LEHIGH VALLEY, Pa., April 25, 2007 (PRIME NEWSWIRE) -- KNBT Bancorp, Inc. (Nasdaq:KNBT), the holding company for Keystone Nazareth Bank & Trust Company (the "Bank"), today reported net income of $5.5 million for the quarter ended March 31, 2007, unchanged compared to the quarter ended March 31, 2006. KNBT's diluted earnings per share increased 10.5% to $0.21 compared to $0.19 for the first quarter of 2006.
During the first quarter of 2007, KNBT repurchased 48,392 shares of common stock at an average cost of $14.81 per share. At March 31, 2007, there were 2,687,268 shares remaining under the previously announced stock repurchase program covering 2,807,219 shares.
Scott V. Fainor, President and Chief Executive Officer, stated, "Despite a very challenging interest rate environment, KNBT reported another solid quarter of earnings. Net interest income after provision for loan losses improved significantly for the quarter as did non-interest income (excluding the one time gain on the sale of branch offices in the December quarter) compared to the fourth quarter of 2006. Contributing to our improved fee income were our Wealth Management and Insurance Divisions." Mr. Fainor went on to note that "KNBT's asset quality remains outstanding with a ratio of non-performing to total assets at March 31, 2007 of 0.16% and no subprime lending activity exposure in our loan portfolio."
Mr. Fainor added, "We continue to expand current customer relationships while adding new customers to KNBT as evidenced by our solid loan and deposit growth."
For the quarter, total loans increased $101.2 million to $1.7 billion, an annualized growth rate of 25.4% compared to December 31, 2006. Total deposits increased $32.6 million to $1.9 billion at March 31, 2007 compared to December 31, 2006, an annualized growth rate of 6.8%.
Net Interest Income and Net Interest Margin
Net interest income decreased $1.4 million from the first quarter of 2006. The decrease was due to a decline in average earning assets of $145.2 million and a 12 basis point decline in the tax-equivalent net interest margin.
The net interest margin on a tax-equivalent basis for the quarter ended March 31, 2007 decreased one basis point to 2.77% compared to 2.78% for the fourth quarter of 2006 and declined from 2.89% compared to the first quarter of 2006. The continuing pressures of a flat yield curve and the increased cost of short-term funding are the prime reasons for the decline in KNBT's margin.
KNBT presents its net interest margin on a tax equivalent basis because management believes that such a presentation provides information that is more useful for a proper understanding of KNBT's operating results. These disclosures should neither be viewed as a substitute for operating results determined in accordance with GAAP nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Without the adjustment for tax-free income, the net interest margin was 2.74%, 2.75% and 2.80% for the quarters ended March 31, 2007, December 31, 2006 and March 31, 2006, respectively.
Provision for Loan Losses and Related Allowance for Loan Losses
There was no provision for loan losses for the quarter ended March 31, 2007 compared to a $750,000 provision for the quarter ended March 31, 2006. Continued improvement in the overall credit quality of the loan portfolio resulted in no provision for the quarter.
At March 31, 2007, KNBT's total non-performing assets were $4.7 million compared to $6.0 million at December 31, 2006. The ratio of non-performing assets to total assets was 0.16% at March 31, 2007 compared to 0.21% at December 31, 2006. At March 31, 2007, KNBT's allowance for loan losses was 356.8% of its non-performing loans and 0.97% of its total loans.
Non-Interest Income and Non-Interest Expense
Non-interest income for the first quarter increased $622,000 from the comparable quarter of 2006. Deposit service charges increased $280,000 or 12.8%, Wealth Management income increased $455,000 or 24% and the Insurance Group increased income by $364,000 or 19%, each on a comparable quarter basis.
Non-interest expense decreased $539,000 for the first quarter of 2007 compared to the first quarter of 2006. Occupancy and equipment expense decreased $287,000, which was partially the result of reduced costs due to the sale of branches in the fourth quarter 2006. Other expenses declined $792,000 due to decreased advertising expenses, professional fees and other miscellaneous expenses. The first quarter of 2006 also contained one-time expenses of $150,000. Partially offsetting such decreases was a $540,000 increase in salaries, wages and employee benefits.
Subsequent Event
KNBT, on April 17, 2007 sold $81.7 million of agency securities with an average yield of 4.14% recognizing a pre-tax loss of $2.1 million. The proceeds will be reinvested in higher yielding loans and investments that will improve the Bank's net interest margin.
About KNBT Bancorp, Inc.
KNBT Bancorp, Inc. is the parent bank holding company for Keystone Nazareth Bank & Trust Company. Keystone Nazareth Bank & Trust Company is a Pennsylvania-chartered savings bank headquartered in Bethlehem, Pennsylvania with 56 branch offices in Lehigh, Northampton, Carbon, Monroe, Luzerne, Columbia and Schuylkill Counties, Pennsylvania.
Website: www.knbt.com
The information contained in this press release may contain forward-looking statements (as defined in the Securities Exchange Act of 1934 and the regulations thereunder) which are not historical facts or as to KNBT's management's intentions, plans, beliefs, expectations or opinions or with respect to the operation of KNBT or its subsidiaries. These statements include, but are not limited to, financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of KNBT and its management, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) economic and competitive conditions which could affect the volume of loan originations, deposit flows and real estate values; (2) the levels of non-interest income and expense and the amount of loan losses; (3) competitive pressure among depository institutions increases significantly; (4) changes in the interest rate environment may reduce interest margins; (5) general economic conditions, either nationally or in the markets in which KNBT is doing business, are less favorable than expected; (6) acquisitions may result in large one-time charges to income, may not produce revenue enhancements or cost savings at levels or within time frames originally anticipated and may result in unforeseen integration difficulties; (7) legislation or changes in regulatory requirements adversely affect the business in which KNBT is engaged; and other factors discussed in the documents filed by KNBT with the Securities and Exchange Commission ("SEC") from time to time. Copies of these documents may be obtained from KNBT upon request and without charge (except for the exhibits thereto) or can be accessed at the website maintained by the SEC at http://www.sec.gov. KNBT undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.
KNBT Bancorp, Inc.
Consolidated Statements of Income
(unaudited)
For the Three Months Ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2007 2006 2006 2006 2006
---------- ---------- ---------- ---------- ----------
(in thousands except per share data)
Interest
income $ 37,042 $ 37,719 $ 37,769 $ 36,661 $ 36,271
Interest
expense 19,741 20,087 19,794 18,140 17,536
---------- ---------- ---------- ---------- ----------
Net interest
income 17,301 17,632 17,975 18,521 18,735
Provision for
loan losses -- 1,014 365 1,200 750
---------- ---------- ---------- ---------- ----------
Net interest
income after
provision
for loan
losses 17,301 16,618 17,610 17,321 17,985
Non-interest
income:
Deposit
service
charges 2,466 2,430 2,456 2,340 2,186
Securities
gains 536 6 1,440 1,597 138
Gain on
extinguish-
ment of
debt -- -- -- -- 1,179
Gain on sale
of branches -- 3,502 -- -- --
Wealth manage-
ment income 2,375 2,213 2,061 2,302 1,920
Bank-owned
life in-
surance 861 884 835 781 774
Insurance
group
income 2,289 2,137 2,146 2,395 1,925
Other 1,176 1,197 1,235 1,034 959
---------- ---------- ---------- ---------- ----------
Total non-
interest
income 9,703 12,369 10,173 10,449 9,081
Non-interest
expenses:
Salaries,
wages and
employee
benefits 11,214 11,173 11,265 11,147 10,674
Net occupancy
and equip-
ment expense 2,977 2,898 3,171 2,964 3,264
Other 4,784 5,716 4,767 5,289 5,576
---------- ---------- ---------- ---------- ----------
Total non-
interest
expense 18,975 19,787 19,203 19,400 19,514
---------- ---------- ---------- ---------- ----------
Income before
income taxes 8,029 9,200 8,580 8,370 7,552
Income tax
expense 2,543 2,894 2,669 2,464 2,072
---------- ---------- ---------- ---------- ----------
Net income $ 5,486 $ 6,306 $ 5,911 $ 5,906 $ 5,480
========== ========== ========== ========== ==========
Per Common Share Data
---------------------------------------------------------------------
Weighted
average
common
shares
- diluted 26,586,047 26,578,083 26,540,660 27,805,107 28,425,764
Weighted
average
common
shares
- basic 26,311,289 26,303,917 26,355,973 27,381,824 28,045,012
Net income
per share
- diluted $ 0.21 $ 0.24 $ 0.22 $ 0.21 $ 0.19
Net income
per share
- basic $ 0.21 $ 0.24 $ 0.22 $ 0.22 $ 0.20
Book value $ 13.76 $ 13.52 $ 13.29 $ 12.83 $ 13.03
Tangible
book
value $ 8.72 $ 8.52 $ 8.26 $ 7.86 $ 8.32
KNBT Bancorp, Inc.
Asset Quality
(unaudited)
At Period End or
For the Three Months Ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2007 2006 2006 2006 2006
------- ------- ------- ------- -------
(dollars in thousands)
Non-accruing loans $ 4,280 $ 4,869 $ 5,467 $ 6,066 $ 6,951
Accruing loans 90 days
or more past due 391 1,058 775 988 1,258
------- ------- ------- ------- -------
Total non-performing
loans 4,671 5,927 6,242 7,054 8,209
Other real estate
owned 77 32 205 322 242
------- ------- ------- ------- -------
Total non-performing
assets $ 4,748 $ 5,959 $ 6,447 $ 7,376 $ 8,451
======= ======= ======= ======= =======
Total non-performing
loans as a percentage
of loans, net 0.27% 0.37% 0.40% 0.46% 0.56%
Total non-performing
loans as a percentage
of total assets 0.16% 0.20% 0.21% 0.24% 0.27%
Total non-performing
assets as a percentage
of total assets 0.16% 0.21% 0.22% 0.25% 0.28%
Allowance for loan
losses, beginning
of period $17,044 $16,630 $16,600 $15,963 $15,964
Provision for loan
losses -- 1,014 365 1,200 750
Total charge-offs (449) (705) (413) (754) (836)
Recoveries on loans
previously
charged-off 72 105 78 191 85
------- ------- ------- ------- -------
Net loans charged-off (377) (600) (335) (563) (751)
------- ------- ------- ------- -------
Allowance for loan
losses, at period
end $16,667 $17,044 $16,630 $16,600 $15,963
======= ======= ======= ======= =======
Allowance for loan
losses at period end
to:
Average net loans 1.02% 1.07% 1.06% 1.11% 1.09%
Total loans at period
end 0.97% 1.05% 1.05% 1.08% 1.07%
Non-performing
loans 356.82% 287.57% 266.42% 235.33% 194.46%
KNBT Bancorp, Inc.
(unaudited)
Balances At the Period Ended
(Period Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
End) 2007 2006 2006 2006 2006
---------------------------------------------------------------------
(dollars in thousands)
Assets $2,906,829 $2,898,827 $2,926,763 $2,994,485 $3,002,004
--------- ---------- ---------- ---------- ---------- ----------
Total
earning
assets: 2,547,350 2,535,197 2,556,670 2,631,759 2,646,728
Investment
securities 801,739 923,110 946,593 1,022,900 1,142,481
Net loans 1,704,772 1,603,122 1,574,022 1,523,847 1,474,158
Commercial 619,992 600,058 559,054 536,947 513,891
Mortgage 580,704 507,919 499,877 503,946 484,500
Consumer 520,743 512,189 531,721 499,554 491,730
Less:
Allowance
for loan
loss (16,667) (17,044) (16,630) (16,600) (15,963)
Loans held
for sale 605 1,994 2,264 20 --
Other earning
assets 40,234 6,971 33,791 84,992 30,089
Goodwill and
other
intangible
assets 132,995 132,866 134,243 135,132 133,103
---------------------------------------------------------------------
Total
deposits: 1,940,125 1,907,547 1,888,636 1,912,797 1,875,359
Non-interest
bearing
deposits 200,351 206,972 197,612 205,847 202,572
Interest-
bearing
checking 247,396 241,567 232,775 238,715 239,440
Money market 572,736 532,824 452,196 438,457 390,050
Savings 211,944 214,949 230,157 252,435 264,949
Certificates
of deposit 588,634 593,079 653,602 654,583 648,386
IRA & Keogh 119,064 118,156 122,294 122,760 124,987
Brokered CDs -- -- -- -- 4,975
---------------------------------------------------------------------
Other
borrowings 78,103 45,296 46,513 54,862 36,887
Subordinated
debt 38,286 38,406 38,525 38,642 38,758
Federal Home
Loan Bank
advances 457,992 519,161 568,861 613,487 659,615
Shareholders'
equity 361,603 356,026 349,715 341,823 359,773
Balances For the Three Months Ended
(Daily Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
Average) 2007 2006 2006 2006 2006
---------------------------------------------------------------------
(dollars in thousands)
Assets $2,877,115 $2,917,925 $2,964,750 $2,975,532 $3,018,876
-------- ---------- ---------- ---------- ---------- ----------
Total
earning
assets: 2,527,087 2,560,145 2,605,410 2,619,100 2,672,203
Investment
securities 887,402 920,940 1,013,377 1,096,658 1,178,368
Net loans 1,630,587 1,588,064 1,563,182 1,499,584 1,470,654
Commercial 604,757 571,102 547,357 526,522 515,424
Mortgage 534,165 506,344 506,735 493,575 480,156
Consumer 508,687 527,281 525,707 495,589 490,956
Less:
Allowance
for loan
loss (17,022) (16,662) (16,617) (16,102) (15,882)
Loans held
for sale 1,944 1,880 29 330 559
Other earning
assets 7,154 49,261 28,823 22,528 22,622
Goodwill and
other
intangible
assets 132,635 133,811 134,757 134,543 130,707
---------------------------------------------------------------------
Total
deposits: 1,890,473 1,894,407 1,899,642 1,853,122 1,814,393
Non-interest
bearing
accounts 189,911 196,362 195,523 196,149 185,614
Interest-
bearing
checking 234,132 234,670 236,346 233,862 229,219
Money market 541,947 494,093 448,266 380,712 370,750
Savings 212,175 223,941 239,887 257,816 260,759
Certificates
of deposit 593,596 624,009 657,002 656,589 638,223
IRA & Keogh 118,712 121,332 122,618 124,222 124,849
Brokered CDs -- -- -- 3,772 4,979
---------------------------------------------------------------------
Other
borrowings 58,657 58,760 52,827 48,809 68,182
Subordinated
debt 38,358 38,474 38,585 38,713 38,831
Federal Home
Loan Bank
advances 495,139 539,100 594,691 645,831 693,955
Shareholders'
equity 358,811 353,777 344,380 356,669 370,395
KNBT Bancorp, Inc.
(unaudited)
For the Three Months Ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
Ratios 2007 2006 2006 2006 2006
---------------------------------------------------------------------
Return on
average
equity 6.12% 7.13% 6.87% 6.62% 5.92%
Return on
average
tangible
equity (a) 9.68% 11.40% 11.11% 10.77% 9.22%
Return on
average
assets 0.76% 0.86% 0.80% 0.79% 0.73%
Net interest
margin 2.77% 2.78% 2.79% 2.90% 2.89%
Efficiency
ratio 68.56% 64.52% 66.70% 64.95% 67.69%
Shareholders'
equity to
total assets 12.44% 12.28% 11.95% 11.42% 11.98%
Tangible
equity to
total assets 7.89% 7.74% 7.42% 6.99% 7.65%
-------------------------------------
(a) Reconciliation Table for Non-GAAP
Financial Measures
Return on
average
equity 6.12% 7.13% 6.87% 6.62% 5.92%
Effect of
goodwill
and
intangibles 3.56% 4.27% 4.24% 4.15% 3.30%
--------- --------- --------- --------- ---------
Return on
average
tangible
equity 9.68% 11.40% 11.11% 10.77% 9.22%
========= ========= ========= ========= =========
Average tangible
equity excludes
acquisition
related average
goodwill
and intangibles:
Average
equity $ 358,811 $ 353,777 $ 344,380 $ 356,669 $ 370,395
Average
goodwill
and in-
tangibles (132,052) (132,565) (131,478) (137,305) (132,756)
--------- --------- --------- --------- ---------
Average
tangible
equity $ 226,759 $ 221,212 $ 212,902 $ 219,364 $ 237,639
========= ========= ========= ========= =========
KNBT Bancorp, Inc.
Consolidated Statements of Income
(unaudited)
Three Months Ended
---------------------
Mar. 31, Mar. 31,
2007 2006
------- -------
(in thousands, except per
share data)
Interest income $37,042 $36,271
Interest expense 19,741 17,536
------- -------
Net interest income 17,301 18,735
Provision for loan losses -- 750
------- -------
Net interest income after
provision for loan losses 17,301 17,985
Non-interest income:
Deposit service charges 2,466 2,186
Securities gains 536 138
Gain on extinguishment of debt -- 1,179
Wealth management income 2,375 1,920
Bank-owned life insurance 861 774
Insurance group income 2,289 1,925
Other income 1,176 959
------- -------
Total non-interest income 9,703 9,081
Non-interest expense:
Salaries, wages and employee benefits 11,214 10,674
Net occupancy and equipment expense 2,977 3,264
Other expenses 4,784 5,576
------- -------
Total non-interest expense 18,975 19,514
------- -------
Income before income taxes 8,029 7,552
Income tax expense 2,543 2,072
------- -------
Net income $ 5,486 $ 5,480
======= =======
Net income per share- diluted $ 0.21 $ 0.19
Net income per share- basic $ 0.21 $ 0.20