PVF Capital Corp. Announces Fiscal 2013 Fourth Quarter Earnings and Full-Year Financial Results

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| Source: PVF Capital Corp.
  • Net income for the fiscal 2013 fourth quarter of $3.2 million, bringing fiscal 2013 net income to $9.1 million
  • Continued asset quality improvement. 22% reduction in non-performing loans during the quarter
  • Capital ratios remain strong
  • Reversal of valuation allowance against net deferred tax asset resulting in a tax benefit of $1.2 million
  • Announced merger with F.N.B. Corporation has received regulatory approvals and is proceeding
  • Results include merger related expenses of $0.4 million for the fiscal 2013 fourth quarter and $0.7 million for fiscal 2013

SOLON, Ohio, July 30, 2013 (GLOBE NEWSWIRE) -- PVF Capital Corp. (Nasdaq:PVFC), the parent company of Park View Federal Savings Bank, announced net income of $3.2 million, or $0.12 basic and diluted earnings per share, for the fiscal 2013 fourth quarter ended June 30, 2013. These results compare with net income of $0.6 million, or $0.02 basic and diluted earnings per share, for the prior-year quarter and net income of $1.8 million, or $0.07 basic and diluted earnings per share, for the fiscal 2013 third quarter ended March 31, 2013. Fiscal 2013 fourth quarter results included $0.4 million of merger-related expenses. For the 2013 full fiscal year, the Company reported net income of $9.1 million, or $0.35 basic earnings per share and $0.34 diluted earnings per share, compared with a net loss for the prior year of $1.9 million, or $0.08 basic and diluted loss per share.

Robert J. King, Jr., President and Chief Executive Officer, commented, "I am extremely pleased with our results for fiscal 2013. We exceeded our targets for net income as well as asset quality improvement. We finished our fiscal year with solid momentum and look forward to consummating the upcoming merger with F.N.B. Corporation."

Net Interest Income Steady

Net interest income totaled $5.6 million for the quarter ended June 30, 2013, which was an increase of $0.1 million, or 2.5% over the quarter ended June 30, 2012, and unchanged from the fiscal 2013 third quarter ended March 31, 2013. The Company has maintained a relatively stable level of net interest income which is attributable to the on-going strategic improvement in the mix of average earning assets and deposits. The Company's net interest margin improved 25 basis points to 3.19% for the quarter ended June 30, 2013 from 2.94% for the same quarter of the prior year, while declining 2 basis points from the quarter ended March 31, 2013.

Stable Non-interest Income Despite Declining Mortgage Banking Revenues

Non-interest income totaled $3.0 million for the quarter ended June 30, 2013, essentially unchanged from the quarters ended June 30, 2012 and March 31, 2013, although there were variances in the contributing components. Compared with the same quarter of the prior year, the gain on the sale of mortgage loans declined $1.3 million or 41.0%, as refinancing activity fluctuated based on the level and direction of interest rates. Partially offsetting this decline was an increase in income from mortgage servicing of $0.4 million, substantially due to the recovery of $0.4 million to the impairment valuation allowance recognized against the carrying value of the Company's capitalized mortgage servicing rights. Additionally, the Company realized a gain on the sale of the guaranteed portion of SBA loans as part of its SBA business strategy of $0.4 million which reflects an increase of $0.2 million over the prior year quarter. The Company reported a decline in the credit-related costs associated with other real estate owned which totaled $44 thousand, a decline of $0.6 million from the fiscal 2012 fourth quarter. Compared with the quarter ended March 31, 2013, the gain on the sale of mortgage loans declined $0.5 million. This decline was offset by an increase in servicing income due to an increase of $0.1 million in the recovery to the impairment valuation allowance recognized against the carrying value of the Company's capitalized mortgage servicing rights, a decrease of $0.1 million in the gain on the sale of the guaranteed portion of SBA loans and a decline of $0.6 million in the credit-related costs associated with other real estate owned as problem assets have reduced and valuations stabilized.

Asset Quality Steadily Improves

During the quarter, nonperforming loans declined $3.8 million, or 22.3%, to $13.2 million, compared with the third quarter of fiscal 2013, while other real estate owned decreased $0.3 million to $6.9 million, resulting in total nonperforming assets of $20.2 million. This was a decrease of $4.1 million, or 17.0%, compared with total nonperforming assets of $24.3 million at March 31, 2013, and a decline of $7.5 million, or 27.0%, over the prior year.

The classified assets to core capital plus general valuation allowance ratio improved to 33.7% at June 30, 2013, compared with 48.2% at the end of the prior-year quarter and 40.6% at March 31, 2013. The Company also reduced its level of classified assets plus special mention assets to core capital plus general valuation allowance ratio to 37.4% at June 30, 2013, versus 55.0% a year ago and 44.9% at March 31, 2013.

The allowance for loan losses at June 30, 2013 was $13.9 million, or 2.5% of total loans. This compares with an allowance of $14.9 million, or 2.7% of total loans, at March 31, 2013, and $16.1 million, or 2.9% of total loans, at June 30, 2012. The allowance's coverage of nonperforming loans improved to 105.2% at June 30, 2013, compared with 87.5% at March 31, 2013, and 80.7% at June 30, 2012. Net charge-offs for the quarter ended June 30, 2013 were $1.0 million, of which $0.6 million related to charge-offs previously treated as a specific valuation allowance and included in the historical loss history. As such, the allowance for loan losses did not need to be replenished for these items. The improved level of loan losses reflects the on-going improvement in the quality of the loan portfolio along with increasing recoveries of previously charged-off loans. The quarter's net charge-offs compare with net charge-offs of $0.2 million for the fiscal 2013 third quarter and $2.4 million for the same quarter of the prior year. Accordingly, there was no provision for loan losses for the current quarter, reflecting the limited net charge-offs during the quarter, continuing progress in improving risk profile and strengthening the performance of the loan portfolio. The provision for loan losses also totaled $0 for the quarter ended March 31, 2013 and $1.5 million for the quarter ended June 30, 2012.

Non-interest Expense Includes Merger-related Expenses

Non-interest expense totaled $6.6 million for the current quarter, unchanged from the fourth quarter ended June 30, 2012, despite $0.4 million of merger-related expenses recognized in the current quarter. As compared with the quarter ended March 31, 2013, non-interest expense declined $0.1 million even though merger-related expenses were $0.1 million higher in the current quarter.

Income Taxes

The Company recognized a Federal income tax benefit of $1.2 million for the quarter ended June 30, 2013, as a result of reversing, in its entirety, the valuation allowance it had established against its net deferred tax asset. Based primarily on six consecutive quarters of profitability, management assessed the likelihood that the deferred tax asset would more likely than not be realized from future taxable income, which led to this reversal. This benefit compares with an income tax benefit of $0.2 million recognized in the quarter ended June 30, 2012 and income tax expense of $0.1 million recorded in the quarter ended March 31, 2013.

Pre-tax, Pre-credit Provision Income

One metric that management believes is useful in analyzing performance is pre-tax, pre-credit provision income, which adjusts earnings to exclude provision expense, credit-related charges involving the valuation and disposition of other real estate owned, and securities gains or losses. In addition, earnings are adjusted for items identified by management to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management at the time to be infrequent or short-term in nature, which management believes may distort the Company's underlying performance trends. The pre-tax, pre-credit provision income for the quarter ended June 30, 2013 was $2.5 million, compared with income of $2.8 million for the quarter ended March 31, 2013, and income of $2.6 million for the prior-year quarter.

A reconciliation of net earnings reported under generally accepted accounting principles ("GAAP") to pre-tax, pre-credit provision income (a non-GAAP metric) for the current and trailing four quarters ended June 30, 2013, is as follows (dollars in millions):

 
June 30,
2013

March 31,
2013

Dec. 31,
2012
Sept. 30,
2012
Revised
June 30,
2012
Revised
           
Net income  $ 3.2  $ 1.8  $ 2.7  $ 1.4  $ 0.6
Federal income tax provision (benefit) (1.2) 0.1 0.0 0.0  (0.2)
Pre-tax income  2.0  1.9  2.7  1.4  0.4
Provision for loan losses  --   --   1.0  1.1  1.5
Merger-related expenses  0.4  0.3  --   --   -- 
Loss/write-down on other real estate owned  0.1  0.6  0.3  0.3  0.7
           
Pre-tax, pre-credit provision income  $ 2.5  $ 2.8  $ 4.0  $ 2.8  $ 2.6

Pre-tax, pre-credit provision income declined by approximately $0.3 million compared with the March 31, 2013 period, primarily as a result of lower mortgage banking revenue. The decline in non-interest income was caused by lower mortgage banking revenue and lower gains on the sale of SBA loans, partially offset by lower non-interest expense.

Bank Capital Ratios Remain Strong

The Bank's capital ratios have continued to build and remain above regulatory requirements. As of June 30, 2013, the ratio of tier one (core) capital to adjusted total assets stood at 10.16% and total risk-based capital to risk-weighted assets was 14.34%.

Full Year Results

For the fiscal year ended June 30, 2013, the Company's net income totaled $9.1 million or $0.35 basic and $0.34 diluted earnings per share, compared with a loss of $1.9 million, or $0.08 basic and diluted loss per share, for the fiscal year ended June 30, 2012. The $11.0 million improvement in the Company's results was attributable to a $1.3 million improvement in net interest income, a reduction in the provision for loan losses of $4.9 million from improving asset quality, a $4.3 million increase in non-interest income from higher overall mortgage banking revenue, SBA income, service and other income and lower REO-related credit costs, a $0.4 million increase in non-interest expense due to merger-related expenses of $0.7 million, and  higher federal income tax benefit of $0.9 million.

Announced Merger Proceeding

The previously announced merger agreement with F.N.B. Corporation (NYSE:FNB) pursuant to which F.N.B. Corporation will acquire PVF Capital Corp. in an all-stock transaction is proceeding as scheduled.

Under the terms of the merger agreement, which has been approved by the board of directors of PVF Capital Corp., shareholders of PVF Capital Corp. will be entitled to receive 0.3405 shares of F.N.B. Corporation common stock for each common share of PVF Capital Corp. they own. Based on F.N.B. Corporation's closing stock price on July 29, 2013, the merger transaction would be valued at approximately $4.34 per share, or $113.2 million in the aggregate. The exchange ratio is fixed and the transaction is expected to qualify as a tax-free exchange for shareholders of PVF Capital Corp.

F.N.B. Corporation and PVF Capital Corp. expect to complete the transaction in October 2013, after satisfaction of customary closing conditions, including regulatory approvals and the approval of the shareholders of PVF Capital Corp.  F.N.B. Corporation has filed a preliminary registration statement on Form S-4 with the Securities and Exchange Commission ("SEC") on June 28, 2013 and amendment No. 1 to the registration statement on July 29, 2013. The preliminary registration statement included a proxy statement/prospectus and other documents relevant to the merger. Additionally, regulatory approval from the various regulatory agencies has been obtained.

SHAREHOLDERS OF PVF CAPITAL CORP. ARE ADVISED TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

The proxy statement/prospectus (including all amendments and supplements) and other relevant materials (when they become available), and any other documents F.N.B. Corporation and PVF Capital Corp. have filed with the SEC, may be obtained free of charge at the SEC's website at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents F.N.B. Corporation has filed with the SEC by contacting James Orie, Chief Legal Officer, F.N.B. Corporation, One F.N.B. Boulevard, Hermitage, PA 16148, telephone: (724) 983-3317, and free copies of the documents PVF Capital Corp. has filed with the SEC by contacting Jeffrey N. Male, Secretary, PVF Capital Corp., 30000 Aurora Road, Solon, OH 44139, telephone: (440) 248-7171.

F.N.B. Corporation and PVF Capital Corp. and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from PVF Capital Corp. shareholders in connection with the proposed merger. Information concerning such participants' ownership of PVF Capital Corp. common shares will be set forth in the proxy statement/prospectus relating to the merger when it becomes available. This communication does not constitute an offer of any securities for sale.

About PVF Capital Corp.

Park View Federal is a wholly-owned subsidiary of PVF Capital Corp. and operates 16 full-service offices located throughout the Greater Cleveland area. For additional information, visit our web site at parkviewfederal.com. PVF Capital Corp.'s common shares trade on the NASDAQ Capital Market under the symbol PVFC.

Use of Non-GAAP Financial Measures

This release included certain financial information determined by methods other than in accordance with GAAP. One non-GAAP performance metric that management believes is useful in analyzing underlying performance trends is pre-tax, pre-credit provision income. This is the level of earnings adjusted to exclude the impact of:

  • provision expense and credit related charges involving the valuation and disposition of other real estate owned, which are excluded because its absolute level is elevated and volatile in times of economic stress;
     
  • available-for-sale and other securities gains/losses, which are excluded because in times of economic stress securities market valuations may also become particularly volatile; and
     
  • certain items identified by management to be outside of ordinary banking activities, such as merger-related expenses, and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management at the time to be infrequent or short-term in nature, which management believes may distort the Company's underlying performance trends.

Non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. The Company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the comparable GAAP financial measures, and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. While the Company believes that non-GAAP financial measures provide useful supplemental information to investors, there are very significant limitations associated with their use. Non-GAAP financial measures are not prepared in accordance with GAAP, may not be reported by all of the Company's competitors and may not be directly comparable to similarly titled measures of the Company's competitors due to potential differences in the exact methods of calculation. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.

Cautionary Note on Forward-Looking Statements

This press release contains statements that are forward-looking, as that term is defined by the Private Securities Litigation Act of 1995 or the Securities and Exchange Commission in its rules, regulations and releases. The Company intends that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectation regarding important risk factors including, but not limited to, interest rate changes, real estate values, continued softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Company's business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Company's periodic reports and registration statements filed with the Securities and Exchange Commission. Accordingly, actual results may differ from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by the Company or any other person that results expressed therein will be achieved. This press release contains time-sensitive information that reflects management's best analysis only as of the date of this document. The Company does not undertake an obligation to publicly update or revise any forward-looking statements to reflect new events, information or circumstances, or otherwise. Further information concerning issues that could materially affect financial performance related to forward-looking statements can be found in the Company's periodic filings with the Securities and Exchange Commission.

PVF CAPITAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
     
  June 30, June 30,
  2013 2012
    (Revised)
     
ASSETS    
Cash and amounts due from financial institutions  $ 22,759,665  $ 5,840,608
Interest-bearing deposits  77,825,249  114,269,532
Total cash and cash equivalents  100,584,914  120,110,140
Securities available for sale  49,150,540  38,658,044
Loans receivable held for sale, net  28,835,018  25,062,786
Loans receivable, net of allowance of $13,926,341 and $16,052,865, respectively  535,818,400  541,627,515
Office properties and equipment, net  6,951,229  7,237,165
Real estate owned, net  6,920,247  7,733,578
Federal Home Loan Bank stock  12,811,100  12,811,100
Bank-owned life insurance  23,803,877  23,648,663
Prepaid expenses and other assets  13,056,775  14,560,882
Total assets  $ 777,932,100  $ 791,449,873
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Liabilities    
Non-interest-bearing deposits  $ 69,064,087  $ 51,786,588
Interest-bearing deposits  561,550,318  604,192,552
Total deposits  630,614,405  655,979,140
Note payable  939,445  1,046,111
Long-term advances from the Federal Home Loan Bank  35,000,000  35,000,000
Advances from borrowers for taxes and insurance  12,893,144  4,469,292
Accrued expenses and other liabilities  17,453,820  24,824,455
Total liabilities  696,900,814  721,318,997
     
Stockholders' equity    
Serial preferred stock, $.01 par value, 1,000,000 shares authorized; none issued  --   --
Common stock, $.01 par value, 65,000,000 shares authorized; 26,521,567 and 26,217,796 shares issued  265,542  262,178
Additional paid-in capital  101,801,499  100,897,561
Retained earnings (accumulated deficit)  (17,661,510)  (26,719,600)
Accumulated other comprehensive income (loss)  462,902  (472,116)
Treasury stock at cost, 472,725 shares, respectively  (3,837,147)  (3,837,147)
Total stockholders' equity  81,031,286  70,130,876
Total liabilities and stockholders' equity  $ 777,932,100  $ 791,449,873
 
 
 
PVF CAPITAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
         
  Three Months Ended Twelve Months Ended
  June 30, June 30,
  2013 2012 2013 2012
    Revised   Revised
Interest and dividends income        
Loans  $ 6,481,663  $ 6,798,717  $ 26,658,566  $ 27,782,801
Mortgage-backed securities  73,055  78,913  264,079  289,690
Federal Home Loan Bank stock dividends  134,253  135,375  559,452  537,608
Securities  121,120  131,382  508,424  316,180
Federal funds sold and interest-bearing deposits  61,026  67,303  245,117  321,889
Total interest and dividends income  6,871,117  7,211,690  28,235,638  29,248,168
         
Interest expense        
Deposits  990,587  1,469,123  4,499,158  6,793,493
Long-term borrowings  267,705  268,011  1,073,872  1,080,898
Total interest expense  1,258,292  1,737,134  5,573,030  7,874,391
         
Net interest income  5,612,825  5,474,556  22,662,608  21,373,777
Provision for loan losses  --   1,500,000  2,050,000  6,982,000
Net interest income after provision for loan losses  5,612,825  3,974,556  20,612,608  14,391,777
         
Non-interest income        
Service charges and other fees  275,307  215,252  1,163,898  838,333
Gain on sale of mortgage loans  1,854,469  3,142,374  12,695,632  10,948,208
Income (loss) from mortgage servicing fees  245,418  (154,744)  (1,240,200)  (1,810,844)
Gain on sale of SBA loans  437,524  234,775  990,164  455,993
Increase in cash surrender value of bank-owned life insurance  35,234  54,658  155,214  228,573
Gain (loss) on real estate owned  16,033  (220,181)  (166,670)  (673,950)
Provision for real estate owned losses  (60,320)  (452,394)  (1,054,196)  (1,728,797)
Other, net  165,281  223,133  833,079  857,705
Total non-interest income  2,968,946  3,042,873  13,376,921  9,115,221
         
Non-interest expense        
Compensation and benefits  3,315,316  2,980,425  12,948,443  11,461,869
Office occupancy and equipment  562,587  580,459  2,238,596  2,351,359
FDIC insurance  249,975  431,895  1,124,091  1,727,508
Professional and legal  150,707  105,000  770,707  410,000
Outside services  704,597  897,428  2,966,243  2,746,530
Maintenance contracts  88,350  203,054  525,876  843,736
Franchise tax  207,262  206,138  813,626  881,994
Real estate owned and collection expense  419,246  563,551  1,703,509  2,534,228
Other  900,211  633,487  2,959,028  2,699,595
Total non-interest expense  6,598,251  6,601,437  26,050,119  25,656,819
         
Income (loss) before federal income taxes  1,983,520  415,992  7,939,410  (2,149,821)
Federal income tax provision (benefit)  (1,248,679)  (193,821)  (1,118,679)  (218,999)
Net income (loss)  $ 3,232,199  $ 609,813  $ 9,058,089  $ (1,930,822)
         
Basic earnings (loss) per share  $ 0.12  $ 0.02  $ 0.35  $ (0.08)
Diluted earnings (loss) per share  $ 0.12  $ 0.02  $ 0.34  $ (0.08)
 
 
 
FINANCIAL HIGHLIGHTS
           
  At or for the three months ended
(dollars in thousands except per share data) June 30, March 31, December 31, September 30, June 30,
  2013 2013 2012 2012 2012
Balance Sheet Data:       Revised Revised
Total assets  $ 777,932  $ 760,456  $ 781,798  $ 779,123  $ 791,450
Loans receivable  549,745  562,137  569,716  559,322  557,680
Allowance for loan losses  13,926  14,920  15,140  16,136  16,053
Loans receivable held for sale, net  28,835  9,348  30,089  19,766  25,063
Cash and cash equivalents  100,585  99,994  94,458  114,575  120,110
Securities available for sale  49,151  41,419  39,761  38,281  38,658
Deposits  630,614  621,167  634,313  646,150  655,979
Borrowings  35,939  35,966  35,993  36,019  36,046
Stockholders' equity  81,031  77,337  75,098  72,013  70,131
Nonperforming loans  13,244  17,044  18,361  17,864  19,900
Other nonperforming assets  6,920  7,251  7,744  7,232  7,734
Tangible common equity ratio 10.42% 10.17% 9.61% 9.24% 8.85%
Book value per share $3.11 $2.97 $2.90 $2.78 $2.71
Common shares outstanding at period end  26,081,460  26,048,842  25,927,214  25,919,470  25,820,424
           
Operating Data:          
Interest income  6,871  6,893  7,214  7,258  7,212
Interest expense  1,258  1,277  1,441  1,596  1,737
           
Net interest income  5,613  5,615  5,773  5,662  5,475
Provision for loan losses  --   --   1,000  1,050  1,500
           
Net interest income after provision for loan losses  5,613  5,615  4,773  4,612  3,975
Non-interest income  2,969  2,911  4,206  3,291  3,043
Non-interest expense  6,598  6,691  6,256  6,505  6,602
           
Income before federal income taxes  1,984  1,836  2,723  1,398  415
Federal income tax expense (benefit)  (1,249)  73  57  --   (194)
           
Net income  $ 3,232  $ 1,763  $ 2,666  $ 1,398  $ 609
           
Basic earnings per share  $ 0.12  $ 0.07  $ 0.10  $ 0.05  $ 0.02
Diluted earnings per share  $ 0.12  $ 0.07  $ 0.10  $ 0.05  $ 0.02
           
Performance Ratios (annualized where appropriate):          
Return on average assets, annualized 1.68% 0.91% 1.37% 0.70% 0.30%
Return on average equity, annualized 16.33% 9.25% 14.49% 7.98% 4.71%
Net interest margin, annualized 3.19% 3.21% 3.16% 3.12% 2.94%
Interest rate spread, annualized 3.09% 3.11% 3.13% 3.07% 2.88%
Efficiency ratio 80.38% 80.01% 61.09% 69.21% 72.38%
Stockholders' equity to total assets (all tangible) 10.42% 10.17% 9.61% 9.24% 8.85%
           
Asset Quality Ratios:          
Nonperforming assets to total assets 2.59% 3.19% 3.34% 3.22% 3.49%
Nonperforming loans to total loans 2.41% 3.03% 3.22% 3.19% 3.57%
Allowance for loan losses to total loans 2.53% 2.65% 2.66% 2.88% 2.88%
Allowance for loan losses to nonperforming loans 105.15% 87.54% 82.46% 90.32% 80.67%
Net charge-offs to average loans, annualized 0.69% 0.15% 1.37% 0.67% 1.64%
           
Park View Federal Regulatory Capital Ratios:          
Ratio of tangible capital to adjusted total assets 10.16% 9.93% 9.36% 9.06% 8.66%
Ratio of tier one (core) capital to adjusted total assets 10.16% 9.93% 9.36% 9.06% 8.66%
Ratio of tier one risk-based capital to risk-weighted assets 13.07% 12.51% 11.66% 11.94% 11.73%
Ratio of total risk-based capital to risk-weighted assets 14.34% 13.77% 12.93% 13.20% 13.00%
James H. Nicholson
Chief Financial Officer
440-248-7171