People's Bancshares, Inc. Announces Fourth Quarter and Full Year 2000 Earnings
NEW BEDFORD, Mass., March 9 /PRNewswire/ -- People's Bancshares, Inc. (Nasdaq: PBKB - news) today reported fourth quarter net income of $1.2 million, or $0.36 per diluted share, in line with the estimate provided in its December 27, 2000 press release.
During the quarter, the Company recorded pre-tax losses of $1.2 million from the sale of approximately $30 million of higher risk earning assets. Proceeds from the sales were used to reduce higher cost interest bearing liabilities, future interest rate risk and balance sheet leverage. For the quarter ended December 31, 1999, net income was $2.3 million, or $0.69 per diluted share. For the full year 2000, net income was $8.3 million, or $2.52 per diluted share, compared with $9.4 million, or $2.77 per diluted share for the comparable 1999 period. Primary factors contributing to the year-to-year decline were the fourth quarter 2000 realized securities losses and an $850 thousand credit provision for loan losses recorded in 1999.
Net interest income for the fourth quarter of 2000 was $6.7 million, compared to $7.3 million for the comparable 1999 quarter. The decline in net interest income is a direct result of higher funding costs over the past year coupled with additional interest costs incurred following the Company's July 2000 issuance of $10 million of capital trust securities. The net interest margin was 2.60% in the fourth quarter of 2000 and 2.82% in the fourth quarter of 1999.
Noninterest income for the fourth quarter was $1.3 million compared with $2.9 million for the fourth quarter of 1999, reflecting the previously mentioned realized securities losses and lower gains from the sale of loans.
Noninterest expense for the quarter ended December 31, 2000 was $6.2 million compared to $6.9 million in the fourth quarter of 1999. The decrease in expenses between the quarters was primarily due to a decline in salaries and employee benefits and other general and administrative expenses.
Net interest income for the year ended December 31, 2000 was $28.6 million compared with $27.8 million for the prior year reflecting an overall growth in earning asset volume and asset/liability mix. The net interest margin was 2.77% during 2000 compared with 2.85% for 1999. The full year net interest margin was impacted by the same interest rate factors as those affecting the fourth quarter.
Noninterest income for the year was $8.8 million compared with $9.0 million for 1999. A $990 thousand increase in gains on the sale of loans was more than offset by the $1.2 million in realized securities losses, compared with $36 thousand of securities gains recorded during 1999.
Noninterest expense for the year 2000 was $25.1 million compared with $23.7 million during 1999, an increase of $1.4 million. Factors contributing to the added expenses include increased salaries and benefits for the full year 2000 for mortgage banking activities initiated during 1999 along with normal staffing adjustments, additional occupancy and equipment expenses, including previously announced equipment write-offs, increased contracted data processing costs and professional fees.
At December 31, 2000, the allowance for loan losses was $4.2 million or 0.95% of total loans and loans held for sale, compared with $4.1 million or 0.93% at December 31, 1999. Nonperforming loans totaled $373 thousand, or 0.04% of total assets at year-end, compared with $503 thousand or 0.05% of total assets at December 31, 1999. Net recoveries on loans previously charged-off for the quarter and year ended December 31, 2000, were $28 thousand and $86 thousand, respectively, compared with net recoveries of $55 thousand and $80 thousand, respectively, for the quarter and year ended December 31, 1999. No provision for loan losses was recorded during 2000 or the fourth quarter of 1999 as loan quality remained strong. A credit provision of $850 thousand was recorded for the full year of 1999. Nonaccrual investment securities at year-end 2000 were $992 thousand. No investment securities were on nonaccrual at year-end 1999.
The Company's primary banking subsidiary, People's Savings Bank of Brockton (the Bank), continues to address issues raised by its regulators including, among other matters, its concentration in trust preferred securities and an understanding that the Bank will achieve and maintain a minimum Tier 1 leverage capital ratio of not less than 6.5 percent of total assets. The Tier 1 leverage capital ratio of the Bank at December 31, 2000 was 6.36 percent and the Company expects that the Bank will exceed the 6.5 percent capital requirement during the first quarter of 2001. In addition, as previously disclosed, the Company is a party to a written agreement with the Federal Reserve Bank of Boston requiring a consolidated Tier 1 leverage capital ratio of not less than 5.0 percent. At December 31, 2000, the consolidated Tier 1 leverage capital ratio of the Company was 5.67 percent. The written agreement requires the prior approval of the Reserve Bank before the Company may declare or pay any dividends on its common stock or make any distribution of interest, principal or other sums on the subordinated debentures issued by the Company in connection with its trust preferred securities.
After review by the Company and discussions with its independent auditors, the Company made a determination that it was appropriate to reclassify held- to-maturity securities with a book value of $514.8 million and a fair value of $473.2 million to the available-for-sale classification effective December 31, 2000 because the Bank no longer had the intent and ability to hold the securities to maturity. As a result, 100 percent of the Company's securities portfolio is now classified as available-for-sale. This strategy allows the Company maximum flexibility in the management of its liquidity, interest rate risk and balance sheet deleveraging strategies while accelerating the Company's ability to address regulatory issues. As a result of this action, the carrying value of securities has been reduced by the unrealized losses on that date of $41.6 million, and the after-tax effect of the adjustment, $27.2 million, has been reported as a reduction to stockholders' equity. Declines in interest rates since year-end have increased the underlying market value of the securities portfolio, thereby reducing the balance of unrealized losses. While the foregoing adjustments have no effect on either the Company's or the Bank's year-end consolidated Tier 1 leverage capital ratios of 5.67 percent and 6.36 percent, respectively, the adjustments will lower the equity to assets ratio as reported under generally accepted accounting principles. In an effort to accelerate capital growth, the Company has elected to suspend its common stock dividend and has not sought regulatory approval to pay such dividends in the current quarter. The Company continues to accrue interest expense on its capital trust securities and has requested Reserve Bank approval to make the scheduled interest payments due on March 31, 2001. There is no assurance, however, that such approval will be received.
Total assets at December 31, 2000 were $1.003 billion, down $68 million from the $1.071 billion reported at year-end 1999. Total loans at December 31, 2000 were $398 million and total deposits were $625 million. Total stockholders' equity, excluding the effect of unrealized securities losses, was $46.0 million at year-end 2000 compared with $42.5 million at year-end 1999. Including the effect of unrealized securities losses, stockholders' equity at year-end 2000 was $17.8 million and $40.9 million at year-end 1999.
At December 31, 2000, the Company had 3,223,734 shares outstanding, compared with 3,331,734 a year ago. Diluted average shares outstanding were 3,267,620 and 3,284,134, respectively, for the quarter and year ended December 31, 2000. Average diluted shares outstanding for the comparable 1999 periods were 3,390,345 and 3,386,279, respectively.
The Company also announced that it has recently engaged the firm of Fox- Pitt, Kelton to provide financial advisory services relating to strategic alternatives available to the Company and general investment banking services.
People's maintains twelve banking locations in Southeastern Massachusetts and twelve loan production offices in Massachusetts, Connecticut, Maryland and Virginia |
