Quaint Oak Bancorp, Inc. (OTCQX: QNTO), the holding company for Quaint Oak Bank, publicized today that net income for the quarter ended December 31, 2017, was $177,000.00, or $0.1 per basic and $0.090 per diluted share, compared to $455,000.00, or $0.250 per basic and $0.230 per diluted share for the same period in 2016.
Net income for the year ended December 31, 2017, was $1.470M, or $0.790 per basic and $0.740 per diluted share, compared to $1.50M, or $0.840 per basic and $0.770 per diluted share for the same period in 2016.
The Tax Act reduced the corporate Federal income tax rate from 35.00% to 21.00% and made other changes to U.S. corporate income tax laws. Accordingly, the incremental income tax cost recorded by the Company in the 4th-quarter of 2017 related to the Tax Act was $297,000.00 ($0.160 per basic and $0.150 per diluted share impact).
Net income amounted to $177,000.00 for the 3-months ended December 31, 2017, a decline of $278,000.00, or 61.10%, compared to net income of $455,000.00 for 3-months ended December 31, 2016.
The decline in net income on a comparative quarterly basis was primarily the result of inclines in the provision for income taxes of $413,000.00 and non-interest cost of $427,000.00, partially offset by inclines in non-interest income of $300,000.00 and net interest income of $237,000.00, and a decline in the provision for loan losses of $25,000.00.
The incline in the provision for income taxes was primarily due to the $297,000.00 re-measurement charge of the Company’s net deferred tax asset as a result of the Tax Act signed into law on December 22, 2017.
The $237,000.00, or 13.50%, incline in net interest income for the 3-months ended December 31, 2017 over the comparable period in 2016 was driven by a $354,000.00, or 14.50%, incline in interest income, partially offset by a $117,000.00, or 16.90%, incline in interest cost.
The incline in interest income was primarily due to a $31.80M incline in average loans receivable, net, including loans held for sale, which inclined from an average balance of $172.10M for the 3-months ended December 31, 2016 to an average balance of $203.90M for the 3-months ended December 31, 2017, and had the effect of increasing interest income $437,000.00.
Partially offsetting this incline was a 19.00 basis point decline in the average yield on loans receivable, net, including loans held for sale, from 5.490% for the 3-months ended December 31, 2016 to 5.30% for the year ended December 31, 2017, which had the effect of decreasing interest income by $96,000.00.
The incline in interest cost was primarily attributable to a $17.60M incline in average interest-bearing liabilities, which inclined from an average balance of $183.70M for the 3-months ended December 31, 2016 to an average balance of $201.30M for the 3-months ended December 31, 2017, and had the effect of increasing interest cost $56,000.00.
This incline in average interest-bearing liabilities was primarily attributable to a $13.00M incline in average Federal Home Loan Bank borrowings which inclined from $12.60M for the 3-months ended December 31, 2016 to an average balance of $25.60M for the 3-months ended December 31, 2017, and had the effect of increasing interest cost $34,000.00, and a $4.90M incline in average certificate of deposit accounts which inclined from an average balance of $137.70M for the 3-months ended December 31, 2016 to an average balance of $142.60M for the 3-months ended December 31, 2017, and had the effect of increasing interest cost $21,000.00.
Also contributing to this incline was a ten basis point incline in the average rate on interest-bearing liabilities, from 1.510% for the 3-months ended December 31, 2016, to 1.610% for the 3-months ended December 31, 2017, which had the effect of increasing interest cost by $61,000.00.
This incline in rate was primarily attributable to a 73.0 basis point incline in rate on average Federal Home Loan Bank borrowings, which inclined from 1.050% for the 3-months ended December 31, 2016, to 1.780% for the 3-months ended December 31, 2017, which had the effect of increasing interest cost by $48,000.00, and a four basis point incline in rate on average certificate of deposit accounts, which inclined from 1.730% for the 3-months ended December 31, 2016 to 1.770% for the 3-months ended December 31, 2017, and had the effect of increasing interest cost by $13,000.00.
The average interest rate spread inclined from 3.320% for the 3-months ended December 31, 2016, to 3.350% for the same period in 2017 while the net interest margin inclined from 3.460% for the 3-months ended December 31, 2016, to 3.520% for the 3-months ended December 31, 2017.
The $25,000.00, or 20.80%, decline in the provision for loan losses for the 3-months ended December 31, 2017, over the 3-months ended December 31, 2016 was based on an evaluation of the allowance relative to such factors as volume of the loan portfolio, concentrations of credit risk, prevailing economic conditions, prior loan loss experience and amount of non-performing loans at December 31, 2017.
The $300,000.00, or 41.20%, incline in non-interest income for the 3-months ended December 31, 2017 over the comparable period in 2016 was primarily attributable to a 236,000.00, or 68.00%, incline in net gain on the sales of residential mortgage loans, a $62,000.00, or 92.50%, decline in loss on sales and write-downs on other real estate owned, a $27,000.00, or 245.50%, incline in other non-interest income, a $15,000.00, or 6.60%, incline in mortgage banking and title abstract fees, and an $11,000.00, or 9.00%, incline in insurance commissions earned by Quaint Oak Insurance Agency, a wholly owned insurance subsidiary of Quaint Oak Bank, partially offset by a $49,000.00, or 76.60%, decline in other fees and services charges.
The $427,000.00, or 23.50%, incline in non-interest cost for the 3-months ended December 31, 2017 compared to the same period in 2016 was primarily attributable to a $293,000.00, or 24.60%, incline in salaries and employee benefits cost, due primarily to inclined staff related to the continued expansion of the Company’s mortgage banking and lending operations, and the expansion of our real estate subsidiary. Also contributing to the incline was a $58,000.00, or 107.40%, incline in data processing cost, a $49,000.00, or 169.00%, incline in advertising cost, and a $29,000.00, or 13.70%, incline in other costs.
The $413,000.00 incline in the provision for income taxes for the 3-months ended December 31, 2017 over the 3-month period ended December 31, 2016, was primarily due to the $297,000.00 re-measurement charge of the Company’s net deferred tax asset as a result of the Tax Act signed into law on December 22, 2017.
For the year ended December 31, 2017, net income declined $31,000.00, or 2.10%, from $1.50M for the year ended December 31, 2016, to $1.470M for the year ended December 31, 2017. The decline was primarily the result of inclines in the provision for income taxes of $469,000.00 and non-interest cost of $1.40M, partially offset by inclines in net interest income of $968,000.00 and non-interest income of $839,000.00, and a decline in the provision for loan losses of $8,000.00. As was the case with the quarter, the incline in the provision for income taxes for the year ended December 31, 2017 over the year ended December 31, 2016 was primarily due to the $297,000.00 re-measurement charge of the Company’s net deferred tax asset as a result of the Tax Act signed into law on December 22, 2017.
The $968,000.00, or 14.60%, incline in net interest income for the year ended December 31, 2017, over the comparable period in 2016 was driven by a $1.40M, or 15.30%, incline in interest income, partially offset by a $437,000.00, or 17.00%, incline in interest cost.
The incline in interest income was primarily due to a $33.60M incline in average loans receivable, net, including loans held for sale, which inclined from an average balance of $159.60M for the year ended December 31, 2016 to an average balance of $193.20M for the year ended December 31, 2017, and had the effect of increasing interest income $1.90M.
Partially offsetting this incline was a 25.0 basis point decline in the average yield on loans receivable, net, including loans held for sale, from 5.550% for the year ended December 31, 2016 to 5.30% for the year ended December 31, 2017, which had the effect of decreasing interest income by $486,000.00. The incline in interest cost was primarily attributable to a $20.50M incline in average interest-bearing liabilities, which inclined from an average balance of $174.10M for the year ended December 31, 2016 to an average balance of $194.60M for the year ended December 31, 2017, and had the effect of increasing interest cost $283,000.00.
This incline in average interest-bearing liabilities was primarily attributable to a $7.70M incline in average Federal Home Loan Bank borrowings which inclined from $13.20M for the year ended December 31, 2016 to an average balance of $20.90M for the year ended December 31, 2017, and had the effect of increasing interest cost $78,000.00, and a $10.50M incline in average certificate of deposit accounts which inclined from an average balance of $128.60M for the year ended December 31, 2016 to an average balance of $139.10M for the year ended December 31, 2017, and had the effect of increasing interest cost $179,000.00.
Also contributing to this incline was a seven basis point incline in the average rate on interest-bearing liabilities, from 1.470% for the year ended December 31, 2016, to 1.540% for the year ended December 31, 2017, which had the effect of increasing interest cost by $153,000.00.
This incline in rate was primarily attributable to a 52.0 basis point incline in rate on average Federal Home Loan Bank borrowings, which inclined from 1.010% for the year ended December 31, 2016, to 1.530% for the year ended December 31, 2017, which had the effect of increasing interest cost by $110,000.00, and a 3-basis point incline in rate on average certificate of deposit accounts, which inclined from 1.710% for the year ended December 31, 2016 to 1.740% for the year ended December 31, 2017, and had the effect of increasing interest cost by $44,000.00.
The average interest rate spread declined from 3.350% for the year ended December 31, 2016, to 3.340% for the same period in 2017 while the net interest margin inclined from 3.480% for the year ended December 31, 2016, to 3.50% for the year ended December 31, 2017.
The $8,000.00, or 2.70%, decline in the provision for loan losses for the year ended December 31, 2017 over the year ended December 31, 2016 was based on an evaluation of the allowance relative to such factors as volume of the loan portfolio, concentrations of credit risk, prevailing economic conditions, prior loan loss experience and amount of non-performing loans at December 31, 2017.
The $839,000.00, or 32.20%, incline in non-interest income for the year ended December 31, 2017 over the comparable period in 2016 was primarily attributable to a $458,000.00, or 28.00%, incline in net gain on the sales of residential mortgage loans, a $207,000.00, or 113.70%, incline in insurance commissions earned by Quaint Oak Insurance Agency which began operations on August 1, 2016, a $125,000.00, or 64.80%, decline in loss on sales and write-downs on other real estate owned, a $93,000.00, or 14.60%, incline in mortgage banking and title abstract fees, and a $52,000.00, or 110.60%, incline in other non-interest income.
These inclines were partially offset by a $60,000.00, or 55.60%, decline in the gain on sale of SBA loans and a $32,000.00, or 33.30%, a decline in other fees and service charges.
The $1.40M, or 20.60%, incline in non-interest cost for the year ended December 31, 2017, over the comparable period in 2016 was primarily attributable to a $966,000.00, or 21.40%, incline in salaries and employee benefits cost.
As was the case for the quarter, the incline in salaries and employee benefits cost for the 2017 fiscal year compared to 2016 was primarily attributable to inclined staff related to the continued expansion of the Company’s mortgage banking and lending operations, the launch of Quaint Oak Insurance Agency on August 1, 2016, and the expansion of our real estate subsidiary.
Also contributing to the incline was a $143,000.00, or 26.30%, incline in other costs, a $140,000.00, or 73.30%, incline in data processing cost, and an $82,000.00, or 72.60%, incline in advertising cost.
As was the case for the quarter, the $469,000.00 incline in the provision for income taxes for the year ended December 31, 2017 over the year ended December 31, 2016 was primarily due to the $297,000.00 re-measurement charge of the Company’s net deferred tax asset as a result of the Tax Act signed into law on December 22, 2017.
The Company’s total assets at December 31, 2017, were $239.60M, an incline of $23.40M, or 10.80%, from $216.20M on December 31, 2016. This growth in total assets was primarily due to a $24.90M, or 14.10%, incline in loans receivable, net, a $2.30M, or 48.70%, incline in loans held for sale, and a $521,000.00, or 73.10%, incline in Federal Home Loan Bank stock.
These inclines were partially offset by a $1.60M, or 17.20%, decline in investment securities available for sale, a $1.40M, or 14.90%, a decline in cash and cash equivalents, and a $1.20M, or 20.00%, a decline in investment in interest-earning time deposits.
The largest inclines within the loan portfolio occurred in the following categories: commercial real estate loans which inclined $14.50M, or 18.70%, multi-family residential loans which inclined $7.10M, or 48.30%, and commercial business loans which inclined $2.70M, or 28.60%.
Total deposits inclined $9.20M, or 5.20%, to $186.20M at December 31, 2017 from $177.00M at December 31, 2016.
This incline in deposits was primarily attributable to inclines of $8.00M, or 5.80%, in certificates of deposit, $2.10M, or 36.00%, in non-interest bearing checking accounts, and $569,000.00, or 31.90%, in savings accounts, partially offset by a $726,000.00, or 61.10%, decline in passbook accounts and a $703,000.00, or 2.30%, decline in money market accounts.
Total Federal Home Loan Bank borrowings inclined $12.50M, or 80.60%, from $15.50M at December 31, 2016, to $28.00M on December 31, 2017.
Throughout the year ended December 31, 2017, the Company borrowed $7.00M of short-term and $12.00M of long-term fixed rate borrowings primarily to fund loan growth.
Throughout the same time period, the Company repaid $4.00M of short-term and $2.50M of long-term fixed rate borrowings.
Total stockholders’ equity inclined $1.40M, or 6.70%, to $22.20M at December 31, 2017 from $20.80M at December 31, 2016. Contributing to the incline was net income for the year ended December 31, 2017 of $1.50M, the re-issuance of treasury stock for exercised stock options of $206,000.00, common stock earned by participants in the employee stock ownership plan of $185,000.00, amortization of stock awards and options under our stock compensation plans of $129,000.00, the re-issuance of treasury stock under the Bank’s 401.00(k) Plan of $94,000.00, and a decline in other comprehensive loss of $25,000.00. These inclines were partially offset by dividends paid of $364,000.00 and by the purchase of treasury stock of $347,000.00.
Non-performing loans amounted to $3.10M, or 1.520%, of net loans receivable at December 31, 2017, consisting of eleven loans, 3-of which are on non-accrual status and eight of which are 90 days or more past due and accruing interest.
Comparably, non-performing loans amounted to $1.90M, or 1.060%, of net loans receivable at December 31, 2016, consisting of fourteen loans, seven of which were on non-accrual status and seven of which were 90.0 days or more past due and accruing interest.
The non-performing loans at December 31, 2017, include four one-to-four family non-owner occupied residential loans, 3-one-to-four family owner-occupied residential loans, two commercial real estate loans, and two construction loans, and all are generally well-collateralized or adequately reserved for. Throughout the quarter ended December 31, 2017, no loans were placed on non-accrual status and two loans previously on non-accrual status were paid-off. The allowance for loan losses as a% of total loans receivable was 0.890% at December 31, 2017, and 0.9% at December 31, 2016.
There was no other real estate owned at December 31, 2017. This compares to 3-properties totaling $435,000.00 on December 31, 2016.
Throughout the quarter ended December 31, 2017, the Company sold one property with a carrying value of $185,000.00 and a loss of $6,000.00 was realized on the transaction.
Non-performing assets amounted to $3.10M, or 1.280%, of total assets at December 31, 2017, compared to $2.30M, or 1.070%, of total assets at December 31, 2016.
