Prudential Bancorp, Inc. (the “Company”) (Nasdaq:PBIP), the holding
company for Prudential Bank (the “Bank”), reported net income of
$1.8 million, or $0.23 per diluted share, for the quarter ended
December 31, 2020 as compared to $2.5 million or $0.28 per diluted
share, for the comparable period in 2019.
Dennis Pollack, President and CEO, commented,
“We are very pleased to report continued positive operating
results. We are continuing to closely monitor the rapidly
challenging environment surrounding the continuing COVID-19
pandemic but remain confident in our long-term strength and
stability and our ability to weather the storm of this crisis. We
continue to evaluate and implement strategies to enhance
shareholder value including stock repurchase programs and the
maintenance of our regular quarterly dividends, but with a focus on
protecting our capital in these uncertain times.”
Highlights for the Quarter Ended December 31,
2020
- Our net loans receivable increased
by $17.6 million to $605.9 million at December 31, 2020 compared to
$588.3 million at September 30, 2020.
- On a linked quarter basis, our net
interest margin improved to 2.02% for the three months ended
December 31, 2020 compared to 1.89% for the three months ended
September 30, 2020.
- The Company repurchased 141,811
shares of its common stock at a weighted average per share cost of
$13.83, well below the Company’s book value per share.
- The Company’s tangible book value
per share (non-GAAP) was $15.61 per share at December 31, 2020 as
compared to $15.07 at September 30, 2020.
- As of December 31, 2020 there are
no loans on COVID-19 deferral.
Net Interest Income:
For the three months ended December 31, 2020,
net interest income amounted to $5.7 million as compared to $6.3
million for the same period in 2019. The decline reflected a $2.1
million decrease in interest income which was partially offset by a
decrease of $1.5 million in interest paid on deposits and
borrowings. The weighted average yield on interest-earning assets
decreased by 35 basis points, to 3.44% for the quarter ended
December 31, 2020 from the comparable period in 2019 due to the
decline in market rates of interest, in particular as a result of
the Federal Reserve’s Open Market Committee’s action to reduce the
Federal Funds Rate in early 2020. The weighted average cost of
borrowings and deposits decreased 37 basis points to 1.59% for the
quarter ended December 31, 2020 from 1.96% for the same period in
2019 due to decreases in market rates of interest noted above which
affected both deposit and borrowing costs. The net interest margin
remained essentially the same, decreasing slightly to 2.02% during
the quarter ended December 31, 2020 from 2.03% for the comparable
period in 2019. The slight decline reflected the effects of the
composition of the Bank’s deposit base, the intense competition for
locally sourced deposits and the increased use of borrowings
combined with changes in market rates of interest that are more
rapidly reflected in the cost of our interest-bearing liabilities
than the yield on our interest-earning assets.
In addition, with the unexpected significant
decline in the Wall Street Journal Prime Rate (“WSJ Prime”) during
the second half of fiscal 2020 as a result of actions taken to
address the COVID-19 pandemic, a significant portion of the
Company’s commercial real estate and construction loan loans which
generally bear adjustable rates experienced downward adjustments in
the interest rates borne by such loans beginning in the third
quarter of fiscal 2020.
For the three months ended December 31, 2020,
net interest income increased by $317,000 to $5.7 million as
compared to $5.4 million for the three months ended September 30,
2020. The increase reflected the effects of a decrease of $226,000,
or 5.3%, in interest paid on deposits and borrowings, combined with
an increase of $90,000, or 1.0% in interest earned on
interest-earning assets. The weighted average rate paid on
interest-bearing liabilities decreased from 1.62% to 1.59% while
the yield earned on interest-earning assets increased from 3.38% to
3.44%.
Non-Interest Income:
With respect to the quarter ended December 31,
2020, non-interest income amounted to $537,000 as compared to
$832,000 for the same quarter in fiscal 2020. Non-interest income
was lower in the first quarter of fiscal 2021 as compared to the
first quarter of fiscal 2020 primarily due to the recognition of
$318,000 in gains from sales of an aggregate of $17.2 million of
investment and mortgage-backed securities in the period ended
December 31, 2019, which sales were not repeated in the first
quarter of fiscal 2021.
Non-Interest Expense:
Non-interest expense remained relatively stable,
increasing modestly from $4.0 million for the three month period
ended December 3, 2019 to $4.1 million for the three months ended
December 31, 2020.
Income Taxes:
For the three-month period ended December 31,
2020, the Company recorded income tax expense of $286,000, compared
to income tax expense of $566,000 for the same period in the prior
year. The reduction in tax expense was primarily due to the decline
in net income before taxes for the first quarter of fiscal 2021 as
compared to the same period in fiscal 2020.
Balance Sheet:
Total assets decreased by $29.0 million to
approximately $1.2 billion at both December 31, 2020 and September
30, 2020. However, net loans receivable increased $17.6 million to
$605.9 million at December 31, 2020 from $588.3 million at
September 30, 2020. Offsetting the increase in net loans were
decreases in the investment portfolio of $19.7 million primarily as
a result of paydowns of U.S. government agency mortgage-backed
securities, while cash and cash equivalents decreased by $26.1
million.
Total liabilities decreased by $32.2 million
during the quarter to $1.1 billion at December 31, 2020 due
primarily to a $22.5 million decrease in deposits and a $5.4
million decrease in borrowings. The reduction in deposits was
primarily due to the maturity of wholesale deposits and
certificates of deposit. At December 31, 2020, the Company had FHLB
advances outstanding of $279.9 million, as compared to $285.3
million at September 30, 2020 as the Company allowed higher costing
FHLB borrowings to run-off as they matured in order to reduce its
cost of funds. All of the borrowings have maturities of less than
five years.
Total stockholders’ equity increased by $2.1
million to $131.2 million at December 31, 2020 from $129.1 million
at September 30, 2020. The increase was primarily due to net income
of $1.8 million. Also contributing to the increase was a $2.7
million increase in the fair value of investment securities held
for sale and in connection with interest rate swap arrangements.
These increases were partially offset by stock repurchases totaling
$2.0 million and dividend payments totaling $570,000 during the
three months ended December 31, 2020.
Asset Quality:
At December 31, 2020, the Company’s
non-performing assets totaled $12.8 million or 1.1% of total assets
as compared to $13.0 million or 1.1% of total assets at September
30, 2020. Non-performing assets at December 31, 2020 included five
construction loans aggregating $8.4 million, 27 one-to-four family
residential mortgage loans aggregating $3.1 million, and three
commercial real estate loans aggregating $1.3 million. At December
31, 2020, the Company had four loans totaling $4.9 million that
were classified as troubled debt restructurings (“TDRs”). One TDR
is on non-accrual and consists of a $404,000 loan secured by a
single-family residential property and is performing in accordance
with the restructured terms. The three remaining TDRs totaling $4.5
million are also classified as non-accrual and are a part of a
lending relationship totaling $10.3 million (after taking into
account the previously disclosed $1.9 million write-down recognized
during the quarter ending March 31, 2017 related to this borrowing
relationship). The primary project of the borrower (the development
of a 169-unit townhouse project in Bristol Borough, Pennsylvania)
is the subject of litigation between the Bank and the borrower. As
previously disclosed, subsequent to the commencement of the
litigation, the borrower filed for bankruptcy under Chapter 11
(Reorganization) of the federal bankruptcy code in June 2017. The
Bank moved the underlying litigation noted above with the borrower
and the Bank from state court to the federal bankruptcy court in
which the bankruptcy proceeding is being heard. The state
litigation is stayed pending the resolution of the bankruptcy
proceedings. Fourteen units have been sold in the project and a
portion of the proceeds have been applied against the outstanding
debt.
The Company recorded no provision for loan
losses for the three months ended December 31, 2020 as the $3.0
million provision expense incurred in fiscal 2020, combined with
minimal recent charge-offs, was deemed sufficient to maintain the
allowance at a level sufficient to cover all inherent and known
losses in the current portfolio. A $125,000 provision expense was
required for the comparable period in 2019. During the three months
ended December 31, 2020 and 2019, the Company recorded recoveries
of $15,000 and $10,000, respectively, and did not record any charge
offs in either of the periods. Although our COVID-19 loan deferrals
were as high as $149.7 million during portions of fiscal 2020, all
existing deferrals had ended by September 30, 2020 and December 31,
2020. All of such loans were current as of December 31, 2020.
The allowance for loan losses totaled $8.3
million, or 1.4% of total loans, and 64.9% of total non-performing
loans at December 31, 2020 (which included loans acquired at their
fair value as a result of the acquisition of Polonia Bancorp, Inc.
(“Polonia”) as of January 1, 2017) as compared to $8.3 million, or
1.4% of total loans and 63.7% of total non-performing loans at
September 30, 2020. The Company believes that the allowance for
loan losses at December 31, 2020 was sufficient to cover all
inherent and known losses associated with the loan portfolio at
such date.
COVID-19 Related
Information
As noted above, in response to the current
situation surrounding the COVID-19 pandemic, the Company is
providing assistance to its customers in a variety of ways. The
Company participated in the initial Paycheck Protection Program
(“PPP”) offered under the CARES Act as a Small Business
Administration (“SBA”) lender. We are currently working with a
third party in order for our customers to be able to participate in
the updated PPP loan program adopted as part of the COVID-19
stimulus bill enacted in December 2020 as part of the 2021
Consolidated Appropriations Act.
The primary method of relief is to allow the
borrower to defer their loan payments for three months (and
extending the term of the loan accordingly). The CARES Act and
regulatory guidelines suspend temporarily the determination of
certain loan modifications related to the COVID19 pandemic from
being treated as TDRs. See “Asset Quality” discussion above.
While the Company’s banking operations were not
restricted by the government stay-at-home orders, the Company took
and continues to take steps to protect its employees and customers
by providing for remote working for many employees, enhancing
cleaning procedures for the Company’s offices, in particular its
branch offices, requiring face masks to be worn by employees and
maintaining appropriate social distancing in our offices. The
Company continues to assess and monitor the on-going COVID-19
pandemic and will take additional such steps as are necessary to
protect its employees and assist its depositor and borrower
customers during this difficult time.
About Prudential Bancorp, Inc.:
Prudential Bancorp, Inc. is the holding company
for Prudential Bank. Prudential Bank is a Pennsylvania-chartered,
FDIC-insured savings bank that was originally organized in 1886.
The Bank conducts business from its headquarters and main office in
Philadelphia, Pennsylvania as well as nine additional full-service
financial centers, seven of which are in Philadelphia, one is in
Drexel Hill, Delaware County, and one in Huntingdon Valley,
Montgomery County, Pennsylvania.
Forward-Looking Statements:
This press release contains “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements include, but are not limited
to, expectations or predictions of future financial or business
performance or conditions relating to the Company and its
operations. These forward-looking statements include statements
with respect to the Company’s beliefs, plans, objectives, goals,
expectations, anticipations, estimates and intentions, that are
subject to significant risks and uncertainties, and are subject to
change based on various factors (some of which are beyond the
Company’s control). The words “may,” “could,” “should,” “would,”
“will,” “believe,” “anticipate,” “estimate,” “expect,” “intend,”
“plan” and similar expressions are intended to identify
forward-looking statements.
In addition to factors previously disclosed in
the reports filed by the Company with the Securities and Exchange
Commission (“SEC”) and those identified elsewhere in this press
release, the following factors, among others, could cause actual
results to differ materially from forward-looking statements or
historical performance: the strength of the United States economy
in general and the strength of the local economies in which the
Company conducts its operations; general economic conditions; the
scope and duration of the COVID-19 pandemic; the effects of the
COVID-19 pandemic, including on the Company’s credit quality and
operations as well as its impact on general economic conditions;
legislative and regulatory changes including actions taken by
governmental authorities in response to the COVID-19 pandemic;
monetary and fiscal policies of the federal government; changes in
tax policies, rates and regulations of federal, state and local tax
authorities including the effects of the Tax Reform Act; changes in
interest rates, deposit flows, the cost of funds, demand for loan
products and the demand for financial services, in each case as may
be affected by the COVID-19 pandemic; competition, changes in the
quality or composition of the Company’s loan, investment and
mortgage-backed securities portfolios; geographic concentration of
the Company’s business; fluctuations in real estate values; the
adequacy of loan loss reserves; the risk that goodwill and
intangibles recorded in the Company’s financial statements will
become impaired; changes in accounting principles, policies or
guidelines and other economic, competitive, governmental and
technological factors affecting the Company’s operations, markets,
products, services and fees.
The Company does not undertake to update any
forward-looking statement, whether written or oral, that may be
made from time to time by or on behalf of the Company to reflect
events or circumstances occurring after the date of this press
release.
For a complete discussion of the assumptions,
risks and uncertainties related to our business, you are encouraged
to review the Company’s filings with the SEC, including the “Risk
Factors” section in its most recent Annual Report on Form 10-K for
the year ended September 30, 2020, as supplemented by its quarterly
or other reports filed subsequently with the SEC.
Contact: Jack E. RothkopfChief Financial Officer
(215) 755-1500
|
SELECTED CONSOLIDATED FINANCIAL AND OTHER
DATA |
|
(Unaudited) |
|
At December 31, |
|
At September 30, |
|
2020 |
|
2020 |
|
(Dollars in Thousands, Except Per Share Data) |
Selected Consolidated
Financial and Other Data (Unaudited): |
|
|
Total assets |
$ |
1,193,267 |
|
$ |
1,223,353 |
Cash and cash equivalents |
|
90,958 |
|
|
117,081 |
Investment and mortgage-backed
securities: |
|
|
Held-to-maturity |
|
22,590 |
|
|
22,860 |
Available-for-sale |
|
400,966 |
|
|
420,415 |
Loans receivable, net |
|
605,883 |
|
|
588,300 |
Goodwill and intangible
assets |
|
6,416 |
|
|
6,442 |
Deposits |
|
748,459 |
|
|
770,949 |
FHLB advances |
|
279,900 |
|
|
285,254 |
Non-performing loans |
|
12,817 |
|
|
13,037 |
Non-performing assets |
|
12,817 |
|
|
13,037 |
Stockholders’ equity |
|
131,245 |
|
|
129,117 |
Common stock outstanding
(shares) |
|
7,996,864 |
|
|
8,138,675 |
Full-service offices |
|
10 |
|
|
10 |
|
|
|
|
For the Three Months Ended December 31, |
|
2020 |
|
2019 |
|
(Dollars in Thousands, Except Per Share Data) |
Selected Operating
Data: |
|
|
Total interest income |
$ |
9,689 |
|
|
$ |
11,827 |
|
Total interest expense |
|
4,006 |
|
|
|
5,484 |
|
Net interest income |
|
5,683 |
|
|
|
6,343 |
|
Provision for loan losses |
|
- |
|
|
|
125 |
|
Net interest income after
provision for loan losses |
|
5,683 |
|
|
|
6,218 |
|
Total non-interest income |
|
537 |
|
|
|
832 |
|
Total non-interest
expense |
|
4,097 |
|
|
|
4,021 |
|
Income before income
taxes |
|
2,123 |
|
|
|
3,029 |
|
Income tax expense |
|
286 |
|
|
|
566 |
|
Net income |
$ |
1,837 |
|
|
$ |
2,463 |
|
Basic earnings per share |
$ |
0.23 |
|
|
$ |
0.28 |
|
Diluted earnings per
share |
$ |
0.23 |
|
|
$ |
0.28 |
|
Dividends paid per common
share |
$ |
0.07 |
|
|
$ |
0.07 |
|
Tangible book value per share
at end of period (1) |
$ |
15.61 |
|
|
$ |
15.27 |
|
Common shares outstanding (at
period end) |
|
7,996,864 |
|
|
|
8,889,447 |
|
|
|
|
Selected Operating
Ratios(2): |
|
|
Average yield on
interest-earning assets |
|
3.44 |
% |
|
|
3.79 |
% |
Average rate paid on
interest-bearing liabilities |
|
1.59 |
% |
|
|
1.96 |
% |
Average interest rate
spread (3) |
|
1.85 |
% |
|
|
1.83 |
% |
Net interest margin (3) |
|
2.02 |
% |
|
|
2.03 |
% |
Average interest-earning
assets to average interest-bearing liabilities |
|
111.94 |
% |
|
|
111.43 |
% |
Net interest income after
provision for loan losses to total non-interest expense |
|
138.70 |
% |
|
|
162.94 |
% |
Total non-interest expense to
total average assets |
|
1.38 |
% |
|
|
1.24 |
% |
Efficiency ratio(4) |
|
65.88 |
% |
|
|
56.04 |
% |
Return on average assets |
|
0.62 |
% |
|
|
0.76 |
% |
Return on average equity |
|
5.59 |
% |
|
|
6.34 |
% |
Average equity to average
total assets |
|
11.04 |
% |
|
|
11.99 |
% |
|
At or for the Three Months EndedDecember 31, |
|
2020 |
|
2019 |
Asset Quality
Ratios(5) |
|
|
|
|
Non-performing loans as a percentage of total loans receivable, net
(6) |
2.12 |
% |
|
2.33 |
% |
Non-performing assets as a
percentage of total assets (6) |
1.07 |
% |
|
1.10 |
% |
Allowance for loan losses as a
percentage of total loans |
1.35 |
% |
|
0.93 |
% |
Allowance for loan losses as a
percentage of non-performing loans |
64.90 |
% |
|
40.22 |
% |
Net recoveries to average
loans receivable |
(0.01 |
)% |
|
(0.01 |
)% |
|
|
|
Capital
Ratios(7) |
|
|
Tier 1 leverage ratio: |
|
|
Company |
10.57 |
% |
|
10.43 |
% |
Bank |
10.42 |
% |
|
10.42 |
% |
Tier 1 common equity
risk-based capital ratio: |
|
|
Company |
17.11 |
% |
|
18.67 |
% |
Bank |
16.87 |
% |
|
18.35 |
% |
Tier 1 risk-based capital
ratio: |
|
|
Company |
17.11 |
% |
|
18.67 |
% |
Bank |
16.87 |
% |
|
18.35 |
% |
Total risk-based capital
ratio: |
|
|
Company |
18.31 |
% |
|
19.50 |
% |
Bank |
18.07 |
% |
|
19.19 |
% |
|
|
|
|
|
|
(1) Non-GAAP measure; see
reconciliation below.(2) With the exception of end of period
ratios, all ratios are based on average monthly balances during the
indicated periods and are annualized where appropriate.(3) Average
interest rate spread represents the difference between the average
yield earned on interest-earning assets and the average rate paid
on interest-bearing liabilities. Net interest margin represents net
interest income as a percentage of average interest-earning
assets.(4) The efficiency ratio represents the ratio of
non-interest expense divided by the sum of net interest income and
non-interest income. (5) Asset quality ratios and capital ratios
are end of period ratios, except for net recoveries to average
loans receivable. (6) Non-performing assets generally consist of
all loans on non-accrual, loans which are 90 days or more past due
as to principal or interest, and real estate acquired through
foreclosure or acceptance of a deed-in-lieu of foreclosure. It is
the Company’s policy to cease accruing interest on all loans which
are 90 days or more past due as to interest or principal.
Non-performing assets and non-performing loans also include loans
classified as troubled debt restructurings due to being recently
restructured and which are initially placed on non-accrual in
connection with such restructuring until such time that an adequate
sustained payment period under the restructured terms has been
established to justify returning the loan to accrual status. (7)
The Company is not subject to the regulatory capital ratios imposed
by Basel III on bank holding companies because the Company is
deemed to be a small bank holding company. The ratios are provided
for informational purposes only. |
Non-GAAP Measures Disclosures:
Reported amounts are presented in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”). The Company’s management believes that the supplemental
non-GAAP information provided in this press release is utilized by
market analysts and others to evaluate the Company's financial
condition and results of operations and, therefore, such
information is useful to investors. These disclosures should not be
viewed as a substitute for financial results determined in
accordance with GAAP, nor are they necessarily comparable to
non-GAAP performance measures presented by other companies.
The following table shows the reconciliation of
the Company’s book value and tangible book value (a non-GAAP
measure which excludes goodwill and the core deposit intangible
resulting from the acquisition of Polonia as of January 1, 2017
from total stockholders’ equity as calculated in accordance with
GAAP) at each of the dates presented.
|
|
As of December 31, 2020 |
As of September 30, 2020 |
As of December 31, 2019 |
(In Thousands, Except Per Share Amounts) |
|
|
|
|
|
|
|
|
|
Book Value |
Tangible Book Value |
Book Value |
Tangible Book Value |
Book Value |
Tangible Book Value |
Total stockholders’ equity |
|
$ |
131,245 |
$ |
131,245 |
$ |
129,117 |
$ |
129,117 |
$ |
142,299 |
$ |
142,299 |
Less intangible assets: |
|
|
|
|
|
|
|
Goodwill |
|
|
-- |
|
6,102 |
|
-- |
|
6,102 |
|
-- |
|
6,102 |
Core deposit intangible |
|
|
-- |
|
314 |
|
-- |
|
342 |
|
-- |
|
418 |
Total intangibles |
|
$ |
-- |
$ |
6,416 |
$ |
-- |
$ |
6,444 |
$ |
-- |
$ |
6,520 |
Adjusted stockholders’ equity |
|
$ |
131,245 |
$ |
124,829 |
$ |
129,117 |
$ |
122,673 |
$ |
142,299 |
$ |
135,779 |
Shares of common stock outstanding |
|
|
7,996,864 |
|
7,996,864 |
|
8,138,675 |
|
8,138,675 |
|
8,889,447 |
|
8,889,447 |
Adjusted book value per share |
|
$ |
16.41 |
$ |
15.61 |
$ |
15.86 |
$ |
15.07 |
$ |
16.01 |
$ |
15.27 |
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