MSB Financial Corp. :MSBF-US: Earnings Analysis: Q4, 2016 By the Numbers : March 21, 2017

MSB Financial Corp. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of MSB Financial Corp. – OceanFirst Financial Corp., Magyar Bancorp, Inc., Kearny Financial Corp., Oritani Financial Corp. and Provident Financial Services, Inc. (OCFC-US, MGYR-US, KRNY-US, ORIT-US and PFS-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 3.51 million, Net Earnings of USD 0.48 million.
  • Net interest income margins widened from 92.53% to 94.15% compared to the same period last year.
  • Net loan assets changed 40.29% compared to same period last year and 11.78% from previous period, total deposits changed 37.97% compared to same period last year and 8.25% from previous period.
  • Year-on-year change in operating cash flow of 1,852.17% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 3.51 3.13 3.44 2.93 2.81
Revenue Growth (%YOY) 24.69 13.46 29.73 15.18 6.6
Earnings (mil) 0.48 0.3 0.22 0.16 0
Earnings Growth (%YOY) 23800 16.67 775.76 -26.39 -99.18
Net Margin (%) 13.64 9.63 6.48 5.43 0.07
EPS 0.09 0.05 0.04 0.03 0
Return on Equity (%) 2.62 1.63 1.17 0.83 0.01
Return on Assets (%) 0.43 0.29 0.23 0.17 0

Access our Ratings and Scores for MSB Financial Corp.

Market Share Versus Profits

Revenues History
Earnings History

MSBF-US‘s change in revenue this period compared to the same period last year of 24.69% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that MSBF-US is holding onto its market share. Also, for comparison purposes, revenues changed by 12.09% and earnings by 58.80% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by the year-on-year improvement in net interest income margins from 92.53% to 94.15%. However, the company’s loan loss provisions have prevented it from fully capitalizing on these net interest income margin improvements. MSBF-US‘s net interest income after provisions margin showed no improvement. Loan loss provisions as a percentage of net interest income were 9.09% this period, and 3.46% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s improvement in net interest income margins was influenced by both the relative increase in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 40.29% compared to the same period last year and 11.78% from the previous period. Total deposits changed 37.97% compared to the same period last year and 8.25% from the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

MSBF-US‘s change in operating cash flow of 1,852.17% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from -17.00% to 22.48% and (2) one-time items. The company’s pretax margins are now 22.48%, compared to -0.11% for the same period last year.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for MSB Financial Corp.

Company Profile

MSB Financial Corp. is a bank holding company, which engages in the ownership and operation of the Bank that offers a range of traditional deposits and lending services. Its loan portfolio comprised of the following segments: Residential Mortgage, Commercial Real Estate, Construction, Consumer, and Commercial and Industrial. The Residential Mortgage loan segment is disaggregated into two classes: one-to four-family loans, which are primarily first liens, and home equity loans, which consist of first and second liens. The Commercial Real Estate loan segment consists of both owner and non-owner occupied loans and is further disaggregated into owner-occupied loans and investor properties, which have medium risk due to historical activity on these type loans. The Construction loan segment is further disaggregated into two classes: one-to four-family owner occupied, which includes land loans, whereby the owner is known and there is less risk, and other, whereby the property is generally under development and tends to have more risk than the one-to four-family owner occupied loans. The Commercial and Industrial loan segment covers of loans made for the purpose of financing the activities of commercial customers. The Consumer loan segment includes primarily of installment loans and overdraft lines of credit connected with customer deposit accounts. The company was founded in 2004 and is headquartered in Millington, NJ.

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