Attached files
file | filename |
---|---|
10-K - 10-K - AJS Bancorp, Inc. | a14-26400_110k.htm |
EX-31.2 - EX-31.2 - AJS Bancorp, Inc. | a14-26400_1ex31d2.htm |
EX-31.1 - EX-31.1 - AJS Bancorp, Inc. | a14-26400_1ex31d1.htm |
EX-32 - EX-32 - AJS Bancorp, Inc. | a14-26400_1ex32.htm |
EX-23 - EX-23 - AJS Bancorp, Inc. | a14-26400_1ex23.htm |
EXCEL - IDEA: XBRL DOCUMENT - AJS Bancorp, Inc. | Financial_Report.xls |
Exhibit 13
2014 ANNUAL REPORT TO STOCKHOLDERS
TABLE OF CONTENTS
LETTER FROM THE CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER |
1 |
FORWARD-LOOKING STATEMENTS |
2 |
BUSINESS OF AJS BANCORP, INC. AND A.J. SMITH FEDERAL SAVINGS BANK |
3 |
SELECTED FINANCIAL AND OTHER DATA |
4 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
6 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
17 |
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION |
18 |
CONSOLIDATED STATEMENTS OPERATIONS |
19 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
20 |
CONSOLIDATED STATEMENTS OF STOCKHOLDERSEQUITY |
21 |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
22 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
23 |
INVESTOR INFORMATION |
57 |
LETTER FROM THE CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER
To Our Stockholders and Customers:
We are pleased to present the Annual Report to Stockholders of AJS Bancorp, Inc. (the Company), and its wholly-owned subsidiary, A.J. Smith Federal Savings Bank (the Bank). In 2014, progress was made on improving the Banks financial condition and enhancing stockholder value. With these improvements, we are proud to provide you with our Annual Report.
The Companys net income for the year ended December 31, 2014 was $2.1 million, or $0.96 per share, compared to $903,000, or $0.39 per share in the prior year. The increase in net income for 2014 was primarily the result of an income tax benefit of $1.7 million that was largely the result of the company reversing all of its valuation allowance on its deferred tax asset during the second quarter of 2014. The valuation allowance was recorded in 2009 as a result of three years of accumulated operating losses. The operating losses were primarily due to an increase in our non-performing assets, particularly multifamily and commercial real estate which had a negative impact on our profitability. In 2008, we ceased originating multifamily and commercial real estate loans and focused on improving our asset quality. Our non-performing assets declined $4.6 million to $4.7 million at December 31, 2014 from $9.3 million at December 31, 2009. The improved asset quality led to significantly lower credit costs, sustained profitability, and expectations for future taxable income which resulted in the reversal of our $1.8 million deferred tax asset valuation allowance and led to our net income of $2.1 million for 2014. In 2014, we also began to originate a limited amount of multifamily and commercial real estate loans consistent with our conservative loan underwriting policies and procedures.
Net income before tax for 2014 was $394,000, a decrease from net income before tax for 2013 of $903,000. The decline was a result of the prolonged low interest rate environment which continued to put downward pressure on the net interest margin. In addition, our focus on improving asset quality through a classified loan sale of $1.6 million resulted in an aggregate net charge-off of $410,000 and led to an increase in our provision for loan losses of $480,000. These declines were partially offset by a gain of $741,000 on the sale of an other real estate owned property with a carrying value of $1.0 million.
The Company and its Board of Directors is committed to sustained and long-term stockholder value. In 2014, the Company repurchased 150,867 shares for a total cost of $2.0 million from the first and second stock repurchase programs. The Company also declared dividends on its common stock of $1.5 million which included four regular quarterly $0.05 dividends and a special $0.25 dividend. In 2015, the Company completed the second stock repurchase program and announced a third stock repurchase program for 110,000 shares, or approximately 5.0% of the Companys outstanding common shares. Book value per share was $14.97 at December 31, 2014, an increase from $14.86 at December 31, 2013. The Board of Directors and management will continue to evaluate all opportunities to enhance stockholder value.
The Companys staff, management, and Board of Directors remain focused on executing our business plan and creating value for the communities we serve and our stockholders. I want to personally thank you for your support as a stockholder and pledge to continue to advance the interest of the Company, the Bank, our stockholders, customers and the community.
|
Sincerely, |
|
|
|
AJS Bancorp, Inc. |
|
|
|
|
|
Thomas R. Butkus |
|
Chairman, President, and Chief Executive Office |
FORWARD-LOOKING STATEMENTS
This Annual Report contains written statements of AJS Bancorp, Inc., or the Company as defined below and its management that may contain, forward-looking statements as such term is defined in the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations, plans, objectives, future performance and business of AJS Bancorp, Inc. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of AJS Bancorp, Inc.s management and on information currently available to management, are generally identifiable by the use of words such as believe, expect, anticipate, plan, intend, estimate, may, will, would, could, should or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and AJS Bancorp, Inc. undertakes no obligation to update any statement in light of new information or future events. By identifying these forward-looking statements for you in this manner, we are alerting you to the possibility that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. These forward looking statements are subject to significant risks, assumptions and uncertainties, including among other things, the following important factors that could affect the actual outcome of future events:
· general economic conditions, either nationally or in our market areas, that are worse than expected;
· competition among depository and other financial institutions;
· inflation and changes in the interest rate environment that reduce our margins and yields or reduce the fair value of financial instruments;
· adverse changes in the securities markets;
· changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;
· our ability to manage operations in the current economic conditions;
· our ability to enter new markets successfully and capitalize on growth opportunities;
· our ability to successfully integrate acquired entities;
· changes in consumer spending, borrowing and savings habits;
· changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;
· changes in our organization, compensation and benefit plans;
· changes in the level of government support for housing finance;
· significant increases in our loan losses; and
· changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by law, we disclaim any intention or obligation to update or revise any forward-looking statements after the date of this Annual Report, whether as a result of new information, future events or otherwise.
BUSINESS OF AJS BANCORP, INC. AND A.J. SMITH FEDERAL SAVINGS BANK
A.J. Smith Federal Savings Bank (the Bank) was founded in 1892 by Arthur J. Smith as a building and loan cooperative organization. In 1924 we were chartered as an Illinois savings and loan association, and in 1934 we converted to a federal charter. In 1984 we amended our charter to become a federally chartered savings bank.
In 2001, the Bank reorganized into the two-tier mutual holding company structure and established AJS Bancorp, Inc., a federal corporation, as the parent company of the Bank. On October 9, 2013 we completed our second-step conversion to a fully stock company. As a result of the second step conversion, all of our outstanding common stock is held by public stockholders and AJS Bancorp, Inc. is our Maryland chartered holding company (the Company).
We are a customer-oriented institution, operating from our main office in Midlothian, Illinois, and two branch offices in Orland Park, Illinois. Our primary business activity is the origination of one- to four-family real estate loans. To a lesser extent, we originate home equity and consumer loans. In 2014, we began to originate a limited amount of multifamily and commercial real estate loans consistent with our conservative underwriting policies and procedures. We also invest in securities, primarily United States Government sponsored enterprises and mortgage-backed securities. In addition, we offer insurance and investment products and services on a limited basis.
The Companys executive offices are located at 14757 S. Cicero Ave, Midlothian, Illinois 60445, our telephone number is (708) 687-7400, and our internet address is www.ajsmithbank.com.
SELECTED FINANCIAL AND OTHER DATA
The following tables set forth selected consolidated financial and other data of AJS Bancorp, Inc. at the dates and for the years presented. Information prior to October 9, 2013 is of AJS Bancorp, Inc., a federal corporation.
|
|
At December 31, |
| |||||||||||||
|
|
2014 |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
| |||||
|
|
(In thousands) |
| |||||||||||||
Selected Financial Condition Data: |
|
|
|
|
|
|
|
|
|
|
| |||||
Total assets |
|
$ |
217,523 |
|
$ |
220,926 |
|
$ |
221,340 |
|
$ |
238,090 |
|
$ |
249,292 |
|
Cash and cash equivalents |
|
32,898 |
|
22,281 |
|
16,346 |
|
79,950 |
|
95,804 |
| |||||
Securities available for sale |
|
54,214 |
|
63,804 |
|
70,311 |
|
79,950 |
|
95,804 |
| |||||
Loans, net |
|
114,130 |
|
119,146 |
|
119,068 |
|
122,333 |
|
128,952 |
| |||||
Bank owned life insurance |
|
5,706 |
|
5,511 |
|
5,311 |
|
3,642 |
|
3,499 |
| |||||
Deposits |
|
166,249 |
|
164,519 |
|
171,721 |
|
181,699 |
|
196,287 |
| |||||
FHLB advances |
|
12,000 |
|
17,000 |
|
22,000 |
|
29,000 |
|
24,300 |
| |||||
Stockholders equity |
|
33,213 |
|
34,384 |
|
22,852 |
|
22,546 |
|
24,118 |
| |||||
|
|
For the Years Ended December 31, |
| |||||||||||||
|
|
2014 |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
| |||||
|
|
(In thousands, except per share data) |
| |||||||||||||
Selected Operating Data: |
|
|
|
|
|
|
|
|
|
|
| |||||
Total interest income |
|
$ |
5,619 |
|
$ |
6,057 |
|
$ |
6,694 |
|
$ |
7,856 |
|
$ |
9,779 |
|
Total interest expense |
|
1,009 |
|
1,135 |
|
1,521 |
|
2,214 |
|
3,180 |
| |||||
Net interest income |
|
4,610 |
|
4,922 |
|
5,173 |
|
5,642 |
|
6,599 |
| |||||
Provision for loan losses |
|
697 |
|
|
|
501 |
|
2,409 |
|
367 |
| |||||
Net interest income after provision for loan losses |
|
3,913 |
|
4,922 |
|
4,672 |
|
3,233 |
|
6,232 |
| |||||
Total non-interest income |
|
1,516 |
|
857 |
|
1,019 |
|
1,242 |
|
2,073 |
| |||||
Total non-interest expense |
|
5,035 |
|
4,876 |
|
5,713 |
|
6,557 |
|
6,897 |
| |||||
Net income (loss) before income taxes |
|
394 |
|
903 |
|
(22 |
) |
(2,082 |
) |
1,408 |
| |||||
Income tax expense (benefit) |
|
(1,708 |
) |
|
|
|
|
|
|
|
| |||||
Net income (loss) |
|
$ |
2,102 |
|
$ |
903 |
|
$ |
(22 |
) |
$ |
(2,082 |
) |
$ |
1,408 |
|
Income (loss) per share basic and diluted (1) |
|
$ |
0.96 |
|
$ |
0.39 |
|
$ |
(0.01 |
) |
$ |
(0.90 |
) |
$ |
0.61 |
|
(1) Shares held by the public prior to October 9, 2013, have been restated to reflect the completion of the second-step conversion using an exchange ratio of 1.1460.
|
|
At or For the Years Ended December 31, |
| ||||||||
|
|
2014 |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Financial Ratios and Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Ratios: |
|
|
|
|
|
|
|
|
|
|
|
Return (loss) on assets (ratio of net income (loss) to average total assets) |
|
0.96 |
% |
0.41 |
% |
(0.01 |
)% |
(0.85 |
)% |
0.56 |
% |
Return (loss) on equity (ratio of net income (loss) to average equity) |
|
6.09 |
|
3.55 |
|
(0.09 |
) |
(8.81 |
) |
5.64 |
|
Average equity to average total assets |
|
15.72 |
|
11.64 |
|
10.23 |
|
9.64 |
|
9.98 |
|
Equity to total assets at end of year |
|
15.27 |
|
15.56 |
|
10.32 |
|
9.47 |
|
9.67 |
|
Interest rate spread (1) |
|
2.13 |
|
2.34 |
|
2.35 |
|
2.36 |
|
2.69 |
|
Net interest margin (2) |
|
2.26 |
|
2.44 |
|
2.46 |
|
2.48 |
|
2.86 |
|
Average interest-earning assets to average interest-bearing liabilities |
|
127.13 |
|
119.14 |
|
114.99 |
|
112.78 |
|
111.96 |
|
Total non-interest expenses to average total assets |
|
2.29 |
|
2.25 |
|
2.51 |
|
2.68 |
|
2.76 |
|
Efficiency ratio (3) |
|
82.19 |
|
84.51 |
|
92.26 |
|
95.25 |
|
79.53 |
|
Dividend payout ratio (4) |
|
71.31 |
|
N/A |
|
N/A |
|
N/A |
|
24.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality Ratios: |
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans as a percent of total loans (5) |
|
2.59 |
|
2.72 |
|
3.16 |
|
2.10 |
|
2.45 |
|
Non-performing assets as a percent of total assets (5) |
|
2.17 |
|
2.67 |
|
3.12 |
|
2.61 |
|
2.63 |
|
Allowance for loan losses as a percent of total loans |
|
0.96 |
|
1.16 |
|
1.30 |
|
1.54 |
|
1.19 |
|
Allowance for loan losses as a percent of non-performing loans |
|
37.04 |
|
42.77 |
|
41.13 |
|
73.39 |
|
48.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Capital Ratios (Bank Only): |
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted assets) |
|
32.21 |
|
29.69 |
|
22.79 |
|
21.53 |
|
22.05 |
|
Tier I capital (to risk-weighted assets) |
|
31.05 |
|
28.44 |
|
21.54 |
|
20.27 |
|
20.80 |
|
Tier I capital (to adjusted assets) |
|
13.67 |
|
12.96 |
|
10.09 |
|
9.34 |
|
9.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of: |
|
|
|
|
|
|
|
|
|
|
|
Banking offices |
|
3 |
|
3 |
|
3 |
|
3 |
|
3 |
|
Full time equivalent employees |
|
44 |
|
46 |
|
45 |
|
46 |
|
56 |
|
(1) Interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost on interest-bearing liabilities.
(2) Net interest margin represents net interest income as a percentage of average interest-earning assets.
(3) Efficiency ratio represents the ratio of non-interest expense divided by the sum of net interest income and total non-interest income.
(4) The dividend payout ratio represents total dividends declared divided by total net income.
(5) Non-performing loans consist of non-accrual loans, non-accruing troubled debt restructurings and accruing loans greater than 90 days delinquent, while non-performing assets consist of non-performing loans and other real estate owned.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis reviews our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. You should read the information in this section in conjunction with AJS Bancorp, Inc.s consolidated financial statements and the related notes included in this Annual Report. The preparation of financial statements involves the application of accounting policies relevant to the business of AJS Bancorp, Inc. Certain of AJS Bancorp, Inc.s accounting policies are important to the portrayal of AJS Bancorp, Inc.s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these judgments include, but without limitation, changes in interest rates, in the performance of the economy or in the financial condition of borrowers.
Overview
We historically have operated as a traditional thrift institution headquartered in Midlothian, Illinois. Our primary business activity is the origination of one- to four-family real estate loans. To a lesser extent, we originate multifamily and commercial real estate, home equity and consumer loans. We also invest in securities, primarily United States Government sponsored enterprises and mortgage-backed securities. In addition, we offer insurance and investment products and services on a limited basis.
Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provision for loan losses, non-interest income and non-interest expense. Non-interest income currently consists primarily of service fee income, rental income, earnings on bank owned life insurance, gain on sale of securities, gain on sale of other real estate owned, and other income. Non-interest expense currently consists primarily of expenses related to compensation and employee benefits, occupancy, data processing, advertising and promotion, professional and regulatory, federal deposit insurance, other real estate owned loss expense, and other operating expenses. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.
Net income for the year ended December 31, 2014 was $2.1 million, or $0.96 per share, compared to $903,000, or $0.39 per share for the year ended December 31, 2013. Net income for 2014 was significantly impacted by the reversal of our deferred tax asset valuation allowance of $1.8 million. The valuation allowance was recorded in 2009 as a result of three years of accumulated operating losses prior to 2009. The operating losses were primarily due to an increase in our non-performing assets, particularly multifamily and commercial real estate which had a negative impact on our profitability. In 2008, we ceased originating multifamily and commercial real estate loans and focused on improving our asset quality. Our non-performing assets declined $4.6 million to $4.7 million at December 31, 2014 from $9.3 million at December 31, 2009. The improved asset quality led to significantly lower credit costs, sustained profitability, and expectations for future taxable income which resulted in the reversal of our $1.8 million deferred tax asset valuation allowance and led to our net income of $2.1 million for 2014. In 2014, we also began to originate a limited amount of multifamily and commercial real estate loans consistent with our conservative loan underwriting policies and procedures.
Business Strategy
Our business strategy is to operate as a well-capitalized, profitable, community-oriented savings bank dedicated to providing quality customer service. In the past, we implemented our business strategy by emphasizing the origination of one- to four-family residential loans and other loans secured by real estate. We continue to be primarily a one- to four-family residential lender with the ability to originate FHA loans. In the past, we broadened the scope of our loan products and services to include loans secured by commercial real estate. However, in 2008, as a result of the economic downturns impact on commercial real estate in the Chicago market, we discontinued our commercial lending services. We have started to originate multifamily and commercial real estate loans again in 2014, but on a limited basis. For the years ended December 31, 2014 and 2013, we had net income of $2.1 million and $903,000, respectively.
Highlights of our business strategy are as follows:
· Continuing One- to Four-Family Residential Real Estate Lending. Historically, we have emphasized one- to four-family residential lending within our market area. As of December 31, 2014, $97.2 million, or 84.4%, of our total loan portfolio consisted of one- to four-family residential real estate loans. During the years ended December 31, 2014 and 2013, we originated $10.1 million and $12.5 million of one- to four-family residential real estate loans, respectively. We intend to continue to originate one- to four-family residential loans because of our expertise with this type of lending.
· Focus on Relationship Banking. We are focused on meeting the financial needs of our customer base through offering a full complement of loan, deposit and online banking solutions (i.e., internet banking). Over the years we have introduced new products and services in order to more fully serve and deepen our relationship with customers which has enabled us to grow our core deposit base, which generally represents a customers primary banking relationship. Total deposits increased to $166.2 million at December 31, 2014 from $164.5 million at December 31, 2013. Our core deposits, which we consider to be our checking, passbook, NOW, and money market accounts, grew 3.5% to $103.7 million as of December 31, 2014 from $100.1 million as of December 31, 2013 primarily as a result of our focus on relationship banking.
· Managing Interest Rate Risk. Like many financial institutions during the prolonged low interest rate environment, a significant portion of our loan portfolio is comprised of fixed-rate loans which are currently preferred by borrowers. We monitor our interest rate risk on an ongoing basis in order to be well positioned for the inevitable increase in interest rates. We manage our interest rate risk in a variety of ways. Substantially all of our investments, a significant portion of which have fixed interest rates, are classified as available for sale. We seek to maintain a portion of our investment portfolio in shorter-term instruments with a stable cash flow. The majority of our one- to four-family residential loans are underwritten to qualify for sale in the secondary market. We also have emphasized lower cost savings deposits and transaction accounts. In addition, we have substantial borrowing capacity to access capital to be used if necessary to originate loans in a rising interest rate environment. Our Asset-Liability Committee meets quarterly to analyze our interest rate risk.
· Continue to Improve Asset Quality. We emphasize a disciplined credit culture based on market knowledge, close ties to our customers, sound underwriting standards and experienced loan officers. While the challenging operating environment following the economic downturn contributed to increase problem assets, particularly multifamily and commercial real estate loans, managements primary objective has been to expeditiously reduce the level of non-performing assets through diligent monitoring and aggressive resolution efforts. Beginning in 2008, we discontinued originating commercial real estate loans and focused on improving our asset quality. Non-performing assets declined $1.2 million to $4.7 million as of December 31, 2014 from $5.9 million at December 31, 2013. Non-performing assets to total assets decreased 50 basis points to 2.17% as of December 31, 2014 from 2.67% as of December 31, 2013. In 2014, we began to originate a limited amount of multifamily and commercial real estate loans consistent with our conservative loan underwriting policies and procedures. Asset quality continues to be the top focus for management and we continue to proactively work to resolve problem loans as they arise.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. By their nature, changes in these assumptions and estimates could significantly affect our financial position or results of operations. Actual results could differ from those estimates.
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an emerging growth company we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.
Discussed below are selected critical accounting policies that are of particular significance to us.
Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable incurred credit losses, increased by the provision for loan losses and decreased by charge-offs less recoveries. We estimate the allowance balance required using past loan loss experience; known and inherent losses in the nature and volume of the portfolio that are both probable and estimable; information about specific borrower situations; and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in our judgment, should be charged off. Loan losses are charged against the allowance when we believe that the uncollectibility of a loan balance is confirmed.
The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful.
Non-performing loans and impaired loans are defined differently. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. A loan is non-performing when it is on non-accrual or greater than 90 days past due. Some loans may be included in both categories, whereas other loans may only be included in one category. Our policy requires that all non-homogeneous loans past due greater than 90 days be classified as impaired and non-performing. However, performing loans may also be classified as impaired when we do not expect to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.
Factors considered by us in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. We determine the significance of payment delays and payment shortfalls on case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrowers prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
Multifamily and commercial real estate loans are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loans existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans are collectively evaluated for impairment, and accordingly, are not separately identified for impairment disclosures.
Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loans effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, we determine the amount of reserve in accordance with the accounting policy for the allowance for loan losses.
The general component covers non-impaired loans and is based on actual historical loss experience determined by portfolio loan segment adjusted for current factors. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio loan segment, such as real estate trends and national and local economic conditions. As greater risk is associated with loans classified as special mention and
substandard that are not impaired, the Company considers the actual historical loss experience by loan segment, the levels of loans classified as special mention and substandard, and the trends in the collateral associated with these classifications.
The following portfolio segments have been identified: One to four-family, multifamily and commercial, home equity, consumer and other. Substantially all of the loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial real estate loans are expected to be repaid from cash flows from operations of businesses and consumer loans are expected to be repaid from personal cash flows. There are no significant concentrations of loans to any one industry or customer. Risk factors impacting loans in each of the portfolio segments include local and national real estate values, local and national economic factors affecting borrowers employment prospects and income levels, levels and movement of interest rates and general availability of credit, and overall economic sentiment.
Other Real Estate Owned. Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.
Deferred Tax Valuation Allowance. A valuation allowance should be recognized against deferred tax assets if, based on the weight of available evidence, it is more likely than not (i.e. greater than 50% probability) that some portion or all of the deferred tax asset will not be realized. Future realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income of the appropriate character (for example, ordinary income or capital gain) within the carry back and carry forward periods available under the tax law. We evaluate the future realization of the deferred tax asset on a quarterly basis and establish a valuation allowance predicated on consideration of future performance as well as tax planning strategies available to us. Tax-planning strategies are actions that we would take in order to prevent an operating loss or tax credit carry forward from expiring unused. In order for a tax-planning strategy to be considered, it must be prudent and feasible and result in realization of the deferred tax assets.
Fair Value of Financial Instruments. Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 7 to our audited consolidated financial statements. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Some of these estimates are not necessarily indicative of an exit price. Changes in assumptions or in market conditions could significantly affect the estimates.
Average Balances, Net Interest Income and Yields Earned and Rates Paid
The following table presents for the years indicated the total dollar amount of interest income on average interest-earning assets and the resultant yields, the interest expense on average interest-bearing liabilities, expressed both in dollars and rates for the years ended December 31, 2014, 2013 and 2012. No tax equivalent adjustments were made. All average balances are monthly average balances. Non-accruing loans have been included in the table as loans carrying a zero yield.
|
|
For The Year Ended December 31, |
| ||||||||||||||||||||||
|
|
2014 |
|
2013 |
|
2012 |
| ||||||||||||||||||
|
|
Average |
|
Interest |
|
Yield/ |
|
Average |
|
Interest |
|
Yield/ |
|
Average |
|
Interest |
|
Yield/ |
| ||||||
|
|
(Dollars in thousands) |
| ||||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest-earning deposits in other financial institutions |
|
$ |
24,978 |
|
$ |
59 |
|
0.24 |
% |
$ |
12,186 |
|
$ |
27 |
|
0.22 |
% |
$ |
12,694 |
|
$ |
24 |
|
0.19 |
% |
Securities |
|
58,786 |
|
861 |
|
1.46 |
|
65,834 |
|
998 |
|
1.52 |
|
73,301 |
|
1,216 |
|
1.66 |
| ||||||
Loans receivable |
|
118,026 |
|
4,691 |
|
3.97 |
|
121,634 |
|
5,027 |
|
4.13 |
|
122,608 |
|
5,449 |
|
4.44 |
| ||||||
Federal Home Loan Bank of Chicago common stock |
|
1,768 |
|
8 |
|
0.45 |
|
1,734 |
|
5 |
|
0.29 |
|
1,914 |
|
5 |
|
0.26 |
| ||||||
Total interest-earning assets |
|
203,558 |
|
5,619 |
|
2.76 |
|
201,388 |
|
6,057 |
|
3.01 |
|
210,517 |
|
6,694 |
|
3.18 |
| ||||||
Total non-interest-earning assets |
|
16,057 |
|
|
|
|
|
17,204 |
|
|
|
|
|
16,722 |
|
|
|
|
| ||||||
Total assets |
|
$ |
219,615 |
|
|
|
|
|
$ |
218,592 |
|
|
|
|
|
$ |
227,239 |
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Passbook accounts |
|
$ |
64,018 |
|
94 |
|
0.15 |
|
$ |
64,084 |
|
85 |
|
0.13 |
|
$ |
61,212 |
|
102 |
|
0.17 |
| |||
NOW accounts |
|
10,664 |
|
1 |
|
0.01 |
|
10,560 |
|
1 |
|
0.01 |
|
10,182 |
|
1 |
|
0.01 |
| ||||||
Money market accounts |
|
6,785 |
|
1 |
|
0.01 |
|
6,293 |
|
1 |
|
0.02 |
|
8,031 |
|
5 |
|
0.06 |
| ||||||
Certificates of deposit |
|
63,884 |
|
571 |
|
0.89 |
|
68,324 |
|
613 |
|
0.90 |
|
78,570 |
|
864 |
|
1.10 |
| ||||||
Total interest-bearing deposits |
|
145,351 |
|
667 |
|
0.46 |
|
149,261 |
|
700 |
|
0.47 |
|
157,995 |
|
972 |
|
0.62 |
| ||||||
Federal Home Loan Bank of Chicago advances |
|
14,769 |
|
342 |
|
2.32 |
|
19,769 |
|
435 |
|
2.20 |
|
25,077 |
|
549 |
|
2.19 |
| ||||||
Total interest-bearing liabilities |
|
160,120 |
|
1,009 |
|
0.63 |
|
169,030 |
|
1,135 |
|
0.67 |
|
183,072 |
|
1,521 |
|
0.83 |
| ||||||
Non-interest-bearing demand deposits |
|
19,979 |
|
|
|
|
|
19,781 |
|
|
|
|
|
16,248 |
|
|
|
|
| ||||||
Other liabilities |
|
4,995 |
|
|
|
|
|
4,330 |
|
|
|
|
|
4,680 |
|
|
|
|
| ||||||
Total liabilities |
|
$ |
185,094 |
|
|
|
|
|
$ |
193,141 |
|
|
|
|
|
$ |
204,000 |
|
|
|
|
| |||
Stockholders Equity |
|
34,521 |
|
|
|
|
|
25,451 |
|
|
|
|
|
23,239 |
|
|
|
|
| ||||||
Total liabilities and stockholders equity |
|
$ |
219,615 |
|
|
|
|
|
$ |
218,592 |
|
|
|
|
|
$ |
227,239 |
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net interest income |
|
|
|
$ |
4,610 |
|
|
|
|
|
$ |
4,922 |
|
|
|
|
|
$ |
5,173 |
|
|
| |||
Net interest rate spread (1) |
|
|
|
|
|
2.13 |
% |
|
|
|
|
2.34 |
% |
|
|
|
|
2.35 |
% | ||||||
Net interest-earning assets (2) |
|
$ |
43,438 |
|
|
|
|
|
$ |
32,358 |
|
|
|
|
|
$ |
27,445 |
|
|
|
|
| |||
Net interest margin (3) |
|
|
|
|
|
2.26 |
% |
|
|
|
|
2.44 |
% |
|
|
|
|
2.46 |
% | ||||||
Average interest-earning assets to average interest-bearing liabilities |
|
127.13 |
% |
|
|
|
|
119.14 |
% |
|
|
|
|
114.99 |
% |
|
|
|
|
(1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average total interest-earning assets.
Rate/Volume Analysis
The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the changes related to outstanding balances and those due to the changes in interest rates. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.
|
|
Year Ended December 31, |
|
Year Ended December 31, |
| ||||||||||||||
|
|
Increase/(Decrease) |
|
Total |
|
Increase/(Decrease) |
|
Total |
| ||||||||||
|
|
Volume |
|
Rate |
|
(Decrease) |
|
Volume |
|
Rate |
|
(Decrease) |
| ||||||
|
|
(In thousands) |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest-earning deposits in other financial institutions |
|
$ |
30 |
|
$ |
2 |
|
$ |
32 |
|
$ |
(1 |
) |
$ |
4 |
|
$ |
3 |
|
Securities |
|
(103 |
) |
(33 |
) |
(137 |
) |
(113 |
) |
(105 |
) |
(218 |
) | ||||||
Loans receivable |
|
(143 |
) |
(193 |
) |
(336 |
) |
(40 |
) |
(382 |
) |
(422 |
) | ||||||
Federal Home Loan Bank of Chicago common stock |
|
|
|
3 |
|
3 |
|
(1 |
) |
1 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total interestearning assets |
|
(216 |
) |
(221 |
) |
(438 |
) |
(155 |
) |
(482 |
) |
(637 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Passbook savings |
|
|
|
9 |
|
9 |
|
4 |
|
(21 |
) |
(17 |
) | ||||||
NOW accounts |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Money market accounts |
|
|
|
|
|
|
|
|
|
(4 |
) |
(4 |
) | ||||||
Certificates of deposit |
|
(40 |
) |
(1 |
) |
(42 |
) |
(92 |
) |
(159 |
) |
(251 |
) | ||||||
Federal Home Loan Bank of Chicago Advances |
|
(116 |
) |
23 |
|
(93 |
) |
(117 |
) |
3 |
|
(114 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total interest-bearing liabilities |
|
(156 |
) |
31 |
|
(126 |
) |
(205 |
) |
(181 |
) |
(386 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Change in net interest income |
|
$ |
(60 |
) |
$ |
(252 |
) |
$ |
(312 |
) |
$ |
50 |
|
$ |
(301 |
) |
$ |
(251 |
) |
Comparison of Financial Condition at December 31, 2014 and December 31, 2013
Assets. Total consolidated assets as of December 31, 2014 were $217.5 million, a decrease of $3.4 million, or 1.5%, from $220.9 million at December 31, 2013. The decrease was primarily due to a decrease in securities available-for-sale of $9.6 million, a decrease of $5.0 million in net loans, and a decrease of $877,000 in other real estate owned, partially offset by a $10.6 million increase in cash and cash equivalents and a $1.3 million increase in other assets.
Cash and cash equivalents increased $10.6 million, or 47.7%, to $32.9 million at December 31, 2014 from $22.3 million at December 31, 2013. The primary reasons for the increase in cash and cash equivalents were due to principal repayments, calls and sales of securities available-for-sale, principal payments of loans, proceeds from the second quarter 2014 multifamily loan sale, proceeds from the sale of other real estate owned, and an increase in total deposits, partially offset by the repayment of maturing Federal Home Loan Bank (FHLB) advances, repurchases of the Companys common stock, and dividends paid to our stockholders.
Securities available-for-sale decreased $9.6 million, or 15.0%, to $54.2 million at December 31, 2014 from $63.8 million at December 31, 2013. The decrease was primarily due to securities available-for-sale principal repayments, calls and sales of $39.2 million exceeding new securities purchases of $29.1 million and a decrease in the unrealized loss of available for sale securities of $641,000 as a result of the decrease in interest rates during the year ended December 31, 2014.
Net loans decreased $5.0 million, or 4.2%, to $114.1 million at December 31, 2014 from $119.1 million at December 31, 2013. The decrease was primarily attributable to the second quarter 2014 multifamily loan sale of $1.2 million, charge-offs of $1.0 million for the year ended December 31, 2014, and principal repayments in the multifamily and commercial real estate and home equity loan portfolios exceeding originations for the year ended
December 31, 2014. Multifamily and commercial real estate loans declined $3.4 million, or 26.1%, to $9.5 million at December 31, 2014 from $12.8 million at December 31, 2013. Home equity loans decreased $2.1 million, or 20.4%, to $8.1 million at December 31, 2014 from $10.1 million at December 31, 2013. The decrease in net loans was also due to a slowdown in one- to four-family residential refinancing and aggressive price competition for multifamily and commercial real estate loans in the Banks marketplace.
Other real estate owned decreased $877,000, or 33.4%, to $1.8 million at December 31, 2014 from $2.6 million at December 31, 2013. The decrease was primarily due to a third quarter 2014 sale of a $1.0 million property, which represented a 12.1% participation in a $9.4 million unimproved land loan located in Northbrook, Illinois. The sale resulted in a gain of $741,000.
Other assets increased $1.3 million, to $2.7 million at December 31, 2014 from $1.3 million at December 31, 2013. The primary reason for the increase was due to the second quarter 2014 reversal of the remaining deferred tax asset valuation allowance of $1.8 million. The reversal of the deferred tax asset valuation allowance was a result of our sustained profitability and improved credit quality that has led to significantly lower credit costs and expectations for future taxable income.
Liabilities. Total liabilities decreased $2.5 million, or 1.3%, to $183.4 million at December 31, 2014 from $185.9 million at December 31, 2013. The decrease in total liabilities was a result of a $5.0 million decrease in FHLB advances, partially offset by a $1.7 million increase in total deposits.
Deposits. Total deposits increased $1.7 million, or 1.1%, to $166.2 million at December 31, 2014 from $164.5 million at December 31, 2013. The increase was primarily in our core deposits, which we consider to be our checking, passbook, NOW, and money market accounts. Passbook accounts grew $1.5 million, or 2.3%, to $65.4 million at December 31, 2014 from $63.9 million at December 31, 2013. NOW and checking accounts increased $2.8 million, or 9.6%, to $31.9 million at December 31, 2014 from $29.1 million at December 31, 2013. Money market accounts decreased $757,000, or 10.5%, to $6.4 million at December 31, 2014 from $7.2 million at December 31, 2013. Certificates of deposit decreased $1.8 million, or 2.8%, to $62.6 million at December 31, 2014 from $64.4 million at December 31, 2013. The increase in our total deposits resulted from our continued focus on maintaining and raising our lower-cost core deposits.
FHLB Advances. FHLB of Chicago advances decreased $5.0 million, or 29.4%, to $12.0 million at December 31, 2014 from $17.0 million at December 31, 2013. We repaid maturing FHLB advances of $5.0 million with a weighted average interest rate of 1.90% during 2014. Outstanding FHLB of Chicago advances at December 31, 2014 were fixed-rate with maturities of one to two years with a weighted average interest rate of 2.37%.
Stockholders Equity. Total stockholders equity decreased $1.2 million, or 3.4%, to $33.2 million at December 31, 2014 from $34.4 million at December 31, 2013. The decrease primarily resulted from our repurchased shares of 150,867 at an average price of $13.53 per share from the first and second stock repurchase programs for a total cost of $2.0 million and dividends on common stock of $1.5 million, offset by net income of $2.1 million and a decrease in the unrealized loss on securities classified as available-for-sale of $385,000 for the year ended December 31, 2014. Stockholders equity also decreased due to an increase in the ESOP repurchase obligation of $263,000 during the year ended December 31, 2014 to $909,000 from $646,000 at December 31, 2013 reflecting the increase in the market value of the vested portion of the common stock held in the ESOP. Book value per share was $14.97 at December 31, 2014 as compared to $14.86 at December 31, 2013.
Comparison of Operating Results for the Years Ended December 31, 2014 and December 31, 2013
General. Net income for the year ended December 31, 2014 increased $1.2 million, or 132.8%, to $2.1 million compared to net income of $903,000 for the year ended December 31, 2013. The increase reflected an income tax benefit recognized of $1.8 million during the second quarter of 2014 due to the reversal of the deferred tax asset valuation allowance and an increase in non-interest income of $659,000, partially offset by an increase in the provision for loan losses of $697,000, a decrease in net interest income of $312,000, and an increase in non-interest expense of $159,000.
Interest Income. Total interest income decreased $438,000, or 7.2%, to $5.6 million for the year ended December 31, 2014 from $6.1 million for 2013. The decrease was primarily due to a 25 basis points decline in the average yield earned on interest earning assets. The average yield on interest earning assets was 2.76% for the year ended December 31, 2014 as compared to 3.01% for 2013. The decline was primarily a result of the decrease in the
average yield on loans and a change in the mix of interest-earning assets, which have shifted from loans and securities available-for-sale to a greater amount of low-yielding cash and cash equivalents.
Interest income from loans decreased by $336,000, or 6.7%, to $4.7 million for the year ended December 31, 2014, from $5.0 million for the year ended December 31, 2013. The decline in interest income from loans was due to decreases in the average loan yield and average loan balance for the year ended December 31, 2014 as compared to the year ended December 31, 2013. The average yield on loans decreased to 3.97% for the year ended December 31, 2014 from 4.13% for 2013. The decrease in the average yield on loans was primarily caused by lower yields earned on new loan originations and repayments of higher yielding seasoned loans as a result of the prolonged low interest rate environment. The average loan balance decreased by $3.6 million to $118.0 million for the year ended December 31, 2014 from $121.6 million for 2013. The decrease in the average loan balance was primarily due to the $1.2 million multifamily loan sale, the slowdown in one- to four-family residential refinancing, and aggressive price competition for multifamily and commercial real estate loans in the Banks marketplace.
Interest income from securities decreased $137,000, or 13.7%, to $861,000 for the year ended December 31, 2014, from $998,000 for the year ended December 31, 2013. The decrease primarily resulted from a decrease in the average securities yield and average securities balance for the year ended December 31, 2014 as compared to 2013. The average yield on securities decreased to 1.46% for the year ended December 31, 2014 from 1.52% for 2013 due to the prolonged low interest rate environment. The average balance of securities decreased $7.0 million to $58.8 million for the year ended December 31, 2014 from $65.8 million for 2013. The decrease in the average securities balance was due to securities principal repayments, calls, and sales exceeding new securities purchases.
Interest Expense. Interest expense decreased by $126,000, or 11.1%, to $1.0 million for the year ended December 31, 2014, from $1.1 million for 2013. The primary reasons for the decrease were due to the $8.9 million decrease in the average balance of interest bearing liabilities and a four basis points decline in the average interest rate paid for interest bearing liabilities. Average interest bearing liabilities were $160.1 million and $169.0 million for the year ended December 31, 2014 and December 31, 2013, respectively, while the average cost of interest bearing liabilities was 0.63% for the year ended December 31, 2014 as compared to 0.67% for 2013.
Interest expense on deposits decreased by $33,000, or 4.7%, to $667,000 for the year ended December 31, 2014, from $700,000 for 2013. Average interest-bearing deposit balances decreased $3.9 million to $145.4 million for the year ended December 31, 2014, from $149.3 million for 2013 due primarily to the decrease in the average balance of certificates of deposit of $4.4 million. The decline in the average balance of certificates of deposit was attributable to legacy certificates of deposit customers seeking higher yields as accounts re-priced to current lower market interest rates upon maturity. Our average cost of deposits decreased one basis point to 0.46% for the year ended December 31, 2014 from 0.47% for the year ended December 31, 2013. The decrease in our average cost of deposits resulted from the continued change in the mix of our average deposits from higher-cost certificates of deposit to lower-cost core deposits.
Interest expense on FHLB advances decreased $93,000, or 21.4%, to $342,000 for the year ended December 31, 2014, from $435,000 for 2013. The primary reason for the decrease was a decrease in the average balance of FHLB of Chicago advances. Average balances of FHLB of Chicago advances decreased $5.0 million to $14.8 million for the year ended December 31, 2014 from $19.8 million for 2013. The decrease was due to the repayment of $5.0 million in maturing FHLB advances during the year ended December 31, 2014.
Net Interest Income. Net interest income decreased by $312,000 to $4.6 million for the year ended December 31, 2014, from 2013. The prolonged period of low interest rates and highly competitive loan environment continued to put downward pressure on the net interest margin and net interest rate spread. The net interest margin declined 18 basis points to 2.26% for the year ended December 31, 2014 compared to 2.44% for the year ended December 31, 2013, and the net interest rate spread declined 21 basis points to 2.13% for the year ended December 31, 2014 compared to 2.34% for the year ended December 31, 2013. These declines were primarily a result of a decrease in the average yield on loans and a change in the mix of interest-earning assets, which have shifted from loans and securities available-for-sale to a greater amount of low-yielding cash and cash equivalents. This decrease was partially offset by a decrease in the average cost of interest-bearing deposits resulting from the continued change in the mix of deposits to core deposits (deposits excluding certificates of deposit) and the continued re-pricing of certificates of deposit to lower current market interest rates upon maturity. The average rate earned on interest-earning assets declined 25 basis points to 2.76%, while the average rate paid on interest-bearing liabilities declined four basis points to 0.63% for the year ended December 31, 2014 compared to 2013.
Provision for Loan Losses. We established a provision for loan losses, which is charged to operations, at a level management believes is appropriate to absorb probable incurred credit losses in the loan portfolio. In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change. Based on our evaluation of these factors, we recorded a provision for loan losses of $697,000 for the year ended December 31, 2014 and no provision for loan losses for the year ended December 31, 2013. The provision for loans losses for the year ended December 31, 2014 was primarily due to net charge-offs of $993,000 during the year. Net charge-offs for the year ended December 31, 2013 were $166,000. The allowance for loan losses was $1.1 million, or 0.96% of total loans, at December 31, 2014 compared to $1.4 million, or 1.16%, at December 31, 2013. The decrease in the allowance for loan losses to total loans was due to a decline in the historical loss factors on the multifamily and commercial real estate loans collectively evaluated for impairment, continued reduced risk profile of the loan portfolio, and improvements in economic conditions in the Banks market area.
Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the adequacy of the allowance. While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require us to recognize additional provisions based on their judgment of information available to them at the time of their examination. The allowance for loan losses as of December 31, 2014 was maintained at a level that represents managements best estimate of inherent losses in the loan portfolio, and such losses that were both probable and reasonably estimable.
Non-Interest Income. Non-interest income increased $659,000 to $1.5 million for the year ended December 31, 2014, from $857,000 for the year ended December 31, 2013. The increase was primarily due to an $805,000 increase in gains on other real estate owned sales, partially offset by a decrease of $59,000 in gains on securities sales, a decrease of $49,000 in other non-interest income items, and a decrease of $37,000 in service fee income. Gains on other real estate owned were $756,000 for the year ended December 31, 2014 compared to losses on other real estate owned of $49,000 for the year ended December 31, 2013. The increase was primarily attributed to the third quarter 2014 sale of an other real estate owned property of $1.0 million, which represented a 12.1% participation in a $9.4 million unimproved land loan located in Northbrook, Illinois and resulted in a gain of $741,000. Gains on securities sales were $123,000 and $182,000 for the years ended December 31, 2014 and 2013, respectively. The decrease was due to fewer securities sales in 2014 than in 2013.
Non-Interest Expense. Non-interest expense increased $159,000, or 3.3%, to $5.0 million for the year ended December 31, 2014 from $4.9 million for the year ended December 31, 2013. The increase was primarily due to a $168,000 increase in professional and regulatory expense. Professional and regulatory expense increased to $502,000 for the year ended December 31, 2014 from $334,000 for the year ended December 31, 2013. The increase was due to a full year of expense operating as a public company since our second step conversion was completed on October 9, 2013.
Provision for Income Taxes. We recorded an income tax benefit of $1.7 million for the year ended December 31, 2014 and no income tax expense or benefit for the year ended December 31, 2013. During the year ended December 31, 2014, we reversed the deferred tax asset valuation allowance of $1.8 million and recorded income tax expense of $82,000. The reversal of the deferred tax asset valuation allowance was a result of our sustained profitability and improved credit quality that has led to significantly lower credit costs and expectations for future taxable income.
Liquidity and Capital Resources
We maintain liquid assets at levels we consider adequate to meet our liquidity needs. Our liquidity ratio averaged 44.1% and 41.8% for the year ended December 31, 2014 and the year ended December 31, 2013, respectively. We adjust our liquidity levels to fund deposit outflows, pay real estate taxes on mortgage loans, repay our borrowings and to fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives.
Our primary sources of liquidity are deposits, amortization and prepayment of loans and mortgage-backed securities, maturities of investment securities and other short-term investments, and earnings and funds provided from operations. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short-term interest-earning investments and other assets, which provide liquidity to meet lending requirements. Short-term interest-earning deposits with the FHLB of Chicago amounted to $12.0 million at December 31, 2014 and $17.0 million at December 31, 2013.
A significant portion of our liquidity consists of securities classified as available-for-sale and cash and cash equivalents, which are a product of our operating, investing and financing activities. Our primary sources of cash are principal repayments on loans and mortgage-backed securities and increases in deposit accounts, along with advances from the FHLB of Chicago.
Liquidity management is both a daily and long-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLB of Chicago and JP Morgan Chase which provides an additional source of funds. At December 31, 2014, we had $12.0 million in advances outstanding and were eligible to borrow an additional $54.4 million from the FHLB of Chicago. At December 31, 2014, we had no balance outstanding on the $5.0 million line of credit at JP Morgan Chase. Of the $12.0 million in FHLB advances, $7.0 million is due within one year and $5.0 million is due between one to two years.
Our cash flows are comprised of three classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $920,000 and $1.6 million for the years ended December 31, 2014 and 2013, respectively.
Net cash provided by investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, proceeds from the sales, calls, repayments and maturities of securities, were $16.0 million and $4.7 million for the years ended December 31, 2014 and December 31, 2013, respectively. During the year ended December 31, 2014, we purchased $29.1 million and sold $11.3 million in securities classified as available-for sale, and during the year ended December 31, 2013, we purchased $22.2 million and sold $8.6 million in securities classified as available-for-sale.
Net cash used in financing activities, consisting primarily of deposit account activity, FHLB advances, repurchases of the Companys common stock, and dividends paid to our stockholders, was $6.3 million and $355,000 for the years ended December 31, 2014 and 2013, respectively.
At December 31, 2014, we had outstanding commitments of $2.0 million to originate loans. This amount does not include the unfunded portion of loans in process. At December 31, 2014, certificates of deposit scheduled to mature in less than one year totaled $37.9 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In addition, the cost of such deposits may be significantly higher upon renewal in a rising interest rate environment.
We are required to maintain liquid assets in an amount that would ensure our safe and sound operation. Our liquidity ratio at December 31, 2014 was 45.1%.
At December 31, 2014, we exceeded all our regulatory capital requirements with a Tier 1 leverage capital level of $29.5 million, or 13.67% of adjusted total assets and total risk-based capital of $30.6 million, or 32.21% of risk-weighted assets. At December 31, 2013, we exceeded all our regulatory capital requirements with a Tier 1 leverage capital level of $28.6 million, or 12.96% of adjusted total assets and total risk-based capital of $29.9 million, or 29.69% of risk-weighted assets. Accordingly, the Bank was classified as well-capitalized at December
31, 2014 and at December 31, 2013. Management is not aware of any conditions or events since the most recent notification that would change our category.
On May 15, 2012, the board of directors of the Company adopted resolutions requested by the Federal Reserve Bank of Chicago that required written approval from the Federal Reserve Bank of Chicago prior to the declaration or payment of dividends, any increase in debt or the stock repurchase or redemption by the Company. On September 12, 2014, the Federal Reserve Bank of Chicago provided the Company with a non-objection letter allowing the board of directors to rescind the resolutions. Subsequently, the board of directors rescinded the resolutions and the Company no longer must obtain written approval from the Federal Reserve Bank of Chicago prior to the declaration or payment of dividends, any increase in debt or the stock repurchase or redemption by the Company.
In July 2013, the OCC and the other federal bank regulatory agencies issued a final rule that will revise their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. Among other things, the new rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), establishes a uniform minimum leverage ratio of 4%, increases the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also requires unrealized gains and losses on certain available for sale securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt-out is exercised. The rule limits a banking organizations capital distributions and certain discretionary bonus payments if the banking organization does not hold a capital conservation buffer consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.
The final rule became effective for the Bank on January 1, 2015. The capital conservation buffer requirement will be phased in beginning January 1, 2016 and ending January 1, 2019, when the full capital conservation buffer requirement will be effective. The impact of the final rule is not expected to have a material impact on the Bank.
Off-Balance-Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers requests for funding and take the form of loan commitments, unused lines of credit and standby letters of credit. For information about our loan commitments, letters of credit and unused lines of credit, see Note 14 of the Notes to Consolidated Financial Statements.
For the years ended December 31, 2014 and 2013, we did not engage in any off-balance-sheet transactions other than loan origination commitments, unused lines of credit and standby letters of credit in the normal course of our lending activities.
Recent Accounting Pronouncements
For information with respect to recent accounting pronouncements that are applicable to AJS Bancorp, please see Note 1 of the notes to AJS Bancorps consolidated financial statements beginning on page 23.
Effect of Inflation and Changing Prices
The consolidated financial statements and related consolidated financial data presented herein regarding AJS Bancorp have been prepared in accordance with accounting principles generally accepted in the United States of America, which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, virtually all of AJS Bancorps assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on AJS Bancorps performance than does the effect of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, because such prices are affected by inflation to a larger extent than interest rates.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
AJS Bancorp, Inc.
Midlothian, Illinois
We have audited the accompanying consolidated statements of financial condition of AJS Bancorp, Inc. as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income, stockholders equity, and cash flows for the years then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis of designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AJS Bancorp, Inc. as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
|
Crowe Horwath LLP |
Oak Brook, Illinois
March 23, 2015
AJS BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
Years ended December 31, 2014 and 2013
(Dollars in thousands, except per share data)
|
|
2014 |
|
2013 |
| ||
ASSETS |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
32,898 |
|
$ |
22,281 |
|
Securities available-for-sale |
|
54,214 |
|
63,804 |
| ||
Securities held-to-maturity (fair value: 2014 $341; 2013 - $350) |
|
331 |
|
335 |
| ||
Loans, net (allowance: 2014 - $1,103; 2013 - $1,399) |
|
114,130 |
|
119,146 |
| ||
FHLB stock |
|
1,768 |
|
1,768 |
| ||
Premises and equipment |
|
3,623 |
|
3,620 |
| ||
Bank-owned life insurance |
|
5,706 |
|
5,511 |
| ||
Other real estate owned |
|
1,751 |
|
2,628 |
| ||
Accrued interest receivable |
|
438 |
|
509 |
| ||
Other assets |
|
2,664 |
|
1,324 |
| ||
|
|
|
|
|
| ||
Total assets |
|
$ |
217,523 |
|
$ |
220,926 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
| ||
Liabilities |
|
|
|
|
| ||
Deposits |
|
$ |
166,249 |
|
$ |
164,519 |
|
FHLB advances |
|
12,000 |
|
17,000 |
| ||
Advance payments by borrowers for taxes and insurance |
|
2,068 |
|
1,955 |
| ||
Other liabilities and accrued interest payable |
|
3,084 |
|
2,422 |
| ||
Total liabilities |
|
183,401 |
|
185,896 |
| ||
|
|
|
|
|
| ||
Employee Stock Ownership Plan (ESOP) repurchase obligation |
|
909 |
|
646 |
| ||
|
|
|
|
|
| ||
Stockholders equity |
|
|
|
|
| ||
Preferred stock, $.01 par value, 50,000,000 shares authorized; none issued |
|
|
|
|
| ||
Common stock, $.01 par value, 100,000,000 shares authorized; 2014 2,218,863 shares issued; 2013 2,313,463 shares issued |
|
22 |
|
23 |
| ||
Additional paid-in capital |
|
13,731 |
|
15,330 |
| ||
Retained earnings |
|
21,126 |
|
20,523 |
| ||
Accumulated other comprehensive loss |
|
(20 |
) |
(405 |
) | ||
Unearned stock awards |
|
(596 |
) |
|
| ||
Unearned ESOP shares |
|
(1,050 |
) |
(1,087 |
) | ||
Total stockholders equity |
|
33,213 |
|
34,384 |
| ||
|
|
|
|
|
| ||
Total liabilities and stockholders equity |
|
$ |
217,523 |
|
$ |
220,926 |
|
See accompanying notes to consolidated financial statements.
AJS BANCORP, INC.
CONSOLIDATED STATEMENTS OPERATIONS
Years ended December 31, 2014 and 2013
(Dollars in thousands, except per share data)
|
|
2014 |
|
2013 |
| ||
Interest and dividend income |
|
|
|
|
| ||
Loans |
|
$ |
4,691 |
|
$ |
5,027 |
|
Securities |
|
861 |
|
998 |
| ||
Interest-earning deposits and other |
|
67 |
|
32 |
| ||
Total interest income |
|
5,619 |
|
6,057 |
| ||
|
|
|
|
|
| ||
Interest expense |
|
|
|
|
| ||
Deposits |
|
667 |
|
700 |
| ||
FHLB advances and other |
|
342 |
|
435 |
| ||
Total interest expense |
|
1,009 |
|
1,135 |
| ||
|
|
|
|
|
| ||
Net interest income |
|
4,610 |
|
4,922 |
| ||
|
|
|
|
|
| ||
Provision for loan losses |
|
697 |
|
|
| ||
|
|
|
|
|
| ||
Net interest income after provision for loan losses |
|
3,913 |
|
4,922 |
| ||
|
|
|
|
|
| ||
Non-interest income |
|
|
|
|
| ||
Service fee income |
|
287 |
|
324 |
| ||
Rental income |
|
75 |
|
71 |
| ||
Earnings on bank-owned life insurance |
|
195 |
|
200 |
| ||
Gain on sale of securities |
|
123 |
|
182 |
| ||
Gain (loss) on sale of other real estate owned |
|
756 |
|
(49 |
) | ||
Other |
|
80 |
|
129 |
| ||
Total non-interest income |
|
1,516 |
|
857 |
| ||
|
|
|
|
|
| ||
Non-interest expense |
|
|
|
|
| ||
Compensation and employee benefits |
|
2,361 |
|
2,392 |
| ||
Occupancy |
|
730 |
|
755 |
| ||
Data processing |
|
348 |
|
352 |
| ||
Advertising and promotion |
|
53 |
|
68 |
| ||
Professional and regulatory |
|
502 |
|
334 |
| ||
Postage and supplies |
|
96 |
|
113 |
| ||
Bank security |
|
120 |
|
120 |
| ||
Federal deposit insurance |
|
235 |
|
210 |
| ||
Other real estate owned loss expense |
|
42 |
|
69 |
| ||
Other |
|
548 |
|
463 |
| ||
Total non-interest expense |
|
5,035 |
|
4,876 |
| ||
|
|
|
|
|
| ||
Income before income taxes |
|
394 |
|
903 |
| ||
Income tax expense (benefit) |
|
(1,708 |
) |
|
| ||
Net Income |
|
$ |
2,102 |
|
$ |
903 |
|
|
|
|
|
|
| ||
Earnings per share |
|
|
|
|
| ||
Basic and diluted |
|
$ |
0.96 |
|
$ |
0.39 |
|
See accompanying notes to consolidated financial statements.
AJS BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2014 and 2013
(Dollars in thousands, except per share data)
|
|
2014 |
|
2013 |
| ||
|
|
|
|
|
| ||
Net income |
|
$ |
2,102 |
|
$ |
903 |
|
|
|
|
|
|
| ||
Other comprehensive income: |
|
|
|
|
| ||
Unrealized gains on securities available-for-sale: |
|
|
|
|
| ||
Unrealized holding gain (loss) arising during the period |
|
764 |
|
(1,537 |
) | ||
Reclassification adjustment for gains included in net income |
|
(123 |
) |
(182 |
) | ||
Tax effect |
|
(256 |
) |
692 |
| ||
Total other comprehensive income (loss) |
|
385 |
|
(1,027 |
) | ||
|
|
|
|
|
| ||
Comprehensive income (loss) |
|
$ |
2,487 |
|
$ |
(124 |
) |
See accompanying notes to consolidated financial statements.
AJS BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERSEQUITY
Years Ended December 31, 2014 and 2013
(Dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
| ||||||||
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
Unearned |
|
Unearned |
|
|
| ||||||||
|
|
Common |
|
Paid-In |
|
Treasury |
|
Retained |
|
Comprehensive |
|
Stock |
|
ESOP |
|
|
| ||||||||
|
|
Stock |
|
Capital |
|
Stock |
|
Earnings |
|
Income (Loss) |
|
Awards |
|
Shares |
|
Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at January 1, 2013 |
|
$ |
24 |
|
$ |
12,453 |
|
$ |
(9,867 |
) |
$ |
19,620 |
|
$ |
622 |
|
$ |
|
|
|
|
$ |
22,852 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Purchase of 715 treasury stock shares |
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
(7 |
) | ||||||||
Reclassification due to changes in fair value of common stock in ESOP subject to contingent repurchase obligation |
|
|
|
(105 |
) |
|
|
|
|
|
|
|
|
|
|
(105 |
) | ||||||||
Net income |
|
|
|
|
|
|
|
903 |
|
|
|
|
|
|
|
903 |
| ||||||||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
(1,027 |
) |
|
|
|
|
(1,027 |
) | ||||||||
Items related to conversion and stock offering: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Treasury stock retired pursuant to reorganization |
|
(4 |
) |
(9,870 |
) |
9,874 |
|
|
|
|
|
|
|
|
|
|
| ||||||||
Cancellation of Old AJS Bancorp, Inc. shares and fractional shares |
|
(20 |
) |
20 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Proceeds from stock offering 2,313,463 shares, net of expense of $1,352 |
|
23 |
|
12,826 |
|
|
|
|
|
|
|
|
|
|
|
12,849 |
| ||||||||
Purchase of 112,534 shares of ESOP pursuant to reorganization |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,125 |
) |
(1,125 |
) | ||||||||
ESOP shares earned shares |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
38 |
|
44 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at December 31, 2013 |
|
23 |
|
15,330 |
|
|
|
20,523 |
|
(405 |
) |
|
|
(1,087 |
) |
34,384 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Allocation of stock awards of 56,267 shares |
|
1 |
|
674 |
|
|
|
|
|
|
|
(675 |
) |
|
|
|
| ||||||||
Stock awards earned |
|
|
|
|
|
|
|
|
|
|
|
79 |
|
|
|
79 |
| ||||||||
Stock options compensation |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
16 |
| ||||||||
Common stock repurchases of 150,867 shares |
|
(2 |
) |
(2,039 |
) |
|
|
|
|
|
|
|
|
|
|
(2,041 |
) | ||||||||
Reclassification due to changes in fair value of common stock in ESOP subject to contingent repurchase obligation |
|
|
|
(263 |
) |
|
|
|
|
|
|
|
|
|
|
(263 |
) | ||||||||
Net income |
|
|
|
|
|
|
|
2,102 |
|
|
|
|
|
|
|
2,102 |
| ||||||||
Cash dividends of $0.70 |
|
|
|
|
|
|
|
(1,499 |
) |
|
|
|
|
|
|
(1,499 |
) | ||||||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
385 |
|
|
|
|
|
385 |
| ||||||||
ESOP shares earned shares |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
37 |
|
50 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at December 31, 2014 |
|
$ |
22 |
|
$ |
13,731 |
|
$ |
|
|
$ |
21,126 |
|
$ |
(20 |
) |
$ |
(596 |
) |
$ |
(1,050 |
) |
$ |
33,213 |
|
See accompanying notes to the consolidated financial statements.
AJS BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2014 and 2013
(Dollars in thousands, except per share data)
|
|
2014 |
|
2013 |
| ||
Cash flows from operating activities |
|
|
|
|
| ||
Net income |
|
$ |
2,102 |
|
$ |
903 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Depreciation |
|
115 |
|
236 |
| ||
Provision for loan losses |
|
697 |
|
|
| ||
Net amortization of securities |
|
254 |
|
485 |
| ||
ESOP compensation expense |
|
50 |
|
44 |
| ||
Stock award and option expense |
|
95 |
|
|
| ||
Earnings on bank-owned life insurance |
|
(195 |
) |
(200 |
) | ||
Gain on sale of securities available-for-sale |
|
(123 |
) |
(182 |
) | ||
(Gain) loss on sale of other real estate owned |
|
(756 |
) |
49 |
| ||
Other real estate owned write-downs |
|
86 |
|
14 |
| ||
Reversal of valuation allowance on deferred taxes |
|
(1,790 |
) |
|
| ||
Changes in: |
|
|
|
|
| ||
Accrued interest receivable and other assets |
|
521 |
|
(436 |
) | ||
Accrued interest payable and other liabilities |
|
(136 |
) |
692 |
| ||
Net cash provided by operating activities |
|
920 |
|
1,605 |
| ||
|
|
|
|
|
| ||
Cash flows from investing activities |
|
|
|
|
| ||
Securities |
|
|
|
|
| ||
Purchases |
|
(29,132 |
) |
(22,202 |
) | ||
Sales |
|
11,296 |
|
8,580 |
| ||
Calls, maturities and principal payments |
|
27,942 |
|
18,113 |
| ||
Loan origination and repayments, net |
|
4,076 |
|
(174 |
) | ||
Purchase of FHLB stock |
|
|
|
(111 |
) | ||
Proceeds from sale of other real estate owned |
|
1,959 |
|
530 |
| ||
Purchase of equipment, net |
|
(118 |
) |
(51 |
) | ||
Net cash provided by investing activities |
|
16,023 |
|
4,685 |
| ||
|
|
|
|
|
| ||
Cash flows from financing activities |
|
|
|
|
| ||
Net change in deposits |
|
1,730 |
|
(7,202 |
) | ||
Maturities of FHLB advances |
|
(5,000 |
) |
(5,000 |
) | ||
Repurchase of common stock |
|
(2,041 |
) |
(7 |
) | ||
Dividends paid on common stock |
|
(959 |
) |
|
| ||
Net change in advance payments by borrowers for taxes and insurance |
|
(56 |
) |
130 |
| ||
Net proceeds from stock offering |
|
|
|
12,849 |
| ||
Purchase of shares by ESOP |
|
|
|
(1,125 |
) | ||
Net cash used in financing activities |
|
(6,326 |
) |
(355 |
) | ||
|
|
|
|
|
| ||
Net change in cash and cash equivalents |
|
10,617 |
|
5,935 |
| ||
|
|
|
|
|
| ||
Cash and cash equivalents at beginning of year |
|
22,281 |
|
16,346 |
| ||
|
|
|
|
|
| ||
Cash and cash equivalents at end of year |
|
$ |
32,898 |
|
$ |
22,281 |
|
|
|
|
|
|
| ||
Supplemental disclosures of cash flow information |
|
|
|
|
| ||
Cash paid (received) during the year for: |
|
|
|
|
| ||
Interest |
|
$ |
1,017 |
|
$ |
1,145 |
|
Income taxes |
|
(70 |
) |
1 |
| ||
|
|
|
|
|
| ||
Supplemental noncash disclosures |
|
|
|
|
| ||
Transfers from loans to real estate owned |
|
$ |
437 |
|
$ |
139 |
|
Transfers of negative advance payment by borrowers for taxes and insurance balances to loans |
|
169 |
|
21 |
| ||
Loans provided for sales of other real estate owned |
|
25 |
|
22 |
| ||
Accrued dividends |
|
540 |
|
|
|
See accompanying notes to the consolidated financial statements.
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Principles of Consolidation: AJS Bancorp, Inc. (the Company), is a savings and loan holding company, the principal asset of which consists of its ownership of A.J. Smith Federal Savings Bank (the Bank). The Bank is a federally chartered savings bank with operations located in Midlothian and Orland Park, Illinois.
On October 9, 2013, the Company completed a second step conversion and reorganization and sale of common stock. Prior to the completion of the second step conversion, the Company was a federal corporation and mid-tier holding company in the mutual holding company structure. Following the reorganization, the Company is the Maryland chartered holding company of the Bank.
The Company provides single-family residential, home equity and commercial real estate loans to customers and accepts deposits from customers located in the southern suburbs of Chicago, Illinois. The Companys profitability is significantly dependent on net interest income, which is the difference between interest income generated from interest-earning assets (i.e. loans and securities) and interest expense paid on interest-bearing liabilities (i.e. customer deposits and Federal Home Loan Bank advances). Net interest income is affected by the relative amount of interest-earning assets and interest-bearing liabilities and the interest received or paid on these balances. The level of interest rates paid or received by the Company can be significantly influenced by a number of environmental factors, such as governmental monetary policy, that are outside of managements control.
The consolidated financial statements included herein include the accounts of the Company and the Bank. All significant intercompany items have been eliminated.
Use of Estimates: To prepare financial statements in conformity with accounting principles generally accepted in the United States of America management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.
Cash Flows: Cash and cash equivalents include cash and deposits with other financial institutions with original maturities of less than 90 days. Certain cash deposits at other financial institutions from time to time may be over the Federal Deposit Insurance Corporation (FDIC) limits. Net cash flows are reported for customer loan and deposit transactions, and certificates of deposit with other financial institutions.
Securities: Securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available-for-sale when they might be sold before maturity. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income (loss), net of tax.
Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Gains and losses on sales are based on the amortized cost of the security sold.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) other-than-temporary impairment related to credit loss, which must be recognized through earnings and 2) other-than-temporary impairment related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.
Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for loan losses.
Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the contractual loan term. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.
Interest income on mortgage and commercial loans is discontinued at the time the loan is greater than 90 days delinquent unless the loan is well-secured and in process of collection. Consumer loans are typically charged off no later than 120 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. A loan is moved to nonaccrual status in accordance with the Companys policy, typically after 90 days of non-payment.
All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses, increased by the provision for loan losses and decreased by charge-offs less recoveries. We estimate the allowance balance required using past loan loss experience; known and inherent losses in the nature and volume of the portfolio that are both probable and estimable; information about specific borrower situations; and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in our judgment, should be charged off. Loan losses are charged against the allowance when we believe that the uncollectibility of a loan balance is confirmed.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful.
Non-performing loans and impaired loans are defined differently. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. A loan is non-performing when it is on non-accrual or greater than 90 days past due. Some loans may be included in both categories, whereas other loans may only be included in one category. Our policy requires that all non-homogeneous loans past due greater than 90 days be classified as impaired and non-performing. However, performing loans may also be classified as impaired when we do not expect to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.
Factors considered by us in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. We determine the significance of payment delays and payment shortfalls on case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrowers prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
Multi-family and commercial loans are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loans existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans are collectively evaluated for impairment, and accordingly, are not separately identified for impairment disclosures.
Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loans effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, we determine the amount of reserve in accordance with the accounting policy for the allowance for loan losses.
The general component covers non-impaired loans and is based on actual historical loss experience determined by portfolio loan segment adjusted for current factors. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio loan segment, such as real estate trends and national and local economic conditions. As greater risk is associated with loans classified as special mention and substandard that are not impaired, the Company considers the actual historical loss experience by loan segment, the levels of loans classified as special mention and substandard, and the trends in the collateral associated with these classifications.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The following portfolio segments have been identified: One to four-family, multi-family and commercial, home equity, consumer and other. Substantially all of the loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flows from operations of businesses and consumer loans are expected to be repaid from personal cash flows. There are no significant concentrations of loans to any one industry or customer. Risk factors impacting loans in each of the portfolio segments include local & national real estate values, local and national economic factors affecting borrowers employment prospects and income levels, levels and movement of interest rates and general availability of credit, and overall economic sentiment.
FHLB Stock: The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.
Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using primarily the straight-line method and is provided over the estimated useful lives of 15 to 50 years for premises and 1 to 10 years for equipment.
Long-Term Assets: Premises and equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.
Bank-Owned Life Insurance: The Company has purchased life insurance policies on certain key executives. Company owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less estimated costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed as incurred.
Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.
Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
A tax position is recognized as a benefit only if it is more likely than not that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the more likely than not test, no tax benefit is recorded. At December 31, 2014 and December 31, 2013, there are no amounts accrued for uncertainty in income taxes.
The Company recognizes interest and/or penalties related to income tax matters in income tax expense. No expense was accrued for these items during the years ended 2014 and 2013.
Retirement Plans: Profit sharing plan expense is the amount of discretionary Company contributions. Deferred compensation is funded by officer and director contributions. Supplemental retirement plan expense allocates the benefits over years of service once eligible participants meet minimum employment requirements.
Employee Stock Ownership Plan: The cost of shares issued to the ESOP, but not yet allocated to participants, is shown as a reduction of shareholders equity. Compensation expense is based on the market price of shares as they are committed to be released to participant accounts. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce debt and accrued interest. Shares are considered outstanding in the earnings per share calculations when earned. Because participants may require the Company to purchase their ESOP shares upon termination of their employment and certain predetermined dates according to the ESOP plan document, the fair value of the putable allocated ESOP shares is reclassified from stockholders equity and included in other liabilities.
Stock-Based Compensation: Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Companys common stock at the date of grant is used for restricted stock awards.
Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.
Income Per Common Share: Basic income per common share is net income divided by the weighted average number of common shares outstanding during the period. Employee stock ownership plan shares are considered outstanding for this calculation unless unearned. Diluted earnings per common share show the dilutive effect, if any, of additional common shares issuable from stock options and stock awards. Income and dividends per share are restated for all stock splits and dividends through the date of issue of the financial statements. No stock splits or stock dividends occurred during 2014 or 2013.
Liquidation Account Related to Reorganization: On September 27, 2013, the Boards of Directors of the Company, AJS Bancorp, MHC and the Bank each unanimously adopted a Plan of Conversion and Reorganization of AJS Bancorp, MHC (the Plan) pursuant to which AJS Bancorp, MHC undertook a second-step conversion and ceased to exist. AJS Bancorp, MHC reorganized from a two-tier mutual holding company structure to a fully public stock holding company structure effective October 9, 2013.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In accordance with Board of Governors of the Federal Reserve System regulations, at the time of the reorganization, the Company substantially restricted retained earnings by establishing a liquidation account. The liquidation account will be maintained for the benefit of eligible account holders who continue to maintain their accounts at the Bank after conversion. The Bank will establish a parallel liquidation account to support the Companys liquidation account in the event the Company does not have sufficient assets to fund its obligations under its liquidation account. The liquidation accounts will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holders interest in the liquidation accounts. In the event of a complete liquidation of the Bank or the Company, each account holder will be entitled to receive a distribution in an amount proportionate to the adjusted qualifying account balances then held. The Bank may not pay dividends if those dividends would reduce equity capital below the required liquidation account amount.
Stock Repurchase Programs: On May 23, 2014, the Company approved its first stock repurchase program for repurchase of up to 56,267 shares of its common stock. On October 30, 2014, the Company completed its first stock repurchase program with the repurchase of 56,267 shares at an average price of $13.41 per share.
On October 21, 2014, the Company approved its second repurchase program for repurchase of up to 115,000 shares of its common stock. As of December 31, 2014, the Company had repurchased 94,600 shares at an average price of $13.60 per share.
Comprehensive Income (Loss): Comprehensive income (loss) consists of net (loss) income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available-for-sale, which are also recognized as separate components of stockholders equity.
Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.
Operating Segments: While management monitors revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.
Dividend Restriction: Banking regulations require the maintenance of certain capital levels and may limit the dividends paid by the Bank to the holding company or by the holding company to the stockholders.
Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or stockholders equity.
NOTE 2 - SECURITIES
The fair value of securities available-for-sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:
|
|
December 31, 2014 |
| ||||||||||
|
|
|
|
Gross |
|
Gross |
|
|
| ||||
|
|
Amortized |
|
Unrealized |
|
Unrealized |
|
Fair |
| ||||
|
|
Cost |
|
Gains |
|
Losses |
|
Value |
| ||||
U.S. government-sponsored entities |
|
$ |
11,000 |
|
$ |
3 |
|
$ |
(10 |
) |
$ |
10,993 |
|
Residential agency mortgage-backed |
|
43,248 |
|
188 |
|
(215 |
) |
43,221 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
54,248 |
|
$ |
191 |
|
$ |
(225 |
) |
$ |
54,214 |
|
|
|
December 31, 2013 |
| ||||||||||
|
|
|
|
Gross |
|
Gross |
|
|
| ||||
|
|
Amortized |
|
Unrealized |
|
Unrealized |
|
Fair |
| ||||
|
|
Cost |
|
Gains |
|
Losses |
|
Value |
| ||||
U.S. government-sponsored entities |
|
$ |
8,997 |
|
$ |
1 |
|
$ |
(90 |
) |
$ |
8,906 |
|
Residential agency mortgage-backed |
|
55,484 |
|
231 |
|
(817 |
) |
54,898 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total |
|
$ |
64,481 |
|
$ |
232 |
|
$ |
(907 |
) |
$ |
63,804 |
|
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 2 - SECURITIES (Continued)
The amortized cost, unrecognized gains and losses, and fair values of securities held-to-maturity were as follows:
|
|
December 31, 2014 |
| ||||||||||
|
|
|
|
Gross |
|
Gross |
|
|
| ||||
|
|
Amortized |
|
Unrecognized |
|
Unrecognized |
|
Fair |
| ||||
|
|
Cost |
|
Gains |
|
Losses |
|
Value |
| ||||
Residential agency mortgage-backed |
|
$ |
11 |
|
$ |
|
|
$ |
|
|
$ |
11 |
|
State and municipal |
|
320 |
|
10 |
|
|
|
330 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
331 |
|
$ |
10 |
|
$ |
|
|
$ |
341 |
|
|
|
December 31, 2013 |
| ||||||||||
|
|
|
|
Gross |
|
Gross |
|
|
| ||||
|
|
Amortized |
|
Unrecognized |
|
Unrecognized |
|
Fair |
| ||||
|
|
Cost |
|
Gains |
|
Losses |
|
Value |
| ||||
Residential agency mortgage-backed |
|
$ |
15 |
|
$ |
1 |
|
$ |
|
|
$ |
16 |
|
State and municipal |
|
320 |
|
14 |
|
|
|
334 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
335 |
|
$ |
15 |
|
$ |
|
|
$ |
350 |
|
Expected maturities of securities at December 31, 2014 were as follows. Securities not due at a single maturity date (mortgage-backed securities) are shown separately.
|
|
Available-for-Sale |
|
Held-to-Maturity |
| ||||||||
|
|
Amortized |
|
Fair |
|
Amortized |
|
Fair |
| ||||
|
|
Cost |
|
Value |
|
Cost |
|
Value |
| ||||
Due after one year through five years |
|
$ |
10,000 |
|
$ |
9,995 |
|
$ |
205 |
|
$ |
212 |
|
Due after five years through ten years |
|
1,000 |
|
998 |
|
115 |
|
118 |
| ||||
Residential agency mortgage-backed |
|
43,248 |
|
43,221 |
|
11 |
|
11 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
54,248 |
|
$ |
54,214 |
|
$ |
331 |
|
$ |
341 |
|
Securities with a carrying value of approximately $10,161 and $5,238 at December 31, 2014 and December 31, 2013 were pledged to secure public deposits and for other purposes as required or permitted by law.
The proceeds from sales of securities and the associated gains are listed below:
|
|
2014 |
|
2013 |
| ||
|
|
|
|
|
| ||
Proceeds from sale |
|
$ |
11,296 |
|
$ |
8,580 |
|
Gross realized gains |
|
123 |
|
182 |
| ||
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 2 - SECURITIES (Continued)
Securities with unrealized losses not recognized in income, by length of time that individual securities have been in a continuous unrealized loss position, are as follows:
|
|
December 31, 2014 |
| ||||||||||||||||
|
|
Less Than 12 Months |
|
12 Months or More |
|
Total |
| ||||||||||||
|
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
| ||||||
|
|
Value |
|
Loss |
|
Value |
|
Loss |
|
Value |
|
Loss |
| ||||||
U.S. government-sponsored entities |
|
$ |
4,992 |
|
$ |
(8 |
) |
$ |
998 |
|
$ |
(2 |
) |
$ |
5,990 |
|
$ |
(10 |
) |
Residential agency mortgage-backed |
|
3,112 |
|
(10 |
) |
13,750 |
|
(205 |
) |
16,862 |
|
(215 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total temporarily impaired |
|
$ |
8,104 |
|
$ |
(18 |
) |
$ |
14,748 |
|
$ |
(207 |
) |
$ |
22,852 |
|
$ |
(225 |
) |
|
|
December 31, 2013 |
| ||||||||||||||||
|
|
Less Than 12 Months |
|
12 Months or More |
|
Total |
| ||||||||||||
|
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
| ||||||
|
|
Value |
|
Loss |
|
Value |
|
Loss |
|
Value |
|
Loss |
| ||||||
U.S. government- sponsored entities |
|
$ |
6,906 |
|
$ |
(90 |
) |
$ |
|
|
$ |
|
|
$ |
6,906 |
|
$ |
(90 |
) |
Residential agency mortgage-backed |
|
30,170 |
|
(548 |
) |
5,349 |
|
(269 |
) |
35,519 |
|
(817 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total temporarily impaired |
|
$ |
37,076 |
|
$ |
(638 |
) |
$ |
5,349 |
|
$ |
(269 |
) |
$ |
42,425 |
|
$ |
(907 |
) |
Unrealized losses on securities have not been recognized because the issuers securities are of high credit quality (rated AA or higher), management does not intend to sell and it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the decline in fair value was largely due to changes in interest rates. The fair value is expected to recover as the securities approach maturity.
NOTE 3 - LOANS
Loans were as follows at December 31:
|
|
2014 |
|
2013 |
| ||
Mortgage: |
|
|
|
|
| ||
One-to-four-family |
|
$ |
97,214 |
|
$ |
97,301 |
|
Multi-family and commercial |
|
9,493 |
|
12,847 |
| ||
Home equity |
|
8,069 |
|
10,141 |
| ||
Consumer and other |
|
349 |
|
181 |
| ||
|
|
115,125 |
|
120,470 |
| ||
Allowance for loan losses |
|
(1,103 |
) |
(1,399 |
) | ||
Net deferred costs and other |
|
108 |
|
75 |
| ||
|
|
|
|
|
| ||
Loans, net |
|
$ |
114,130 |
|
$ |
119,146 |
|
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 3 - LOANS (Continued)
The following tables present the activity in the allowance for the loan losses by portfolio segment:
|
|
Year ended December 31, 2014 |
| |||||||||||||
|
|
|
|
Multi-Family |
|
|
|
Consumer |
|
|
| |||||
|
|
One-to-Four |
|
and |
|
Home |
|
and |
|
|
| |||||
|
|
Family |
|
Commercial |
|
Equity |
|
Other |
|
Total |
| |||||
Allowances for loan losses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Beginning balance |
|
$ |
823 |
|
$ |
466 |
|
$ |
109 |
|
$ |
1 |
|
$ |
1,399 |
|
Provision for loan losses |
|
217 |
|
568 |
|
(87 |
) |
(1 |
) |
697 |
| |||||
Charge-offs |
|
(224 |
) |
(778 |
) |
|
|
|
|
(1,002 |
) | |||||
Recoveries |
|
6 |
|
3 |
|
|
|
|
|
9 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance |
|
$ |
822 |
|
$ |
259 |
|
$ |
22 |
|
$ |
|
|
$ |
1,103 |
|
|
|
Year ended December 31, 2013 |
| |||||||||||||
|
|
|
|
Multi-Family |
|
|
|
Consumer |
|
|
| |||||
|
|
One-to-Four |
|
and |
|
Home |
|
and |
|
|
| |||||
|
|
Family |
|
Commercial |
|
Equity |
|
Other |
|
Total |
| |||||
Allowances for loan losses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Beginning balance |
|
$ |
1,038 |
|
$ |
467 |
|
$ |
59 |
|
$ |
1 |
|
$ |
1,565 |
|
Provision for loan losses |
|
|
|
|
|
|
|
|
|
|
| |||||
Charge-offs |
|
(224 |
) |
(6 |
) |
|
|
|
|
(230 |
) | |||||
Recoveries |
|
9 |
|
5 |
|
50 |
|
|
|
64 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance |
|
$ |
823 |
|
$ |
466 |
|
$ |
109 |
|
$ |
1 |
|
$ |
1,399 |
|
The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method:
|
|
December 31, 2014 |
| |||||||||||||
|
|
|
|
Multi-Family |
|
|
|
Consumer |
|
|
| |||||
|
|
One-to-Four |
|
and |
|
Home |
|
and |
|
|
| |||||
|
|
Family |
|
Commercial |
|
Equity |
|
Other |
|
Total |
| |||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Loans individually evaluated for impairment |
|
$ |
234 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
234 |
|
Loans collectively evaluated for impairment |
|
588 |
|
259 |
|
22 |
|
|
|
869 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total ending allowance balance |
|
$ |
822 |
|
$ |
259 |
|
$ |
22 |
|
$ |
|
|
$ |
1,103 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans: |
|
|
|
|
|
|
|
|
|
|
| |||||
Loans individually evaluated for impairment |
|
$ |
1,564 |
|
$ |
899 |
|
$ |
|
|
$ |
|
|
$ |
2,463 |
|
Loans collectively evaluated for impairment |
|
95,650 |
|
8,594 |
|
8,069 |
|
349 |
|
112,662 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending loans balance |
|
$ |
97,214 |
|
$ |
9,493 |
|
$ |
8,069 |
|
$ |
349 |
|
$ |
115,125 |
|
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 3 - LOANS (Continued)
|
|
December 31, 2013 |
| |||||||||||||
|
|
|
|
Multi-Family |
|
|
|
Consumer |
|
|
| |||||
|
|
One-to-Four |
|
and |
|
Home |
|
and |
|
|
| |||||
|
|
Family |
|
Commercial |
|
Equity |
|
Other |
|
Total |
| |||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Loans individually evaluated for impairment |
|
$ |
235 |
|
$ |
139 |
|
$ |
|
|
$ |
|
|
$ |
374 |
|
Loans collectively evaluated for impairment |
|
588 |
|
327 |
|
109 |
|
1 |
|
1,025 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total ending allowance balance |
|
$ |
823 |
|
$ |
466 |
|
$ |
109 |
|
$ |
1 |
|
$ |
1,399 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans: |
|
|
|
|
|
|
|
|
|
|
| |||||
Loans individually evaluated for impairment |
|
$ |
2,971 |
|
$ |
2,652 |
|
$ |
144 |
|
$ |
|
|
$ |
5,767 |
|
Loans collectively evaluated for impairment |
|
94,330 |
|
10,195 |
|
9,997 |
|
181 |
|
114,703 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending loans balance |
|
$ |
97,301 |
|
$ |
12,847 |
|
$ |
10,141 |
|
$ |
181 |
|
$ |
120,470 |
|
|
|
December 31, 2014 |
| ||||||||||||||||
|
|
|
|
|
|
Allowance |
|
|
|
|
|
|
| ||||||
|
|
Unpaid |
|
|
|
for Loan |
|
Average |
|
Interest |
|
Cash |
| ||||||
|
|
Principal |
|
Recorded |
|
Losses |
|
Recorded |
|
Income |
|
Basis |
| ||||||
|
|
Balance |
|
Investment |
|
Allocated |
|
Investment |
|
Recognized |
|
Recognized |
| ||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
One-to-four family |
|
$ |
410 |
|
$ |
297 |
|
$ |
|
|
$ |
224 |
|
$ |
15 |
|
$ |
|
|
Multi-family and commercial |
|
1,185 |
|
899 |
|
|
|
1,658 |
|
2 |
|
18 |
| ||||||
Home equity |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Subtotal |
|
1,595 |
|
1,196 |
|
|
|
1,882 |
|
17 |
|
18 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
One-to-four family |
|
1,300 |
|
1,267 |
|
234 |
|
1,274 |
|
64 |
|
|
| ||||||
Multi-family and commercial |
|
|
|
|
|
|
|
144 |
|
|
|
|
| ||||||
Home equity |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Subtotal |
|
1,300 |
|
1,267 |
|
234 |
|
1,418 |
|
64 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total |
|
$ |
2,895 |
|
$ |
2,463 |
|
$ |
234 |
|
$ |
3,300 |
|
$ |
81 |
|
$ |
18 |
|
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 3 - LOANS (Continued)
|
|
December 31, 2013 |
| ||||||||||||||||
|
|
|
|
|
|
Allowance |
|
|
|
|
|
|
| ||||||
|
|
Unpaid |
|
|
|
for Loan |
|
Average |
|
Interest |
|
Cash |
| ||||||
|
|
Principal |
|
Recorded |
|
Losses |
|
Recorded |
|
Income |
|
Basis |
| ||||||
|
|
Balance |
|
Investment |
|
Allocated |
|
Investment |
|
Recognized |
|
Recognized |
| ||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
One-to-four family |
|
$ |
2,536 |
|
$ |
2,223 |
|
$ |
|
|
$ |
2,194 |
|
$ |
45 |
|
$ |
|
|
Multi-family and commercial |
|
2,746 |
|
1,987 |
|
|
|
2,004 |
|
74 |
|
|
| ||||||
Home equity |
|
148 |
|
144 |
|
|
|
79 |
|
3 |
|
|
| ||||||
Subtotal |
|
5,430 |
|
4,354 |
|
|
|
4,277 |
|
122 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
One-to-four family |
|
826 |
|
748 |
|
235 |
|
906 |
|
24 |
|
|
| ||||||
Multi-family and commercial |
|
729 |
|
665 |
|
139 |
|
682 |
|
|
|
|
| ||||||
Home equity |
|
|
|
|
|
|
|
18 |
|
|
|
|
| ||||||
Subtotal |
|
1,555 |
|
1,413 |
|
374 |
|
1,606 |
|
24 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total |
|
$ |
6,985 |
|
$ |
5,767 |
|
$ |
374 |
|
$ |
5,883 |
|
$ |
146 |
|
$ |
|
|
The recorded investment in loans excludes accrued interest receivable and loan origination costs, net, due to immateriality.
Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of December 31, 2014 and 2013:
|
|
|
|
|
|
Loans Past Due Over |
| ||||||
|
|
Nonaccrual |
|
90 Days Still Accruing |
| ||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
| ||||
One-to-four family |
|
$ |
1,886 |
|
$ |
1,565 |
|
$ |
|
|
$ |
|
|
Multi-family and commercial |
|
900 |
|
1,542 |
|
|
|
|
| ||||
Home equity |
|
192 |
|
164 |
|
|
|
|
| ||||
Consumer and other |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,978 |
|
$ |
3,271 |
|
$ |
|
|
$ |
|
|
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 3 - LOANS (Continued)
The following tables present the aging of the recorded investment in past due loans by class of loans:
|
|
December 31, 2014 |
| ||||||||||||||||
|
|
30 - 59 |
|
60 - 89 |
|
Greater Than |
|
|
|
|
|
|
| ||||||
|
|
Days |
|
Days |
|
90 Days |
|
Total |
|
Loans Not |
|
|
| ||||||
|
|
Past Due |
|
Past Due |
|
Past Due |
|
Past Due |
|
Past Due |
|
Total |
| ||||||
One-to-four family |
|
$ |
245 |
|
$ |
305 |
|
$ |
753 |
|
$ |
1,303 |
|
$ |
95,911 |
|
$ |
97,214 |
|
Multi-family and commercial |
|
206 |
|
|
|
379 |
|
585 |
|
8,908 |
|
9,493 |
| ||||||
Home equity |
|
88 |
|
44 |
|
35 |
|
167 |
|
7,902 |
|
8,069 |
| ||||||
Consumer and other |
|
|
|
|
|
|
|
|
|
349 |
|
349 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
539 |
|
$ |
349 |
|
$ |
1,167 |
|
$ |
2,055 |
|
$ |
113,070 |
|
$ |
115,125 |
|
|
|
December 31, 2013 |
| ||||||||||||||||
|
|
30 - 59 |
|
60 - 89 |
|
Greater Than |
|
|
|
|
|
|
| ||||||
|
|
Days |
|
Days |
|
90 Days |
|
Total |
|
Loans Not |
|
|
| ||||||
|
|
Past Due |
|
Past Due |
|
Past Due |
|
Past Due |
|
Past Due |
|
Total |
| ||||||
One-to-four family |
|
$ |
575 |
|
$ |
328 |
|
$ |
851 |
|
$ |
1,754 |
|
$ |
95,547 |
|
$ |
97,301 |
|
Multi-family and commercial |
|
|
|
|
|
524 |
|
524 |
|
12,323 |
|
12,847 |
| ||||||
Home equity |
|
13 |
|
46 |
|
46 |
|
105 |
|
10,036 |
|
10,141 |
| ||||||
Consumer and other |
|
|
|
|
|
|
|
|
|
181 |
|
181 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total |
|
$ |
588 |
|
$ |
374 |
|
$ |
1,421 |
|
$ |
2,383 |
|
$ |
118,087 |
|
$ |
120,470 |
|
Troubled Debt Restructurings
The following table presents the recorded investment of troubled debt restructurings by accrual status and specific reserves allocated to troubled debt restructuring:
|
|
2014 |
|
2013 |
| ||
Accrual status |
|
$ |
1,431 |
|
$ |
2,359 |
|
Non-accrual status |
|
1,032 |
|
1,715 |
| ||
|
|
2,463 |
|
4,074 |
| ||
Specific reserves allocated |
|
234 |
|
373 |
| ||
|
|
|
|
|
| ||
Net |
|
$ |
2,229 |
|
$ |
3,701 |
|
No additional loan commitments were outstanding to these borrowers at December 31, 2014 and December 31, 2013. Loans are returned to accrual status after a period of satisfactory payment performance under the terms of the restructuring and reasonable future payment assurance. Satisfactory payment performance is generally no less than six consecutive months of timely payments.
The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. Modifications involving a reduction of the stated interest rate of the loan ranged from 0.50% to 5.0%. Modifications involving an extension of the maturity date were for periods ranging from 10 months to 378 months.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 3 - LOANS (Continued)
The troubled debt restructurings described above resulted in an additional $11 increase in the allowance for loan losses and no charge offs during the year ending December 31, 2014. There was no additional increase in the allowance for loan losses and $5 in charge offs during the year ending December 31, 2013.
The following tables present loans by class modified as troubled debt restructurings that occurred during the years ended December 31 2014 and 2013:
|
|
|
|
Pre-Modification |
|
Post-Modification |
| ||
|
|
|
|
Outstanding |
|
Outstanding |
| ||
|
|
Number of |
|
Recorded |
|
Recorded |
| ||
|
|
Loans |
|
Investment |
|
Investment |
| ||
December 31, 2014 |
|
|
|
|
|
|
| ||
One-tofour family |
|
1 |
|
$ |
100 |
|
$ |
100 |
|
Multi-family and commercial |
|
1 |
|
176 |
|
181 |
| ||
Home equity |
|
|
|
|
|
|
| ||
Consumer and other |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
Total |
|
2 |
|
$ |
276 |
|
$ |
281 |
|
|
|
|
|
|
|
|
| ||
December 31, 2013 |
|
|
|
|
|
|
| ||
One-tofour family |
|
2 |
|
$ |
231 |
|
$ |
242 |
|
Multi-family and commercial |
|
|
|
|
|
|
| ||
Home equity |
|
|
|
|
|
|
| ||
Consumer and other |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
Total |
|
2 |
|
$ |
231 |
|
$ |
242 |
|
The recorded investment increased due to real estate taxes for the years ended December 31, 2014 and 2013. The troubled debt restructurings described above were evaluated for impairment prior to modification, did not result in an increase in the allowance for loan losses upon modification, and resulted in no additional charge-offs for the years ended December 31, 2014 and 2013.
A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. The following tables present loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the years ended December 31, 2014 and 2013.
|
|
Number of |
|
Recorded |
| |
|
|
Loans |
|
Investment |
| |
December 31, 2014 |
|
|
|
|
| |
One-tofour family residences |
|
1 |
|
$ |
34 |
|
Multi-family and commercial properties |
|
|
|
|
| |
Home equity |
|
|
|
|
| |
Consumer and other |
|
|
|
|
| |
|
|
|
|
|
| |
Total |
|
1 |
|
$ |
34 |
|
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 3 - LOANS (Continued)
|
|
Number of |
|
Recorded |
| |
|
|
Loans |
|
Investment |
| |
December 31, 2013 |
|
|
|
|
| |
One-tofour family residences |
|
1 |
|
$ |
216 |
|
Multi-family and commercial properties |
|
|
|
|
| |
Home equity |
|
|
|
|
| |
Consumer and other |
|
|
|
|
| |
|
|
|
|
|
| |
Total |
|
1 |
|
$ |
216 |
|
The terms of certain other loans were modified during the twelve months ended December 31, 2014 and 2013 that did not meet the definition of a troubled debt restructuring. These loan balances were not material in the twelve months ended December 31, 2014 and 2013.
In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Companys internal underwriting policy.
Credit Quality Indicators:
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes one-to-four family, multi-family and commercial real estate loans, and home equity loans. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
Special Mention. Loans classified as special mention have a potential weakness that deserves managements close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Companys credit position at some future date.
Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 3 - LOANS (Continued)
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans. As of December 31, 2014 and December 31, 2013, and based on the most recent analysis performed, the risk category of loans by class of loans was as follows:
|
|
December 31, 2014 |
| |||||||||||||
|
|
|
|
Special |
|
|
|
|
|
|
| |||||
|
|
Pass |
|
Mention |
|
Substandard |
|
Doubtful |
|
Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
One to four-family |
|
$ |
94,007 |
|
$ |
|
|
$ |
3,207 |
|
$ |
|
|
$ |
97,214 |
|
Multi-family and commercial |
|
2,649 |
|
102 |
|
6,742 |
|
|
|
9,493 |
| |||||
Home equity |
|
7,641 |
|
|
|
428 |
|
|
|
8,069 |
| |||||
Consumer and other |
|
349 |
|
|
|
|
|
|
|
349 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total |
|
$ |
104,646 |
|
$ |
102 |
|
$ |
10,377 |
|
$ |
|
|
$ |
115,125 |
|
|
|
December 31, 2013 |
| |||||||||||||
|
|
|
|
Special |
|
|
|
|
|
|
| |||||
|
|
Pass |
|
Mention |
|
Substandard |
|
Doubtful |
|
Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
One to four-family |
|
$ |
93,144 |
|
$ |
201 |
|
$ |
3,956 |
|
$ |
|
|
$ |
97,301 |
|
Multi-family and commercial |
|
2,606 |
|
4,569 |
|
5,672 |
|
|
|
12,847 |
| |||||
Home equity |
|
9,996 |
|
|
|
145 |
|
|
|
10,141 |
| |||||
Consumer and other |
|
181 |
|
|
|
|
|
|
|
181 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total |
|
$ |
105,927 |
|
$ |
4,770 |
|
$ |
9,773 |
|
$ |
|
|
$ |
120,470 |
|
Certain directors and executive officers of the Company and companies with which they are affiliated have obtained loans on various occasions. A summary of such loans made by the Company is as follows:
|
|
2014 |
|
2013 |
| ||
|
|
|
|
|
| ||
Beginning balance |
|
$ |
854 |
|
$ |
992 |
|
New loans |
|
|
|
|
| ||
Effect of changes in related parties |
|
|
|
(75 |
) | ||
Repayments |
|
(63 |
) |
(63 |
) | ||
Ending balance |
|
$ |
791 |
|
$ |
854 |
|
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 4 - PREMISES AND EQUIPMENT
Premises and equipment as of December 31, 2014 and 2013 were as follows:
|
|
2014 |
|
2013 |
| ||
|
|
|
|
|
| ||
Land |
|
$ |
1,351 |
|
$ |
1,351 |
|
Office buildings and improvements |
|
5,451 |
|
5,432 |
| ||
Furniture, fixtures, and equipment |
|
1,844 |
|
1,735 |
| ||
|
|
8,646 |
|
8,518 |
| ||
Less accumulated depreciation |
|
5,023 |
|
4,898 |
| ||
|
|
|
|
|
| ||
|
|
$ |
3,623 |
|
$ |
3,620 |
|
NOTE 5 - DEPOSITS
Certificates of deposit in denominations of $250 or more, the federally insured limits, were $6,798 and $4,372 at December 31, 2014 and 2013. Deposit accounts are summarized as follows:
|
|
2014 |
|
2013 |
| ||
|
|
|
|
|
| ||
Passbook accounts |
|
$ |
65,359 |
|
$ |
63,871 |
|
NOW and checking accounts |
|
31,874 |
|
29,079 |
| ||
Money market accounts |
|
6,432 |
|
7,189 |
| ||
Certificates of deposit |
|
62,584 |
|
64,380 |
| ||
|
|
|
|
|
| ||
Total deposits |
|
$ |
166,249 |
|
$ |
164,519 |
|
Scheduled maturities of time certificates at December 31, 2014 are as follows:
2015 |
|
$ |
37,943 |
|
2016 |
|
8,258 |
| |
2017 |
|
5,780 |
| |
2018 |
|
4,318 |
| |
2019 |
|
3,462 |
| |
Thereafter |
|
2,823 |
| |
|
|
|
| |
|
|
$ |
62,584 |
|
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 5 DEPOSITS (Continued)
Interest expense for the year ended December 31, 2014 and 201 on deposits is summarized as follows:
|
|
2014 |
|
2013 |
| ||
|
|
|
|
|
| ||
NOW |
|
$ |
1 |
|
$ |
1 |
|
Money market |
|
1 |
|
1 |
| ||
Passbook |
|
94 |
|
86 |
| ||
Certificates of deposit |
|
571 |
|
612 |
| ||
|
|
|
|
|
| ||
|
|
$ |
667 |
|
$ |
700 |
|
Non-interest-bearing deposits totaled $20,905 and $18,936 at December 31, 2014 and 2013. Deposit accounts held by directors and executive officers totaled $841 and $508 at December 31, 2014 and 2013.
NOTE 6 - FHLB ADVANCES
At December 31, 2014 and 2013, maturities and weighted-average rate of FHLB advances by year of maturity were as follows:
|
|
2014 |
|
2013 |
| ||||||
Maturity |
|
Balance |
|
Rate |
|
Balance |
|
Rate |
| ||
|
|
|
|
|
|
|
|
|
| ||
2014 |
|
$ |
|
|
|
% |
5,000 |
|
1.90 |
% | |
2015 |
|
7,000 |
|
2.24 |
|
7,000 |
|
2.24 |
| ||
2016 |
|
5,000 |
|
2.55 |
|
5,000 |
|
2.55 |
| ||
|
|
|
|
|
|
|
|
|
| ||
|
|
$ |
12,000 |
|
2.37 |
% |
$ |
17,000 |
|
2.23 |
% |
The advances are fixed rate, payable upon maturity date, and also subject to a prepayment penalty equivalent to the unpaid interest cash flows at rates effective at the time of the prepayment. The advances were collateralized by $66,402 and $68,469 of first mortgage loans under a blanket lien arrangement at December 31, 2014 and December 31, 2013. Based on this collateral and the Companys holdings of FHLB stock, the Company is eligible to borrow an additional $54,402 at December 31, 2014.
NOTE 7 - FAIR VALUES
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 7 - FAIR VALUES (Continued)
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a companys own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The Company used the following methods and significant assumptions used to estimate the fair value of the following items:
Securities: The fair values of trading securities and securities available-for-sale are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).
Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value of underlying collateral. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrowers financial statements, or aging reports, adjusted or discounted based on managements historical knowledge, changes in market conditions from the time of the valuation, and managements expertise and knowledge of the client and clients business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.
Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.
Appraisals for both collateral dependent impaired loans and real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 7 - FAIR VALUES (Continued)
At December 31, 2014 and 2013, the Company had no liabilities measured at fair value. Assets measured at fair value on a recurring basis are summarized below:
|
|
December 31, 2014 |
| ||||||||||
|
|
|
|
Quoted Prices in |
|
Significant |
|
|
| ||||
|
|
|
|
Active Markets |
|
Other |
|
Significant |
| ||||
|
|
|
|
For Identical |
|
Observable |
|
Unobservable |
| ||||
|
|
|
|
Assets |
|
Inputs |
|
Inputs |
| ||||
|
|
Total |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
| ||||
Securities available-for-sale |
|
|
|
|
|
|
|
|
| ||||
U.S. government-sponsored entities |
|
$ |
10,993 |
|
$ |
|
|
$ |
10,993 |
|
$ |
|
|
Residential agency mortgage-backed |
|
43,221 |
|
|
|
43,221 |
|
|
| ||||
|
|
December 31, 2013 |
| ||||||||||
|
|
|
|
Quoted Prices in |
|
Significant |
|
|
| ||||
|
|
|
|
Active Markets |
|
Other |
|
Significant |
| ||||
|
|
|
|
For Identical |
|
Observable |
|
Unobservable |
| ||||
|
|
|
|
Assets |
|
Inputs |
|
Inputs |
| ||||
|
|
Total |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
| ||||
Securities available-for-sale |
|
|
|
|
|
|
|
|
| ||||
U.S. government-sponsored entities |
|
$ |
8,906 |
|
$ |
|
|
$ |
8,906 |
|
$ |
|
|
Residential agency mortgage-backed |
|
54,898 |
|
|
|
54,898 |
|
|
| ||||
There were no transfers between Level 1 and Level 2 during the years ended December 31, 2014 and 2013.
The following tables set forth the Companys assets that were measured at fair value on a non-recurring basis:
|
|
December 31, 2014 |
| ||||||||||
|
|
|
|
Quoted Prices in |
|
Significant |
|
|
| ||||
|
|
|
|
Active Markets |
|
Other |
|
Significant |
| ||||
|
|
|
|
For Identical |
|
Observable |
|
Unobservable |
| ||||
|
|
|
|
Assets |
|
Inputs |
|
Inputs |
| ||||
|
|
Total |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
| ||||
Impaired loans: |
|
|
|
|
|
|
|
|
| ||||
One-to-four family |
|
$ |
201 |
|
$ |
|
|
$ |
|
|
$ |
201 |
|
Multi-family and commercial |
|
346 |
|
|
|
|
|
346 |
| ||||
Other real estate owned: |
|
|
|
|
|
|
|
|
| ||||
One-to-four family |
|
412 |
|
|
|
|
|
412 |
| ||||
Multi-family and commercial |
|
1,299 |
|
|
|
|
|
1,299 |
| ||||
|
|
December 31, 2013 |
| ||||||||||
|
|
|
|
Quoted Prices in |
|
Significant |
|
|
| ||||
|
|
|
|
Active Markets |
|
Other |
|
Significant |
| ||||
|
|
|
|
For Identical |
|
Observable |
|
Unobservable |
| ||||
|
|
|
|
Assets |
|
Inputs |
|
Inputs |
| ||||
|
|
Total |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
| ||||
Impaired loans: |
|
|
|
|
|
|
|
|
| ||||
One-to-four family |
|
$ |
513 |
|
$ |
|
|
$ |
|
|
$ |
513 |
|
Multi-family and commercial |
|
526 |
|
|
|
|
|
526 |
| ||||
Other real estate owned: |
|
|
|
|
|
|
|
|
| ||||
One-to-four family |
|
130 |
|
|
|
|
|
130 |
| ||||
Multi-family and commercial |
|
2,283 |
|
|
|
|
|
2,283 |
| ||||
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 7 - FAIR VALUES (Continued)
At December 31, 2014, impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a recorded investment of $547, with no valuation allowance, resulting in an additional provision for loan losses of $134 for 2014. At December 31, 2013, impaired loans had a recorded investment of $1,413, net of a valuation allowance of $374, resulting in no additional provision for loan losses for the year ended December 31, 2013.
At December 31, 2014, other real estate owned, which is carried at fair value less estimated costs to sell, had a carrying amount of $2,021, net of a valuation allowance of $310, resulting in a write-down of $86 during 2014. At December 31, 2013, other real estate owned had a carrying amount of $2,636, net of a valuation allowance of $223, resulting in $13 additional write-downs during 2013.
The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis:
|
|
December 31, 2014 | |||||||
|
|
|
|
Valuation |
|
|
|
Range | |
|
|
Fair Value |
|
Technique(s) |
|
Unobservable Input(s) |
|
(Weighted Average) | |
|
|
|
|
|
|
|
|
| |
Impaired loans One-to-four family |
|
$ |
201 |
|
Sales comparison approach |
|
Adjustment for differences between the comparable Sales |
|
0.0-7.0% (-4.8%) |
Impaired loans Multi-family and commercial |
|
$ |
346 |
|
Sales comparison approach |
|
Adjustment for differences between the comparable sales |
|
0.0-56.7% (18.2%) |
Other real estate owned One-to-four family |
|
$ |
412 |
|
Sales comparison approach |
|
Adjustment for differences between the comparable sales |
|
0.0-5.3% (-6.5%) |
Other real estate owned multi-family and commercial |
|
$ |
90 |
|
Sales comparison approach |
|
Adjustment for differences between the comparable sales |
|
5.7-55.4% (34.2%) |
|
|
1,209 |
|
Income approach |
|
Adjustment for differences in net operating income expectations |
|
13.1% (13.1%) | |
|
|
|
|
|
|
Capitalization rate |
|
8.3% (8.3%) |
|
|
December 31, 2013 | |||||||
|
|
|
|
Valuation |
|
|
|
Range | |
|
|
Fair Value |
|
Technique(s) |
|
Unobservable Input(s) |
|
(Weighted Average) | |
|
|
|
|
|
|
|
|
| |
Impaired loans One to four-family |
|
$ |
513 |
|
Sales comparison approach |
|
Adjustment for differences between the comparable sales |
|
0.0 31.2% (5.5%) |
Impaired loans Multi-family and commercial |
|
$ |
526 |
|
Sales comparison approach |
|
Adjustment for differences between the comparable sales |
|
0.0 23.7% (-6.4%) |
Other real estate owned One -to four family |
|
$ |
130 |
|
Sales comparison approach |
|
Adjustment for differences between the comparable sales |
|
0.0% (0.0%) |
Other real estate owned multi-family and commercial |
|
$ |
1,037 |
|
Sales comparison approach |
|
Adjustment for differences between the comparable sales |
|
0.0 4.9% (1.1%) |
|
|
1,246 |
|
Income approach |
|
Adjustment for differences in net operating income expectations |
|
12.0% (12.0%) | |
|
|
|
|
|
|
Capitalization rate |
|
9.8% (9.8%) |
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 7 - FAIR VALUES (Continued)
The carrying amount and estimated fair value of financial instruments not previously presented were as follows.
|
|
December 31, 2014 |
| |||||||||||||
|
|
Carrying |
|
Fair Value Measurements Using: |
| |||||||||||
|
|
Amount |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| |||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
|
$ |
32,898 |
|
$ |
32,898 |
|
$ |
|
|
$ |
|
|
$ |
32,898 |
|
Securities held-to-maturity |
|
331 |
|
|
|
341 |
|
|
|
341 |
| |||||
Loans, net (less impaired loans) |
|
113,583 |
|
|
|
|
|
113,316 |
|
113,316 |
| |||||
FHLB stock |
|
1,768 |
|
N/A |
|
N/A |
|
N/A |
|
1,768 |
| |||||
Accrued interest receivable |
|
438 |
|
|
|
20 |
|
418 |
|
438 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
Non-interest-bearing deposits |
|
$ |
20,905 |
|
$ |
20,905 |
|
$ |
|
|
$ |
|
|
$ |
20,905 |
|
Interest-bearing deposits |
|
145,344 |
|
|
|
145,444 |
|
|
|
145,444 |
| |||||
FHLB advances |
|
12,000 |
|
|
|
12,163 |
|
|
|
12,163 |
| |||||
Advances from borrowers for taxes |
|
2,068 |
|
|
|
2,068 |
|
|
|
2,068 |
| |||||
Accrued interest payable |
|
28 |
|
|
|
28 |
|
|
|
28 |
|
|
|
December 31, 2013 |
| |||||||||||||
|
|
Carrying |
|
Fair Value Measurements Using: |
| |||||||||||
|
|
Amount |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| |||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
|
$ |
22,281 |
|
$ |
22,281 |
|
$ |
|
|
$ |
|
|
$ |
22,281 |
|
Securities held-to-maturity |
|
335 |
|
|
|
350 |
|
|
|
350 |
| |||||
Loans, net (less impaired loans) |
|
117,733 |
|
|
|
|
|
115,242 |
|
115,242 |
| |||||
FHLB stock |
|
1,768 |
|
N/A |
|
N/A |
|
N/A |
|
1,768 |
| |||||
Accrued interest receivable |
|
509 |
|
|
|
30 |
|
479 |
|
509 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
Non-interest-bearing deposits |
|
$ |
18,936 |
|
$ |
18,936 |
|
$ |
|
|
$ |
|
|
$ |
18,936 |
|
Interest-bearing deposits |
|
145,583 |
|
|
|
145,454 |
|
|
|
145,454 |
| |||||
FHLB advances |
|
17,000 |
|
|
|
17,488 |
|
|
|
17,488 |
| |||||
Advances from borrowers for taxes |
|
1,955 |
|
|
|
1,955 |
|
|
|
1,955 |
| |||||
Accrued interest payable |
|
36 |
|
|
|
36 |
|
|
|
36 |
|
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 7 - FAIR VALUES (Continued)
The methods and assumptions, not previously presented, used to estimate fair values are described as follows:
(a) Cash and Cash Equivalents
The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1
(b) Securities Held-to-Maturity
The carrying amounts of held to maturity securities are determined using a pricing matrix resulting in a Level 2 classification.
(c) FHLB Stock
It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.
(d) Loans
Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.
(e) Accrued Interest Receivable
The carrying amount of accrued interest receivable approximates its fair value and is classified as Level 2 for securities and Level 3 for loans.
(f) Deposits
The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) and are classified as Level 1. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date are classified as a Level 2. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.
(g) FHLB Advances
The fair value of FHLB advances, which are at a fixed rate, are estimated using discounted cash flow analyses based on current rates for similar advances resulting in a Level 2 classification.
(h) Advances From Borrowers For Taxes
The carrying value of the short-term borrowings approximated fair value and are classified as Level 2.
(i) Accrued Interest Payable
The carrying amount of accrued interest payable approximates its fair value and is classified as Level 2.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 8 - EARNINGS (LOSS) PER SHARE
According to the provisions of FASB ASC 260, Earnings Per Share, nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and are included in the computation of EPS pursuant to the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. ESOP shares are considered outstanding for basic and diluted earnings per share when the shares are committed to be released. The Companys nonvested restricted stock awards qualify as participating securities.
Net income is allocated between the common stock and participating securities pursuant to the two-class method, based on their rights to receive dividends, participate in earnings or absorb losses. Basic earnings per common share is computed by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding during the period, excluding participating nonvested restricted shares.
The table below calculates the earnings per share for the year ended December 31, 2014 and 2013:
|
|
December 31, |
| ||||
|
|
2014 |
|
2013 |
| ||
Basic: |
|
|
|
|
| ||
Net income |
|
$ |
2,102 |
|
$ |
903 |
|
Distributed earnings allocated to participated securities |
|
(20 |
) |
|
| ||
Undistributed income allocated to participated securities |
|
(9 |
) |
|
| ||
Earnings allocated to common shareholders |
|
2,073 |
|
903 |
| ||
|
|
|
|
|
| ||
Weighted common shares outstanding including participating securities |
|
2,204,803 |
|
2,288,379 |
| ||
Less: Participating securities |
|
(34,729 |
) |
|
| ||
Weighted-average common shares outstanding |
|
2,170,074 |
|
2,288,379 |
| ||
|
|
|
|
|
| ||
Basic earnings per common share |
|
$ |
0.96 |
|
$ |
0.39 |
|
|
|
|
|
|
| ||
Diluted: |
|
|
|
|
| ||
Net earnings allocated to common stock |
|
$ |
2,073 |
|
$ |
903 |
|
|
|
|
|
|
| ||
Weighted average shares for basic |
|
2,170,074 |
|
2,288,379 |
| ||
Diluted effects: |
|
|
|
|
| ||
Stock options |
|
|
|
|
| ||
Stock awards |
|
|
|
|
| ||
Diluted weighted-average shares for basic |
|
2,170,074 |
|
2,288,379 |
| ||
|
|
|
|
|
| ||
Diluted earnings per common share |
|
$ |
0.96 |
|
$ |
0.39 |
|
At December 31, 2014 and 2013, there were 119,507 and 1,375 anti-dilutive stock options, respectively.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 8 - EARNINGS (LOSS) PER SHARE (Continued)
Weighted average common shares outstanding were adjusted to reflect the completion of the second-step conversion using an exchange ratio of 1.1460 for shares held by the public prior to October 9, 2013. In addition, employee stock ownership plan shares are considered outstanding for this calculation unless unearned. At December 31, 2014 and December 31, 2013 there were 105,032 and 108,783 shares unearned from the employee stock ownership plan, respectively.
NOTE 9 - INCOME TAXES
Income tax expense (benefit) was as follows:
|
|
2014 |
|
2013 |
| ||
Current |
|
|
|
|
| ||
Federal |
|
$ |
|
|
$ |
19 |
|
State |
|
|
|
|
| ||
Deferred |
|
82 |
|
268 |
| ||
Change in valuation allowance |
|
(1,790 |
) |
(287 |
) | ||
|
|
|
|
|
| ||
Total |
|
$ |
(1,708 |
) |
$ |
|
|
Effective tax rates differ from federal statutory rates applied to financial statement income due to the following:
|
|
2014 |
|
2013 |
| ||
|
|
|
|
|
| ||
Income tax at federal statutory rate (34%) |
|
$ |
134 |
|
$ |
307 |
|
Effect of: |
|
|
|
|
| ||
State taxes, net of federal benefit |
|
10 |
|
43 |
| ||
Other, net |
|
(62 |
) |
(63 |
) | ||
Change in valuation allowance |
|
(1,790 |
) |
(287 |
) | ||
|
|
|
|
|
| ||
Total |
|
$ |
(1,708 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
NA |
|
0.0 |
% |
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 9 - INCOME TAXES (Continued)
The net deferred tax assets included in other assets in the consolidated statements of financial condition are as follows:
|
|
2014 |
|
2013 |
| ||
Deferred tax assets |
|
|
|
|
| ||
Allowance for loan losses |
|
$ |
432 |
|
$ |
563 |
|
Accrued expenses |
|
664 |
|
621 |
| ||
Reserve for uncollectible interest |
|
31 |
|
46 |
| ||
OREO valuation allowances |
|
137 |
|
106 |
| ||
Unrealized gain on securities available-for-sale |
|
14 |
|
270 |
| ||
Net operating loss carryforwards |
|
1,734 |
|
1,767 |
| ||
Other, net |
|
7 |
|
|
| ||
|
|
3,019 |
|
3,373 |
| ||
Deferred tax liabilities |
|
|
|
|
| ||
Premises and equipment |
|
(331 |
) |
(302 |
) | ||
FHLB stock dividends |
|
(127 |
) |
(131 |
) | ||
Deferred loan fees |
|
79 |
|
(75 |
) | ||
Other, net |
|
|
|
(41 |
) | ||
|
|
(537 |
) |
(549 |
) | ||
Net deferred tax asset |
|
2,482 |
|
2,824 |
| ||
Valuation allowance |
|
|
|
(1,790 |
) | ||
|
|
|
|
|
| ||
Net deferred tax asset |
|
$ |
2,482 |
|
$ |
1,034 |
|
At December 31, 2014 and December 31, 2013, the Company had net deferred tax assets of $2,482 and $1,034 respectively. At December 31, 2013, the net deferred tax asset was net of a $1,790 valuation allowance. The valuation allowance was recorded in 2009 due to accumulated operating losses during the three years prior to 2009. The Company could not fully rely on projected future taxable income to utilize deferred tax assets and therefore a valuation allowance was established and maintained through March 31, 2014 to the amount of net deferred tax assets that could be supported. A valuation allowance is recognized for a deferred tax asset if, based on the weight of available evidence, it is more likely-than-not that some portion of the entire deferred tax asset will not be realized. The ultimate realization of a deferred tax asset is dependent upon the generation of future taxable income during the periods in which temporary differences responsible for the deferred tax asset become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making an assessment regarding the realizability of our deferred tax asset. Based upon the Companys recent sustained ability to generate taxable income and projections of future taxable income over the periods in which our existing deferred tax assets, including our NOL carryforward, is expected to become deductible, management determined that the realization of our deferred tax assets was more likely-than-not as of June 30, 2014. As a result a valuation allowance for the deferred tax asset was unnecessary at June 30, 2014. Excluding the reversal of the remaining deferred tax asset valuation allowance of $1,790 the Company recorded tax expense for the year ended December 31, 2014 of $82. The amount of our deferred tax asset considered realizable, however, could be reduced in a subsequent quarter if unexpected losses are realized or if estimated of future taxable income are reduced.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 9 - INCOME TAXES (Continued)
Federal income tax laws provided additional bad debt deductions through 1987 totaling $2,372. Accounting standards do not require a deferred tax liability to be recorded on this amount, which liability otherwise would total $928 at December 31, 2014 and $955 at December 31, 2013. If the Bank were liquidated or otherwise ceased to be a bank or if tax laws were to change, this amount would be expensed. The Company files income tax returns in the U.S. federal jurisdiction and in Illinois. The Company is no longer subject to examination by the U.S. federal tax authorities and by Illinois tax authorities for years prior to 2011.
The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months.
If not utilized, the federal net operating loss carryforward of $3,890 will begin to expire in 2024, and the state net operating loss carryforward of $8,041will begin to expire in 2021.
NOTE 10 - EQUITY INCENTIVE PLANS
The Companys 2014 Equity Incentive Plan provides for grants of stock options, stock awards, stock units, awards, performance stock awards, stock appreciations rights, and other equity-based awards to key employees and nonemployee directors. The Equity Incentive Plan provides for grants of up to 140,667 of stock options and 56,267 of stock awards. During 2014, the Company granted stock options and stock awards. The Company recognizes stock compensation costs for services received in a share-based payment transaction over the required service period, generally defined as the vesting period.
Stock Options
For stock options, certain key employees and nonemployee directors were granted options to purchase shares of the Companys common stock at fair value at the date of the grant (exercise price). The options become exercisable in equal installments over a five-year period from the date of grant, and they expire ten years from the date of grant. Compensation cost is determined by estimating the fair value of the option on the date of the grant using a closed form option valuation (Black-Scholes) model. Expected volatilities are based on historical volatilities of the Companys common stock. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferrable. The risk-free interest rate for the expected term of the option is based on the U.S. treasury yield curve in effect at the time of grant. There were 118,132 options granted in May 2014. No options became vested, exercised, or expired during 2014 Total unrecognized compensation expense for stock options was $122 as of December 31, 2014. Compensation expense totaled $16 for the year ended December 31, 2014. Management expects all options to vest over the remaining vesting period of 4.4 years. There was no compensation expense for the year ended December 31, 2013, as all outstanding options were fully vested.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 10 - EQUITY INCENTIVE PLANS (Continued)
There were no stock options granted during 2013. A summary of the activity in the stock option plan for 2014 follows:
|
|
|
|
|
|
Weighted |
| |
|
|
|
|
Weighted |
|
Average |
| |
|
|
|
|
Average |
|
Remaining |
| |
|
|
|
|
Exercise |
|
Contractual |
| |
|
|
Shares |
|
Price |
|
Term (Years) |
| |
|
|
|
|
|
|
|
| |
Outstanding at beginning of year |
|
1,375 |
|
$ |
20.72 |
|
|
|
Granted |
|
118,132 |
|
11.99 |
|
|
| |
Exercised |
|
|
|
|
|
|
| |
Forfeited or expired |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Outstanding at end of year |
|
119,507 |
|
$ |
12.09 |
|
9.32 |
|
|
|
|
|
|
|
|
|
|
Exercisable at end of year |
|
1,375 |
|
$ |
20.72 |
|
1.22 |
|
All options outstanding at December 31, 2014 are expected to vest.
Aggregate intrinsic value of options outstanding was $180,456 at December 31, 2014 and zero at December 31, 2013.
Stock Awards
For stock awards, the compensation cost is based on the grant date fair value of the award (as determined by quoted market prices) and is recognized over the vesting period. The Companys stock awards vest based on a service period of five years. The unamortized cost of shares not yet earned (vested) is reported as a reduction of stockholders equity. The Company awarded 56,267 shares of stock awards in May 2014. No awards were vested during 2014. Total unrecognized compensation expense for awards was $596 as of December 31, 2014. Compensation expense totaled $79 for the year ended December 31, 2014. Management expects all awards to vest over the remaining vesting period of 4.4 years. There was no compensation expense for the year ended December 31, 2013, as all were fully vested.
NOTE 11 - EMPLOYEE BENEFITS
The Company maintains a contributory profit sharing plan for its employees. To be eligible to participate, an employee must have completed one year of service, be credited with 1,000 hours of service during that period, and have attained the age of 18. Bank contributions to the plan are discretionary and determined by the Board of Directors. Profit sharing expense was $5 and $14 for the years ended December 31, 2014 and 2013.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 11 - EMPLOYEE BENEFITS (Continued)
The Company offers a deferred compensation plan to its officers and directors. Participants can defer (i) twenty percent (20%) of such Participants Base Salary; (ii) fifty percent (50%) of such Participants annual Bonus; (iii) and one hundred percent (100%) of such Participants Directors Fees. Deferred compensation balances earn a rate equal to two percentage points above the prime rate, as published in The Wall Street Journal. The Companys liability for the deferred compensation plan totaled $1,086 and $952 at December 31, 2014 and 2013. Contributions were $87 and $96 for the years ended December 31, 2014 and 2013. Interest earned was $53 and $46 for the years ended December 31, 2014 and 2013. Payouts were $6 and $67 for the years ended December 31, 2014 and 2013. The assets of the plan are subject to claim of the general creditors of the Bank.
The Company sponsors nonqualified unfunded retirement plans for certain directors, which provide annual benefit payments upon their retirement. The Companys liability for the plans totaled $308 and $294 at December 31, 2014 and 2013. Expenses were $14 and $12 for the year ended December 31, 2014 and 2013. There were no payments from this plan in 2014 and 2013.
NOTE 12 - EMPLOYEE STOCK OWNERSHIP PLAN
During 2004, the Bank implemented an Employee Stock Ownership Plan (ESOP), which covers substantially all of its employees. In connection with the second step offering on October 9, 2013 the Company purchased 112,534 shares of common stock which were added to the 70,554 allocated converted shares from the original ESOP for a total of 183,088 shares. The 108,783 unallocated shares of common stock are eligible for allocation under the ESOP in exchange for a thirty-year note in the amount of $1.1 million. The $1.1 million for the ESOP purchase was borrowed from the Company with the ESOP shares being pledged as collateral for the loan.
The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Banks contributions to the ESOP and earnings on ESOP assets. The Company makes discretionary contributions to the ESOP, as well as paying dividends on unallocated shares to the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocate to participants based on relative compensation and expense recorded. Dividends on allocated shares increase participant accounts.
Participants receive the shares at the end of employment. A participant may require stock received to be repurchased unless the stock is traded on an established market. The estimated fair value of allocated shares subject to repurchase obligation and recorded in other liabilities was $909 and $646 at December 31, 2014 and 2013, respectively. Contributions to the ESOP in 2014 were $58 of which $49 was from dividends on unallocated ESOP shares. Contributions to the ESOP in 2013 were $58. ESOP related expense totaled $50 and $44 during 2014 and 2013.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 13 - REGULATORY AND CAPITAL MATTERS
In 2014, capital requirements did not apply to savings and loan holding companies. Beginning in 2015, since the Company is a Small Savings and Loan Holding Company with consolidated assets under $500 million, regulatory capital requirements apply will only to the Bank. The Bank is subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. As of December 31, 2014 and 2013, management believes the Bank meets all capital adequacy requirements to which it is subject.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At December 31, 2014 and 2013, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.
On March 8, 2012, the Company entered into an Agreement by and between its wholly owned subsidiary, the Bank, and the Comptroller of the Currency (the OCC). The Agreement required the Company to address findings of unsafe and unsound practices relating to management, credit underwriting and administration, and liquidity risk management. On September 19, 2013, the OCC terminated its formal agreement with the Company.
Concurrent with entering into the Formal Agreement, the Bank was deemed by the OCC to be in troubled condition under the OCCs prompt corrective action rules. In addition, pursuant to an Individual Minimum Capital Requirement, the Bank had been directed by the OCC to maintain a Tier 1 Leverage capital ratio of 8% and a Total Risk-Based capital ratio of 12%. On March 26, 2014, the OCC terminated the Individual Minimum Capital Requirement.
The Banks actual and required capital amounts and ratios are presented below:
|
|
|
|
|
|
|
|
|
|
To Be Well |
| |||||
|
|
|
|
|
|
|
|
|
|
Capitalized |
| |||||
|
|
|
|
|
|
|
|
|
|
Under Prompt |
| |||||
|
|
|
|
|
|
For Capital |
|
Corrective Action |
| |||||||
|
|
Actual |
|
Adequacy Purposes |
|
Requirement |
| |||||||||
|
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
| |||
As of December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total risk-based capital to risk-weighted assets |
|
$ |
30,603 |
|
32.21 |
% |
$ |
7,601 |
|
8.0 |
% |
$ |
9,502 |
|
10.0 |
% |
Tier I (core) capital to risk- weighted assets |
|
29,500 |
|
31.05 |
|
3,801 |
|
4.0 |
|
5,701 |
|
6.0 |
| |||
Tier I (core) capital to adjusted total assets |
|
29,500 |
|
13.67 |
|
8,630 |
|
4.0 |
|
10,787 |
|
5.0 |
| |||
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 13 - REGULATORY AND CAPITAL MATTERS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To Be Well |
| |||||
|
|
|
|
|
|
|
|
|
|
Individual |
|
Capitalized |
| |||||||
|
|
|
|
|
|
|
|
|
|
Minimum |
|
Under Prompt |
| |||||||
|
|
|
|
|
|
For Capital |
|
Capital |
|
Corrective Action |
| |||||||||
|
|
Actual |
|
Adequacy Purposes |
|
Requirement |
|
Capital Ratios |
| |||||||||||
|
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
As of December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total risk-based capital to risk-weighted assets |
|
$ |
29,867 |
|
29.69 |
% |
$ |
8,047 |
|
8.0 |
% |
$ |
12,071 |
|
12.0 |
% |
10,059 |
|
10.0 |
% |
Tier I (core) capital to risk-weighted assets |
|
28,608 |
|
28.44 |
|
4,024 |
|
4.0 |
|
N/A |
|
N/A |
|
6,035 |
|
6.0 |
| |||
Tier I (core) capital to adjusted total assets |
|
28,608 |
|
12.96 |
|
8,830 |
|
4.0 |
|
17,660 |
|
8.0 |
|
11,038 |
|
5.0 |
| |||
The Qualified Thrift Lender (QTL) test requires that at least 65% of assets be maintained in housing-related finance and other specified areas. If this test is not met, the Bank must operate under specific restrictions. The Dodd-Frank Act made noncompliance with the QTL test also subject to agency enforcement action for a violation of law. Management believes that this test is met.
On May 15, 2012, the board of directors of the Company adopted resolutions requested by the Federal Reserve Bank of Chicago that required written approval from the Federal Reserve Bank of Chicago prior to the declaration or payment of dividends, any increase in debt or the stock repurchase or redemption by the Company. On September 12, 2014, the Federal Reserve Bank of Chicago provided the Company with a non-objection letter allowing the board of directors to rescind the resolutions. Subsequently, the board of directors rescinded the resolutions and the Company no longer must obtain written approval from the Federal Reserve Bank of Chicago prior to the declaration or payment of dividends, any increase in debt or the stock repurchase or redemption by the Company.
The Companys principal source of funds for dividend payments is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current years net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. At December 31, 2014, the Bank has $1,506 of retained earnings available for dividends.
NOTE 14 COMMITMENTS AND CONTINGENT LIABILITIES
Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
The contractual amount of financial instruments with off-balance sheet risk was as follows at year end:
|
|
December 31,2014 |
|
December 31,2013 |
| ||||||||
|
|
Fixed |
|
Variable |
|
Fixed |
|
Variable |
| ||||
|
|
Rate |
|
Rate |
|
Rate |
|
Rate |
| ||||
Commitments to make loans |
|
$ |
1,827 |
|
$ |
221 |
|
$ |
2,153 |
|
$ |
250 |
|
Unused lines of credit and letters of credit |
|
181 |
|
8,633 |
|
189 |
|
10,005 |
| ||||
Commitments to make loans are generally made for periods of 120 days or less. At December 31, 2014, the fixed rate loan commitments have interest rates ranging from 1.88% to 4.38% and the commitments are to extend credit ranging from 5 to 30 years.
The Bank has previously sold fixed rate mortgages to Fannie Mae and Freddie Mac with and without recourse. Recourse obligations on sold loans are recorded at fair value.
|
|
December 31,2014 |
|
December 31,2013 |
| ||||||||
|
|
Contract |
|
Carrying |
|
Contract |
|
Carrying |
| ||||
|
|
Amount |
|
Value |
|
Amount |
|
Value |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Loans sold with recourse |
|
$ |
8 |
|
$ |
8 |
|
$ |
10 |
|
$ |
10 |
|
In the normal course of business, there are various outstanding contingent liabilities, such as claims and legal actions that are not reflected in the financial statements. In the opinion of management, no material losses are anticipated as a result of these actions or claims.
NOTE 15 - PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
The following are the condensed balance sheets and statements of operations and cash flows for AJS Bancorp, Inc.
CONDENSED BALANCE SHEETS
|
|
December 31, |
| ||||
|
|
2014 |
|
2013 |
| ||
ASSETS |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
2,412 |
|
$ |
5,616 |
|
Investment in bank subsidiary |
|
30,867 |
|
28,204 |
| ||
Other |
|
1,469 |
|
1,249 |
| ||
|
|
|
|
|
| ||
|
|
$ |
34,748 |
|
$ |
35,069 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
Liabilities |
|
$ |
1,535 |
|
$ |
685 |
|
Stockholders equity |
|
|
33,213 |
|
|
34,384 |
|
|
|
|
|
|
|
|
|
|
|
$ |
34,748 |
|
$ |
35,069 |
|
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 15 - PARENT COMPANY CONDENSED FINANCIAL STATEMENTS (Continued)
CONDENSED STATEMENTS OF OPERATIONS
|
|
December 31, |
| ||||
|
|
2014 |
|
2013 |
| ||
Income |
|
|
|
|
| ||
Interest on deposits in financial institution |
|
$ |
11 |
|
$ |
2 |
|
Interest on ESOP loan |
|
35 |
|
9 |
| ||
|
|
46 |
|
11 |
| ||
Other expenses |
|
|
|
|
| ||
Other operating expenses |
|
281 |
|
84 |
| ||
|
|
|
|
|
| ||
Loss before income taxes and equity in undistributed earnings |
|
(235 |
) |
(73 |
) | ||
|
|
|
|
|
| ||
Income tax benefit |
|
204 |
|
|
| ||
|
|
|
|
|
| ||
Loss before equity in undistributed income of bank subsidiary |
|
(31 |
) |
(73 |
) | ||
|
|
|
|
|
| ||
Undistributed income from bank subsidiary |
|
2,133 |
|
976 |
| ||
|
|
|
|
|
| ||
Net income |
|
$ |
2,102 |
|
$ |
903 |
|
(Continued)
AJS BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Dollars in thousands, except per share data)
NOTE 15 - PARENT COMPANY CONDENSED FINANCIAL STATEMENTS (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
|
|
December 31, |
| ||||
|
|
2014 |
|
2013 |
| ||
Operating activities |
|
|
|
|
| ||
Net income |
|
$ |
2,102 |
|
$ |
903 |
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
| ||
Equity in undistributed income of bank subsidiary |
|
(2,133 |
) |
(976 |
) | ||
Change in other assets and liabilities |
|
(223 |
) |
14 |
| ||
Net cash used in operating activities |
|
(254 |
) |
(59 |
) | ||
|
|
|
|
|
| ||
Investing activities |
|
|
|
|
| ||
Capital distribution to Bank |
|
|
|
(6,393 |
) | ||
ESOP loan disbursement and repayment, net |
|
50 |
|
(1,081 |
) | ||
Net cash provided (used) in investing activities |
|
50 |
|
(7,474 |
) | ||
|
|
|
|
|
| ||
Financing activities |
|
|
|
|
| ||
Net Proceeds from stock offering |
|
|
|
12,849 |
| ||
Repurchase of common stock |
|
(2,041 |
) |
(7 |
) | ||
Dividends paid on common stock |
|
(959 |
) |
|
| ||
Net cash provided (used) in financing activities |
|
(3,000 |
) |
12,842 |
| ||
|
|
|
|
|
| ||
Net change in cash and cash equivalents |
|
(3,204 |
) |
5,309 |
| ||
|
|
|
|
|
| ||
Cash and cash equivalents at beginning of year |
|
5,616 |
|
307 |
| ||
|
|
|
|
|
| ||
Cash and cash equivalents at end of year |
|
$ |
2,412 |
|
$ |
5,616 |
|
NOTE 16 SUBSEQUENT EVENT
On January 20, 2015, the Board of Directors announced the declaration of a quarterly cash dividend on the Companys outstanding shares of common stock of $0.05 per share. The dividend will be payable to stockholders of record as of February 3, 2015 and is expected to be paid on February 24, 2015.
On March 13, 2015, the Board of Directors of the Company completed its second stock repurchase program adopted on October 21, 2014. Under the plan, the Company repurchased 115,000 shares, or approximately 5.0%, of its common stock. The shares were repurchased by the Company at an average price of $13.61 per share.
On March 17, 2015, the Board of Directors of the Company adopted a third stock repurchase program. Under the repurchase program, the Company may purchase up to 110,000 shares of its common stock, or approximately 5.0% of its outstanding shares.
INVESTOR INFORMATION
Annual Meeting
The Annual Meeting of stockholders will be held at 1:00 p.m., Central Standard Time, on May 20, 2015 at the A.J. Smith Federal Savings Bank Corporate Offices located at 14757 S. Cicero Avenue, Midlothian, Illinois.
Stock Listing
AJS Bancorp, Inc. common stock is quoted on the OTCQB Marketplace under the symbol AJSB.
As of March 23, 2015, there were 2,198,463 shares of AJS Bancorp, Inc. common stock outstanding (including unallocated ESOP shares) and there were approximately 344 registered holders of record.
Set forth below are the high and low prices of our common stock for 2014 and 2013. Our second step conversion was completed on October 9, 2013 whereby each share of AJS Bancorp, Inc., a federal corporation was exchanged for 1.1460 shares of AJS Bancorp, Inc., a Maryland corporation. Accordingly, we have adjusted the share prices prior to October 9, 2013 to reflect the 1.1460 exchange rate.
|
|
High |
|
Low |
|
Dividends |
| |||
2014 |
|
|
|
|
|
|
| |||
Quarter ended March 31, 2014 |
|
$ |
12.40 |
|
$ |
11.71 |
|
$ |
0.05 |
|
Quarter ended June 30, 2014 |
|
12.25 |
|
11.77 |
|
0.30 |
| |||
Quarter ended September 30, 2014 |
|
13.75 |
|
12.25 |
|
0.05 |
| |||
Quarter ended December 31, 2014 |
|
13.73 |
|
13.50 |
|
0.30 |
| |||
|
|
High |
|
Low |
|
Dividends |
| |||
2013 |
|
|
|
|
|
|
| |||
Quarter ended March 31, 2013 |
|
$ |
9.38 |
|
$ |
8.50 |
|
$ |
|
|
Quarter ended June 30, 2013 |
|
11.25 |
|
8.73 |
|
|
| |||
Quarter ended September 30, 2013 |
|
11.69 |
|
10.35 |
|
|
| |||
Quarter ended December 31, 2013 |
|
12.15 |
|
10.99 |
|
|
| |||
Shareholder inquires |
Transfer Agent |
|
|
AJS Bancorp, Inc. |
Computershare |
14757 S. Cicero Avenue |
211 Quality Circle, Suite 210 |
Midlothian, Illinois 60445 |
College Station, Texas 77845 |
(708) 687-7400 |
(800) 962-4284 |
Attn: Thomas R. Butkus |
|
Investor Relations |
|
DIRECTORS AND EXECUTIVE OFFICERS
Directors of AJS Bancorp, Inc. |
|
Officers of |
|
Officers of |
|
|
|
|
|
Thomas R. Butkus |
|
Thomas R. Butkus |
|
Thomas R. Butkus |
Chairman of the Board, |
|
Chairman of the Board, |
|
Chairman of the Board, |
President and Chief |
|
President and Chief |
|
President and Chief |
Executive Officer |
|
Executive Officer |
|
Executive Officer |
|
|
|
|
|
Roger L. Aurelio |
|
Emily Lane |
|
Emily Lane |
President and Chief Executive Officer, |
|
Chief Financial Officer |
|
Chief Financial Officer |
New Supplies Company |
|
(principal financial officer and |
|
(principal financial officer and |
Romeoville, Illinois |
|
principal accounting officer) |
|
principal accounting officer) |
|
|
|
|
|
Raymond J. Blake |
|
|
|
Donna Manual |
Retired Director of Research and |
|
|
|
Senior Vice President, Lending |
Development with Commonwealth Edison |
|
|
|
|
|
|
|
|
|
Richard J. Nogal |
|
|
|
Jo Anne Cano |
Law Partner with Goldstine, Skrodzki, |
|
|
|
Vice President, Deposit Operations |
Russian, Nemec and Hoff, Ltd. |
|
|
|
|
Burr Ridge, Illinois |
|
|
|
|
|
|
|
|
|
Michael H. Rose |
|
|
|
|
Chairman and President of Location |
|
|
|
|
Finders International |
|
|
|
|
Mokena, Illinois |
|
|
|
|