STND Standard AVB Financial Corporation

Standard AVB Financial Corp. (the “Company”) - (NASDAQ: STND), the holding company for Standard Bank, PaSB, announced earnings for the quarter ended December 31, 2020 of $2.0 million, or $0.44 per basic share compared to $2.1 million, or $0.46 per basic share, for the quarter ended December 31, 2019. Net income for the fourth quarter was significantly impacted by merger-related expenses of $522,000 ($422,000 after tax) related to the pending merger with Dollar Mutual Bancorp. Excluding the after tax impact of the merger-related expenses, net income would have been $2.5 million or $0.53 per basic share for the quarter ended December 31, 2020. In addition to merger expenses, there was an increase in the provision for loan losses and decreases in both interest income and service charges, partially offset by decreases in interest expense and other operating expenses and increases in net loan sale gains and referral fees and equity fair value adjustments.  

The Company announced earnings for the year ended December 31, 2020 of $6.5 million, or $1.43 per basic share compared to $8.8 million, or $1.91 per basic share, for the year ended December 31, 2019. Year to date merger-related expenses were $1.1 million ($975,000 after tax). Excluding the after tax impact of merger-related expenses, net income would have been $7.5 million or $1.65 per basic share. In addition to merger expenses, the decrease in earnings for the twelve month period resulted primarily from a higher provision for loan losses, equity fair value adjustments and lower interest income, partially offset by lower interest expense, higher net loan sale gains and referral fees and lower income taxes.  

The Company’s annualized return on average assets and average equity were 0.76% and 5.59%, respectively, (0.92% and 6.75%, respectively, excluding the merger-related expenses) for the quarter ended December 31, 2020 compared to 0.83% and 5.84%, respectively, for the quarter ended December 31, 2019. The Company’s annualized return on average assets and average equity were 0.63% and 4.56%, respectively, (0.73% and 5.24%, respectively, excluding the merger-related expenses) for the year ended December 31, 2020 compared to 0.90% and 6.28%, respectively, for the year ended December 31, 2019.

The Company’s board of directors declared a quarterly cash dividend of $0.221 per share on the Company’s common stock. The dividend will be payable to stockholders of record as of February 8, 2021 and will be paid on February 22, 2021.

On September 25, 2020, the Company and Dollar Mutual Bancorp jointly announced the signing of a definitive merger agreement pursuant to which Dollar Mutual Bancorp will acquire the Company in an all cash transaction for an aggregate purchase price of $158 million.   The shareholders of the Company approved the merger on January 19, 2021 and the transaction is expected to close in the first half of 2021.    

Andrew W. Hasley, President & CEO, stated, “While we continue to operate in an environment of significant economic uncertainty, we have produced positive financial results for our shareholders. The historically low interest rate environment has resulted in the contraction of our net interest margin; however, we remain committed to controlling expenses and enhancing earnings from sources other than net interest income to continue to produce positive results. The Bank had record commercial and residential loan production in 2020 as our customer relationship management team continued to care for our existing and expanding customer base. Throughout this time, we have continued to prudently manage our credit as well as interest rate risk. Conservative positioning on both fronts will result in a more resilient business model as the long term impact of the COVID-19 pandemic remains unclear.

The Company ended December with an increased capacity to absorb credit losses, an abundance of liquidity and regulatory capital well in excess of the proscribed minimums. Taking all of this into consideration, the Company made the decision to maintain our dividend at this time.”

CONSOLIDATED BALANCE SHEET & ASSET QUALITY OVERVIEW

Total assets at December 31, 2020 increased $66.8 million, or 6.8%, to $1.1 billion, from $984.4 million at December 31, 2019. The increase in total assets included an increase in cash and cash equivalents of $18.1 million, or 55.8%, an increase in loans receivable of $21.8 million, or 3.1%, and an increase in investment securities of $23.7 million, or 14.4%. The increase in cash and cash equivalents was primarily the result of an increase in deposits during the period which is further discussed below. The increase in loans receivable was due in large part to a $51.8 million increase in commercial mortgage loans and $42.4 million in Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans that were booked during the period, partially offset by prepayments and residential loan sales.  

Total deposits at December 31, 2020 increased by $74.8 million, or 10.2%, to $809.2 million from $734.5 million at December 31, 2019.   The increase resulted from a $113.7 million, or 23.2%, increase in demand and savings accounts partially offset by a $39.0 million, or 15.9%, decrease in time deposits. The increase in demand and savings accounts was primarily the result of inflows from several sources including PPP loan proceeds, government stimulus and maturing time deposits as well as reductions in business and consumer spending during the period.   Borrowed funds decreased by $9.9 million, or 9.6% to $93.0 million at December 31, 2020 from $102.8 million at December 31, 2019. The decrease was primarily due to the net repayment of Federal Home Loan Bank advances during the period.

Stockholders’ equity increased by $3.7 million, or 2.6% to $145.5 million at December 31, 2020 from $141.8 million at December 31, 2019. The increase was the result of net income earned during the period as well as an increase in accumulated other comprehensive income, partially offset by dividends paid and stock repurchased during the period. The Company temporarily suspended its stock repurchase plan on March 19, 2020.

Non-performing loans at December 31, 2020 were $5.0 million, or 0.67% of total loans compared to $2.7 million, or 0.38% of total loans at December 31, 2019. During 2020, the Company’s allowance for loan losses increased from $4.9 million at December 31, 2019 to $7.9 million at December 31, 2020. The increase of $3.0 million, or 60.6%, was the result of provision for loan losses recorded during the year totaling $3.1 million while recognizing $99,000 of net losses over that same period. Based upon Management’s understanding of the credit quality of the loan portfolio, the Company has built up reserves to protect against future potential losses.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), was signed into law on March 27, 2020, and provided for over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the SBA to temporarily guarantee loans under a new 7(a) loan program, the PPP. As a qualified SBA lender, the Company was automatically authorized to originate PPP loans. As of December 31, 2020, Standard Bank had received approval from the SBA for 428 PPP loans totaling $42.4 million which generated $1.7 million in fees to be recognized over the life of the loans. The initial PPP loan program closed on August 8, 2020. The Company is currently working with customers to submit the required information to the SBA in order to receive the maximum amount of loan forgiveness on those loans.   On December 27, 2020, an additional round of PPP funding was established. The Company is continuing to participate in the program, which opened mid-January for new loan applications.

The Company has continued to provide assistance to individuals and small business clients directly impacted by the COVID-19 pandemic by allowing borrowers to defer loan payments.   As of December 31, 2020, the Bank had payment deferrals for 8 commercial loans totaling $7.7 million and 17 consumer loans totaling $2.1 million. All of these loans were initially provided a deferral period of 90 days and, if necessary, additional deferral periods were provided upon request. The Company remains fully committed to serving our customers and communities through this uncertain time.

It is anticipated that certain industries will continue to suffer losses as a result of the COVID-19 pandemic. The Bank’s loan portfolio consists of commercial real estate, commercial business and residential loans that may be primarily impacted. The largest commercial loan concentrations are to the lessors of residential properties and the lessors of nonresidential properties representing 34.4% and 24.6% of the commercial loan portfolio at December 31, 2020, respectively. Additionally, the Bank has approximately $15.6 million in total exposure to the hotel sector.

OPERATING RESULTS OVERVIEW

Net interest income was $7.2 million for the three months ended December 31, 2020 compared to $7.0 million for the three months ended December 31, 2019.   Net interest income was $27.9 million for the year ended December 31, 2020 compared to $28.4 million for the year ended December 31, 2019. The net interest margin for the three months ended December 31, 2020 was 2.88%, compared to 2.99% for the same period in the prior year. The net interest margin for the year ended December 31, 2020 was 2.89%, compared to 3.10% for the same period in the prior year. The increase in net interest income for the quarter was primarily due to an increase in the balance of interest-earning assets and a decrease in the cost of interest-bearing liabilities partially offset by a decrease in the yield on interest-earning assets. The decreases in net interest income and net interest margin for the year was primarily due to a decrease in the yield on interest-earning assets partially offset by a decrease in the cost of interest-bearing liabilities and an increase in the balance of interest-earning assets.

A provision for loan losses of $520,000 was recorded for the three months ended December 31, 2020, compared to $181,000 for the three months ended December 31, 2019. A provision for loan losses of $3.1 million was recorded for the year ended December 31, 2020, compared to $725,000 for the year ended December 31, 2019. The increased provision for loan losses for both the quarter and year end periods was impacted by the increasing concern over the pandemic’s impact on the local, regional and national economy as well as the hotel sector where it was determined necessary to build reserves.

Noninterest income totaled $1.8 million for the quarter ended December 31, 2020, compared to $1.3 million for the quarter ended December 30, 2019.   The increase in noninterest income for the three months ended December 31, 2020 was primarily the result of an increase in residential loan sale gains and referral fees and an increase in the net equity securities fair value adjustment partially offset by a decrease in service charges.   Noninterest income totaled $5.6 million for the year ended December 31, 2020, compared to $5.1 million for the year ended December 31, 2019. The increase in noninterest income for the year ended December 31, 2020 was primarily the result of an increase in residential loan sale gains and referral fees, partially offset by a decrease in the net equity securities fair value adjustment and a decrease in other income.

Noninterest expenses totaled $5.9 million for the quarter ended December 31, 2020, compared to $5.5 million for the quarter ended December 31, 2019. Excluding merger-related expenses, noninterest expenses totaled $5.4 million for the quarter ended December 31, 2020. An increase in compensation expenses were offset by a decrease in other operating expenses.   Noninterest expenses totaled $22.6 million for the year ended December 31, 2020, compared to $21.6 million for the year ended December 31, 2019.   Excluding merger-related expenses, noninterest expenses totaled $21.5 million for the year ended December 31, 2020.   The increase in noninterest expenses other than merger-related expenses for the year ended December 31, 2020 was primarily the result of an increase in compensation expenses, partially offset by decreases in core deposit intangible amortization and other operating expenses.

Income tax expense totaled $483,000 for the quarter ended December 31, 2020, compared to $501,000 for the quarter ended December 31, 2019. Income tax expense totaled $1.4 million for the year ended December 31, 2020, compared to $2.3 million for the year ended December 31, 2019. The decrease in income tax expense was primarily the result of a decrease in taxable income as well as a lower effective tax rate for the period.

Standard AVB Financial Corp., with total assets of $1.1 billion at December 31, 2020, is the parent company of Standard Bank, PaSB, a Pennsylvania chartered savings bank that operates 17 offices serving individuals and small to mid-sized businesses in Allegheny, Westmoreland and Bedford Counties, in Pennsylvania and Allegany County in Maryland. Standard Bank is a member of the FDIC and an Equal Housing Lender.  

This news release may contain a number of forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995.   Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors. In addition, the COVID-19 pandemic is having an adverse impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened or remain reopened. The Company 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.

CONTACTS:
Andrew W. Hasley President Chief Executive Officer 412.856.0363	Timothy K. Zimmerman Senior Executive Vice President Chief Operating Officer 412.856.0363	Susan A. ParenteExecutive Vice PresidentChief Financial Officer412.856.0363

Standard AVB Financial Corp.
Financial Highlights
(Dollars in thousands, except per share data)
(Unaudited)
OPERATIONS DATA:		Three Months Ended December 31,								Twelve Months Ended December 31,
			2020				2019				2020				2019
Interest and Dividend Income		$	8,744			$	9,329			$	35,315			$	37,704
Interest Expense			1,536				2,363				7,387				9,262
Net Interest Income			7,208				6,966				27,928				28,442
Provision for Loan Losses			520				181				3,058				725
Net Interest Income after Provision for Loan Losses			6,688				6,785				24,870				27,717
Noninterest Income			1,757				1,333				5,611				5,052
Noninterest Expenses			5,928				5,542				22,604				21,625
Income before Income Tax Expense			2,517				2,576				7,877				11,144
Income Tax Expense			483				501				1,359				2,338
Net Income		$	2,034			$	2,075			$	6,518			$	8,806
Earnings Per Share - Basic		$	0.44			$	0.46			$	1.43			$	1.91
Earnings Per Share - Diluted		$	0.44			$	0.45			$	1.41			$	1.90
Annualized Return on Average Assets			0.76	%			0.83	%			0.63	%			0.90	%
Average Assets		$	1,058,973			$	990,310			$	1,031,734			$	983,042
Annualized Return on Average Equity			5.59	%			5.84	%			4.56	%			6.28	%
Average Equity		$	144,321			$	140,901			$	142,984			$	140,189
Efficiency Ratio			61.43	%			65.42	%			62.19	%			62.91	%
Net Interest Spread			2.65	%			2.67	%			2.62	%			2.77	%
Net Interest Margin			2.88	%			2.99	%			2.89	%			3.10	%
Annualized Noninterest Expense to Average Assets			2.22	%			2.22	%			2.19	%			2.20	%
FINANCIAL CONDITION DATA:		December 31,				December 31,
			2020				2019
Total Assets		$	1,051,174			$	984,387
Cash and Cash Equivalents			50,513				32,427
Investment Securities			188,279				164,566
Loans Receivable, Net			734,752				712,965
Deposits			809,240				734,453
Borrowed Funds			92,979				102,838
Total Stockholders' Equity			145,537				141,848
Book Value Per Share		$	30.49			$	30.25
Tangible Book Value Per Share		$	24.78			$	24.34
Allowance for Loan Losses		$	7,841			$	4,882
Non-Performing Loans		$	4,965			$	2,716
Allowance for Loan Losses to Total Loans			1.06	%			0.68	%
Allowance for Loan Losses to Non-Performing Loans			157.93	%			179.75	%
Non-Performing Assets to Total Assets			0.52	%			0.32	%
Non-Performing Loans to Total Loans			0.67	%			0.38	%

STANDARD AVB FINANCIAL CORP.RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES

EXPLANATION OF OUR USE OF NON-GAAP MEASURES

In addition to the results of operations presented in accordance with generally accepted accounting principles (GAAP), our management uses, and this exhibit contains, certain non-GAAP financial measures. We believe these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance, our business and performance trends, and facilitate comparisons with the performance of others in the financial service industry.

Although we believe these non-GAAP financial measures enhance investors’ understanding of our business and performance, they should not be considered an alternative to GAAP. The reconciliation of these non-GAAP financial measures from GAAP to non-GAAP follows.

Standard AVB Financial Corp.
Reconciliation of Certain Non-GAAP Financial Measures
(Dollars in thousands, except per share data)
(Unaudited)
Noninterest expense, net income, basic earnings per share, diluted earnings per share, return on average assets and return on average equity excluding merger-related expenses are all non-GAAP measures. The following table reconciles noninterest expense to noninterest expense excluding merger-related expenses and net income to net income excluding merger-related expenses. Additionally, basic earnings per share, diluted earnings per share, return on average assets and return on average equity utilizing both net income and net income excluding merger-related expenses are presented for the respective periods:
		Three Months Ended December 31,									Twelve Months Ended December 31,
			2020				2019					2020				2019
Noninterest Expense (GAAP)		$	5,928			$	5,542				$	22,604			$	21,625
Merger-related expenses (GAAP)			(522	)			-					(1,075	)			-
Noninterest expense, excluding merger-related expenses		$	5,406			$	5,542				$	21,529			$	21,625
Net Income (GAAP)		$	2,034			$	2,075				$	6,518			$	8,806
After tax merger-related expenses (GAAP)			422				-					975				-
Net income, excluding merger-related expenses		$	2,456			$	2,075				$	7,493			$	8,806
Earnings Per Share - Basic
GAAP		$	0.44			$	0.46				$	1.43			$	1.91
Excluding merger-related expenses		$	0.53				n/a				$	1.65				n/a
Earnings Per Share - Diluted
GAAP		$	0.44			$	0.45				$	1.41			$	1.90
Excluding merger-related expenses		$	0.53				n/a				$	1.62				n/a
Average Assets (GAAP)		$	1,058,973			$	990,310				$	1,031,734			$	983,042
Return on Average Assets
GAAP			0.76	%			0.83	%				0.63	%			0.90	%
Excluding merger-related expenses			0.92	%			n/a					0.73	%			n/a
Average Equity (GAAP)		$	144,321			$	140,901				$	142,984			$	140,189
Return on Average Equity
GAAP			5.59	%			5.84	%				4.56	%			6.28	%
Excluding merger-related expenses			6.75	%			n/a					5.24	%			n/a
Tangible book value per common share is a non-GAAP measure and is calculated based on tangible book value divided by period-end common shares outstanding. The following tables reconcile book value and book value per share to tangible book value and tangible book value per share for the periods indicated:
		December 31, 2020				December 31, 2019
Total Stockholders' Equity (GAAP)		$	145,537			$	141,848
Goodwill and Other Intangible Assets, Net			(27,247	)			(27,717	)
Tangible Book Value			118,290				114,131
Common Shares Outstanding			4,773,995				4,689,354
Book Value Per Share (GAAP)		$	30.49			$	30.25
Goodwill and Other Intangible Assets, Net Per Share		$	(5.71	)		$	(5.91	)
Tangible Book Value Per Share		$	24.78			$	24.34