Guaranty Federal Bancshares, Inc., (NASDAQ:GFED), the holding
company (the “Company”) for Guaranty Bank (the “Bank”), today
announces a record net income of $3.9 million for the quarter ended
September 30, 2018, compared to $1.7 million for the same period in
2017. Diluted earnings per common share was $.88 for the
quarter, compared to ($.08) for the second quarter of 2018 and
compared to $.39 for the third quarter of 2017.
The primary reason for the increase in earnings
is related to the Company’s acquisition of Hometown Bancshares,
Inc. (“Hometown”) at the beginning of the second quarter and the
associated economies of scale that were quickly gained.
Secondly, the yield accretion income recognized in conjunction with
loans acquired from the transaction were significant for the
quarter and greater than originally projected, as discussed
below.
The Company experienced an acceleration of
expected cash flows received since the acquisition, which resulted
in an acceleration of yield accretion recognized into income.
Also, positively impacting results were the unexpected payoffs of
certain specific Purchase Credit Impaired (PCI) loans
acquired. At the time of acquisition, these PCI loans
contained evidence of credit deterioration from when they were
previously originated, and a significant discount was recorded at
acquisition to reflect estimated fair value based on the Company’s
analysis of appraisals and evaluations of collateral securing the
loans. Under current accounting rules, at payoff, the
discounts related to these credits are immediately recognized as
income. See further discussion below regarding the financial
impact of the yield accretion income on loan yield, net interest
income and margin.
Shaun A. Burke, President and Chief Executive
Officer of the Company stated, “We are very pleased with the strong
results for this quarter. We experienced a smooth integration
with the Hometown acquisition and are already seeing the benefits
that our new team members and expansion provides to our
Company.”
Select Quarterly Financial Data
Below are selected financial results for the
Company’s third quarter of 2018, compared to the second quarter of
2018 and the third quarter of 2017.
|
|
|
Quarter
ended |
|
September
30, |
|
June 30, |
|
September
30, |
|
2018 |
|
2018 |
|
2017 |
|
|
|
(Dollar amounts in thousands,
except per share data) |
Net income (loss) available to common shareholders |
$ |
3,934 |
|
|
$ |
(343 |
) |
|
$ |
1,717 |
|
|
|
|
|
|
|
Diluted income (loss) per common share |
$ |
0.88 |
|
|
$ |
(0.08 |
) |
|
$ |
0.39 |
|
Common shares outstanding |
|
4,418,397 |
|
|
|
4,412,431 |
|
|
|
4,374,725 |
|
Average common shares outstanding , diluted |
|
4,490,585 |
|
|
|
4,404,029 |
|
|
|
4,447,566 |
|
|
|
|
|
|
|
Annualized return on average assets |
|
1.64 |
% |
|
|
-0.14 |
% |
|
|
0.91 |
% |
Annualized return on average common equity |
|
20.26 |
% |
|
|
-1.48 |
% |
|
|
9.20 |
% |
Net interest margin |
|
4.77 |
% |
|
|
3.54 |
% |
|
|
3.36 |
% |
Efficiency ratio |
|
54.68 |
% |
|
|
102.99 |
% |
|
|
65.75 |
% |
|
|
|
|
|
|
Tangible common equity to tangible assets |
|
7.58 |
% |
|
|
7.26 |
% |
|
|
9.83 |
% |
Tangible book value per common share |
$ |
16.48 |
|
|
$ |
15.73 |
|
|
$ |
17.06 |
|
Nonperforming assets to total assets |
|
1.56 |
% |
|
|
1.42 |
% |
|
|
1.35 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
The following were key items impacting the third
quarter operating results as compared to the same quarter in 2017
and the financial condition results compared to December 31,
2017:
Net Interest income – Net interest income
totaled $10.7 million for the quarter as compared to $6.1 million
during the prior year quarter, an increase of 77%. Included
in interest income was $2.7 million of yield accretion recognized
on loans acquired, of which $1.8 million of accretion was
recognized upon the unexpected full payoff of certain PCI loans
totaling $4.3 million during the quarter. The total loan
accretion income was significantly greater than originally
projected during the quarter due to accelerated cash flows received
from loan principal paydowns and payoffs overall. Core
loan yield, excluding accretion, was 5.06% for the quarter, a 54
basis point increase from the prior year.
Net interest margin was 4.77% for the quarter as compared to
3.36% in 2017. The Company’s core net interest margin,
excluding accretion was 3.54% for the quarter, an 18 basis point
increase from the prior year quarter.
See the Analysis of Net Interest Income and Margin table below
for the third quarter.
Asset Quality, Provision for Loan Loss Expense and
Allowance for Loan Losses – The Company’s nonperforming
assets increased to $15.1 million as of September 30, 2018 as
compared to $10.2 million as of December 31, 2017. The increase is
primarily attributable to the Hometown acquisition.
Based on its reserve analysis and methodology, the Company
recorded a provision for loan loss expense of $200,000 during the
quarter, a decrease from the $450,000 recognized during the prior
year quarter. The provision for the quarter was primarily due
to the increased reserves needed for growing loan balances for
construction lending and various reserves on a few specific problem
credits. At September 30, 2018, the allowance for loan losses
of $7.7 million was .98% of gross loans outstanding (excluding
mortgage loans held for sale), representing a decrease from the
1.12% as of December 31, 2017.
In accordance with generally accepted accounting principles for
acquisition accounting, the loans acquired through the acquisition
of Hometown were recorded at fair value; therefore, there was no
allowance associated with Hometown’s loans at acquisition.
Management continues to evaluate the allowance needed on the
acquired Hometown loans factoring in the net remaining discount
($3.0 million at September 30, 2018).
Management believes the allowance for loan losses is at a
sufficient level to provide for loan losses in the Bank’s existing
loan portfolio.
Noninterest Income – Noninterest income
decreased $109,111 (7%) during the quarter primarily due to the
Company’s write-downs of foreclosed assets held for sale, including
two properties acquired from Hometown. The re-measurements
and write-downs were due to a lack of sales activity, further
review of surrounding property values and reductions in the
property’s listing price (in most cases). Net loss on
foreclosed assets were $459,308 during the quarter compared to a
gain of $47,787 for the prior year quarter. Offsetting these
losses was a significant increase in fee income from deposits,
primarily services charges and debit card interchange
income. Service charges increased $217,835 (70%) and
interchange income increased $111,209 (54%) when compared to the
same period in 2017.
Noninterest Expense – Noninterest expenses
increased $1,654,017 (33%) due to a few significant factors
discussed below.
Salaries and employee benefits increased $835,165 (27%) for the
quarter and is primarily due to the Hometown acquisition and also
the Company’s existing expansion in the Joplin, Missouri market,
pre-acquisition.
Occupancy expenses increased $520,741 (88%) for the quarter due
to a few factors. The Company’s move to a new headquarters
during the fourth quarter of 2017 increased lease expense by
$155,000 for the quarter. The remaining increase relates to
depreciation on furniture and fixtures for the new facility and
Hometown.
Due to the acquisition completed in the second quarter, $150,877
of additional nonrecurring merger costs were incurred during the
third quarter.
Capital – At September 30, 2018, stockholders’
equity increased to $78.6 million compared to $74.9 million at
December 31, 2017. On a per common share basis, tangible book
value decreased to $16.48 at September 30, 2018 as compared to
$17.10 as of December 31, 2017. This reduction was due to the
acquisition of Hometown.
From a regulatory capital standpoint, all capital ratios for the
Bank remain strong and above regulatory requirements.
Non-Generally Accepted Accounting Principle (GAAP)
Financial Measures
In addition to the GAAP financial results presented in this
press release, the Company presents non-GAAP financial measures
discussed below. These non-GAAP measures are provided to
enhance investors’ overall understanding of the Company’s current
financial performance. Additionally, Company management
believes that this presentation enables meaningful comparison of
financial performance in various periods. However, the
non-GAAP financial results presented should not be considered a
substitute for results that are presented in a manner consistent
with GAAP. A limitation of the non-GAAP financial measures
presented is that the adjustments concern gains, losses or expenses
that the Company does expect to continue to recognize; the
adjustments of these items should not be construed as an inference
that these gains or expenses are unusual, infrequent or
non-recurring. Therefore, Company management believes that
both GAAP measures of its financial performance and the respective
non-GAAP measures should be considered together.
Operating Income
Operating income is a non-GAAP financial measure that adjusts
net income for the following non-operating items:
- Gains (losses) on sales of available-for-sale securities
- Gains (losses) on foreclosed assets held for sale
- Provision for loan loss expense
- Provision for income taxes
- Merger costs
A reconciliation of the Company’s net income to its operating
income for the three and nine months ended September 30, 2018 and
2017 is set forth below.
|
|
|
|
|
|
|
|
|
Quarter
ended |
|
Nine months
ended |
|
September
30, |
|
September
30, |
|
2018 |
2017 |
|
2018 |
|
2017 |
|
|
|
(Dollar amounts are in
thousands) |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
3,934 |
|
$ |
1,717 |
|
|
$ |
4,947 |
|
$ |
4,739 |
|
|
|
|
|
|
|
|
|
Add back: |
|
|
|
|
|
|
|
Provision for income taxes |
|
1,391 |
|
|
444 |
|
|
|
1,231 |
|
|
1,468 |
|
Less: Benefit of investment tax credits |
|
- |
|
|
(166 |
) |
|
|
- |
|
|
(166 |
) |
Income (loss) before income taxes |
|
5,325 |
|
|
1,995 |
|
|
|
6,178 |
|
|
6,041 |
|
|
|
|
|
|
|
|
|
Add back/(subtract): |
|
|
|
|
|
|
|
Gain (loss) on investment securities |
|
1 |
|
|
(11 |
) |
|
|
8 |
|
|
(73 |
) |
Net loss (gains) on foreclosed assets held for
sale |
|
459 |
|
|
(48 |
) |
|
|
338 |
|
|
(56 |
) |
Merger costs |
|
151 |
|
|
- |
|
|
|
3,571 |
|
|
- |
|
Provision for loan losses |
|
200 |
|
|
450 |
|
|
|
925 |
|
|
1,500 |
|
Impairment loss on investment tax credits |
|
- |
|
|
147 |
|
|
|
- |
|
|
147 |
|
|
|
811 |
|
|
538 |
|
|
|
4,842 |
|
|
1,518 |
|
|
|
|
|
|
|
|
|
Operating income |
$ |
6,136 |
|
$ |
2,533 |
|
|
$ |
11,020 |
|
$ |
7,559 |
|
|
|
|
|
|
|
|
|
About Guaranty Federal Bancshares,
Inc.Guaranty Federal Bancshares, Inc. (NASDAQ:GFED) has a
subsidiary corporation offering full banking services. The
principal subsidiary, Guaranty Bank, is headquartered in
Springfield, Missouri, and has 18 full-service branches in Greene,
Christian, Jasper, Newton and McDonald Counties and a Loan
Production Office in Webster County. Guaranty Bank is a
member of the MoneyPass and TransFund ATM networks which provide
its customers surcharge free access to over 24,000 ATMs nationwide.
For more information visit the Guaranty Bank website:
www.gbankmo.com.
The Company may from time to time make written
or oral “forward-looking statements,” including statements
contained in the Company’s filings with the SEC, in its reports to
stockholders and in other communications by the Company, which are
made in good faith by the Company pursuant to the “safe harbor”
provisions of the Private Securities Litigation Reform Act of 1995.
Words such as “anticipates,” “estimates,” “believes,” “expects,”
and similar expressions are intended to identify such
forward-looking statements but are not the exclusive means of
identifying such statements.
These forward-looking statements involve risks
and uncertainties, such as statements of the Company’s plans,
objectives, expectations, estimates and intentions, that are
subject to change based on various important factors (some of which
are beyond the Company’s control). The following factors, among
others, could cause the Company’s financial performance to differ
materially from the plans, objectives, expectations, estimates and
intentions expressed in such forward-looking statements:
- the strength of the United States economy in general and the
strength of the local economies in which we conduct
operations;
- the effects of, and changes in, trade, monetary and fiscal
policies and laws, including interest rate policies of the Federal
Reserve, inflation, interest rates, market and monetary
fluctuations;
- the timely development of and acceptance of new products and
services and the perceived overall value of these products and
services by users, including the features, pricing and quality
compared to competitors’ products and services;
- the willingness of users to substitute competitors’ products
and services for our products and services;
- our success in gaining regulatory approval of our products and
services, when required;
- the impact of changes in financial services laws and
regulations (including laws concerning taxes, banking, securities
and insurance);
- technological changes;
- the ability to successfully manage and integrate any future
acquisitions if and when our board of directors and management
conclude any such acquisitions are appropriate;
- changes in consumer spending and saving habits;
- our success at managing the risks resulting from these factors;
and
- other factors set forth in reports and other documents filed by
the Company with the SEC from time to time.
|
|
|
|
|
|
|
|
Financial Highlights: |
|
|
|
|
|
|
|
|
Quarter
ended |
|
Nine months
ended |
Operating Data: |
September
30, |
|
September
30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
(Dollar amounts are in
thousands, except per share data) |
|
|
|
|
|
|
|
|
Total interest income |
$ |
13,378 |
|
|
$ |
7,525 |
|
|
$ |
31,713 |
|
|
$ |
21,538 |
|
Total interest expense |
|
2,649 |
|
|
|
1,473 |
|
|
|
6,981 |
|
|
|
3,999 |
|
Net interest income |
|
10,729 |
|
|
|
6,052 |
|
|
|
24,732 |
|
|
|
17,539 |
|
Provision for loan losses |
|
200 |
|
|
|
450 |
|
|
|
925 |
|
|
|
1,500 |
|
Net interest income after |
|
|
|
|
|
|
|
provision for loan losses |
|
10,529 |
|
|
|
5,602 |
|
|
|
23,807 |
|
|
|
16,039 |
|
Noninterest income |
|
|
|
|
|
|
|
Service charges |
|
529 |
|
|
|
311 |
|
|
|
1,398 |
|
|
|
869 |
|
Gain on sale of loans held for sale |
|
595 |
|
|
|
619 |
|
|
|
1,592 |
|
|
|
1,551 |
|
Gain on sale of Small Business Administration
loans |
|
264 |
|
|
|
229 |
|
|
|
660 |
|
|
|
484 |
|
Net gain (loss) on foreclosed assets |
|
(459 |
) |
|
|
48 |
|
|
|
(338 |
) |
|
|
56 |
|
Other income |
|
533 |
|
|
|
364 |
|
|
|
1,423 |
|
|
|
1,207 |
|
|
|
1,462 |
|
|
|
1,571 |
|
|
|
4,735 |
|
|
|
4,167 |
|
Noninterest expense |
|
|
|
|
|
|
|
Salaries and employee benefits |
|
3,888 |
|
|
|
3,052 |
|
|
|
11,163 |
|
|
|
8,845 |
|
Occupancy |
|
1,113 |
|
|
|
592 |
|
|
|
2,921 |
|
|
|
1,563 |
|
Merger costs |
|
151 |
|
|
|
- |
|
|
|
3,571 |
|
|
|
- |
|
Amortization of core deposit intangible |
|
94 |
|
|
|
- |
|
|
|
314 |
|
|
|
- |
|
Other expense |
|
1,420 |
|
|
|
1,368 |
|
|
|
4,395 |
|
|
|
3,591 |
|
|
|
6,666 |
|
|
|
5,012 |
|
|
|
22,364 |
|
|
|
13,999 |
|
Income before income taxes |
|
5,325 |
|
|
|
2,161 |
|
|
|
6,178 |
|
|
|
6,207 |
|
Provision for income taxes |
|
1,391 |
|
|
|
444 |
|
|
|
1,231 |
|
|
|
1,468 |
|
Net income available for common shareholders |
$ |
3,934 |
|
|
$ |
1,717 |
|
|
$ |
4,947 |
|
|
$ |
4,739 |
|
Net income per common share-basic |
$ |
0.89 |
|
|
$ |
0.39 |
|
|
$ |
1.12 |
|
|
$ |
1.08 |
|
Net income per common share-diluted |
$ |
0.88 |
|
|
$ |
0.39 |
|
|
$ |
1.10 |
|
|
$ |
1.07 |
|
|
|
|
|
|
|
|
|
Annualized return on average assets |
|
1.64 |
% |
|
|
0.91 |
% |
|
|
0.72 |
% |
|
|
0.86 |
% |
Annualized return on average common equity |
|
20.26 |
% |
|
|
9.20 |
% |
|
|
8.50 |
% |
|
|
8.66 |
% |
Net interest margin |
|
4.77 |
% |
|
|
3.36 |
% |
|
|
3.82 |
% |
|
|
3.35 |
% |
Efficiency ratio |
|
54.68 |
% |
|
|
65.75 |
% |
|
|
75.90 |
% |
|
|
64.49 |
% |
|
|
|
|
|
|
|
|
|
|
|
At |
|
At |
|
|
Financial Condition Data: |
|
|
September
30, |
|
December 31,
2017 |
|
|
Cash and cash equivalents |
|
|
$ |
31,212 |
|
|
$ |
37,407 |
|
|
|
Investments |
|
|
|
85,618 |
|
|
|
81,495 |
|
|
|
Loans, net of allowance for loan losses |
|
|
|
|
|
|
|
9/30/2018 - $7,732; 12/31/2017 - $7,107 |
|
|
|
781,278 |
|
|
|
631,527 |
|
|
|
Goodwill |
|
|
|
2,615 |
|
|
|
- |
|
|
|
Core deposit intangible |
|
|
|
3,206 |
|
|
|
- |
|
|
|
Premises and equipment, net |
|
|
|
22,158 |
|
|
|
10,607 |
|
|
|
Bank owned life insurance |
|
|
|
20,083 |
|
|
|
19,741 |
|
|
|
Other assets |
|
|
|
20,211 |
|
|
|
13,683 |
|
|
|
Total assets |
|
|
$ |
966,381 |
|
|
$ |
794,460 |
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
$ |
760,729 |
|
|
$ |
607,364 |
|
|
|
Advances from correspondent banks |
|
|
|
96,700 |
|
|
|
94,300 |
|
|
|
Subordinated debentures |
|
|
|
21,783 |
|
|
|
15,465 |
|
|
|
Other borrowed funds |
|
|
|
5,000 |
|
|
|
- |
|
|
|
Other liabilities |
|
|
|
3,554 |
|
|
|
2,439 |
|
|
|
Total liabilities |
|
|
|
887,766 |
|
|
|
719,568 |
|
|
|
Stockholders' equity |
|
|
|
78,615 |
|
|
|
74,892 |
|
|
|
Total liabilities and stockholders' equity |
|
|
$ |
966,381 |
|
|
$ |
794,460 |
|
|
|
Tangible common equity to tangible assets ratio |
|
|
|
7.58 |
% |
|
|
9.43 |
% |
|
|
Tangible book value per common share |
|
|
$ |
16.48 |
|
|
$ |
17.10 |
|
|
|
Nonperforming assets |
|
|
$ |
15,117 |
|
|
$ |
10,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis
of Net Interest Income and Margin: |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended 9/30/2018 |
|
Three months ended 9/30/2017 |
|
AverageBalance |
|
Interest |
|
Yield/ Cost |
|
AverageBalance |
|
Interest |
|
Yield/ Cost |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Interest-earning: |
|
|
|
|
|
|
|
|
|
|
|
Loans |
$ |
787,638 |
|
$ |
12,774 |
|
|
6.43 |
% |
|
$ |
618,652 |
|
$ |
7,052 |
|
|
4.52 |
% |
Investment
securities |
|
87,182 |
|
|
574 |
|
|
2.61 |
% |
|
|
84,577 |
|
|
432 |
|
|
2.03 |
% |
Other assets |
|
18,257 |
|
|
30 |
|
|
0.65 |
% |
|
|
10,418 |
|
|
41 |
|
|
1.56 |
% |
Total
interest-earning |
|
893,077 |
|
|
13,378 |
|
|
5.94 |
% |
|
|
713,647 |
|
|
7,525 |
|
|
4.18 |
% |
Noninterest-earning |
|
59,509 |
|
|
|
|
|
|
|
|
|
40,386 |
|
|
|
|
|
|
$ |
952,586 |
|
|
|
|
|
$ |
754,033 |
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing: |
|
|
|
|
|
|
|
|
|
|
|
Savings accounts |
$ |
42,412 |
|
|
29 |
|
|
0.27 |
% |
|
$ |
30,026 |
|
|
15 |
|
|
0.20 |
% |
Transaction
accounts |
|
405,230 |
|
|
1,175 |
|
|
1.15 |
% |
|
|
348,925 |
|
|
524 |
|
|
0.60 |
% |
Certificates of
deposit |
|
208,534 |
|
|
622 |
|
|
1.18 |
% |
|
|
133,198 |
|
|
354 |
|
|
1.05 |
% |
FHLB advances |
|
88,750 |
|
|
482 |
|
|
2.15 |
% |
|
|
89,246 |
|
|
420 |
|
|
1.87 |
% |
Other borrowed
funds |
|
5,000 |
|
|
59 |
|
|
0.00 |
% |
|
|
- |
|
|
- |
|
|
0.00 |
% |
Subordinated
debentures |
|
21,797 |
|
|
282 |
|
|
5.13 |
% |
|
|
15,465 |
|
|
160 |
|
|
4.10 |
% |
Total
interest-bearing |
|
771,723 |
|
|
2,649 |
|
|
1.36 |
% |
|
|
616,860 |
|
|
1,473 |
|
|
0.95 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing |
|
103,817 |
|
|
|
|
|
|
|
|
|
62,599 |
|
|
|
|
|
|
|
Total liabilities |
|
875,540 |
|
|
|
|
|
|
679,459 |
|
|
|
|
Stockholders’
equity |
|
77,046 |
|
|
|
|
|
|
74,574 |
|
|
|
|
|
$ |
952,586 |
|
|
|
|
|
$ |
754,033 |
|
|
|
|
Net earning
balance |
$ |
121,354 |
|
|
|
|
|
$ |
96,787 |
|
|
|
|
Earning yield less
costing rate |
|
|
|
|
4.58 |
% |
|
|
|
|
|
3.24 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income,
and net yield spread |
|
|
|
|
|
|
|
|
|
|
|
on
interest earning assets |
|
|
$ |
10,729 |
|
|
4.77 |
% |
|
|
|
$ |
6,052 |
|
|
3.36 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of
interest-earning assets to |
|
|
|
|
|
|
|
|
|
|
|
interest-bearing liabilities |
|
|
|
116 |
% |
|
|
|
|
|
|
116 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contacts:Shaun A. Burke, President and CEO or Carter M. Peters,
CFO2144 E Republic Road, Suite F200Springfield, MO 65804
Guaranty Federal Bancsha... (NASDAQ:GFED)
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