EXHIBIT 99.1
CHESTER VALLEY BANCORP INC.
REPORTS SECOND QUARTER EARNINGS
FOR IMMEDIATE RELEASE
WEDNESDAY JANUARY 26, 2005
CONTACT: JOSEPH T. CROWLEY
TREASURER & CHIEF FINANCIAL OFFICER
(610) 269-9700 EXT. 3085
Downingtown - Chester Valley Bancorp Inc. announces that the Company posted
earnings of $1.605 million for its second quarter ended December 31, 2004. This
represents the second highest quarterly earnings in the history of the Company.
This compared to earnings of $1.598 million for the quarter ended December 31,
2003. On a diluted share basis, the Company earned $0.30 per diluted share for
each of the quarters ended December 31, 2004 and December 31, 2003. Earnings for
the six months ended December 31, 2004 were $3.127 million as compared to $3.112
million for the six months ended December 31, 2003. Diluted earnings per share
were $0.59 for both periods.
While earnings were relatively stable from period to period, the Company
reported net interest income of $5.203 million and $10.317 million for the three
and six months ended December 31, 2004, respectively. This compares to $4.743
million and $9.451 million for the comparable periods ended December 31, 2003,
respectively. This represents a 9.7% increase for the quarter and a 9.2%
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
and net interest spread (computed on a fully tax equivalent basis) increased to
3.50% and 3.45%, respectively, during the quarter from 3.47% and 3.42%,
respectively, for the quarter ended September 30, 2004. This represents the
third sequential quarter in which the Company has experienced an increase in
both its net interest margin and net interest spread. Future increases in
short-term interest rates should have a positive impact on the Company's
earnings, as the Company continues to be asset sensitive.
Non-interest income decreased to $2.353 million for the quarter ended December
31, 2004, an 8.4% decrease from the quarter ended December 31, 2003. Excluding
gains on the sale of securities, non-interest income increased by $161 thousand
or 8.0% over the same quarterly comparisons. The increases occurred primarily in
investment services income, including trust fees along with 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 income realized upon
the sale of single-family residential mortgage loans available for sale. For the
six months ended December 31, 2004, non-interest income decreased to $4.442
million, or 3.1% as compared to the six months ended December 31, 2003.
Excluding gains on the sale of securities, non-interest income increased by $234
thousand or 5.9% over the same six month comparisons. The increases occurred
primarily in the same categories noted above in the quarterly comparison.
The above noted increases were offset in part by an increase in operating
expenses, primarily in compensation and benefits, which was partially offset by
a reduction in legal expenses (included in other expenses on the Consolidated
Statement of Operations). In addition to normal salary increases for the year,
the Company has made a 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
recent consolidation within the local community banking market. 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 afore-mentioned 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. For the three and six months ended December 31, 2004, these costs were
$65,000 and $108,000, respectively.
At December 31, 2004, total assets increased to $669.1 million as compared to
total assets of $642.1 million at June 30, 2004, or 4.2%. At December 31, 2004,
loans receivable, net increased by $28.5 million or 7.2% to $423.6 million as
compared to $395.1 million at June 30, 2004. For the quarter ended December 31,
2004, the loan portfolio increased $23.5 million or 5.9% as compared to loans
receivable, net at September 30, 2004. The growth continues to be concentrated
in construction and commercial loans. In December 2004, the Company completed
the acquisition of the Avondale branch from PNC National Bank, which resulted in
increased consumer loans of $5.9 million and the assumption of approximately
$8.9 million in deposit liabilities.
The loan growth was funded through a reduction in interest-bearing deposits as
well as deposits assumed in the Avondale branch acquisitions along with Federal
Home Loan Bank advance borrowings. As in the prior quarter, the Company
continues to have a large amount in undisbursed closed construction and
commercial loans available for future funding. These aggregate $68.8 million at
December 31, 2004, an increase of $16.3 million as compared to September 30,
2004. Additionally, at December 31, 2004, the pipeline remains strong at
approximately $25.3 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 December 31, 2004, the Company's non-performing assets to total
assets declined to 0.54% from 0.64% at September 30, 2004. Additionally, the
allowance for loan losses to non-performing loans increased to 190.5% at
December 31, 2004 from 147.3% at September 30, 2004. The improved credit quality
measurements were attributed primarily to the Company's receipt of a $750
thousand principal pay-down on an approximate $2.9 million non-performing
commercial mortgage. Additionally, the borrower prepaid interest as a condition
to the Bank's extension of the maturity date on the remaining balance of the
loan.
Donna Coughey, President and CEO stated, "While loan demand has increased, the
competition within our market is intense for both loans and deposits. Despite
this competition, our loan closings were strong, particularly at the end of
December. These closings, the future funding of lines of credit closed during
the year, and the continued asset sensitivity of the Company's balance sheet
should positively impact future earnings. 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. However, the
successful acquisition of the Avondale and Coatesville branches from PNC
National Bank and the opening of a de novo branch in Oxford provide us with
growth opportunities not available in those recent years. We will continue to
seek opportunities to enhance our existing branch networks through both external
acquisitions as well as internal growth. Our recently opened Plymouth Meeting
loan production office continues to provide us with a stronger presence in a
market that has been impacted by the recent consolidation within the local
community banking industry."
Joseph Crowley, Chief Financial Officer added, "The growth and re-structuring of
the loan portfolio has continued to enhance our core banking operations. Pre-tax
core banking income (income excluding gains on securities available for sale)
increased to $2.037 million for the three months ended December 31, 2004 from
$1.546 million for the three months ended December 31, 2003 or 31.8%. Our net
interest margin continues to increase as a result of the loan growth as well as
the recent increase in market interest rates. Our balance sheet continues to be
structured in such a manner as to benefit from any future increase in short-term
rates by the Federal Reserve."
On January 20, 2005, the Company issued a press release announcing its intent to
join forces with Willow Grove Bancorp, Inc. to form a $1.5 billion Suburban
Philadelphia based Community Bank with combined operations primarily in Bucks,
Chester and Montgomery counties around Suburban Philadelphia. Information about
the proposed transaction is contained in the Company's Form 8-K filings dated
January 20, 2005 and January 26, 2005 and Section 425 filings on various dates
beginning with January 20, 2005.
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 Oxford, Chester County,
Pennsylvania towards the end of the second calendar quarter of 2005.
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 new
company, including expected synergies resulting from the merger of Chester
Valley Bancorp and Willow Grove Bancorp, combined operating and financial data,
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 failure to realize capital, operating expense and
other synergies; 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
Chester Valley Bancorp and Willow Grove 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 Chester Valley
Bancorp's and Willow Grove 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 September 30, 2004.
This message speaks only as of its date, and Chester Valley Bancorp and Willow
Grove 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 will be filed with the SEC. CHESTER
VALLEY BANCORP AND WILLOW GROVE 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 WILL BE 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 Chester Valley Bancorp and Willow Grove Bancorp. Shareholders
will be able to obtain the documents free of charge at the SEC's website,
www.sec.gov, from Chester Valley Bancorp by calling Joseph T. Crowley, or from
Willow Grove Bancorp by calling Christopher E. Bell.
PARTICIPANTS IN SOLICITATION. Chester Valley Bancorp, Willow Grove 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 participant's 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. Information concerning persons who may be considered
participant's 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.
Additional information regarding the interests of participants of Chester Valley
Bancorp and Willow Grove Bancorp in the solicitation of proxies in respect of
the merger will be included in the registration statement and joint proxy
statement/prospectus to be filed with the SEC.
CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands)
(Unaudited)
DECEMBER 31, JUNE 30,
2004 2004
--------- ---------
ASSETS
Cash in banks $ 11,339 $ 12,844
Interest-bearing deposits 7,558 15,352
--------- ---------
TOTAL CASH AND CASH EQUIVALENTS 18,897 28,196
--------- ---------
Trading account securities 12 8
Investment securities available for sale 130,408 130,089
Investment securities held to maturity (fair value -
December 31, 2004, $62,147
June 30, 2004, $57,779) 62,442 59,384
Loans held for sale 515 538
Loans receivable 430,788 401,965
Deferred fees (487) (508)
Allowance for loan losses (6,705) (6,331)
--------- ---------
Loans receivable, net 423,596 395,126
--------- ---------
Accrued interest receivable 2,900 2,652
Property and equipment - net 14,142 13,009
Bank owned life insurance 5,527 5,414
Real estate owned 54 54
Goodwill 2,411 1,171
Intangible assets 836 384
Other assets 7,375 6,083
--------- ---------
TOTAL ASSETS $ 669,115 $ 642,108
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 434,946 $ 427,103
Securities sold under agreements to repurchase 15,940 27,216
Advance payments by borrowers for taxes and insurance 872 1,433
Federal Home Loan Bank advances 150,318 120,963
Trust preferred securities 10,310 10,310
Accrued interest payable 696 679
Other liabilities 1,016 2,147
--------- ---------
TOTAL LIABILITIES 614,098 589,851
--------- ---------
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;
5,150,941 and 4,876,484 shares issued and outstanding
at December 31, 2004 and June 30, 2004, respectively 5,151 4,876
Additional paid-in capital 41,350 36,247
Retained earnings - partially restricted 10,497 13,303
Treasury stock (612 and 583 shares at December 31, 2004 and June 30,
2004, respectively, at cost) (13) (13)
Accumulated other comprehensive income (loss) (1,968) (2,156)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 55,017 52,257
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 669,115 $ 642,108
========= =========
CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except for Per Share Amounts)
(Unaudited)
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
2004 2003
----------- -----------
INTEREST INCOME:
Loans $ 6,051 $ 5,898
Mortgage-backed securities 373 407
Interest-bearing deposits 16 23
Investment securities:
Taxable 1,314 678
Non-taxable 371 432
----------- -----------
TOTAL INTEREST INCOME 8,125 7,438
----------- -----------
INTEREST EXPENSE:
Deposits 1,336 1,328
Securities sold under agreements to repurchase 68 26
Short-term borrowings 119 33
Long-term borrowings 1,399 1,308
----------- -----------
TOTAL INTEREST EXPENSE 2,922 2,695
----------- -----------
NET INTEREST INCOME 5,203 4,743
Provision for loan losses 256 296
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,947 4,447
----------- -----------
OTHER INCOME:
Investment services income 1,157 1,124
Service charges and fees 813 756
Gain on the sale of:
Loans
82 13
Securities available for sale 181 559
Other 120 118
----------- -----------
TOTAL OTHER INCOME 2,353 2,570
----------- -----------
OPERATING EXPENSES:
Salaries and employee benefits 2,921 2,690
Occupancy and equipment 747 715
Data processing 270 226
Advertising 82 50
Deposit insurance premiums 16 16
Other 1,046 1,215
----------- -----------
TOTAL OPERATING EXPENSES 5,082 4,912
----------- -----------
Income before income taxes 2,218 2,105
Income tax expense 613 507
----------- -----------
NET INCOME $ 1,605 $ 1,598
=========== ===========
EARNINGS PER SHARE (1)
Basic $ 0.31 $ 0.31
=========== ===========
Diluted $ 0.30 $ 0.30
=========== ===========
DIVIDENDS PER SHARE PAID DURING PERIOD (1) $ 0.11 $ 0.10
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING (1)
Basic 5,147,569 5,081,652
=========== ===========
Diluted 5,318,538 5,291,758
=========== ===========
(1) Earnings per share, dividends per share and weighted average shares
outstanding have been restated to reflect the effects of the 5% stock
dividends paid in September 2004.
CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except for Per Share Amounts)
(Unaudited)
SIX MONTHS ENDED DECEMBER 31,
-----------------------------
2004 2003
---------- ----------
INTEREST INCOME:
Loans $ 11,902 $ 11,992
Mortgage-backed securities 786 749
Interest-bearing deposits 35 31
Investment securities:
Taxable 2,602 1,196
Non-taxable 691 897
---------- ----------
TOTAL INTEREST INCOME 16,016 14,865
---------- ----------
INTEREST EXPENSE:
Deposits 2,653 2,738
Securities sold under agreements to repurchase 114 58
Short-term borrowings 205 60
Long-term borrowings 2,727 2,558
---------- ----------
TOTAL INTEREST EXPENSE 5,699 5,414
---------- ----------
NET INTEREST INCOME 10,317 9,451
Provision for loan losses 358 676
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,959 8,775
---------- ----------
OTHER INCOME:
Investment services income 2,188 2,108
Service charges and fees 1,607 1,527
Gain on the sale of:
Loans 153 85
Available for sale 258 634
Other 236 230
---------- ----------
TOTAL OTHER INCOME 4,442 4,584
---------- ----------
OPERATING EXPENSES:
Salaries and employee benefits 5,852 5,130
Occupancy and equipment 1,483 1,424
Data processing 524 459
Advertising 163 79
Deposit insurance premiums 32 31
Other 2,087 2,176
---------- ----------
TOTAL OPERATING EXPENSES 10,141 9,299
---------- ----------
Income before income taxes 4,260 4,060
Income tax expense 1,133 948
---------- ----------
NET INCOME $ 3,127 $ 3,112
========== ==========
EARNINGS PER SHARE (1)
Basic $ 0.61 $ 0.61
========== ==========
Diluted $ 0.59 $ 0.59
========== ==========
DIVIDENDS PER SHARE PAID DURING PERIOD (1) $ 0.21 $ 0.20
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING (1)
Basic 5,134,839 5,063,160
========== ==========
Diluted 5,298,117 5,245,250
========== ==========
(1) Earnings per share, dividends per share and weighted average shares
outstanding have been restated to reflect the effects of the 5% stock
dividends paid in September 2004.
CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED SIX MONTHS ENDEd
DECEMBER 31, DECEMBER 31,
----------------------------- -----------------------------
2004 2003 2004 2003
------------ ------------- ------------- -------------
Average interest rate spread (2) 3.45% 3.42% 3.43% 3.46%
Net yield on average interest-earning assets (2) 3.50% 3.46% 3.49% 3.49%
Ratio of average interest-earning
assets to average interest-bearing liabilities 1.04 x 1.04 x 1.04 x 1.04 x
Non-performing assets to total assets 0.54% 0.74% 0.54% 0.74%
Allowance for loan loss to total loans 1.58% 1.51% 1.58% 1.51%
Return on equity 11.78% 12.55% 11.64% 12.40%
Return on assets 0.99% 1.06% 0.96% 1.04%
Book value per common share (1) $10.68 $10.17 $10.68 $10.17
Closing price of common stock at end of
period (1) $21.94 $22.06 $21.94 $22.06
Number of full-service offices at end of period 13 10 13 10
(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 DECEMBER 31,
----------------------------------------------------------------------------------------
2004 2003
------------------------------------------ ------------------------------------------
INTEREST TAX ADJUSTED INTEREST TAX ADJUSTED
INCOME ADJUSTMENT INCOME INCOME ADJUSTMENT INCOME
------------------------------------------ ------------------------------------------
(Dollars in thousands)
Loans $ 6,051 $ 19 $ 6,070 $ 5,898 $ 16 $ 5,914
Investments 2,074 138 2,212 1,540 162 1,702
------------- -------------- ------------- ------------- -------------- -------------
Total $ 8,125 $ 157 $ 8,282 $ 7,438 $ 178 $ 7,616
============= ============== ============= ============= ============== =============
SIX MONTHS ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
2004 2003
------------------------------------------ ------------------------------------------
INTEREST TAX ADJUSTED INTEREST TAX ADJUSTED
INCOME ADJUSTMENT INCOME INCOME ADJUSTMENT INCOME
------------------------------------------ ------------------------------------------
(Dollars in thousands)
Loans $ 11,902 $ 38 $ 11,940 $ 11,992 $ 30 $ 12,022
Investments 4,114 257 4,371 2,873 335 3,208
------------- -------------- ------------- ------------- -------------- -------------
Total $ 16,016 $ 295 $ 16,311 $ 14,865 $ 365 $ 15,230
============= ============== ============= ============= ============== =============