Magyar Bancorp News
400 Somerset St., New Brunswick, NJ 08901
732.342.7600
MAGYAR BANCORP, INC. ANNOUNCES FIRST QUARTER FINANCIAL RESULTS
New Brunswick, New Jersey, January 29, 2009 - Magyar Bancorp (NASDAQ: MGYR) (the
"Company"), parent company of Magyar Bank, reported today the results of its
operations for the three months ended December 31, 2008.
The Company reported a net loss of $3.9 million for the three months ended
December 31, 2008, compared to net income of $142,000 for the three months ended
December 31, 2007. The Company's loss was attributable to a $4.0 million
provision for loan loss during the quarter due to increasing levels of
non-performing loans and further deterioration in economic conditions.
The basic loss per share was $0.67 for the three months ended December 31, 2008.
Basic and diluted earnings per share for the three months ended December 31,
2007 were $0.02.
Results from Operations
Net income decreased $4.0 million during the three-month period ended December
31, 2008 compared with the three-month period ended December 31, 2007 due to
larger provision for loan losses, which increased $3.8 million to $4.0 million
during the three months ended December 31, 2008. The increase in provision for
loan losses was due to higher levels of non-performing loans, adverse economic
conditions resulting in the depreciation of collateral values securing
construction and commercial loans, and higher levels of loan charge-offs during
the current quarter.
Net interest margin decreased by 48 basis points to 2.76% for the quarter ended
December 31, 2008 compared to 3.24% for the quarter ended December 31, 2007. The
yield on interest-earning assets fell 152 basis points to 5.42% for the three
months ended December 31, 2008 from 6.94% for the three months ended December
31, 2007 primarily due to reductions in the Prime Rate during the last twelve
months totaling 400 basis points, of which 175 basis points occurred during the
current quarter. The yield on assets was also lower in the current quarter due
to higher levels of non-performing assets. The cost of interest-bearing
liabilities fell 117 basis points to 2.83% for the three months ended December
31, 2008 from 4.00% for the three months ended December 31, 2007.
The Company's net interest income decreased $170,000, or 4.8%, to $3.4 million
during the quarter ended December 31, 2008 from $3.6 million during the quarter
ended December 31, 2007.
Interest and dividend income decreased $967,000, or 12.7%, to $6.6 million for
the three months ended December 31, 2008 from $7.6 million for the three months
ended December 31, 2007. An increase in average interest-earning assets of $51.2
million, or 11.7%, was more than offset by a decrease in the yield on such
assets of 152 basis points to 5.42% for the quarter ended December 31, 2008
compared with the prior year period. Interest expense decreased $797,000, or
19.7%, to $3.3 million for the three months ended December 31, 2008 from $4.0
million for the three months ended December 31, 2007. While the average balance
of interest-bearing liabilities increased $54.4 million between the two periods,
the cost on such liabilities fell 117 basis points to 2.83% for the quarter
ended December 31, 2008 compared with the prior year period.
The provision for loan losses was $4.0 million for the three months ended
December 31, 2008 compared to $223,000 for the three months ended December 31,
2007. Net charge-offs were $987,000 for the three months ended December 31, 2008
compared to a net recovery of $13,000 for the three months ended December 31,
2007.
The higher level of loan charge-offs resulted from depreciation of real estate
collateral securing commercial and construction loans due to the current adverse
economic environment. Specifically, during the three months ended December 31,
2008, the Bank decreased its allowance for loan loss by reducing the carrying
value of three loans. First, a $1.7 million loan used to acquire and develop ten
scattered lots in Newark, NJ was written down by $876,000 to an updated
appraised value of $892,000. The loan was identified as non-performing at
September 30, 2008 although interest payments ceased to be made during the
current quarter. Second, a $465,000 loan used to acquire land in Allamuchy, NJ
was written down $93,000 to an updated appraised value of $372,000. The loan was
identified as non-performing at September 30, 2008 and is in the process of
foreclosure. Finally, the Bank accepted a short-sale on a $606,000 construction
loan that resulted in an $18,000 reduction in the allowance for loan loss.
"The continued deterioration in the housing market and our economy negatively
impacted our construction and commercial loan portfolios, resulting in this
quarter's loan loss provision," stated Elizabeth E. Hance, President & Chief
Executive Officer. "During fiscal 2009, we'll continue our efforts to workout
existing credit issues, and reduce construction loans as a percentage of our
total loan portfolio, focusing on residential and commercial lending
opportunities."
Non-interest income decreased $24,000, or 7.1%, to $316,000 during the three
months ended December 31, 2008 compared to $340,000 for the three months ended
December 31, 2007. The decrease was primarily attributable to greater loan
prepayment penalties received during the prior year period.
Non-interest expense of $3.6 million during the three months ended December 31,
2008 was $30,000 higher than the three month period ended December 31, 2007. An
increase in FDIC insurance premiums paid between the two periods of $67,000 was
partially offset by decreases in compensation and employee and benefit expenses
and occupancy expenses of $35,000 and $17,000, respectively.
The Company recorded tax expense of $19,000 for the three months ended December
31, 2008, compared with tax expense of $20,000 for the three months ended
December 31, 2007. Where applicable, deferred tax assets are reduced by a
valuation allowance for any portions determined not likely to be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which temporary differences are
deductible and carry forwards are available. Due to the uncertainty of the
Company's ability to realize the benefit of the deferred tax assets, the net
deferred tax assets are fully offset by a valuation allowance at December 31,
2008.
Balance Sheet Comparison
Total assets increased $28.5 million, or 5.5%, to $542.8 million during the
three months ended December 31, 2008. The quarterly increase was attributable to
investment securities, which increased $15.6 million, or 26.5%, and loans
receivable, which increased $15.1 million, or 3.7%.
Total loans receivable at December 31, 2008 were comprised of $161.9 million
(38.0%) one-to-four family residential mortgage loans, $99.2 million (23.3%)
commercial real estate loans, $93.1 million (21.9%) construction loans, $38.8
million (9.1%) commercial business loans, $18.6 million (4.4%) home equity lines
of credit and $14.1 million (3.3%) other loans. Growth during the quarter ended
December 31, 2008 occurred primarily in commercial real estate loans, which
increased $6.4 million, followed by $4.0 million in one-to-four family
residential mortgage loans, $2.8 million in commercial business loans, and $2.7
million in home equity lines of credit.
Total non-performing loans increased by $1.7 million to $21.8 million at
December 31, 2008 from $20.1 million at September 30, 2008. The ratio of
non-performing loans to total loans was 5.12% at December 31, 2008 compared to
3.24% at September 30, 2008.
Included in the non-performing loan totals were ten construction loans totaling
$14.6 million, ten commercial loans totaling $6.6 million, and two residential
mortgage loans totaling $510,000. The Company has not and does not intend to
originate or purchase sub-prime loans or option-ARM loans.
The allowance for loan losses increased by $3.0 million to $7.5 million at
December 31, 2008 from $4.5 million recorded at September 30, 2008. The increase
in the allowance was primarily attributable to the higher current year provision
for loan losses which reflected the overall growth in the loan portfolio, higher
levels of non-performing loans, adverse economic conditions that resulted in
depreciation of collateral values securing construction and commercial loans,
and higher levels of loan charge-offs.
The allowance for loan losses as a percentage of non-performing loans was 34.5%
at December 31, 2008 compared with 22.4% at September 30, 2008. At December 31,
2008, the Company's allowance for loan losses as a percentage of total loans was
1.77% compared with 1.10% at September 30, 2008. Future increases in the
allowance for loan losses may be necessary based on the growth of the loan
portfolio, the change in composition of the loan portfolio, possible future
increases in non-performing loans and charge-offs, and the possible continuation
of the current adverse economic environment. At December 31, 2008, to the best
of management's knowledge, all known and inherent losses that are probable and
which can be reasonably estimated have been recorded.
At December 31, 2008, investment securities were $74.5 million, reflecting an
increase of $15.6 million, or 26.5%, from September 30, 2008. Investment
securities consisted of $68.8 million of mortgage-backed securities, $3.4
million of municipal bonds, and $2.3 million of U.S. Government and Agency
obligations. The mortgage-backed securities are collateralized by mortgage loans
that meet agency conforming standards and do not contain sub-prime mortgage
loans.
Total deposits grew $9.3 million, or 2.5%, to $384.9 million during the three
months ended December 31, 2008. The growth in deposits occurred in certificates
of deposit (including individual retirement accounts), which increased $13.4
million to $220.2 million, and savings accounts, which increased $4.5 million,
or 13.1%. Money market and interest-bearing checking account balances, which
decreased $5.3 million and $2.7 million, respectively, partially offset the
growth in certificates of deposit and savings accounts. Further, non-interest
bearing checking balances decreased $530,000 during the quarter to $24.2 million
at December 31, 2008. Deposits accounted for 70.9% of total assets and 92.0% of
loans receivable, net of allowance for loan losses at December 31, 2008.
Included with the total deposits at December 31, 2008 were $23.2 million in
Certificate of Deposit Account Registry Service (CDARS) reciprocal certificates
of deposit and $8.7 million in brokered certificates of deposit.
To the extent the Company's asset growth exceeded growth in deposits, Federal
Home Loan Bank of New York (FHLBNY) advances were used as alternative funding
sources. Use of the FHLBNY advances enabled the Bank to reduce its cost of funds
and manage its interest rate risk position. FHLBNY borrowings increased $22.2
million during the three months ended December 31, 2008, respectively, to $110.1
million, or 20.2% of assets.
During the three months ended December 31, 2008, the Company repurchased 6,400
shares at an average price of $7.85. Through December 31, 2008, the Company had
repurchased 63,770 shares at an average price of $9.69 pursuant to the second
stock repurchase plan which has reduced outstanding shares to 5,749,741.
The Company's book value per share decreased to $7.44 at December 31, 2008 from
$8.51 at December 31, 2007. The decrease was the result of the Company's results
from operations, partially offset by the reduction of shares outstanding during
the twelve month period.
About Magyar Bancorp
Magyar Bancorp is the parent company of Magyar Bank, a community bank
headquartered in New Brunswick, New Jersey. Magyar Bank has been serving
families and businesses in Central New Jersey for over 86 years with a complete
line of financial products and services. Today, Magyar operates five branch
locations in New Brunswick (2), North Brunswick, South Brunswick and Branchburg.
Please visit us online at www.magbank.com.
Forward Looking Statements
This press release contains statements about future events that constitute
forward-looking statements within the meaning of the Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Such forward-looking statements may be identified by reference to a future
period or periods, or by the use of forward- looking terminology, such as "may,"
"will," "believe," "expect," or similar terms or variations on those terms, or
the negative of those terms. Forward-looking statements are subject to numerous
risks and uncertainties, including, but not limited to, those risks previously
disclosed in the Company's filings with the SEC, general economic conditions,
changes in interest rates, regulatory considerations, competition, technological
developments, retention and recruitment of qualified personnel, and market
acceptance of the Company's pricing, products and services, and with respect to
the loans extended by the Bank and real estate owned, the following: risks
related to the economic environment in the market areas in which the Bank
operates, particularly with respect to the real estate market in New Jersey; the
risk that the value of the real estate securing these loans may decline in
value; and the risk that significant expense may be incurred by the Company in
connection with the resolution of these loans. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made. The Company does not undertake and
specifically declines any obligation to publicly release the result of any
revisions that may be made to any forward-looking statements to reflect events
or circumstances after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.
Contact: John Reissner, 732.214.2083
MAGYAR BANCORP, INC. AND SUBSIDIARY
Selected Financial Data
(Dollars in Thousands, Except Per Share Data)
Three Months Ended
December 31,
2008 2007
--------- --------
(Unaudited)
Income Statement Data:
- ----------------------
Interest and dividend income $ 6,648 $ 7,615
Interest expense 3,252 4,049
------- -------
Net interest and dividend income 3,396 3,566
Provision for loan losses 4,002 223
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Net interest and dividend income (loss) after
provision for loan losses (606) 3,343
Non-interest income 316 340
Non-interest expense 3,551 3,521
------- ------
Income (loss) before income tax expense (3,841) 162
Income tax expense 19 20
-------- ------
Net income (loss) $ (3,860) $ 142
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Per Share Data:
- ---------------
Basic earnings (losses) per share $ (0.67) $ 0.02
Diluted earnings (losses) per share N/A $ 0.02
Book value per share $ 7.44 $ 8.51
Selected Ratios:
- ----------------
Return on average assets -2.90% 0.12%
Return on average equity -36.88% 1.16%
Net interest margin 2.76% 3.24%
At or For the Year Ended
------------------------
December 31, September 30,
2008 2008
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Balance Sheet Data: (Unaudited)
- -------------------
Assets $ 542,754 $ 514,272
Loans receivable 425,821 410,651
Allowance for loan losses 7,517 4,502
Investment securities - available for sale, at fair value 65,322 49,326
Investment securities - held to maturity, at cost 9,215 9,618
Deposits 384,908 375,560
Borrowings 110,122 87,934
Shareholders' Equity 42,751 45,826
Asset Quality Data:
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Non-performing loans $ 21,800 $ 20,068
REO property 5,921 4,666
Allowance for loan losses to non-performing loans 34.48% 22.43%
Allowance for loan losses to total loans receivable 1.77% 1.10%
Non-performing loans to total loans receivable 5.12% 4.89%
Non-performing assets to total assets 5.11% 4.81%
Non-performing assets to total equity 64.84% 53.97%