I am pleased to report unaudited financial results for Kish Bancorp, Inc., parent company of Kish Bank and related affiliates, for the twelve month period ending December 31, 2017. It was a year of unprecedented growth for the Corporation and reflected an associated expansion in revenues and core earning categories. In addition, the passage of the Tax Cuts and Jobs Act in late December also significantly brightened the outlook for the future net income of the Corporation through a 40% reduction in the corporate tax rate. This enactment also triggered an adjustment for financial statement reporting purposes, as well as several other actions that better position the Corporation's balance sheet in anticipation of rising economic activity and an improved business climate. This will be discussed later in this letter and in full detail in the Annual Report.
Year-end highlights for 2017 include total assets reaching a new high, exceeding $800 million for the first time in our history; growth in total loans and deposits that both exceeded 16%; strong results by both the wealth management and travel services units; stability in revenues from mortgage originations, insurance activities, and bank fee income sources; and the completion of the acquisition of the Benefit Management Group practice. Despite some noise created by the passage of tax reform in the fourth quarter, it was a year of powerful results for the Corporation.
Balance Sheet
The Corporation's total assets ended the period at $811 million, an increase of $86.1 million, or 11.88%, compared to total assets of $725 million as of December 31, 2016. Asset growth continued to be driven by strong growth in lending activities, with loans rising $80.1 million to $575 million, or 16.20%, from $495 million at the end of December 2016. Total deposits grew by $91.8 million to $654 million, an increase of 16.33% from $562 million a year ago. Borrowings decreased to $95 million, compared to $104 million at the end of December 2016. The decrease in borrowings was due to strong deposit growth and a reduction in the securities portfolio.
Net Interest Income
In 2017, higher margins resulting from the robust growth in loans and core deposits generated net interest income of $23.10 million, an increase of $2.23 million, or 10.70%, compared to $20.87 million at the end of December 2016. Contributions to the loan loss reserve equaled $600 thousand for the year ending December 2017, as compared to $530 thousand in December 2016. Higher loan charge-offs at year end meant reserves were relatively unchanged year over year. Although the reserve as a percentage of outstanding loans declined, this was supported by stronger overall loan quality metrics.
Noninterest Income
Noninterest income was $6.53 million for the year ending December 31, 2017, a decrease of $570 thousand, or 8.03%, from $7.10 million in 2016. Noninterest income from most sources was generally stable asreflected in income from mortgage originations, bank service fees, and insurance agency revenue. Notably higher revenue was generated by travel services and wealth management services, which both registered strong results for 2017. However, these revenue gains were more than offset by year-end actions taken to reduce the Corporation's investment in tax-free municipal securities and longer dated maturities due to the passage of tax reform. Reinvestment of the proceeds in shorter maturity taxable securities at lower tax rates will mean the losses will be more than recouped in 2018. When compared to 2016, 2017 investment securities gains declined by $672 thousand.
Noninterest Expense
Year over year, noninterest expense increased by $1.70 million, or 7.69%, to $23.88 million as of December 31, 2017 from $22.18 million the prior year. The increase reflects higher compensation expenses related primarily to an expansion in the sales force throughout 2016 and 2017. These additions have served to dramatically expand sales results across most business units and will support the Corporation's capacity
to drive future market share expansion. Another factor contributing
to higher expenses was increased data processing costs necessary
to support higher levels of customer activity. Most other expense categories were well controlled when compared to the prior year.
Net Income
Net income for 2017 was $4.56 million, a decrease of $60 thousand, or 1.29%, compared to $4.62 million in 2016. This was prior to an additional downward adjustment of $417 thousand required by FASB rules as a consequence of the enactment of the Tax Cuts and Jobs Act. This adjustment was due to a revaluation of net deferred tax assets held by the Corporation. While the timing of the implementation of the act was a challenge in 2017, the resulting benefit of lower tax rates will have a significantly positive impact in 2018 and beyond. Before the year-end financial statement reporting adjustments and securities losses taken to reposition the balance sheet, we had projected that net income for 2017 would be in excess of $5.1 million, or an increase of approximately $500 thousand, over 2016 net income.
The Board of Directors has declared a quarterly dividend in the amount of $0.46 per share, payable January 31, 2018, to shareholders of record as of January 15, 2018.
Your ownership stake in Kish Bancorp is appreciated. Please consider using Kish for all your financial service needs and recommending us to others as opportunities arise.
Sincerely,
William P. Hayes
Chairman, President and Chief Executive Officer
CONSOLIDATED BALANCE SHEET
(Unaudited; in thousands)
ASSETS:
Cash and due from banks Interest-bearing deposits with other institutions
Cash and cash equivalents
Certificates of deposit in other financial institutions Investment securities available for sale
Investment securities held to maturity
Loans held for sale
Loans
Less allowance for loan losses Net Loans
Premises and equipment Goodwill
Regulatory stock Bank-owned life insurance Accrued interest and other assets TOTAL ASSETS
LIABILITIES: Noninterest-bearing deposits Interest-bearing deposits Total Deposits
Short-term borrowings Other borrowings
Accrued interest and other liabilities TOTAL LIABILITIES
STOCKHOLDERS' EQUITY: Common stock, $0.50 par value; 2,000,000 shares authorized, 1,348,750 shares issued
Additional paid-in capital Retained earnings
Accumulated other comprehensive income
Treasury stock, at cost (85,792 and 106,324 shares)
TOTAL STOCKHOLDERS' EQUITY
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
Dec. 31, 2017
Dec. 31, 2016
$
7,964 $ 8,334 35,924 12,070 43,888 20,404
3,492 3,492 140,048 161,270
6,000 6,000 1,279 1,006 574,708 494,599 5,698 6,011 569,010 488,588
12,997 12,762
2,144 1,669
6,149 6,519
15,438 15,011
10,747 8,350
$
$
$ 811,192
811,192 $ 725,071
85,526
568,161 488,480 653,687 561,928
8,931 14,783 85,932 89,349 6,303 5,418 754,853 671,478
674 674
3,071 2,956
56,291 54,453
426 110
$ 73,448
(4,123) 56,339
(4,600) 53,593
$ 725,071
CONSOLIDATED STATEMENT OF INCOME
(Unaudited; in thousands)
INTEREST AND DIVIDEND INCOME Interest and fees on loans:
Taxable
Exempt from federal income tax Investment securities:
Taxable
Exempt from federal income tax Interest-bearing deposits with other institutions
Other dividend income
TOTAL INTEREST AND DIVIDEND
INCOME
INTEREST EXPENSE Deposits
Short-term borrowings Other borrowings
TOTAL INTEREST EXPENSE
NET INTEREST INCOME Provision for loan losses
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
NONINTEREST INCOME
Service fees on deposit accounts Investment securities gains, net Gain on sale of loans, net Earnings on Bank-owned life insurance
Insurance commissions Travel agency commissions Wealth management Other
TOTAL NONINTEREST INCOME
NONINTEREST EXPENSE Salaries and employee benefits Occupancy and equipment Data processing Professional fees Advertising
Federal deposit insurance Other
TOTAL NONINTEREST EXPENSE
INCOME BEFORE INCOME TAXES Income taxes
NET INCOME BEFORE
ADJUSTMENT
Adjustment due to revaluation of net deferred tax assets due to tax reform
NET INCOME AFTER ADJUSTMENT
Twelve Months Ended Dec. 31, 2017 Dec. 31, 2016
$
22,855 $ 19,372
1,337 1,443
2,656 3,045
1,332 1,416
345 152
602 610
29,127 26,038
3,865 3,236
23 30
2,138 1,904
$
6,026 5,170 MARKET MAKERS
23,101 20,868
600 530
22,501 20,338
1,614 1,673
101 773
867 964
430 444
1,128 1,124
377 273
1,400 1,279
608 565
6,525 7,095
14,633 13,477
2,878 2,744
2,089 1,943
315 421
252 304
237 352
3,480 2,938
23,884 22,179
5,142 5,254
585 637
4,557 4,617
417 4,140
$
0 4,617
(Unaudited; in thousands, except for per share data)
SELECTED FINANCIAL HIGHLIGHTS
Net Income | $ | 4,557 | $ | 4,617 |
Total Assets | $ | 811,192 | $ | 725,071 |
Loans Outstanding | $ | 574,708 | $ | 494,599 |
Total Deposits | $ | 653,687 | $ | 561,928 |
ROA (annual) | 0.59% | 0.65% | ||
ROE (annual) | 8.20% | 8.54% | ||
Earnings per Share | $ | 3.64 | $ | 3.73 |
Dividends per Share | $ | 1.84 | $ | 1.72 |
The highlights above are based on net income before the adjustment required by the enactment of the Tax Cuts and Jobs Act.
Stifel, Nicolaus & Company, Incorporated Contact: Steven Jefferis 614-789-9354
655 Metro Place South, Suite 425 Dublin, OH 43017
Boenning & Scattergood, Inc.
Contact: Eugene Bodo 1-800-883-1212
4 Tower Bridge, 200 Barr Harbor Drive, Suite 300 West Conshohocken, PA 19428-2979
Raymond James and Associates, Inc.
Contact: Anthony LanFranca 312-655-2961
222 South Riverside Plaza, 7th Floor Chicago, IL 60606
4255 East Main Street, Belleville, PA 17004 1-888-554-4748 |www.KishBank.com
Kish Bancorp Inc. published this content on 31 January 2018 and is solely responsible for the information contained herein.
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