FFBW FFBW Inc

FFBW, Inc. (Nasdaq: FFBW) (the “Company”), the parent company of First Federal Bank of Wisconsin (the “Bank”), a federally chartered stock savings bank offering full-service commercial banking, retail banking and residential lending, today announced unaudited financial results for the three months and year ended December 31, 2018.  The December 31, 2018 results showed significant period-over-period earnings growth, improved asset quality, and solid loan portfolio growth.  For the three months and year ended December 31, 2018, net income was $233,000, or $0.04 per share, and $1.1 million, or $0.17 per share, respectively, compared with net losses of $417,000, or $0.07 per share, and $186,000, or $0.03 per share, for the same respective periods last year.

Edward H. Schaefer, President and CEO, commented, “Our fourth quarter results marked a strong finish to a successful first full year as a public company. We were able to strategically realign our balance sheet, realizing a loss on sale of securities during the quarter, and still finished ahead of our budget. By selling more than $5.4 million in lower-yielding securities, we positioned ourselves to reinvest those funds into higher-yielding loans and securities, thereby increasing our future earnings.”

Fourth Quarter and Year-to-Date Highlights

• Earnings growth. Quarterly earnings improved $650,000 from a loss of $417,000 to income of $233,000, and annual earnings increased more than $1.2 million from a loss of $186,000 to income of $1.1 million.  
• Asset quality improvement. Nonperforming assets decreased 58% to $789,000 at December 31, 2018 from $1.9 million as of December 31, 2017. Non-performing loans to total loans dropped to 0.36% at December 31, 2018 compared to 0.72% at December 31, 2017. 
• Strong loan portfolio growth. Net loans have increased 16% since December 31, 2017 to $199 million. Commercial loans have increased $26 million, while residential real estate and consumer loans have increased $2 million for the same period.      

Repurchase Plan Announcement

On January 25, 2019, the Company announced that the Board of Directors authorized the repurchase of up to 5% of total outstanding shares of common stock (“the Repurchase Program”). The Company is not obligated to repurchase any such shares under the Repurchase Program, but will make decisions based on the prevailing market prices and in accordance with federal securities laws.

Income Statement and Balance Sheet Overview

Total interest and dividend income increased $375,000, or 15.4%, to $2.8 million for the fourth quarter of 2018 compared to $2.4 million for the prior year quarter.  Average interest-earning assets increased $1.5 million, or 0.6%, for the quarter ended December 31, 2018 compared to the quarter ended December 31, 2017 and the weighted average yield on interest-earning assets increased 58 basis points for quarter to quarter. Total interest and dividend income increased $1.6 million, or 17.9%, to $10.6 million for the year ended December 31, 2018 compared to $9.0 million for 2017.  Total average interest-earning assets increased $21.4 million, or 9.5%, for the year ended December 31, 2018 compared to the year ended December 31, 2017, and the weighted average yield on interest-earning assets increased 31 basis points year to year.

Total interest expense increased $272,000, or 72.9%, to $645,000 for the quarter ended December 31, 2018 compared to $373,000 for the quarter ended December 31, 2017.  Average interest-bearing liabilities increased $4.7 million, or 2.6%, for the quarter ended December 31, 2018 compared to the quarter ended December 31, 2017, and the cost of funds increased 57 basis points to 1.40% for the quarter ended December 31, 2018 compared to 0.83% for the quarter ended December 31, 2017. The increase in average cost of funds was primarily the result of rising interest rates and competition within our market. Total interest expense increased $555,000, or 35.7%, to $2.1 million for the year ended December 31, 2018 compared to $1.6 million for the year ended December 31, 2017.  Average interest-bearing liabilities increased $767,000, or 0.4%, for 2018 compared to 2017, and the cost of funds increased 30 basis points to 1.15% for the year ended December 31, 2018 compared to 0.85% for year ended December 31, 2017.

Net interest margin was 3.48% and 3.44% for the three and twelve months ended December 31, 2018, compared to 3.34% and 3.29% for the three and twelve months ended December 31, 2017, respectively.

The loan loss provision was $98,000 for the quarter ended December 31, 2018 compared to $253,000 the quarter ended December 31, 2017.  The net recoveries for the 2018 were $1,000, 0.00%, of average total loans. The loan loss provision was $513,000 for the year ended December 31, 2018 compared to $419,000 for the year ended December 31, 2017. Net charge-offs for 2018 were $195,000, 0.10% of average total loans.  At December 31, 2018, our allowance for loan loss is $2.1 million, or 1.05%, of total loans. Management believes the allowance is adequate for future probable losses.

Noninterest income decreased to $39,000 for the three months ended December 31, 2018 compared to $264,000 for the three months ended December 31, 2017.  The decreased resulted primarily from a $224,000 loss from sale of securities completed in the fourth quarter as part of a balance sheet restructuring strategy to sell more than $5.4 million of securities with below market book yields and redeploy those funds into higher yielding assets. By redeploying those funds into higher yielding loans and securities, management expects an earnback period of approximately 1.15 years. Both gain on sale of loans and service charges and other fees improved for the three months ended December 31, 2018 compared to the same period in the prior year.

Compared to 2017, noninterest income decreased $191,000.  This was primarily due to the following: (1) gain on sale of loans dropped $22,000 in 2018 compared to 2017 due to management’s decision to retain more mortgage loans in the loan portfolio rather than selling to the secondary market, (2) a loss of $224,000 from the sale of securities recognized in the fourth quarter, and (3) 2017 included a gain on the sales of two office buildings. This was partially offset by the increase in service charges and other fees of $92,000 year over year.

Noninterest expense decreased $421,000 to $1.8 million for the three months ended December 31, 2018 compared to $2.2 million for the three months ended December 31, 2017.  The Company had decreases in other noninterest expense, occupancy and equipment, and foreclosed assets while having increases in salaries and employee benefits, data processing, and professional fees.  Noninterest expense decreased $524,000 to $7.3 million for the year ended December 31, 2018 compared to $7.8 million for the year ended December 31, 2017. The Company had decreases in other noninterest expense and occupancy and equipment while having increases in salaries and employee benefits, data processing, foreclosed assets, and professional fees.  The other noninterest expense decrease is due to the third quarter 2017 donation of our former downtown office to a local community group and the fourth quarter 2017 donation to FFBW Community Foundation, Inc.

Total assets increased $6.2 million to $262.7 million at December 31, 2018 from $256.5 million at December 31, 2017.  This increase was primarily due to the increase in total loans of $27.3 million to $198.7 million at December 31, 2018 from $171.4 million at December 31, 2017.  The increase in loans resulted from increases in our commercial real estate loans of $16.2 million, development loans of $6.3 million, and multifamily loans of $2.8 million.  The increase in loans was offset by decreases in cash and cash equivalents of $7.3 million and available for sale securities of $14.3 million. Total deposits increased $292,000 to $183.2 million at December 31, 2018 from $182.9 million at December 31, 2017, primarily due to the increase in certificates required to fund the increasing loan activity.

Nonaccrual loans decreased to $720,000, or 0.36% of total loans, at December 31, 2018 from $1.2 million, or 0.72% of total loans, at December 31, 2017.  Non-performing assets decreased to $789,000, or 0.30% of total assets, at December 31, 2018 compared to $1.9 million, or 0.73% of total assets, at December 31, 2017.

The following table presents the estimated regulatory capital ratios for the Company, the Bank, and the minimum requirements for the Bank at December 31, 2018.

At December 31, 2018	Company			Bank			MinimumRequirement For Capital AdequacyPurposes			MinimumRequirement to BeWell Capitalized UnderPrompt CorrectiveAction Provisions
Tier 1 leverage ratio	22.8	%		18.4	%		4.0	%		5.0	%
Common equity Tier 1 capital ratio	29.3	%		23.7	%		4.5	%		6.5	%
Tier1 capital ratio	29.3	%		23.7	%		6.0	%		8.0	%
Total capital ratio	30.4	%		24.7	%		8.0	%		10.0	%

About the Company

FFBW, Inc. is the holding company for First Federal Bank of Wisconsin, a wholly owned subsidiary. The Company’s stock trades on the NASDAQ Capital Market under the symbol “FFBW.”  First Federal Bank of Wisconsin is a full-service federally chartered stock savings bank based in Waukesha, Wisconsin, servicing customers in Waukesha and Milwaukee Counties in Wisconsin through 4 branch locations.

Cautionary Statement Regarding Forward-Looking Statements

This release contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. These forward-looking statements include, but are not limited to: statements of our goals, intentions and expectations; statements regarding our business plans, prospects, growth and operating strategies; statements regarding the quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits. These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. 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: general economic conditions, either nationally or in our market areas, that are worse than expected; changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; our ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in our market area; our ability to implement and change our business strategies; competition among depository and other financial institutions; inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make; adverse changes in the securities or secondary mortgage markets; changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, including as a result of Basel III; the impact of the Dodd-Frank Act and the implementing regulations; changes in the quality or composition of our loan or investment portfolios; technological changes that may be more difficult or expensive than expected; the inability of third-party providers to perform as expected; our ability to manage market risk, credit risk and operational risk in the current economic environment; our ability to enter new markets successfully and capitalize on growth opportunities;  our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto; changes in consumer spending, borrowing and savings habits; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; our ability to retain key employees; our compensation expense associated with equity allocated or awarded to our employees; and changes in the financial condition, results of operations or future prospects of issuers of securities that we own. Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. 

Contact: Nikola B. Schaumberg, CFO(262) 542-4448

FFBW, Inc.Balance Sheets December 31, 2018 (Unaudited) and December 31, 2017(In thousands, except share data)

		December 31,				December 31,
Assets		2018					2017
Cash and due from banks		$	1,746			$	3,285
Fed funds sold			2,742				8,528
Cash and cash equivalents			4,488				11,813
Available for sale securities, stated at fair value			43,751				58,012
Loans held for sale			679				109
Loans, net of allowance for loan and lease losses of $2,118 and $1,800, respectively			198,694				171,355
Premises and equipment, net			5,057				5,290
Foreclosed assets			69				619
FHLB stock, at cost			739				514
Accrued interest receivable			768				782
Cash value of life insurance			7,007				6,558
Other assets			1,474				1,429
TOTAL ASSETS		$	262,726			$	256,481
Liabilities and Equity
Deposits		$	183,205			$	182,913
Advance payments by borrowers for taxes and insurance			55				36
FHLB advances			17,750				12,750
Accrued interest payable			70				37
Other liabilities			1,284				1,256
Total liabilities		$	202,364			$	196,992
Preferred stock ($0.01 par value, 1,000,000 authorized, no shares issued or outstanding as of December 31, 2018 and 2017, respectively)		$	-			$	-
Common stock ($0.01 par value, 19,000,000 authorized, 6,696,742 and 6,612,500 issued and outstanding as of December 31, 2018 and 2017, respectively)			67				66
Additional paid in capital			28,326				28,296
Retained earnings			34,995				33,937
Unallocated common stock of Employee Stock Ownership Plan ("ESOP") (243,303 and 256,263 shares at December 31, 2018 and 2017, respectively)			(2,433	)			(2,563	)
Accumulated other comprehensive loss, net of income taxes			(593	)			(247	)
Total equity		$	60,362			$	59,489
TOTAL LIABILITIES AND EQUITY		$	262,726			$	256,481

 

FFBW, Inc.Statements of Income Three Months and Year Ended December 31, 2018 and 2017 (Unaudited) (In thousands, except share data)

			Three months ended December 31,								Years ended December 31,
			2018				2017				2018				2017
Interest and dividend income:
	Loans, including fees		$	2,491			$	2,081			$	9,192			$	7,817
	Securities
		Taxable		296				270				1,290				943
		Tax-exempt		-				27				49				142
	Other			30				64				78				93
		Total interest and dividend income		2,817				2,442				10,609				8,995
Interest expense:
	Interest-bearing deposits			538				316				1,677				1,314
	Borrowed funds			107				57				432				240
		Total interest expense		645				373				2,109				1,554
Net interest income				2,172				2,069				8,500				7,441
Provision for loan losses				98				253				513				419
Net interest income after provision for loan losses				2,074				1,816				7,987				7,022
Noninterest income:
	Service charges and other fees			86				75				371				279
	Net gain on sale of loans			102				52				244				266
	Net gain (loss) on sale of securities			(224	)			-				(204	)			20
	Increase in cash surrender value of insurance			50				47				194				196
	Other noninterest income			25				90				95				130
		Total noninterest income		39				264				700				891
Noninterest expense:
	Salaries and employee benefits			1,019				976				4,248				3,960
	Occupancy and equipment			255				294				1,002				1,109
	Data processing			177				159				719				605
	Foreclosed assets, net			-				5				36				27
	Professional fees			178				165				508				506
	Other noninterest expense			181				632				798				1,628
		Total noninterest expense		1,810				2,231				7,311				7,835
Income (loss) before income taxes				303				(151	)			1,376				78
Provision (credit) for income taxes				70				266				318				264
Net income (loss)			$	233			$	(417	)		$	1,058			$	(186	)
Earnings (loss) per share
	Basic		$	0.04			$	(0.07	)		$	0.17			$	(0.03	)
	Diluted		$	0.04			$	(0.07	)		$	0.17			$	(0.03	)

 

FFBW, Inc.Statements of Income  (In thousands, except share data)

		For the Quarter Ended
		December 31, 2018			September 30, 2018			June 30, 2018			March 30, 2018			December 31, 2017
Total interest and dividend income		$	2,817		$	2,738		$	2,700		$	2,354		$	2,442
Total interest expense			645			607			458			399			373
	Net interest income		2,172			2,131			2,242			1,955			2,069
Provision for loan losses			98			111			189			115			253
	Net interest income after provision for loan losses		2,074			2,020			2,053			1,840			1,816
Total noninterest income			39			250			200			211			264
Total noninterest expense			1,810			1,810			1,816			1,875			2,231
Income (loss) before income taxes			303			460			437			176			(151	)
Provision for income taxes			70			111			84			53			266
Net income (loss)		$	233		$	349		$	353		$	123		$	(417	)
Earnings (loss) per share
	Basis	$	0.04		$	0.05		$	0.06		$	0.02		$	(0.07	)
	Diluted	$	0.04		$	0.05		$	0.06		$	0.02		$	(0.07	)

 

FFBW, Inc.Non-performing Assets (In thousands)

	At December 31,
	2018				2017				2016
Non-accrual loans:
Commercial:
Development	$	-			$	-			$	-
Real estate		-				-				-
Commercial and industrial		20				114				126
Residential real estate and consumer:
1-4 family owner-occupied		365				580				1,698
1-4 family investor-owned		241				549				827
Multifamily		-				-				248
Consumer		94				-				-
Total		720				1,243				2,899
Accruing loans 90 days or more past due:
Residential real estate and consumer:
Consumer		-				-				-
Total loans 90 days or more past due		-				-				-
Total non-performing loans		720				1,243				2,899
Foreclosed assets		69				619				667
Other non-performing assets		-				-				-
Total non-performing assets	$	789			$	1,862			$	3,566
Troubled debt restructurings:
Commercial:
Development	$	-			$	-			$	-
Real estate		-				-				14
Commercial and industrial		67				192				127
Residential real estate and consumer:
1-4 family owner-occupied		785				630				2,104
1-4 family investor-owned		241				808				2,454
Multifamily		-				-				468
Consumer		108				-				-
Total	$	1,201			$	1,630			$	5,167
Ratios:
Total non-performing loans to total loans		0.36	%			0.72	%			1.72	%
Total non-performing loans to total assets		0.27	%			0.48	%			1.20	%
Total non-performing assets to total assets		0.30	%			0.73	%			1.48	%

 

FFBW, Inc.Yield and Cost

	For the Year Ended December 31,
	2018										2017
	AverageOutstandingBalance				Interest			Yield/ Rate			AverageOutstandingBalance				Interest			Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	189,233			$	9,192		4.86	%		$	170,577			$	7,817		4.58	%
Investment securities		55,030				1,339		2.43				47,602				1,085		2.28
Interest-bearing deposits		2,278				42		1.84				7,024				79		1.12
FHLB stock		765				36		4.71				700				14		2.00
Total interest-earning assets		247,306				10,609		4.29				225,903				8,995		3.98
Noninterest-earning assets		20,763										20,454
Allowance for loan losses		(1,912	)									(1,542	)
Total assets	$	266,157									$	244,815
Interest-bearing liabilities:
Demand accounts	$	5,225				24		0.46	%		$	3,254				11		0.34	%
Money market accounts		51,855				433		0.84				54,956				282		0.51
Savings accounts		15,394				29		0.19				16,447				16		0.10
Health savings accounts		11,462				30		0.26				11,485				30		0.26
Certificates of deposit		76,277				1,161		1.52				77,990				975		1.25
Total interest-bearing deposits		160,213				1,677		1.05				164,132				1,314		0.80
Borrowings		22,552				432		1.92				17,866				240		1.34
Total interest-bearing liabilities		182,765				2,109		1.15				181,998				1,554		0.85
Noninterest-bearing deposits		19,631										20,902
Other noninterest bearing liabilities		229										2,083
Total liabilities		202,625										204,983
Equity		63,532										36,832
Total liabilities and equity	$	266,157									$	241,815
Net interest income					$	8,500									$	7,441
Net interest rate spread (1)								3.14	%									3.13	%
Net interest-earning assets (2)	$	64,541									$	43,905
Net interest margin (3)								3.44	%									3.29	%
Average interest-earning assets to interest-bearing liabilities		135	%									124	%

(1) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.(2) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.(3) Net interest margin represents net interest income divided by total interest-earning assets.