Harvard Illinois Bancorp, Inc. Announces Quarterly Earnings

HARVARD, Ill., Aug. 12, 2015

Results of operations. The Company reported unaudited net income for the three months ended June 30, 2015 of $1.3 million, compared to net income of $173,000 for the three months ended June 30, 2014. The Company reported unaudited net income for the six months ended June 30, 2015 of $1.4 million, compared to net income of $407,000 for the six months ended June 30, 2014.

Net income increased $1.1 million, or 654.3% during the second quarter of 2015, compared to the second quarter of 2014. The increase in net income was due to an increase in noninterest income of $16,000, and decreases in interest expense, the provision for loan losses and the provision for income taxes of $71,000, $1.3 million and $90,000, respectively, partially offset by a decrease in interest and dividend income of $186,000, and an increase in noninterest expense of $204,000. The decrease in interest expense was primarily due to deposits and borrowings re-pricing at current lower rates as the average cost of interest-bearing liabilities decreased 22 basis points to 0.74%.The decrease in the provision for loan losses was primarily due to a $1.3 million increase in the carrying basis of the defaulted repurchase agreement purchased through Pennant Management, Inc. The decrease in the provision for income taxes to zero for the three months ended June 30, 2015 reflected the impact of the non-recurring decrease in valuation allowances recorded for deferred tax assets. The decrease in interest and dividend income was primarily due to a decrease of $9.3 million in average interest-earning assets, and a decrease in the average yield on interest-earning assets of 24 basis points to 3.95%. The increase in noninterest expense was primarily due to an increase in legal and professional fees of $256,000 related to the recently announced transaction with The State Bank Group, ongoing regulatory issues, and recovery efforts with respect to the defaulted repurchase agreement purchased through Pennant Management, Inc.

Stockholders' equity. Total stockholders' equity increased $1.5 million to $11.6 million at June 30, 2015 from $10.1 million at December 31, 2014, primarily as a result of the net income of $1.4 million for the six months ended June 30, 2015. 

Non-performing assets.  Non-performing assets increased $14.1 million to $16.9 million or 10.79% as a percent of total assets at June 30, 2015, compared to $2.8 million or 1.61% as a percent of total assets at June 30, 2014. Included in non-performing assets were non-performing loans which increased $5.4 million to $7.7 million or 6.76% as a percent of loans at June 30, 2015, compared to $2.3 million or 1.91% as a percent of loans at June 30, 2014.  Non-performing assets at June 30, 2015 included $11.2 million related to the Bank's investment in the defaulted repurchase agreement purchased through Pennant Management, Inc., $2.7 million of which was included in non-performing loans. At June 30, 2015, the net recognized receivable for the defaulted repurchase agreement totaled $8.5 million, net of a valuation allowance of $2.7 million recognized.

Selected Consolidated Financial and Other Data

The financial condition data at June 30, 2015 and the operating data for the three and six months ended June 30, 2015 and 2014 is derived in part from the consolidated financial statements of Harvard Illinois Bancorp, Inc. and is unaudited. The financial condition data at December 31, 2014 is derived in part from the audited consolidated financial statements of Harvard Illinois Bancorp, Inc. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of operations for the unaudited periods have been made.  The selected operating data presented below are not necessarily indicative of the results that may be expected for future periods.