and
non-accrual
loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions
and other qualitative and quantitative factors which could affect potential credit losses. The allowance for loan losses is assessed on a quarterly basis and provisions are made for loan losses as required in order to maintain the allowance.
Provision for loan losses decreased by $15,000, or 20.00%, to $60,000 for the three months ended June 30, 2019 from a provision for loan
losses for the three months ended June 30, 2018 of $75,000. We recorded net charge-offs of $50,000 for each of the three months ended June 30, 2019 and 2018.
Non-performing
loans totaled $929,000 at
June 30, 2018 compared to $673,000 million at June 30, 2018. The increase of $256,000 in
non-performing
loans was the result of an increase of $484,000 in
non-performing
nonresidential loans offset by a decrease of $238,000 in
non-performing
one-to
four-family loans. Our
non-performing
loans to total loans increased to 0.64% at June 30, 2019 from 0.48% at June 30, 2018. We have provided for losses that are probable and reasonably estimable at June 30, 2019.
Non-interest
Income.
Non-interest
income
decreased by $40,000, or 27.59%, to $105,000 for the three months ended June 30, 2019 from $145,000 for the three months ended June 30, 2018. The decrease was primarily due to the decrease of $39,000 in gain on sale of loans to $19,000 for
the three months ended June 30, 2019 from $58,000 for the three months ended June 30, 2018.
Non-interest
Expense.
Non-interest
expense increased by $401,000, or 28.96%, to $1.8 million for the three months ended June 30, 2019 from $1.4 million
for the three months ended June 30, 2018. Salaries, director fees and employee benefits increased $249,000, or 31.24%, to $1.0 million for the three months ended June 30, 2019 from $797,000 for the three months ended June 30,
2018 due primarily to the recording of $205,000 in stock-based compensation expense relating to the ESOP and 2019 Equity Incentive Plan. Professional fees increased $80,000, or 97.56%, to $162,000 for the three months ended June 30, 2019 from
$82,000 for the three months ended June 30, 2018 primarily due to increased consulting fees relating to information technology system enhancements, the increased expenses relating to reporting requirements associated with the Companys
public company status offset by a recovery of legal fee expenses relating to past due loan relationships that were resolved in the second quarter of 2019. Marketing expenses increased $11,000, or 28.95%, to $49,000 for the three months ended
June 30, 2019 compared to $38,000 for the three months ended June 30, 2018 primarily due to marketing outlays to generate organic growth and investments in new products and services. Provision for losses and costs on foreclosed real estate
increased by $20,000 to $26,000 for the three months ended June 30, 2019 from $6,000 for the three months ended June 30, 2018 due to a writedown in the valuation of the foreclosed real estate to its current fair market value. Other
operating expenses increased by $49,000, or 32.03%, to $202,000 for the three months ended June 30, 2019 from $153,000 for the three months ended June 30, 2018 primarily due to an increase in insurance costs as well as an increase in
software maintenance costs.
Income Tax Expense.
Income tax expense decreased by $17,000, or 23.29%, to $56,000 for the
three months ended June 30, 2019 from $73,000 for the three months ended June 30, 2018. The effective tax rate was 24.46% and 25.30% for the three months ended June 30, 2019 and 2018, respectively. The decrease in tax expense was the
result of a decrease in income before income taxes of $108,000 to $228,000 for the three months ended June 30, 2019 from $290,000 for the three months ended June 30, 2018.
Comparison of Operating Results for the Six Months Ended June 30, 2019 and June 30, 2018
General.
Net income was $444,000 for the six months ended June 30, 2019 compared to $473,000 for the six months ended
June 30, 2018. The decrease was due primarily to an increase in
non-interest
expense and a decrease in
non-interest
income offset by an increase in net interest
income.
Non-interest
expenses increased by $595,000, or 22.33%, to $3.3 million for the six months ended June 30, 2019 compared to $2.7 million for the six months ended June 30, 2018.
Non-interest
income decreased $100,000, or 33.67%, to $197,000 for the six months ended June 30, 2019 compared to $297,000 for the six months ended June 30, 2018. Net interest income increased $664,000, or
21.12%, to $3.8 million for the six months ended June 30, 2019 from $3.1 million for the six months ended June 30, 2018.
Interest Income
. Interest and dividend income increased $883,000, or 24.62%, to $4.5 million for the six months ended
June 30, 2019 from $3.6 million for the six months ended June 30, 2018. The increase in interest income was due primarily to the increase in average interest-earning assets for the six months ended June 30, 2019 compared to the
average interest earnings assets for the six months ended June 30, 2018.
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