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Prudential Bancorp (Nasdaq:PBIP), the holding company for Prudential Savings Bank (the “Bank”), has reported net income of $535,000, or $0.06 per basic and diluted share, for the quarter ended March 31, 2014 as compared to $14,000 or $0.00 per basic and diluted share, for the comparable period ended March 31, 2013.
For the six months ended March 31, 2014, the Company recognized net income of $873,000, or $0.10 per basic and $0.09 per diluted share, as compared to net income of $286,000, or $0.03 per basic and diluted share for the comparable period in 2013.
The improved profitability for the three and six months ended March 31, 2014 was primarily due to gains recorded in 2014 from the sale of investment securities and a lower expense recorded in 2014, compared to 2013, relating to real estate owned expense.
Tom Vento, Chairman, President and Chief Executive Officer, stated, “We are pleased with the Company’s efforts and long term focus. This quarter represents our twelfth consecutive quarter of earnings, along with the early sign of positive impact from the implementation of our strategy of controlled loan growth. Along with our strategic loan growth plan, the Company continues to provide necessary resources for the improvement in asset quality.”
At March 31, 2014, we had total assets of $515.4 million, as compared to $607.9 million at September 30, 2013, a decrease of $92.5 million or 15.2%. The primary reason for the $92.5 million decrease in assets was the return to subscribers of $74.3 million in excess subscription funds received in connection with the second-step conversion offering. Cash and cash equivalents decreased $107.6 million to $51.4 million at March 31, 2014, compared to $159.0 million at September 30, 2013.
This decrease was attributable to the $74.3 million returned to subscribers, the use of cash and cash equivalents to fund the increase in outstanding net loan balances of $12.0 million and a reduction of deposits of $13.6 million (excluding $145.7 million subscription funds held in escrow related to the second-step stock offering). Loans receivable increased to $318.6 million at March 31, 2014 from $306.5 million at September 30, 2013. A majority of the loan growth consisted of the origination of single-family residential loans within our immediate market area. During the quarter the Company completed a sale of five below investment grade mortgage-backed securities aggregating $1.0 million, reflecting a gain of $274,000.
Total liabilities decreased to $386.9 million at March 31, 2014 from $548.0 million at September 30, 2013. The $161.1 million decrease in total liabilities was primarily due to the return of $74.3 million to subscribers due to an oversubscription in the offering as well as the transfer to equity of $69.4 million of net proceeds from the offering. In addition, the Company continued with its strategy to allow certain higher costing certificates of deposit to run-off as part of our asset/liability management strategy. The deposit outflows experienced during the quarter were funded from cash and cash equivalents.
Total stockholders’ equity increased by $68.6 million to $128.5 million at March 31, 2014 from $59.9 million at September 30, 2013. The increase reflected the receipt of net proceeds of approximately $69.4 million from the Company’s second-step offering which closed October 9, 2013. Other items that impacted equity this quarter were the recognition of $873,000 in earnings, the receipt of $847,000 of cash transferred from the mutual holding company as part of the conversion and a slight increase in the market value of the remaining available for sale securities in the investment portfolio due to improvement in market rates since September 30, 2013.
For the three months ended March 31, 2014, net interest income increased $119,000 or 3.8% to $3.2 million as compared to $3.1 million for the same period in 2013. Interest expense declined by $286,000 or 25.1% partially offset by a decrease of $167,000 or 3.9% in interest earned on assets. The decrease in interest expense resulted primarily from a 20 basis point decrease to 0.89% in the weighted average rate paid on interest-bearing liabilities, reflecting the continued repricing downward of interest-bearing liabilities during the past year combined with a $31.3 million or 7.5% decrease in the average balance of interest-bearing liabilities, primarily certificates of deposit, for the three months ended March 31, 2014, as compared to the same period in fiscal 2013.
The decrease in interest income resulted from a 35 basis point decrease to 3.31% in the weighted average yield earned on interest-earning assets partially offset by a $36.0 million or 7.7% increase to $501.3 million in the average balance of interest-earning assets for the three months ended March 31, 2014, as compared to the same period in fiscal 2013. The decrease in the weighted average yield earned was primarily due to the origination of new loans at lower current market rates of interest combined with the reinvestment at lower current market rates of the proceeds from called investment and mortgage-backed securities. The increase in the average balance of interest-earning assets reflected the Company’s efforts to grow the loan portfolio in a controlled manner.
For the six months ended March 31, 2014, net interest income increased $106,000 or 1.7% to $6.4 million as compared to $6.3 million for the same period in 2013. Interest expense declined by $602,000 or 25.5% and was partially offset by a decrease of $496,000 or 5.7% in interest income. The decrease in interest expense resulted primarily from a 22 basis point decrease to 0.90% in the weighted average rate paid on interest-bearing liabilities, reflecting the continued repricing downward of interest-bearing liabilities during the past year combined with a $27.6 million or 6.6% decrease in the average balance of interest-bearing liabilities, primarily certificates of deposit, for the six months ended March 31, 2014, as compared to the same period in fiscal 2013.
The decrease in interest income resulted from a 50 basis point decrease to 3.20% in the weighted average yield earned on interest-earning assets partially offset by a $42.6 million or 9.1% increase to $510.3 million in the average balance of interest-earning assets for the six months ended March 31, 2014, as compared to the same period in fiscal 2013. The decrease in the weighted average yield earned was primarily due to the origination of new loans at lower current market rates of interest combined with the reinvestment at lower current market rates of the proceeds from called investment and mortgage-backed securities. The increase in the average balance of interest-earning assets reflected the Company’s efforts to grow the loan portfolio in a controlled manner.
For the three months ended March 31, 2014, the net interest margin was 2.62%, as compared to 2.68% for the same period in fiscal 2013. For the six months ended March 31, 2014, the net interest margin was 2.51%, as compared to 2.69% for the same period in fiscal 2013.
The Company determined that a provision for loan loss was not necessary for the three and six month periods ended March 31, 2014. During the quarter, the Company did not record any charge-offs, but did record a recovery of $37,000 relating to a single-family residential loan. For the six month period the Company recorded total charge-offs of $10,000 which were offset by recoveries of $47,000. The Company believes that the allowance for loan losses at March 31, 2014 is sufficient to cover all inherent and known losses associated with the loan portfolio at such date. At March 31, 2014, the Company’s non-performing assets totaled $7.4 million or 1.4% of total assets as compared to $7.0 million or 1.2% of total assets at September 30, 2013. Non-performing assets at March 31, 2014 included $6.9 million in non-performing loans consisting of ten one-to four-family residential loans aggregating $3.4 million, five single-family residential investment property loans aggregating $2.3 million and six commercial real estate loans aggregating $1.0 million. Non-performing assets also included three one-to-four family residential real estate owned properties with an aggregate carrying value of $489,000. The increase in non-performing assets during the quarter ended March 31, 2014 was primarily due to the addition of two one-to-four-family residential loans in the amount of $1.3 million, and one loan in the amount of $1.5 million (consisting of the consolidation of a group of investment property loans) related to an individual borrower being classified as a troubled debt restructuring (“TDR”), partially offset by a $1.3 million performing TDR loan being placed on accrual status and three single-family loans in the amount of $428,000 and two residential investment properties in the amount of $465,000 becoming current.
The allowance for loan losses totaled $2.4 million, or 0.7% of total loans and 34.8% of total non-performing loans at March 31, 2014 as compared to $2.4 million, or 0.8% of total loans and 35.5% of total non-performing loans at September 30, 2013.
Non-interest income amounted to $413,000 and $574,000 for the three and six month periods ended March 31, 2014, compared to $200,000 and $414,000 for the same periods in 2013. The increase for the 2014 periods was primarily attributed to a $274,000 gain recorded from the sale of private label mortgage-backed securities, which occurred during the second fiscal quarter of 2014.
For the three and six month periods ended March 31, 2014, non-interest expense decreased $160,000 or 5.1% and $125,000 or 2.1%, respectively, compared to the prior year periods. The primary reasons for the decreases were a reduction of FDIC insurance premiums and expenses related to real estate owned recorded during the quarter ended March 31, 2013.
Prudential recorded income tax expense for the three and six months ended March 31, 2014 of $157,000 and $341,000, respectively, compared to income tax expense of $187,000 and $537,000, respectively, for the three and six months ended March 31, 2013. The effective tax rate for the three and six months ended March 31, 2014 were 22.8% and 28.1%, respectively. The tax expense related to the sale of available for sale securities was reduced by Company’s ability to utilize prior period capital loss carryforwards.
