
384 |
|
|
375 |
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Service bureau fees |
|
200 |
|
|
95 |
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Advertising |
|
1 |
|
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7 |
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FDIC assessment |
|
45 |
|
|
46 |
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Professional services |
|
414 |
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|
1,278 |
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Merger Expenses |
|
525 |
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|
— |
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Other |
|
221 |
|
|
209 |
|
Total Non-Interest Expenses |
|
3,653 |
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|
3,867 |
|
Income before Income
Taxes |
|
879 |
|
|
746 |
|
Income Tax Expense |
|
346 |
|
|
232 |
|
Net
Income |
|
$ |
533 |
|
|
$ |
514 |
|
Earnings per
share: |
|
|
|
|
Basic |
|
$ |
0.11 |
|
|
$ |
0.10 |
|
Diluted |
|
$ |
0.11 |
|
|
$ |
0.10 |
|
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