PFSL Pocahontas Bancorp

Pocahontas Bancorp, Inc. (NASDAQ: PFSL) announced earnings for the second quarter of the fiscal year ending September 30, 2005. Net income was $0.43 million for the quarter ended March 31, 2005, compared to net income of $1.43 million for the quarter ended March 31, 2004, a decrease of $1.00 million or 69.9%. Basic earnings per share were $0.10 and diluted earnings per share were $0.09 for the quarter ended March 31, 2005 compared to basic earnings per share of $0.32 and diluted earnings per share of $0.31 for the same period last year. Net interest income before provision for loan loss for the quarter ended March 31, 2005 was $4.16 million compared to $5.03 million for the quarter ended March 31, 2004, a decrease of $0.87 million or 17.3%. The decrease was primarily due to a 41 basis point decrease in the net interest rate spread to 2.77% for the quarter ended March 31, 2005 compared to 3.18% for the quarter ended March 31, 2004. There was no provision for loan losses for the quarter ended March 31, 2005 compared to $0.35 million for the quarter ended March 31, 2004. Management periodically reviews the credit quality of the loan portfolio in order to establish a sufficient allowance for losses on loans. The provision for loan loss for the quarters ended March 31, 2005 and 2004 reflected management's estimate of the amount of allowance for loan losses required based on management's current judgments about the credit quality of individual loans and segments of the loan portfolio; changing economic and other conditions may require future adjustments to the allowance for loan losses. Non-interest income decreased $0.79 million or 49.1% to $0.82 million for the quarter ended March 31, 2005 compared to the quarter ended March 31, 2004. The decrease in non-interest income was primarily due to a $0.34 million trading loss on equity securities during the quarter ended March 31, 2005 compared to a $0.29 million trading gain on equity securities during the quarter ended March 31, 2004. A subdued refinancing environment during the quarter ended March 31, 2005 resulted in a decreased number of loans originated and subsequently sold which resulted in the lower gain on sale of loans. Gain on sale of loans decreased to $0.20 million for the quarter ended March 31, 2005 from $0.25 million for the same period a year ago. The quarter ended March 31, 2004 included a $0.14 million one time gain on the sale of branches. Total operating expenses were $4.33 million for the quarter ended March 31, 2005, compared to $4.11 million for the quarter ended March 31, 2004. The increase in operating expenses was primarily due to a $0.18 million increase in advertising and donations, as the Company hired an outside advertising firm instead of handling advertising internally. Net income was $1.55 million for the six months ended March 31, 2005, compared to net income of $2.80 million for the six months ended March 31, 2004, a decrease of $1.25 million or 44.7%. Basic and diluted earnings per share were $0.34 for the six months ended March 31, 2005 compared to basic earnings per share of $0.62 and diluted earnings per share of $0.61 for the same period last year. Net interest income before provision for loan loss for the six months ended March 31, 2005 was $8.53 million compared to $10.02 million for the six months ended March 31, 2004, a decrease of $1.49 million or 14.9%. The decrease was primarily due to a 28 basis point decrease in the net interest rate spread to 2.82% for the six months ended March 31, 2005 compared to 3.10% for the six months ended March 31, 2004 and a 35 basis point decrease in the net interest margin to 2.66% for the six months ended March 31, 2005 from 3.01% for the six months ended March 31, 2004. Provision for loan losses for the six months ended March 31, 2005 was $0.13 million compared to $0.50 million for the six months ended March 31, 2004. Management periodically reviews the credit quality of the loan portfolio in order to establish a sufficient allowance for losses on loans. The provision for loan loss for the six months ended March 31, 2005 and 2004 reflected management's estimate of the amount of allowance for loan losses required based on management's current judgments about the credit quality of individual loans and segments of the loan portfolio; changing economic and other conditions may require future adjustments to the allowance for loan losses. Non-interest income decreased $0.61 million or 20.4% to $2.37 million for the six months ended March 31, 2005 compared to the six months ended March 31, 2004. The decrease in non-interest income was primarily due to $0.42 million decrease in trading gain on equity securities during the six months ended March 31, 2005 compared to the six months ended March 31, 2004. A subdued refinancing environment during the six months ended March 31, 2005 resulted in a decreased number of loans originated and subsequently sold which resulted in the lower gain on sale of loans. Gain on sale of loans decreased to $0.48 million for the six months ended March 31, 2005 from $0.60 million for the same period a year ago. The six months ended March 31, 2004 included a $0.14 million one-time gain on the sale of branches. Total operating expenses were $8.43 million for the six months ended March 31, 2005, and $8.25 million for the six months ended March 31, 2004. The increase in operating expenses is primarily due to a $0.28 million increase in advertising and donations, as the Company hired an outside advertising firm instead of handling advertising internally; professional fees increased $0.07 million for the six months ended March 31, 2005 compared to the same period a year ago. These increases were partially offset by a decrease in expenses on REO and other repossessed assets during the six months ended March 31, 2005. Total assets increased $12.64 million or 1.8% to $732.55 million at March 31, 2005 compared to balances at September 30, 2004. The increase was primarily the result of a net increase in investment securities of $53.04 million or 21.5%, which was partially offset by a $22.36 million or 63.5% decrease in cash and a $21.86 million or 5.7% decrease in total net loans. The yield on average interest earning assets at March 31, 2005 was 5.46% compared to 5.50% at September 30, 2004. Investment securities increased as the result of the purchase of $78.03 million of securities, partially offset by the call of $0.50 million of securities, principal payments and maturities of $21.16 million and $3.42 million decrease in market value. Total net loans receivable were $361.95 million at March 31, 2005 compared to $383.81 million at September 30, 2004. During the six-month period ended March 31, 2005, proceeds from the sale of mortgage loans held for sale were $24.20 million, compared to $32.66 million sold during the six months ended March 31, 2004. Total nonperforming loans decreased 6.9% to $4.35 million at March 31, 2005 from $4.67 million at September 30, 2004. Total deposits increased $9.65 million or 2.0% to $500.73 million at March 31, 2005 compared to balances at September 30, 2004. The increase in deposits was primarily the result of offering more competitive interest rates on a diverse product base in our market area. Total Federal Home Loan Bank advances increased $4.28 million or 2.8% to $158.18 million at March 31, 2005 compared to $153.90 million at September 30, 2004. Pocahontas Bancorp, Inc. is a unitary thrift holding company, which owns First Community Bank, a federally chartered savings and loan. First Community Bank conducts business from 18 offices located primarily in Northeast Arkansas. Pocahontas Bancorp's common stock is traded on the NASDAQ National Market under the symbol PFSL. -0- *T POCAHONTAS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) March 31, September 30, 2005 2004 ASSETS Cash $12,856,239 $35,218,491 Cash surrender value of life insurance 7,925,501 7,684,251 Securities held-to-maturity, at cost 138,314,318 86,200,660 Securities available-for-sale, at fair value 161,563,993 160,633,022 Trading securities, at fair value 2,905,919 1,982,365 Loans receivable, net 360,278,949 382,316,096 Loans receivable, held for sale 1,673,903 1,494,200 Accrued interest receivable 3,985,636 4,196,103 Premises and equipment, net 15,650,086 13,762,438 Federal Home Loan Bank stock, at cost 8,032,600 7,925,900 Goodwill 8,847,572 8,847,572 Core deposit premiums 5,809,921 6,296,523 Other assets 4,701,337 3,350,292 ------------- ------------- TOTAL ASSETS $732,545,974 $719,907,913 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Deposits $500,730,675 $491,078,533 Federal Home Loan Bank advances 158,183,028 153,896,869 Deferred compensation 2,273,772 2,430,094 Accrued expenses and other liabilities 3,488,574 3,059,676 Trust preferred securities 16,952,300 16,941,917 ------------- ------------- Total liabilities 681,628,349 667,407,089 STOCKHOLDERS' EQUITY: Common stock, 76,024 76,024 Additional paid-in capital 57,447,655 57,447,655 Unearned ESOP shares (2,435,931) (2,116,198) Accumulated other comprehensive loss, net (2,785,113) (717,085) Retained earnings 23,017,534 22,212,972 ------------- ------------- 75,320,169 76,903,368 Less Treasury stock, at cost (24,402,544) (24,402,544) ------------- ------------- Total stockholders' equity 50,917,625 52,500,824 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $732,545,974 $719,907,913 ============= ============= POCAHONTAS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED) Three Months Ended Six Months Ended March 31 March 31 2005 2004 2005 2004 INTEREST INCOME: Loans receivable $5,522,801 $5,946,192 $11,314,925 $12,159,899 Investment securities 3,201,417 3,196,538 6,187,410 6,436,348 ----------- ----------- ------------ ------------ Total interest income 8,724,218 9,142,730 17,502,335 18,596,247 INTEREST EXPENSE: Deposits 2,934,733 2,964,550 5,730,537 6,407,451 Borrowed funds 1,280,508 826,328 2,554,017 1,544,372 Trust preferred securities 351,875 315,375 693,273 629,569 ----------- ----------- ------------ ------------ Total interest expense 4,567,116 4,106,253 8,977,827 8,581,392 NET INTEREST INCOME 4,157,102 5,036,477 8,524,508 10,014,855 0 PROVISION FOR LOAN LOSSES - 350,000 125,000 500,000 ----------- ----------- ------------ ------------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,157,102 4,686,477 8,399,508 9,514,855 OTHER INCOME: Fees and service charges 769,876 745,435 1,563,580 1,535,957 Gain on sale of loans 201,608 252,340 475,038 602,421 Gain on sale of securities, net - 52,458 - 39,535 Trading gains (losses), net (338,408) 287,231 23,720 440,453 Gain on sale of branches - 139,334 - 139,334 Other 185,625 129,720 307,152 221,984 ----------- ----------- ------------ ------------ Total other income 818,701 1,606,518 2,369,490 2,979,684 ----------- ----------- ------------ ------------ OPERATING EXPENSE: Compensation and benefits 2,391,062 2,359,192 4,760,712 4,771,207 Occupancy and equipment 766,139 723,091 1,434,672 1,451,849 Insurance premiums 85,882 92,894 176,341 163,280 Professional fees 280,496 240,268 537,253 468,707 Data processing 163,410 172,209 311,622 338,702 Advertising and donations 253,783 71,674 420,528 142,041 Office supplies 65,175 50,996 117,929 120,871 REO and other repossessed assets 11,977 112,875 39,512 177,665 Other 307,421 290,836 626,692 611,831 ----------- ----------- ------------ ------------ Total operating expense 4,325,345 4,114,035 8,425,261 8,246,153 ----------- ----------- ------------ ------------ INCOME BEFORE INCOME TAXES 650,458 2,178,960 2,343,737 4,248,386 INCOME TAXES 220,600 747,069 796,500 1,451,000 ----------- ----------- ------------ ------------ NET INCOME $429,858 $1,431,891 $1,547,237 $2,797,386 POCAHONTAS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED) Three Months Ended Six Months Ended March 31 March 31 2005 2004 2005 2004 OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: Unrealized holding gain (loss) on securities available for- sale arising during the period $(2,423,551) $1,582,539 $(2,068,028) $894,378 Reclassification adjustment for gains included in net income - (34,622) - (26,093) ------------ ----------- ------------ ----------- Other comprehensive income (loss) (2,423,551) 1,547,917 (2,068,028) 868,285 ------------ ----------- ------------ ----------- COMPREHENSIVE INCOME (LOSS) $(1,993,693) $2,979,808 $(520,791) $3,665,671 ============ =========== ============ =========== EARNINGS PER SHARE: Basic earnings per share $0.10 $0.32 $0.34 $0.62 ============ =========== ============ =========== Diluted earnings per share $0.09 $0.31 $0.34 $0.61 ============ =========== ============ =========== *T