Chester Valley Bancorp (NASDAQ:CVAL)
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Chester Valley Bancorp Inc. Reports Third Quarter Earnings
DOWNINGTOWN, Pa., April 29 /PRNewswire-FirstCall/ -- Chester Valley Bancorp
Inc. (NASDAQ:CVAL) announces that the Company posted earnings of $194 thousand
for its third quarter ended March 31, 2005. Excluding charges related to the
prepayment of Federal Home Loan Bank borrowings of $1.6 million and
approximately $439 thousand in merger and integration charges related to the
Company's previously announced acquisition by Willow Grove Bancorp, the
Company's pre-tax operating income (income before income taxes excluding gains
or losses on the sale of investment securities) increased 17.3% to $2.1 million
for the quarter ended March 31, 2005 from $1.8 million for the quarter ended
March 31, 2004. As previously disclosed in a Form 8-K filed with the Securities
and Exchange Commission, the Company prepaid approximately $21.0 million in
Federal Home Loan Bank Borrowings with an average cost of 5.95%, resulting in a
prepayment penalty of approximately $1.6 million. Coincident with the
repayment of the borrowings, the Company sold approximately $10.7 million in
residential mortgage loans with an average yield of approximately 5.23%. At the
time of the repayment, a rise in market interest rates resulted in an
approximate $500 thousand reduction in the prepayment penalty and therefore the
company elected to repay the borrowings as it was contemplated as part of the
acquisition and would be beneficial to future operations on a standalone basis.
On a diluted share basis, the Company earned $0.04 per diluted share for the
quarter ended March 31, 2005 as compared to $0.30 for the quarter ended March
31, 2004. Earnings for the nine months ended March 31, 2005 were $3.321 million
as compared to $4.718 million for same period in 2004. Diluted earnings per
share were $0.62 for the nine months ended March 31, 2005 and $0.90 for the
same period in 2004.
On January 21, 2005, the Company announced it signed a definitive agreement
with Willow Grove Bancorp, Inc. to combine their companies and their respective
subsidiary banks, Willow Grove Bank and First Financial Bank. To date, the
merger process is moving forward as scheduled, and will be voted on by each
company's shareholders at special meetings to be held on June 14, 2005. For
more information, please refer to the Company's joint proxy/prospectus filed
with the Securities and Exchange Commission on April 27, 2005.
Donna Coughey, President and CEO, commented, "The need for locally managed,
community-oriented banking has never been greater. Together, Willow Grove
Bancorp and Chester Valley Bancorp will serve some of the fastest- growing and
most attractive markets in Southeastern Pennsylvania. We will form the
foundation of a super-community bank that provides a broad range of consumer
and commercial banking products, have a higher legal lending limit, and an
expanded branch and ATM network to customers. We look forward to the completion
of the transaction and a new era in banking in Southeastern Pennsylvania."
While earnings were negatively impacted by the above noted charges, the Company
reported net interest income of $5.4 million and $15.7 million for the three
and nine months ended March 31, 2005, respectively. This compares to $4.7
million and $14.2 million for the comparable periods ended March 31, 2004,
respectively. This represents a 14.1% increase for the quarter and a 10.8%
increase for the year-to-date results. After years of pressure and a resulting
decline in the Company's net interest margin, the Federal Reserve Bank's recent
rate hikes along with the growth experienced within the loan portfolio have
positively impacted the Company's net interest margin. The net interest margin
(computed on a fully tax equivalent basis) increased to 3.52% during the
quarter from 3.50% for the quarter ended December 31, 2004. This represents the
fourth consecutive sequential quarter in which the Company has experienced an
increase in its net interest margin. Potential future increases in short-term
interest rates as well as the above borrowings repayment should have a positive
impact on the Company's net interest margin and earnings, as the Company
continues to be asset sensitive.
Non-interest income remained relatively flat for the quarter ended March 31,
2005 as compared to the quarter ended March 31, 2004. Reductions in gains on
the sale of securities and investment services income were offset by increases
in service charges and fees as well as gains on the sale of loans. Loan sales
increased as a result of the above noted loan sale as well as increased sales
volume due largely to a change in the platform on which the Company originates
its residential mortgage loans held for sale. Service charges and fees
increased due to increases in deposit fees resultant from a growth in
transaction type deposit accounts (i.e. Consumer and business checking, money
market and savings) as well as a fee earned on a commercial mortgage loan.
Operating expenses increased for the quarter ended March 31, 2005 as compared
to the quarter ended March 31, 2004, due primarily to the aforementioned
prepayment penalty on borrowings and the merger and integration costs.
Additionally, legal expenses increased by approximately $115 thousand in
connection with services provided in relation to the Company's complying with
the subpoena from the Securities and Exchange Commission as previously
disclosed in the Form 8-K filed on March 16, 2005 with the Securities and
Exchange Commission. Additionally, compensation and benefits increased as a
result of normal salary increases for the year as well as the Company's
significant investment in its future. The Company expanded its retail
brokerage business personnel in September 2004. Additionally, on a yearly
comparison, the Bank hired six lending and private-banking relationship
managers who became available as a result of the consolidation within the local
community banking market experienced over the last twelve months. In addition
the Bank expanded its branch network through the Coatesville and Avondale
branch acquisitions from PNC National Bank in March 2004 and December 2004,
respectively. Additionally, in August 2004, the Bank opened a loan production
office in Plymouth Meeting, Montgomery County, Pennsylvania, an area that was
largely impacted by the aforementioned consolidation; and a Private Client
office in West Chester Borough in June 2004 to better serve the complex needs
of affluent clients and the professionals who handle their business affairs. As
with other institutions, the Company has incurred increased costs related to
the implementation of the final rules of Section 404 of the Sarbanes-Oxley Act
of 2002.
At March 31, 2005, total assets increased to $674.4 million as compared to
total assets of $642.1 million at June 30, 2004, or 5.0%. At March 31, 2005,
net loans receivable increased by $34.7 million or 8.8% to $429.8 million as
compared to $395.1 million at June 30, 2004. For the quarter ended March 31,
2005, the loan portfolio (excluding the aforementioned sale of single family
mortgages) increased $16.9 million or 4.0% as compared to net loans receivable
at December 31, 2004. The growth continues to be concentrated in construction
and commercial loans.
The loan growth was funded primarily through a reduction in interest- bearing
deposits as well as deposit growth, both internally and as a result of the
Avondale branch acquisition. As in the prior quarter, the Company continues to
have a large amount in undisbursed closed construction and commercial loans
available for future funding, which aggregate $72.5 million at March 31, 2005.
Additionally, at March 31, 2005, the pipeline remains strong at approximately
$44.8 million, mostly in commercial and construction loans. The loans are at
various stages of the commitment and customer acceptance process. The ultimate
closing of these loans is dependent upon a number of factors including but not
limited to; (a) competition within the marketplace, (b) changes in interest
rates during the process and (c) other factors impacting the customer. At
March 31, 2005, the Company's non- performing assets to total assets declined
to 0.52% from 0.54% at December 31, 2004. Additionally, the allowance for loan
losses to non-performing loans increased to 200.0% at March 31, 2005 from
190.5% at December 31, 2004. The improved credit quality measurements were
attributed primarily to improvement in the balance of classified loans.
Donna Coughey, President and CEO, added, "While loan demand remains strong, the
competition within our market is intense for both loans and deposits. The
anticipated continued rising interest rate environment could, however, pose a
challenge in maintaining the type of deposit growth experienced in the more
recent years as the competition becomes aggressive in its pricing strategies to
maintain and/or increase market share. However, the successful acquisition of
the Avondale and Coatesville branches from PNC National Bank and the future
opening of a de novo branch in Oxford provide us with growth opportunities not
available to the Bank in past years. We will continue to seek opportunities to
enhance our existing branch networks through both external acquisitions as well
as internal growth."
Chester Valley Bancorp Inc. is the parent company of both First Financial Bank
and Philadelphia Corporation for Investment Services. First Financial's
executive offices are located in Downingtown, Pennsylvania with branches in
Exton, Frazer, Thorndale, Westtown, Airport Village, Brandywine Square, Devon,
Kennett Square, Eagle Square, Coatesville, Avondale and West Chester.
Philadelphia Corporation has offices in Wayne and Philadelphia. Additionally,
the Company will open a thirteenth branch in the future in Oxford, Chester
County, Pennsylvania.
Chester Valley Bancorp stock is traded on the NASDAQ market under the symbol
"CVAL".
Forward-Looking Statements. A number of the matters discussed in this message
that are not historical or current facts deal with potential future
circumstances and developments, in particular, information regarding the
combined company, including expected synergies resulting from the merger of
Willow Grove Bancorp and Chester Valley Bancorp, future banking plans, and
whether and when the transactions contemplated by the merger agreement will be
consummated. The discussion of such matters is qualified by the inherent risks
and uncertainties surrounding future expectations generally, and also may
materially differ from actual future experience involving any one or more of
such matters. Such risks and uncertainties include: the result of the review
of the proposed merger by various regulatory agencies, and any conditions
imposed on the new company in connection with consummation of the merger;
approval of the merger by the shareholders of Willow Grove Bancorp and Chester
Valley Bancorp and satisfaction of various other conditions to the closing of
the merger contemplated by the merger agreement; and the risks that are
described from time to time in Willow Grove Bancorp's and Chester Valley
Bancorp's respective reports filed with the SEC, including each company's
annual report on Form 10-K for the year ended June 30, 2004 and quarterly
report on Form 10-Q for the quarter ended December 31, 2004. This message
speaks only as of its date, and Willow Grove Bancorp and Chester Valley Bancorp
each disclaims any duty to update the information herein.
Additional Information and Where to Find It. In connection with the proposed
merger, a registration statement on Form S-4 was filed with the SEC on March
28, 2005. WILLOW GROVE BANCORP AND CHESTER VALLEY BANCORP SHAREHOLDERS ARE
ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS
FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS THAT ARE A
PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE MERGER. The final joint proxy statement/prospectus will
be mailed to shareholders of Willow Grove Bancorp and Chester Valley Bancorp.
Shareholders will be able to obtain the documents free of charge at the SEC's
website, http://www.sec.gov/, from Willow Grove Bancorp by calling Christopher
E. Bell or from Chester Valley Bancorp by calling Joseph Crowley.
Participants In Solicitation. Willow Grove Bancorp, Chester Valley Bancorp and
their respective directors and executive officers and other members of
management and employees may be deemed to be participants in the solicitation
of proxies in respect of the merger. Information concerning persons who may be
considered participants in the solicitation of Willow Grove Bancorp's
shareholders is set forth in the proxy statement dated October 8, 2004, for
Willow Grove Bancorp's 2004 annual meeting of shareholders as filed with the
SEC on Schedule 14A. Information concerning persons who may be considered
participants in the solicitation of Chester Valley Bancorp's shareholders is
set forth in the proxy statement dated September 10, 2004, for Chester Valley
Bancorp's 2004 annual meeting of shareholders as filed with the SEC on Schedule
14A. Additional information regarding the interests of participants of Willow
Grove Bancorp and Chester Valley Bancorp in the solicitation of proxies in
respect of the merger is included in the registration statement and joint proxy
statement/prospectus filed with the SEC.
CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands)
March 31, June 30,
2005 2004
Assets
Cash in banks $14,003 2,541
Interest-bearing deposits $12,844 15,352
Total cash and cash equivalents 16,544 28,196
Trading account securities 13 8
Investment securities available for sale 130,698 130,089
Investment securities held to maturity
(fair value - March 31, 2005, $60,341
June 30, 2004, $57,779) 61,352 59,384
Loans held for sale 747 538
Loans receivable 436,984 401,965
Deferred fees (420) (508)
Allowance for loan losses (6,793) (6,331)
Loans receivable, net 429,771 395,126
Accrued interest receivable 3,236 2,652
Property and equipment - net 14,083 13,009
Bank owned life insurance 5,579 5,414
Real estate owned 54 54
Goodwill 2,416 1,171
Intangible assets 806 384
Other assets 9,102 6,083
Total Assets $674,401 $642,108
Liabilities and Stockholders' Equity
Liabilities:
Deposits $456,936 $427,103
Securities sold under
agreements to repurchase 21,875 27,216
Advance payments by borrowers
for taxes and insurance 977 1,433
Federal Home Loan Bank advances 127,086 120,963
Trust preferred securities 10,310 10,310
Accrued interest payable 736 679
Other liabilities 2,249 2,147
Total Liabilities 620,169 589,851
Stockholders' Equity:
Preferred stock - $1.00 par value;
5,000,000 shares authorized; none issued - -
Common stock - $1.00 par value;
10,000,000 shares authorized;
5,161,911 and 4,876,484 shares issued and
outstanding at March 31, 2005 and
June 30, 2004, respectively 5,162 4,876
Additional paid-in capital 41,527 36,247
Retained earnings - partially restricted 10,149 13,303
Treasury stock (612 and 583 shares at
March 31, 2005 and June 30,
2004, respectively, at cost) (13) (13)
Accumulated other comprehensive income (loss) (2,593) (2,156)
Total Stockholders' Equity 54,232 52,257
Total Liabilities and
Stockholders' Equity $674,401 $642,108
CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except for Per Share Amounts)
Three Months Ended March 31,
2005 2004
INTEREST INCOME:
Loans $6,378 $5,690
Mortgage-backed securities 431 396
Interest-bearing deposits 39 16
Investment securities:
Taxable 1,300 844
Non-taxable 339 423
Total interest income 8,487 7,369
INTEREST EXPENSE:
Deposits 1,419 1,258
Securities sold under agreements to repurchase 87 21
Short-term borrowings 65 70
Long-term borrowings 1,501 1,275
Total interest expense 3,072 2,624
NET INTEREST INCOME 5,415 4,745
Provision for loan losses 112 180
Net interest income after
provision for loan losses 5,303 4,565
OTHER INCOME:
Investment services income 1,014 1,096
Service charges and fees 1,037 716
Gain on the sale of:
Loans 129 15
Available for sale 32 378
Other 110 108
Total other income 2,322 2,313
OPERATING EXPENSES:
Salaries and employee benefits 3,092 2,825
Occupancy and equipment 867 752
Data processing 272 278
Advertising 114 89
Deposit insurance premiums 15 15
Merger and integration charges 439 -
Debt prepayment fees 1,608 -
Other 1,173 785
Total operating expenses 7,580 4,744
Income before income taxes 45 2,134
Income tax (benefit) expense (149) 528
NET INCOME $194 $1,606
EARNINGS PER SHARE (1)
Basic $0.04 $0.32
Diluted $0.04 $0.30
DIVIDENDS PER SHARE PAID DURING PERIOD (1) $0.11 $0.10
WEIGHTED AVERAGE SHARES OUTSTANDING (1)
Basic 5,154,885 5,096,848
Diluted 5,399,024 5,292,764
(1) Earnings per share, dividends per share and weighted average shares
outstanding have been restated to reflect the effects of the 5% stock
dividend paid in September 2004
CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except for Per Share Amounts)
Nine Months Ended March 31,
2005 2004
INTEREST INCOME:
Loans $18,280 $17,682
Mortgage-backed securities 1,217 1,145
Interest-bearing deposits 74 47
Investment securities:
Taxable 3,905 2,040
Non-taxable 1,030 1,320
Total interest income 24,506 22,234
INTEREST EXPENSE:
Deposits 4,075 3,996
Securities sold under agreements to repurchase 201 79
Short-term borrowings 270 130
Long-term borrowings 4,228 3,833
Total interest expense 8,774 8,038
NET INTEREST INCOME 15,732 14,196
Provision for loan losses 470 856
Net interest income after
provision for loan losses 15,262 13,340
OTHER INCOME:
Investment services income 3,202 3,204
Service charges and fees 2,644 2,243
Gain on the sale of:
Loans 282 100
Available for sale 290 1,012
Other 346 338
Total other income 6,764 6,897
OPERATING EXPENSES:
Salaries and employee benefits 8,944 7,955
Occupancy and equipment 2,350 2,176
Data processing 796 737
Advertising 277 168
Deposit insurance premiums 47 46
Merger and integration charges 439 -
Debt prepayment fees 1,608 -
Other 3,260 2,961
Total operating expenses 17,721 14,043
Income before income taxes 4,305 6,194
Income tax expense 984 1,476
NET INCOME $3,321 $4,718
EARNINGS PER SHARE (1)
Basic $0.65 $0.93
Diluted $0.62 $0.90
DIVIDENDS PER SHARE PAID DURING PERIOD (1) $0.32 $0.30
WEIGHTED AVERAGE SHARES OUTSTANDING (1)
Basic 5,141,423 5,074,308
Diluted 5,334,583 5,264,381
(1) Earnings per share, dividends per share and weighted average shares
outstanding have been restated to reflect the effects of the 5% stock
dividend paid in September 2004
CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
Three Months Ended Nine Months Ended
March 31, March 31,
2005 2004 2005 2004
Average interest
rate spread (2) 3.43% 3.36% 3.44% 3.41%
Net yield on average
interest-earning
assets (2) 3.52% 3.48% 3.50% 3.47%
Ratio of average
interest-earning
assets to average
interest-bearing
liabilities 1.03 x 1.05 x 1.04 x 1.05 x
Non-performing assets
to total assets 0.52% 0.69% 0.52% 0.69%
Allowance for loan loss
to total loans 1.58% 1.58% 1.58% 1.58%
Return on equity 1.41% 12.20% 8.17% 12.33%
Return on assets 0.12% 1.06% 0.67% 1.05%
Book value per
common share (1) $10.51 $10.44 $10.51 $10.44
Closing price of common
stock at end
of period (1) $25.50 $20.86 $25.50 $20.86
Number of full-service
offices at
end of period 13 11 13 11
(1) Per share amounts have been restated to reflect the effects of the 5%
stock dividend paid in September 2004.
(2) Percentages are presented on a taxable equivalent basis.
The following details the tax equivalent adjustments in the above table:
Three Months Ended March 31,
2005 2004
Interest Tax Adjusted Interest Tax Adjusted
Income Adjustment Income Income Adjustment Income
(Dollars in thousands)
Loans $6,378 $29 $6,407 $5,690 $15 $5,705
Investments 2,109 127 2,236 1,679 158 1,837
Total $8,487 $156 $8,643 $7,369 $173 $7,542
Nine Months Ended March 31,
2005 2004
Interest Tax Adjusted Interest Tax Adjusted
Income Adjustment Income Income Adjustment Income
(Dollars in thousands)
Loans $18,280 $67 $18,347 $17,682 $45 $17,727
Investments 6,226 384 6,610 4,552 494 5,046
Total $24,506 $451 $24,957 $22,234 $539 $22,773
DATASOURCE: Chester Valley Bancorp Inc.
CONTACT: Joseph T. Crowley, Treasurer & Chief Financial Officer, Chester
Valley Bancorp, +1-610-269-9700 ext. 3085
Web site: http://www.ffbonline.com/