Emclaire Financial Corp (NASDAQ:EMCF), the parent holding company
of The Farmers National Bank of Emlenton, reported consolidated net
income of $574,000, or $0.25 per diluted share, for the three
months ended December 31, 2017, a decrease of $622,000, or 52.0%,
from $1.2 million, or $0.55 per diluted share, reported for the
same period in 2016. Consolidated net income for the year
ended December 31, 2017 was $4.3 million, or $1.93 per diluted
share, an increase of $291,000, or 7.3%, from $4.0 million, or
$1.85 per diluted share, reported for 2016. Net income for
the quarter and year ended December 31, 2017 was negatively
impacted by a one-time nonrecurring charge for a write down of
deferred tax assets as discussed below.
On December 22, 2017, President Trump signed
into law the Tax Cuts and Jobs Act, a tax reform bill which, among
other items, reduces the federal corporate income tax rate to a
flat 21% from a maximum of 35% effective January 1, 2018. As
changes in tax laws or rates are enacted, deferred tax assets and
liabilities are revalued with an adjustment through income tax
expense. During the fourth quarter of 2017, the Corporation
reduced the value of its deferred tax assets and as a result,
recorded an additional income tax expense of $827,000. Had
the tax law not been enacted, consolidated net income would have
been $1.4 million for the three months ended December 31, 2017 and
$5.1 million for the full year. The Corporation realized a
return on average assets of 0.59% and a return on average equity of
7.52% for 2017, compared to 0.60% and 7.32% for 2016.
Positively impacting net income for the three
months ended December 31, 2017 compared to the same period in 2016,
net interest income and noninterest income increased $750,000 and
$103,000, respectively. Partially offsetting these increases
were increases in noninterest expense and the provision for loan
losses of $432,000 and $276,000, respectively.
The increase in net income for the year ended
December 31, 2017 was primarily driven by increases in net interest
income and noninterest income of $2.4 million and $1.4 million,
respectively, partially offset by increases in noninterest expense
and the provision for loan losses of $2.2 million and $439,000,
respectively. Growth in net interest income was driven by a
$69.7 million increase in the average balance of loans receivable
and the increase in noninterest income was the result of a $1.3
million bargain purchase gain recorded during the third quarter of
2017 related to the acquisition of Northern Hancock Bank and Trust
Co. (NHBT) in Newell, West Virginia on September 30, 2017. This
gain resulted as the fair value of the assets acquired less the
liabilities assumed exceeded the purchase price. Partially
offsetting this gain and driving the increase in noninterest
expense were acquisition costs of $1.1 million for 2017. Also
contributing to the increase in noninterest expense were costs
associated with the full-year operation of two banking offices
added during 2016. In connection with the acquisition, the
Corporation added approximately $18.5 million in loans and $19.7
million in deposits.
William C. Marsh, Chairman, President and Chief
Executive Officer of the Corporation and the Bank, noted, “The
Board of Directors, management and I are pleased with the core
operating results, considerable balance sheet growth and successful
acquisition of NHBT in 2017. Although the Tax Cuts and Jobs Act
required a one-time charge to earnings as a result of the reduction
in the tax rate, our net income in the future is expected to
increase and we expect to earn back the charge within the next two
years. We continue to realize significant loan production and
deposit growth across our franchise including our newer offices in
Allegheny County. We remain focused on sustaining a sound capital
base while providing an attractive return to our shareholders and
are well-positioned for future profitable growth.”
2017 OPERATING RESULTS
OVERVIEW
Net income increased $291,000, or 7.3%, to $4.3
million or $1.93 per diluted share for the year ended December 31,
2017, compared to $4.0 million or $1.85 per diluted share for
2016. The increase resulted from increases in net interest
income and noninterest income of $2.4 million and $1.4 million,
respectively, partially offset by increases in noninterest expense,
the provision for income taxes and the provision for loan losses of
$2.2 million, $866,000 and $439,000, respectively. Net income
would have been $5.1 million for the year without the one-time
nonrecurring write down of deferred tax assets.
Net interest income increased $2.4 million, or
12.5%, to $21.9 million for the year ended December 31, 2017 from
$19.5 million in 2016. The increase in net interest income
resulted from an increase in interest income of $3.0 million, or
12.7%, as the Corporation experienced a $69.7 million increase in
the average balance of loans. Partially offsetting the
increase in interest income, interest expense increased $548,000,
or 13.9%, as the Corporation's average balance of interest-bearing
deposits and borrowed funds increased $53.2 million and $3.1
million, respectively. The increases in the Corporation's
interest-earning assets and interest-bearing liabilities primarily
related to the aforementioned acquisition of NHBT in September
2017, the acquisition of United American Savings Bank (UASB) in
April 2016 and strong loan and deposit production across the Bank's
franchise.
Noninterest income increased $1.4 million, or
37.4%, to $5.0 million for the year ended December 31, 2017 from
$3.7 million in 2016. During 2017, the Corporation recorded the
aforementioned $1.3 million bargain purchase gain related to the
acquisition of NHBT. During 2017, the Corporation also
recorded a $508,000 other-than-temporary impairment charge on a
subordinated debt investment issued by First NBC Bank Holding
Company. On April 28, 2017, the Louisiana Office of Financial
Institutions closed First NBC Bank, the wholly owned banking
subsidiary of First NBC Bank Holding Company, and named the FDIC as
receiver for the bank. Partially offsetting this impairment
charge, the Corporation realized net securities gains of $346,000
during 2017, compared to $82,000 in 2016. Additionally, gains
on the sale of loans totaled $248,000 in 2017 compared to $119,000
in 2016 and customer service fees increased $133,000 as overdraft
charges for the year ended December 31, 2017 outpaced the prior
year.
The provision for loan losses increased
$439,000, or 94.6%, to $903,000 for the year ended December 31,
2017 from $464,000 in 2016 due to general increases in the
Corporation's loan portfolio.
Noninterest expense increased $2.2 million, or
12.6%, to $19.6 million for the year ended December 31, 2017 from
$17.4 million in 2016. The increase related to increases in
acquisition costs, other noninterest expense, compensation and
benefits, premises and equipment, federal deposit insurance and
intangible asset amortization of $718,000, $714,000, $628,000,
$126,000, $27,000, and $20,000, respectively. During 2017, the
Corporation incurred expenses of $1.1 million related to the
acquisition of NHBT, compared to $401,000 of expenses related to
the acquisition of UASB in 2016. Increases in other expense items
related primarily to the operation of three new full-service
banking offices (including the two acquired) as well as normal
salary and benefit increases.
The provision for income taxes increased
$866,000 or 69.4%, to $2.1 million for the year ended December 31,
2017 from $1.2 million in 2016. During 2017, the Corporation
reduced the value of its deferred tax assets by $827,000 and
recorded an additional income tax expense as a result of the Tax
Cuts and Jobs Act.
FOURTH QUARTER OPERATING RESULTS
OVERVIEW
Net income decreased $622,000, or 52.0%, to
$574,000 or $0.25 per diluted share for the three months ended
December 31, 2017, compared to $1.2 million or $0.55 per diluted
share for the same period in 2016. The decrease resulted from
increases in the provision for income taxes, noninterest expense
and the provision for loan losses of $767,000, $432,000 and
$276,000, respectively, partially offset by increases in net
interest income and noninterest income of $750,000 and $103,000,
respectively. Net income would have been $1.4 million for the
three months ended December 31, 2017 without the one-time
nonrecurring write down of deferred tax assets.
The increase in net interest income resulted
from a $1.0 million increase in interest income, partially offset
by a $254,000 increase in interest expense. The increase in
noninterest income resulted primarily from an increase in gains on
the sale of loans. The increase in the provision for income
taxes resulted from the revaluation of deferred tax assets. The
increase in noninterest expense was primarily associated with
operating three new full-service banking offices and the increase
in the provision for loan losses was due to general growth in the
loan portfolio.
CONSOLIDATED BALANCE SHEET & ASSET
QUALITY OVERVIEW
Total assets increased $57.9 million, or 8.4%,
to $750.1 million at December 31, 2017 from $692.1 million at
December 31, 2016. Asset growth was driven by an increase in
net loans receivable of $62.3 million. Liabilities increased
$52.9 million, or 8.3%, to $691.0 million at December 31, 2017 from
$638.1 million at December 31, 2016 due to an increase in customer
deposits of $69.7 million, partially offset by a $18.0 million
reduction in borrowed funds. The Corporation added approximately
$18.5 million in loans and $19.7 million in deposits through the
acquisition of NHBT.
Asset quality remained stable as total
nonperforming assets were $4.2 million, or 0.56% of total assets at
December 31, 2017 compared to $3.6 million, or 0.52% of total
assets at December 31, 2016.
Stockholders’ equity increased $5.0 million, or
9.3%, to $59.1 million at December 31, 2017 from $54.1 million at
December 31, 2016 primarily due to proceeds from the exercise of
stock options of $1.4 million, $1.7 million of common stock issued
in connection with the acquisition of NHBT and net income of $4.3
million for 2017, offset by common stock dividends paid of $2.4
million. The Corporation remains well capitalized and is
positioned for continued growth with total stockholders’ equity at
7.9% of total assets. Tangible book value per common share
was $21.28 at December 31, 2017, compared to $20.08 at December 31,
2016.
ANNUAL SHAREHOLDER MEETING
In addition to reporting earnings, the
Corporation announced that the annual meeting of shareholders will
be held on Wednesday, April 25, 2018 at 9:00 a,m. at the main
office of The Farmers National Bank of Emlenton, in Emlenton,
Pennsylvania. The voting record date for the purpose of
determining stockholders eligible to vote on proposals presented at
the annual meeting will be March 1, 2018.
Emclaire Financial Corp is the parent company of
The Farmers National Bank of Emlenton, an independent, nationally
chartered, FDIC-insured community bank headquartered in Emlenton,
Pennsylvania, operating 17 full service banking offices in Venango,
Allegheny, Butler, Clarion, Clearfield, Crawford, Elk, Jefferson
and Mercer counties, Pennsylvania and Hancock County, West
Virginia. The Corporation’s common stock is quoted on and
traded through the NASDAQ Capital Market under the symbol
“EMCF”. For more information, visit the Corporation’s website
at “www.emclairefinancial.com”.
This news release may contain forward-looking
statements as defined in the Private Securities Litigation Reform
Act of 1995. Forward-looking statements may contain words such as
“believe”, “expect”, “anticipate”, “estimate”, “should”, “may”,
“can”, “will”, “outlook”, “project”, “appears” or similar
expressions. Such forward-looking statements are subject to
risk and uncertainties which could cause actual results to differ
materially from those currently anticipated due to a number of
factors. Such factors include, but are not limited to, changes in
interest rates which could affect net interest margins and net
interest income, the possibility that increased demand or prices
for the Corporation's financial services and products may not
occur, changing economic and competitive conditions, technological
and regulatory developments, and other risks and uncertainties,
including those detailed in the Corporation's filings with the
Securities and Exchange Commission. The Corporation does not
undertake, and specifically disclaims any obligation to update any
forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.
INVESTOR RELATIONS CONTACT:
William C. MarshChairman, President andChief Executive
OfficerPhone: (844) 800-2193Email:
investor.relations@farmersnb.com
| |
|
| EMCLAIRE FINANCIAL CORP |
|
| Consolidated Financial
Highlights |
|
| (Unaudited - Dollar amounts in thousands, except share
data) |
|
|
|
|
|
|
|
CONSOLIDATED OPERATING RESULTS DATA: |
Three month period |
|
Year ended |
|
|
|
|
|
ended December 31, |
|
December 31, |
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
| Interest
income |
$ |
7,111 |
|
|
$ |
6,107 |
|
|
$ |
26,400 |
|
|
$ |
23,425 |
|
|
| Interest
expense |
|
1,262 |
|
|
|
1,008 |
|
|
|
4,493 |
|
|
|
3,945 |
|
|
|
|
Net interest
income |
|
|
5,849 |
|
|
|
5,099 |
|
|
|
21,907 |
|
|
|
19,480 |
|
|
| Provision
for (recovery of) loan losses |
|
270 |
|
|
|
(6 |
) |
|
|
903 |
|
|
|
464 |
|
|
|
Noninterest income |
|
1,024 |
|
|
|
921 |
|
|
|
5,022 |
|
|
|
3,655 |
|
|
|
Noninterest expense |
|
4,894 |
|
|
|
4,462 |
|
|
|
19,635 |
|
|
|
17,437 |
|
|
|
|
Income before provision
for income taxes |
|
|
1,709 |
|
|
|
1,564 |
|
|
|
6,391 |
|
|
|
5,234 |
|
|
| Provision
for income taxes |
|
1,135 |
|
|
|
368 |
|
|
|
2,114 |
|
|
|
1,248 |
|
|
|
|
Net income |
|
$ |
574 |
|
|
$ |
1,196 |
|
|
$ |
4,277 |
|
|
$ |
3,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic
earnings per common share |
$ |
0.25 |
|
|
$ |
0.56 |
|
|
$ |
1.95 |
|
|
$ |
1.86 |
|
|
| Diluted
earnings per common share |
$ |
0.25 |
|
|
$ |
0.55 |
|
|
$ |
1.93 |
|
|
$ |
1.85 |
|
|
| Dividends
per common share |
$ |
0.27 |
|
|
$ |
0.26 |
|
|
$ |
1.08 |
|
|
$ |
1.04 |
|
|
| Return on
average assets (1) |
|
0.30 |
% |
|
|
0.69 |
% |
|
|
0.59 |
% |
|
|
0.60 |
% |
|
| Return on
average equity (1) |
|
3.80 |
% |
|
|
8.66 |
% |
|
|
7.52 |
% |
|
|
7.32 |
% |
|
| Yield on
average interest-earning assets |
|
4.02 |
% |
|
|
3.88 |
% |
|
|
3.95 |
% |
|
|
3.86 |
% |
|
| Cost of
average interest-bearing liabilities |
|
0.88 |
% |
|
|
0.80 |
% |
|
|
0.84 |
% |
|
|
0.82 |
% |
|
| Cost of
funds |
|
0.72 |
% |
|
|
0.64 |
% |
|
|
0.68 |
% |
|
|
0.65 |
% |
|
| Net
interest margin |
|
3.32 |
% |
|
|
3.26 |
% |
|
|
3.29 |
% |
|
|
3.23 |
% |
|
| Efficiency
ratio |
|
68.83 |
% |
|
|
71.41 |
% |
|
|
71.49 |
% |
|
|
72.78 |
% |
|
|
____________________ |
|
|
|
|
|
|
|
|
| (1)
Returns are annualized for the three month periods ended December
31, 2017 and 2016. |
|
|
|
|
|
|
|
|
|
CONSOLIDATED BALANCE SHEET DATA: |
|
As of |
|
As of |
|
|
|
|
|
|
|
|
|
12/31/2017 |
|
12/31/2016 |
|
| Total
assets |
|
|
|
|
$ |
750,084 |
|
|
$ |
692,135 |
|
|
| Cash and
equivalents |
|
|
|
|
|
14,374 |
|
|
|
17,568 |
|
|
|
Securities |
|
|
|
|
|
101,167 |
|
|
|
101,560 |
|
|
| Loans,
net |
|
|
|
|
|
577,738 |
|
|
|
515,435 |
|
|
|
Deposits |
|
|
|
|
|
654,643 |
|
|
|
584,940 |
|
|
| Borrowed
funds |
|
|
|
|
|
26,000 |
|
|
|
44,000 |
|
|
|
Stockholders' equity |
|
|
|
|
|
59,091 |
|
|
|
54,073 |
|
|
| Book value
per common share |
|
|
|
|
$ |
26.02 |
|
|
$ |
25.12 |
|
|
| Tangible
book value per common share |
|
|
|
|
$ |
21.28 |
|
|
$ |
20.08 |
|
|
| Net loans
to deposits |
|
|
|
|
|
88.25 |
% |
|
|
88.13 |
% |
|
| Allowance
for loan losses to total loans |
|
|
|
|
|
1.05 |
% |
|
|
1.06 |
% |
|
|
Nonperforming assets to total assets |
|
|
|
|
|
0.56 |
% |
|
|
0.52 |
% |
|
|
Stockholders' equity to total assets |
|
|
|
|
|
7.88 |
% |
|
|
7.81 |
% |
|
| Shares of
common stock outstanding |
|
|
|
|
|
2,271,139 |
|
|
|
2,152,358 |
|
|
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