Contact: Jerry A. Weberling, Chief Executive Officer, President and Chief Financial Officer (708)

Transcription

1 FOR IMMEDIATE RELEASE Contact: Jerry A. Weberling, Chief Executive Officer, President and Chief Financial Officer (708) AJS Bancorp, Inc. Announces Third Quarter and Year to Date 2018 Financial Results MIDLOTHIAN, IL November 20, 2018 AJS Bancorp, Inc. (the Company ) (OTC Pink: AJSB), the holding company for A.J. Smith Federal Savings Bank (the Bank ), announced a third quarter 2018 net loss of $223,000, or $(0.11) per share, compared to net income of $111,000, or $0.05 per share, for the third quarter of Net income for the nine months ended September 30, 2018 was $100,000, or $0.05 per share compared to net income of $284,000, or $0.14 per share for the nine months ended September 30, The operating results for the current quarter and nine months ended September 30, 2018 were negatively impacted by $433,000 of pretax merger related expenses incurred for investment banking, legal and accounting professional fees related to our pending merger with Northwest Indiana Bancorp (NWIN) that was entered into on July 30, Comparison of Operating Results for the Three Months Ended September 30, 2018 and 2017 Net loss for the three months ended September 30, 2018 was $223,000, or $(0.11) per share, as compared to net income of $111,000, or $0.05 per share, for the same period in The $334,000 decrease in net income for the three months ended September 30, 2018 compared to the prior year period was mainly attributable to a $433,000 increase in professional fees related to merger related expenses and a $159,000 increase in income tax expense primarily due to the non-deductibility of certain merger related expenses, partially offset by an $85,000 decrease in the provision for loan losses, a $110,000 decrease in compensation and employee benefits expense, a $38,000 decrease in other non-interest expense and a $19,000 increase in other non-interest income. Net interest income was flat at $1.1 million for the three months ended September 30, 2018 and The net interest margin increased 11 basis points, or 4.4% to 2.59% for the three months ended September 30, 2018 compared to 2.48% for the same period in The average yield on interest-earning assets increased 24 basis points to 2.98% driven by higher yields on interest-earning deposits and securities available-forsale, while the average cost of interest-bearing liabilities increased 18 basis points to 0.53% for the third quarter of 2018 compared to the third quarter of 2017 as deposit costs rose on certificates of deposit and money market accounts. The net interest margin improvement was substantially offset by a $9.3 million, or 5.1% decrease in average interest-earning assets. The Company recorded a $20,000 credit to the provision for loan losses for the three months ended September 30, 2018 compared to a $65,000 provision for loan losses for the three months ended September 30, The current quarter had a $12,439 loan charge-off and recoveries of $4,481, for net charge-offs of $7,958. The credit provision in the current year quarter was primarily due to a $2.3 million reduction in the loan portfolio. The allowance for loan losses was $720,000, or 0.74% of total loans, at September 30, 2018 compared to $778,000, or 0.74% of total loans, at December 31, The allowance for loan losses as a percentage of total loans remained stable despite the $58,000 decrease in the allowance for loan losses which was primarily due to the $8.1 million decrease in the loan portfolio during the nine months ended September 30, Non-interest income increased $26,000 to $148,000 for the three months ended September 30, 2018, from $122,000 for the three months ended September 30, The increase was primarily due to a $19,000 increase in other income due to higher correspondent loan fee income. 1

2 Non-interest expense increased $279,000, or 23.1%, to $1.5 million for the three months ended September 30, 2018 compared to the same period in The increase was primarily due to a $433,000 increase in professional and regulatory expenses due to merger related investment banking, legal and accounting expenses. Partially offsetting the increase in merger related expenses was a $110,000 decrease in compensation and employee benefits expense primarily due to cost saves related to consolidation of executive positions and the prior year including one-time costs related to the retirement of the former chief executive officer in August 2017, and a $38,000 decrease in other expense due to lower auto depreciation and repair expenses, lower loan related legal expenses, and debit card processing expenses. We recorded an income tax expense of $32,000 for the quarter ended September 30, 2018 compared to an income tax benefit of $127,000 for the same quarter in The increase in income tax expense despite the pretax loss in the third quarter of 2018 was primarily due to the non-deductibility of certain merger related expenses. We recorded an income tax benefit of $127,000 for the quarter ended September 30, 2017 primarily due to recording a $107,000 income tax benefit related to the increase in the deferred tax asset related to our state net operating loss carryforwards due to the increase in the Illinois income tax rate from 7.75% to 9.50% effective July 1, In addition, the tax benefit was impacted by the larger tax benefit impact of the tax-free earnings on bank owned life insurance. Comparison of Operating Results for the Nine Months Ended September 30, 2018 and 2017 Net income for the nine months ended September 30, 2018 was $100,000, or $0.05 per share, a decrease of $184,000 from net income of $284,000, or $0.14 per share for the nine months ended September 30, The decrease was mainly attributable to a $201,000 increase in non-interest expense, a $189,000 increase in income tax expense and a $42,000 decrease in non-interest income, partially offset by a $260,000 decrease in the provision for loan losses. Net interest income was flat at $3.4 million for the nine months ended September 30, 2018 and The net interest margin increased by 14 basis points, or 5.8% to 2.57% for the nine months ended September 30, 2018 compared to 2.43% for the nine months ended September 30, 2017 as the 23 basis points increase in the average yield on interest-earning assets outpaced the 12 basis points increase in the average cost of interest-bearing deposits. The net interest margin improvement was substantially offset by an $11.2 million, or 6.0% decrease in average interest-earning assets. The net interest rate spread increased 11 basis points to 2.46% for the nine months ended September 30, 2018 compared to 2.35% for the nine months ended September 30, We recorded a credit to the provision for loan losses of $70,000 for the nine months ended September 30, 2018 compared to a $190,000 provision for loan losses for the nine months ended September 30, The credit provision in the current year period was primarily due to having net recoveries of $11,810 and an $8.0 million decrease in net loans. The prior year period s provision was necessary to provide for net charge-offs of $219,000. The allowance for loan losses was $720,000, or 0.74% of total loans, at September 30, 2018 compared to $778,000, or 0.74% of total loans, at December 31, Non-interest income decreased $42,000 to $381,000 for the nine months ended September 30, 2018, from $423,000 for the nine months ended September 30, The decrease was primarily due to a $19,000 loss on sale of other real estate owned and a $16,000 decrease in service charge income due to lower checking account activity. Non-interest expense increased $201,000, or 5.9%, to $3.6 million for the nine months ended September 30, 2018, from $3.4 million for the nine months ended September 30, The increase was primarily due to a $403,000 increase in professional and regulatory expenses due to merger related investment banking, legal and accounting expenses and a $42,000 increase in other real estate owned expense/impairment due 2

3 to $20,650 of write-downs and higher real estate tax and maintenance expenses. Partially offsetting the increase in merger related expenses was a $179,000 decrease in compensation and employee benefits expense primarily due to cost saves related to consolidation of executive positions and the prior year including one-time costs related to the retirement of the former chief executive officer in August 2017, and a $78,000 decrease in other expense due to lower auto depreciation and repair expenses, lower loan related legal expenses, debit card processing expenses and bad check losses. We recorded an income tax expense of $134,000 for the nine months ended September 30, 2018 as compared to an income tax benefit of $55,000 for the nine months ended September 30, The increase in income tax expense in 2018 was primarily due to the non-deductibility of certain merger related expenses. In addition, the effective income tax rate dropped from 29.4% in 2017 to 23.5% in 2018 primarily due to the enactment of the Tax Cuts and Jobs Act in December 2017 that lowered our federal income tax rate from 34% to 21%. The prior year period included a $107,000 income tax benefit related to the increase in the deferred tax asset related to our state net operating loss carryforwards due to the increase in the Illinois income tax rate from 7.75% to 9.50% effective July 1, Comparison of Financial Condition at September 30, 2018 and December 31, 2017 Total consolidated assets as of September 30, 2018 were $183.3 million, a decrease of $9.8 million, or 5.1%, from $193.1 million at December 31, The decrease was primarily due to an $8.0 million decline in net loans. Cash and cash equivalents decreased $13.0 million, or 36.2%, to $22.9 million at September 30, 2018 from $35.8 million at December 31, The primary reasons for the decrease in cash and cash equivalents were due to an increase in the securities available for sale portfolio of $11.3 million as a result of the investment of a portion of cash and cash equivalents, a $7.1 million decrease in deposits, and a $1.0 million decrease in other liabilities, partially offset by increased liquidity as a result of a $8.0 million decrease in net loans. Securities available-for-sale increased $11.3 million to $51.5 million at September 30, 2018 from $40.2 million at December 31, The increase was primarily due to new securities purchases of $18.0 million partially offset by securities available-for-sale principal repayments of $5.9 million and a decrease in the fair value of available-for-sale securities of $838,000 as a result of the increase in interest rates during the nine months ended September 30, Net loans decreased $8.0 million, or 7.7%, to $96.1 million at September 30, 2018 from $104.1 million at December 31, The decrease was primarily attributable to a $6.6 million decline in our one-to fourfamily loan portfolio during the nine months ended September 30, The decrease in the one-to fourfamily loan portfolio was due in part to a slowdown in refinance activity and our reluctance to originate many 30 year fixed rate mortgage loans for portfolio in the current interest rate environment. Home equity loans decreased $476,000, or 12.7%, to $3.3 million at September 30, 2018 from $3.8 million at December 31, 2017 as floating rate lines of credit continued to mature and convert to fixed rate loans. Total deposits decreased $7.1 million, or 4.5%, to $149.8 million at September 30, 2018 from $156.9 million at December 31, Passbook account balances decreased $870,000, or 1.3%, to $67.1 million at September 30, 2018 from $68.0 million at December 31, NOW and checking account balances decreased $565,000, or 1.6%, to $35.6 million at September 30, 2018 from $36.2 million at December 31, Money market accounts decreased $1.5 million, or 19.8%, to $6.3 million at September 30, 2018 from $7.8 million at December 31, Certificates of deposit decreased $4.1 million, or 9.2%, to $40.8 million at September 30, 2018 from $44.9 million at December 31, The decline in the balance of certificates of deposit was attributable to increased local rate competition and losing deposits of older customers due to retirement and moving and/or customers heirs closing accounts. 3

4 Total stockholders equity decreased $725,000 to $30.9 million at September 30, 2018 from $31.7 million at December 31, The Company reported a $599,000 decrease in the net unrealized loss on securities classified as available-for-sale due to higher interest rates and cash dividends paid on shares of common stock of $347,000 during the nine months ended September 30, 2018, which was partially offset by net income of $100,000, and stock related compensation benefits of $119,000 for the nine months ended September 30, Book value per share was $14.39 at September 30, 2018 as compared to $14.73 at December 31, About AJS Bancorp, Inc. AJS Bancorp, Inc. is the holding company for A. J. Smith Federal Savings Bank which was founded in A. J. Smith Federal Savings Bank is headquartered in Midlothian, Illinois and has two branches in Orland Park, Illinois. The Company had total consolidated assets of $183.3 million and total deposits of $149.8 million as of September 30, Additional information about the Company is available at Safe-Harbor This news release contains forward-looking statements within the meaning of the federal securities laws. Statements in this release that are not strictly historical are forward-looking and are based upon current expectations that may differ materially from actual results. These forward-looking statements, identified by words such as will, expected, believe, and prospects, involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. These risks and uncertainties involve general economic trends and changes in interest rates, increased competition, changes in consumer demand for financial services, the possibility of unforeseen events affecting the industry generally, the uncertainties associated with newly developed or acquired operations, and market disruptions. AJS Bancorp, Inc. undertakes no obligation to release revisions to these forward-looking statements publicly to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under applicable rules and regulations. ************* 4

5 AJS BANCORP, INC. Consolidated Statements of Financial Condition (Unaudited) September 30, 2018 and December 31, 2017 (Dollars in thousands, except per share data) September 30, December 31, ASSETS Cash and cash equivalents $ 22,855 $ 35,830 Securities available-for-sale 51,492 40,196 Securities held-to-maturity (fair value: 2018 $170; $220) Loans, net (allowance: $720; $778) 96, ,082 FHLB of Chicago stock Premises and equipment 2,927 3,037 Bank-owned life insurance 6,381 6,252 Other real estate owned Accrued interest receivable Other assets 2,270 2,232 Total assets $ 183,311 $ 193,070 LIABILITIES AND STOCKHOLDERS EQUITY Liabilities: Deposits $ 149,773 $ 156,871 Advance payments by borrowers for taxes and insurance 983 1,920 Other liabilities and accrued interest payable 1,616 2,615 Total liabilities 152, ,406 Commitments and contingent liabilities Stockholders equity: Preferred stock, $0.01 par value, 50,000,000 shares authorized; None issued - - Common stock, $0.01 par value, 100,000,000 shares authorized; 2018 and ,149,860 shares issued Additional paid-in capital 13,820 13,802 Retained earnings 19,135 19,380 Accumulated other comprehensive income (loss) (941) (342) Unearned stock awards (167) (268) Unearned ESOP shares (930) (930) Total stockholders equity 30,939 31,664 Total liabilities and stockholders equity $ 183,311 $ 193,070 5

6 AJS BANCORP, INC. Consolidated Statements of Operations (Unaudited) Three Months and Nine Months Ended September 30, 2018 and 2017 (Dollars in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, Interest income: Loans $ 888 $ 977 $ 2,765 $ 2,986 Securities Interest-earning deposits Total interest income 1,297 1,256 3,840 3,765 Interest expense on deposits Net interest income 1,127 1,134 3,389 3,401 Provision (credit) for loan losses (20) 65 (70) 190 Net interest income after provision (credit) for loan losses 1,147 1,069 3,459 3,211 Non-interest income: Service fees Rental income Earnings on bank-owned life insurance Other real estate owned gains (losses) - - (19) - Other Total non-interest income Non-interest expense: Compensation and employee benefits ,672 1,851 Occupancy expense Data processing expense Advertising and promotion Professional and regulatory Postage and supplies Bank security Federal deposit insurance Other real estate owned expense/impairment Other Total non-interest expense 1,486 1,207 3,606 3,405 Income (loss) before income taxes (191) (16) Income tax expense (benefit) 32 (127) 134 (55) Net income (loss) $ (223) $ 111 $ 100 $ 284 Earnings (loss) per share: Basic $ (0.11) $ 0.05 $ 0.05 $ 0.14 Diluted $ (0.11) $ 0.05 $ 0.05 $ 0.14 Weighted average common share and common share equivalents outstanding: Basic 2,041,274 2,028,751 2,037,030 2,023,555 Diluted 2,057,459 2,040,791 2,050,564 2,039,266 6

7 AJS BANCORP, Inc. Selected Financial Data and Ratios (Unaudited) (Dollars in thousands, except share data) September 30, December 31, September 30, Book value per share Common shares outstanding Stockholders equity to total assets $ ,149, % $ ,149, % $ ,149, % C Regulatory Capital Ratios (Bank only): Total risk-based capital to risk-weighted assets Tier 1 (core) capital to risk-weighted assets Common equity Tier 1 capital to risk-weighted assets Tier 1 (core) capital to adjusted total assets 31.90% % % Asset Quality Data and Ratios: Non-performing loans Other real estate owned Non-performing assets $1, ,314 $1, ,427 $1, ,453 Non-performing loans as a percent of total loans 1.14% 1.11% 1.16% Non-performing assets as a percent of total assets Allowance for loan losses as a percent of total loans Allowance for loan losses as a percent of non-performing loans Three Months Ended September 30, Nine Months Ended September 30, Performance Ratios (annualized): Return on average assets (0.47)% 0.22% 0.07% 0.19% Return on average equity (2.87) Average yield on interest-earning assets Average cost of interest-bearing-liabilities Interest rate spread Net interest margin Average interest-earning assets to average interest-bearing liabilities Efficiency ratio (1) (1) The efficiency ratio is calculated by dividing non-interest expense by the sum of net interest income and non-interest income