Poage Bankshares, Inc. :PBSK-US: Earnings Analysis: Q2, 2017 By the Numbers : September 19, 2017

Poage Bankshares, Inc. reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Poage Bankshares, Inc. – HopFed Bancorp, Inc., Athens Bancshares Corporation, Home Bancorp, Inc. and Charter Financial Corporation (HFBC-US, AFCB-US, HBCP-US and CHFN-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 4.76 million, Net Earnings of USD 0.37 million.
  • Net interest income margins widened from 84.47% to 84.92% compared to the same period last year.
  • Net loan assets changed -1.46% compared to same period last year and -0.55% from previous period, total deposits changed 8.11% compared to same period last year and -1.28% from previous period.
  • Year-on-year change in operating cash flow of -22.83% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline from worsening in operating margins as well as 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):

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 4.76 4.72 4.9 5.02 4.95
Revenue Growth (%YOY) -3.74 -2.44 -7.6 0.38 -22.41
Earnings (mil) 0.37 0.46 0.24 0.36 0.68
Earnings Growth (%YOY) -46.48 -5.75 -29.24 -30.71 -59.5
Net Margin (%) 7.67 9.73 4.94 7.19 13.79
EPS 0.1 0.13 0.07 0.1 0.19
Return on Equity (%) 0.54 0.67 0.35 0.51 0.96
Return on Assets (%) 0.32 0.4 0.21 0.32 0.62

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Market Share Versus Profits

Revenues History
Earnings History

PBSK-US’s change in revenue this period compared to the same period last year of -3.74% 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 PBSK-US is holding onto its market share. Also, for comparison purposes, revenues changed by 0.87% and earnings by -20.48% 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

{arg3)’s earnings declined year-on-year because of the increases in loan loss provisions. Its net interest income after provisions margins went from 82.75% to 77.65%. The fall in earnings would have been worse were it not for the fact that the company’s net interest income margins improved, from 84.47% to 84.92%. For comparison, net interest income margins were 86.50% and net interest income after provisions margins 79.02% in the immediate last period.

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 -1.46% compared to the same period last year and -0.55% from the previous period. Total deposits changed 8.11% compared to the same period last year and -1.28% 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.

PBSK-US’s change in operating cash flow of -22.83% 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 decline in earnings has been influenced by the following factors: (1) Contraction of operating margins from 19.64% to 12.86% and (2) One-time items that contributed to a decrease in pretax margins from 19.64% to 12.86%

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 Poage Bankshares, Inc.

Company Profile

Poage Bankshares, Inc. is a bank holding company, which engages in the provision of banking products and services through its subsidiary, Town Square Bank. Its activities include accepting savings accounts, checking accounts and certificates of deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in first lien one- to four-family mortgage loans, commercial and multi-family real estate loans, commercial and industrial loans, consumer loans, consisting primarily of automobile loans and home equity loans and lines of credit, and construction loans. The company was founded in January 2011 and is headquartered in Ashland, KY.

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