AJS Bancorp, Inc. Announces Fourth Quarter and Year Ended 2017 Net Loss New Tax Legislation Significantly Impacted 2017 Results

Transcription

1 FOR IMMEDIATE RELEASE Contacts: Jerry A. Weberling, Chief Executive Officer, President and Chief Financial Officer (708) AJS Bancorp, Inc. Announces Fourth Quarter and Year Ended 2017 Net Loss New Tax Legislation Significantly Impacted 2017 Results MIDLOTHIAN, IL February 1, 2018 AJS Bancorp, Inc. (the Company ) (OTC Pink: AJSB), the holding company for A.J. Smith Federal Savings Bank (the Bank ), announced a fourth quarter 2017 net loss of $479,000, or $(0.23) per share, compared to net income of $101,000, or $0.05 per share, for the fourth quarter of Net loss for the year ended December 31, 2017 was $195,000, or $(0.09) per share, compared to net income of $533,000, or $0.27 per share for the year ended December 31, The operating results for the current quarter and 2017 were negatively impacted by a $611,000, or $(0.30) per share revaluation of our deferred tax asset as a result of the enactment of the Tax Cuts and Jobs Act of 2017 ( TCJ Act ). Comparison of Operating Results for the Three Months Ended December 31, 2017 and 2016 Net income (loss) for the three months ended December 31, 2017 decreased $580,000 to a net loss of $479,000, compared to net income of $101,000 for the three months ended December 31, The decrease was primarily due to the $628,000 increase in income tax expense, the majority of which was due to the impact of the TCJ Act. Generally accepted accounting principles require that the impact of the provisions of the TCJ Act be accounted for in the period of enactment. The increase in income tax expense was partially offset by increases in net interest income and non-interest income. Net interest income increased $19,000, or 1.7% to $1.1 million for the three months ended December 31, 2017, from the comparable quarter in The increase was primarily due to a $32,000 increase in interest income due in part to the $4.2 million increase in the average balance of interest-earning deposits at the Federal Reserve along with the 75 basis points increase in the federal funds rate over the last year. The net interest margin increased 12 basis points to 2.47% for the fourth quarter of 2017 compared to 2.35% for the fourth quarter of The average yield on interest-earning assets increased 15 basis points to 2.76%, while the average cost of interest-bearing liabilities increased five basis points to 0.39% for the fourth quarter of 2017 compared to the fourth quarter of 2016 as deposit costs rose on higher average municipal balances. The Company recorded a credit to the provision for loan losses of $20,000 for the three months ended December 31, 2017, as compared to a $10,000 credit to the provision for loan losses for the same period in The credit to the provision for the current quarter was due to a combination of factors, including net recoveries of $1,896, having a smaller loan portfolio with a reduced risk profile, applying lower historical loss factors on one-to-four family loans, improving credit quality trends and improving economic conditions. At December 31, 2017 non-performing loans as a percent of total loans decreased modestly to 1.11% from 1.32% at December 31, 2016 primarily due to a $341,000, or 22.7% decrease in nonaccrual loans, combined with the impact of the $8.9 million, or 7.9% decrease in total loans. Non-interest income increased $19,000 to $156,000 for the three months ended December 31, 2017, from $137,000 for the three months ended December 31, The increase was primarily due to the $24,000 of gains on sale of securities in the three months ended December 31, 2017 compared to no gains recorded in the prior year period, partially offset by less rental income. Non-interest expense was flat at $1.1 million for the fourth quarter of 2017 compared to the fourth quarter of 2016 as a result of an increase of $33,000 in professional fees related to strategic plan initiatives and a $33,000 increase in other real estate owned expense/impairment expense primarily due to higher expenses incurred related to the increase in properties in other real estate owned. These increases were partially offset by a $58,000 decrease in compensation and benefits expense primarily due to reduced expenses related to the retirement of the former CEO and the prior year quarter including a $0.50 special dividend being paid which resulted in higher compensation expense related to the unvested restricted stock awards and higher ESOP expense. 1

2 We recorded an income tax expense of $651,000 for the quarter ended December 31, 2017 compared to an income tax expense of $23,000 for the same quarter in The increase in income tax expense was primarily due to a $611,000 revaluation of our deferred tax asset as a result of the enactment of the TCJ Act which reduced our federal corporate income tax rate from 34% to 21%, effective January 1, 2018, which makes our federal net operating loss carryforwards less valuable at the lower tax rate. Comparison of Operating Results for the Years Ended December 31, 2017 and 2016 Net income (loss) for the year ended December 31, 2017 decreased $728,000 to a net loss of $195,000 compared to net income of $533,000 for the year ended December 31, The decrease was primarily due to a $388,000 increase in income tax expense primarily due to the revaluation of our deferred tax assets and a $320,000 increase in the provision for loan losses primarily due to higher net charge-offs in Net interest income increased by $37,000, or 0.8% to $4.5 million for the year ended December 31, 2017 than The increase was primarily due to an increase in interest income on interest-earning deposits and securities, which more than offset the decrease in interest income on loans receivable caused by the reduction in our loan portfolio. The $201,000 increase in interest income on interest-earning assets was due to the $2.5 million increase in the average interest-earning deposits at the Federal Reserve along with the 75 basis points, or 100% increase in the federal funds rate over the last year. The net interest margin increased seven basis points to 2.44% for the year ended December 31, 2017 from 2.37% for The average yield on interest-earning assets increased by seven basis points and the average cost of interest-bearing liabilities was flat at 0.35%. We recorded a provision for loan losses of $170,000 for the year ended December 31, 2017 compared to a $150,000 credit to the provision for loan losses for the year ended December 31, The increase in the provision for loans losses was primarily a function of higher net charge-offs in 2017 of $217,000 compared to $13,000 in 2016 offset by an improvement in credit quality trends, a lower risk profile and a decrease in historical loss factors. The allowance for loan losses was $778,000, or 0.74% of total loans at December 31, 2017 compared to $825,000, or 0.73%, at December 31, Non-interest income decreased $100,000 to $579,000 for the year ended December 31, 2017, from $679,000 for the year ended December 31, The decrease was primarily due to $48,000 in lower gains on securities, an $18,000 decrease in service charge income due to lower debit card interchange income, lower rental income due to the loss of a tenant and a decrease in earnings on bank owned life insurance due to lower interest rates. Non-interest expense decreased $43,000, or 0.9%, to $4.5 million for the year ended December 31, 2017 from $4.6 million for the year ended December 31, The decrease was primarily due to a $91,000 decrease in occupancy costs due to lower real estate taxes and maintenance expenses, a $35,000 decrease in federal deposit insurance expense due to a decrease in the insurance premium rate for smaller financial institutions along with a decrease in asset size, partially offset by a $56,000 increase in other real estate owned expense primarily due to higher carrying costs for delinquent real estate taxes and board up expenses on other real estate owned. We recorded an income tax expense of $596,000 for the year ended December 31, 2017 compared to an income tax expense of $208,000 for the year ended December 31, The $388,000 increase in income tax expense was primarily due to the $611,000 revaluation of our deferred tax asset recorded in the fourth quarter of 2017 related to the reduction in the federal corporate income tax rate from 34% to 21%, partially offset by the $107,000 tax benefit recorded in the third quarter of 2017 related to the increase in the Illinois state income tax rate from 7.75% to 9.50% effective July 1, 2017, and lower income tax expense related to the decrease in pretax income. Comparison of Financial Condition at December 31, 2017 and December 31, 2016 Total consolidated assets as of December 31, 2017 were $193.1 million, a decrease of $9.0 million, or 4.4%, from $202.1 million at December 31, 2016 primarily due to a decrease in net loans of $8.9 million. Cash and cash equivalents increased $4.6 million, or 14.6%, to $35.8 million at December 31, 2017 from $31.3 million at December 31, The primary reason for the increase in cash and cash equivalents was the cash generated by the net decreases of $4.1 million in securities available-for-sale, and $8.9 million in net loans, was partially offset by the $8.3 million decrease in deposits. 2

3 Securities available-for-sale decreased $4.1 million, or 9.2%, to $40.2 million at December 31, 2017 from $44.3 million at December 31, The decrease was primarily due to securities available-for-sale principal repayments, calls and sales of $9.7 million exceeding new securities purchases of $5.7 million, and the unrealized loss on securities available for sale decreasing by $91,000 primarily due to the smaller portfolio size in Net loans were down $8.9 million to $104.1 million at December 31, 2017 compared to $113.0 million at December 31, 2016 primarily as a result of a $7.0 million decrease in one-to-four family loans, a $1.1 million decrease in home equity loans and an $861,000 decrease in multifamily and commercial real estate loans. Other real estate owned increased $164,000 to $267,000 at December 31, 2017 from $103,000 at December 31, The increase was primarily due to the transfer of one multifamily property and two one-to four family loans to other real estate owned during Total deposits decreased $8.3 million, or 5.0%, to $156.9 million at December 31, 2017 from $165.2 million at December 31, Certificates of deposit decreased $7.2 million, or 13.9%, to $44.9 million at December 31, 2017 from $52.1 million at December 31, 2016 which was attributable to maturing legacy certificate of deposit customers moving maturing certificate balances into core deposits in the current low interest rate environment. Our core deposits, which we consider to be our checking, passbook, NOW, and money market accounts decreased by $1.1 million. Passbook accounts decreased $4.5 million, or 6.2%, to $68.0 million at December 31, 2017 from $72.5 million at December 31, 2016 primarily due to decreases in balances related to the Bank s termination of the employees profit sharing plan. NOW and checking accounts increased $519,000, or 1.5%, to $36.2 million at December 31, 2017 from $35.7 million at December 31, Money market accounts increased $2.9 million, or 59.0%, to $7.8 million at December 31, 2017 from $4.9 million at December 31, 2016 primarily due to a $2.8 million increase in municipal balances. Total stockholders equity decreased $370,000, or 1.2%, to $31.7 million at December 31, 2017 from $32.0 million at December 31, The decrease primarily resulted from dividends paid on common stock of $405,000, and the net loss of $195,000. These decreases were offset by $115,000 of stock related compensation, a decrease in the unrealized loss on securities classified as available-for-sale of $61,000 and a $55,000 decrease in unearned ESOP shares due to shares released to participants. Book value per share was $14.73 at December 31, 2017 as compared to $14.90 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 $193.1 million and total deposits of $156.9 million as of December 31, 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. ************* 3

4 AJS BANCORP, INC. Consolidated Statements of Financial Condition (Unaudited) December 31, 2017 and 2016 (Dollars in thousands, except per share data) ASSETS (Unaudited) Cash and cash equivalents $ 35,830 $ 31,256 Securities available-for-sale 40,196 44,286 Securities held-to-maturity (fair value: $220; $273) Loans, net (allowance: 2017 $778; $825) 104, ,009 Federal Home Loan Bank stock Premises and equipment 3,037 3,251 Bank-owned life insurance 6,252 6,078 Other real estate owned Accrued interest receivable Other assets 2,232 2,806 Total assets $ 193,070 $ 202,055 LIABILITIES AND STOCKHOLDERS EQUITY Liabilities Deposits $ 156,871 $ 165,204 Advance payments by borrowers for taxes and insurance 1,920 2,126 Other liabilities and accrued interest payable 2,615 2,691 Total liabilities 161, ,021 Stockholders equity Preferred stock, $.01 par value, 50,000,000 shares authorized; none issued - - Common stock, $.01 par value, 100,000,000 shares authorized; 2,149,860 and 2,149,860 shares issued and outstanding at December 31, 2017 and 2016, respectively Additional paid-in capital 13,802 13,757 Retained earnings 19,380 19,926 Accumulated other comprehensive loss (342) (347) Unearned stock awards (268) (355) Unearned ESOP shares (930) (968) Total stockholders equity 31,664 32,034 Total liabilities and stockholders equity $ 193,070 $ 202,055 4

5 AJS BANCORP, INC. Consolidated Statements of Operations (Unaudited) Three Months and Year Ended December 31, 2017 and 2016 (Dollars in thousands, except per share data) Three Months Ended Year Ended December 31, December 31, Interest income: Loans $ 960 $ 1,019 $ 3,946 $ 4,192 Securities Interest-earning deposits Total interest income 1,258 1,226 5,023 4,994 Interest expense: Deposits Federal Home Loan Bank advances Total interest expense Net interest income 1,126 1,107 4,527 4,490 Provision (credit) for loan losses (20) (10) 170 (150) Net interest income after provision (credit) for loan losses 1,146 1,117 4,357 4,640 Non-interest income: Service fees Rental income Earnings on bank-owned life insurance Gain on sale of securities Gain (loss) on sale of other real estate owned (4) Other Non-interest expense: Compensation and employee benefits ,413 2,390 Occupancy Data processing Advertising and promotion Professional and regulatory Postage and supplies Bank security Federal deposit insurance Other real estate owned (income) expense/impairment 28 (5) 43 (13) Other Total non-interest expense 1,130 1,130 4,535 4,578 Income before income taxes Income tax expense Net income (loss) $ (479) $ 101 $ (195) $ 533 Earnings (loss) per share: Basic $ (0.23) $ 0.05 $ (0.09) $ 0.27 Diluted $ (0.23) $ 0.05 $ (0.09) $ 0.27 Weighted average common share and common share equivalents outstanding: Basic 2,029,424 2,048,502 2,025,030 2,046,062 Diluted 2,045,178 2,060,142 2,041,621 2,058,513 5

6 AJS Bancorp, Inc. Selected Financial Data and Ratios (Unaudited) (Dollars in thousands, except share data) Year Ended December 31, Book value per share... $ $ Common shares outstanding... 2,149,860 2,149,860 Stockholders equity to total assets % 15.85% Regulatory Capital Ratios (Bank only): Total risk-based capital to risk-weighted assets % 34.46% 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 Asset Quality Data and Ratios: Non-performing loans... $ 1,160 $ 1,501 Other real estate owned Non-performing assets... 1,427 1,604 Non-performing loans as a percent of total loans % 1.32% 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 December 31, Year Ended December 31, Performance Ratios (annualized): Return (loss) on average assets (0.83)% 0.20% (0.09)% 0.26% Return(loss) on average equity (5.13) 1.23 (0.58) 1.61 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