People's Bancshares, Inc. (PBKB) Diluted 1999 EPS Increases 23%, ROE at 25%
NEW BEDFORD, Mass., Jan. 26 /PRNewswire/ -- People's Bancshares, Inc. (Nasdaq: PBKB - news) reported net income of $9.4 million or $2.77 diluted earnings per share for the year ended December 31, 1999 compared to $7.6 million or $2.25 diluted earnings per share for the year ended December 31, 1998. The Company reported net income of $2.3 million or $0.69 diluted earnings per share for the fourth quarter ended December 31, 1999, compared to $2.6 million or $0.78 diluted earnings per share for the fourth quarter of 1998. Basic earnings per share were $0.70 for the fourth quarter of 1999, compared to $0.79 for the fourth quarter of 1998 and $2.81 for the year ended December 31, 1999, compared to $2.30 for the year ended December 31, 1998. The supplementary financial data table shows the quarterly breakout of operating results on a diluted earnings per share basis.
``Core' diluted earnings per share (diluted earnings per share excluding securities transactions and non-recurring items) were $0.69 in the fourth quarter of 1999 compared to $0.70 in the fourth quarter of 1998. There were no investment securities gains or losses in the fourth quarter of 1999, compared to gains of $434,000 for the fourth quarter of 1998. There were no non-recurring items in the fourth quarters ended December 31, 1999 and 1998. The primary reason for the decrease in ``core' earnings per share was the decrease in the Company's mortgage subsidiary's income. The Company's mortgage subsidiary operated in the midst of a refinancing boom in the fourth quarter of 1998 compared to a market contraction in the fourth quarter of 1999. Additionally, the mortgage subsidiary was undergoing a substantial operational consolidation in the last 90 days.
Quarterly comparisons have primarily been affected by an increase in average earning assets and the continued growth of the Bank's mortgage banking subsidiary, including the purchase of Allied on September 1, 1999. Income before income taxes decreased by $751,000 in the fourth quarter of 1999 compared to the fourth quarter of 1998 and income tax expense amounted to $997,000 in the fourth quarter of 1999 compared to income tax expense of $1.5 million in the fourth quarter of 1998. The decrease in fourth quarter pre-tax income for 1999 was primarily due to a decrease of $434,000 in gains on sales of securities, a $373,000 increase in occupancy and equipment expense, a $1.3 million increase in salary expense, and a $110,000 increase in other general and administrative expenses. These reductions to pre-tax income were partially offset by a $773,000 increase in net interest income, and a $150,000 decrease in the loan loss provision. The increases in expenses were primarily attributable to the inclusion of Allied's results in the fourth quarter.
The allowance for loan losses at December 31, 1999 totaled $4.1 million or 0.98% of total loans compared to $4.9 million or 1.14% of total loans at year- end 1998. The allowance as a percentage of non-performing loans amounted to 814% at December 31, 1999 compared to 321% at December 31, 1998. Non- performing assets amounted to $788,000 or 0.07% of total assets at December 31, 1999 compared to $1.6 million or 0.17% of total assets at December 31, 1998. Net recoveries for the year ended December 31, 1999, were $80,000 compared to net charge-offs of $25,000 for the year ended December 31, 1998.
There was no provision for loan losses recorded in the fourth quarter of 1999, compared to a provision of $150,000 in the corresponding period of 1998. A reduction of the allowance for loan losses of $850,000 was recognized for the year ended December 31, 1999 compared to provisions of $600,000 in the corresponding period of 1998.
Earnings for the year ended December 31, 1999 were favorably affected by growth in earning assets, by the improved profitability of the Company's banking operation, and by the credits to the loan loss provision. These were offset by the decreased profitability of the Company's mortgage operations including start-up costs of the Allied operations. In the first month of operations a mortgage company's expenses and income are mismatched. Under generally accepted accounting principles for mortgage companies, operating expenses are accrued while gains on sales of loans are recognized when sales are funded.
On September 1, 1999, People's purchased selected fixed and prepaid assets of Allied for $1.0 million over fair value. Additional purchase payouts to the sellers of Allied will be contingent upon pre-set profit targets and will reduce pre-tax income. Allied, like People's Mortgage, does not retain servicing. Allied's loan production has historically averaged over 60% in FHA/VA lending which currently allows it to achieve gross margins after commissions in excess of 200 basis points. Both the percentage of government lending and gross margins are significantly above industry standards. The Allied acquisition broke even in the fourth quarter of 1999, and is expected to be accretive to earnings for fiscal year 2000.
The Company's return on average equity for the fourth quarter and year ended December 31, 1999 was 23.00% and 24.82%, respectively compared to 30.69% and 23.33% for the corresponding periods in 1998. For the year ended December 31, 1999, diluted earnings per share were up 23%, return on equity has increased 6%, and dividends have increased 40% from the year ended December 31, 1998.
The Company's total assets increased from $944.6 million at December 31, 1998 to $1.1 billion at December 31, 1999. The Company's various capital ratios continue to exceed regulatory requirements. At December 31, 1999, the Company's book value per share amounted to $12.27 per share compared to $10.44 per share at December 31, 1998. At December 31, 1999, the Company had 3,332,000 shares outstanding, compared to 3,320,000 shares outstanding at December 31, 1998. The Company had 3,386,000 average diluted shares outstanding compared to 3,385,000 average diluted shares outstanding for the year ended December 31, 1998.
Commenting on analyst estimates for fiscal year 2000, Richard Straczynski, Chief Executive Officer said; ``We believe the $3.10 consensus estimate is prudent. We anticipate that the Federal Reserve will be aggressive in raising rates to combat asset inflation in the equity markets. We expect to repurchase at least 10% of our shares this year which will have a slightly adverse effect on earnings per share. We also expect first quarter earnings per share will be off 5%-10% from the fourth quarter's. This would reflect a normal seasonal pattern for the Company compared to the last two years' first quarter results which benefitted from mortgage refinancing booms. Finally, People's expects to achieve over $2.0 million in cost savings in the mortgage subsidary for fiscal year 2000 by consolidating operations. Most of these cost-cutting measures have been implemented in the 30 days prior to this earnings release.'
People's maintains twelve banking locations in Southeastern Massachusetts and fifteen loan production offices in Massachusetts, Rhode Island, Connecticut, Maryland, and Virginia. |
