FLPB Leesport Financial (MM)

WYOMISSING, Pa., April 17 /PRNewswire-FirstCall/ -- Leesport Financial Corp. ("Company") (NASDAQ:FLPB) reported net income for the three months ended March 31, 2007 of $1,990,000, a 12.5% decrease over net income of $2,274,000 for the same period in 2006. Total revenue for the three months ended March 31, 2007 was $21,339,000 as compared to $19,562,000 for the same period in 2006, a 9.1% increase. Robert D. Davis, President and Chief Executive Officer of Leesport Financial Corp. commented "Our first quarter results clearly reflect the challenges felt throughout the financial services industry. At Leesport, we continue to experience pressure on our net interest income as our net interest margin compresses due to the inverted yield curve. To help our Company better position itself in this unprecedented rate environment, we recently completed a restructuring of a portion of our balance sheet through the sale of lower yielding securities and reinvested the proceeds to purchase higher yielding securities. We believe this balance sheet restructuring will help our company better position itself for an uncertain interest rate environment and improve our net interest income and net interest margin without increasing our interest rate risk." Davis continued, "During the first quarter, we experienced modest growth in our commercial loan portfolio. We anticipate a return to our historically strong commercial loan growth for the balance of the calendar year across our markets with equal attention being paid to maintaining above average credit quality. As reported previously, we hired a new commercial banking team who joined us in late 2006. This strategic investment is consistent with our commercial client focus and is beginning to produce measurable new business in our Madison Bank Division in terms of commercial loans, cash management fees and cost effective core deposit growth. They will also provide a steady source of referrals to our insurance and wealth management lines of business as well." During the three months ended March 31, 2007, the Company recorded a cumulative-effect adjustment to reduce retained earnings by $2.1 million, net of tax, as a result of the Company's election to early adopt Statement of Financial Accounting Standards ("SFAS") No. 159 and No. 157. Effective January 1, 2007, the Company elected the fair value measurement option for certain pre-existing financial assets and liabilities including $64.1 million of available for sale investment securities and $20.1 of junior subordinated debentures issued to capital trusts ("trust preferred securities"). Under the provisions of SFAS No. 159, the cumulative-effect adjustment is a one-time charge to equity and will not be recognized in current earnings. As mentioned earlier, the Company believes early adoption of SFAS No. 159 and No. 157 will have a positive impact on the Company's ability to manage its balance sheet from both a market and an interest rate risk perspective which will benefit interest income, net income and earnings per common share for the remainder of 2007 and beyond. A more detailed discussion of the early adoption of SFAS No. 159 and No. 157 will be included in the Company's Form 10-Q for the first quarter. As a result of the fair value measurement election and subsequent sale of $64.1 million in lower-yielding available for sale securities mentioned earlier, the Company recognized a pretax loss of $112,000 which is included in the operating results for the three months ended March 31, 2007. Additionally, in the first quarter of 2007, the Company purchased $65.5 million of higher-yielding investment securities. Net Interest Income For the three months ended March 31, 2007, net interest income before the provision for loan losses increased 2.7% to $8,130,000 compared to $7,914,000 for the same period in 2006. The increase in net interest income for the three months resulted from a 16.1% increase in total interest income to $16,586,000 from $14,285,000 and a 32.7% increase in total interest expense to $8,456,000 from $6,371,000. The increase in total interest income resulted from an increase in average earning assets for the three months ended March 31, 2007 of $77,695,000 due primarily to strong growth in commercial loans over the same period in 2006. The increase in total interest expense for the three months ended March 31, 2007 resulted primarily from an increase in average interest-bearing deposits of $47,846,000 and short term borrowings and securities sold under agreements to repurchase of $53,912,000 and higher interest rates over the same period in 2006. For the three months ended March 31, 2007, the net interest margin on a fully taxable equivalent basis was 3.62% as compared to 3.84% for the same period in 2006. The decrease in net interest margin for the three months ended March 31, 2007 was due mainly to higher cost of time deposits and wholesale funds fueled by increases in short-term interest rates over the same periods in 2006 offset by strong organic commercial loan growth and a disciplined approach to deposit pricing. Net interest income after the provision for loan losses for the three months ended March 31, 2007 was $7,980,000 as compared to $7,714,000 for the same periods in 2006, an increase of 3.4%. The provision for loan losses for the three months ended March 31, 2007 was $150,000 compared to $200,000 for the same period in 2006. Comparing March 31, 2007 to March 31, 2006, the decrease in the provision is due primarily to improved credit quality of the loan portfolio. Net charge-offs to average loans was -0.02% for the three months ended March 31, 2007 as compared to 0.16% for the twelve months ended December 31, 2006. As of March 31, 2007, the allowance for loan losses was $7,792,000 compared to $7,355,000 as of March 31, 2006, an increase of 5.9%. Management continues to evaluate and classify the credit quality of the loan portfolio utilizing a qualitative and quantitative internal loan review process and has determined that the current allowance for loan losses is adequate. Non-Interest Income Total non-interest income for the three months ended March 31, 2007 decreased 9.9% to $4,753,000 compared to $5,277,000 for the same period in 2006. Net securities losses were $75,000 for the three months ended March 31, 2007 compared to net securities gains of $104,000 for the same period in 2006. The net securities losses were primarily due to the sale of $64.1 million in lower-yielding available for sale securities discussed earlier. For the three months ended March 31, 2007, revenue from commissions and fees from insurance sales increased 1.9% to $2,725,000 compared to $2,673,000 for the same period in 2006. The increase for the three months ended March 31, 2007 is mainly attributed to increased contingency income on insurance products offered through Essick & Barr, LLC, a wholly owned subsidiary of the Company. For the three months ended March 31, 2007, revenue from mortgage banking activity decreased to $553,000 from $1,055,000, or 47.6%, for the same period in 2006. The decrease was primarily due to declining volume of loans sold into the secondary mortgage market. The Company operates its mortgage banking activities through Philadelphia Financial Mortgage Company, a division of Leesport Bank. For the three months ended March 31, 2007, revenue from brokerage and investment advisory commissions and fee activity increased to $226,000 from $192,000, or 17.7%, for the same period in 2006. The increase is due primarily to an increase in investment advisory service activity offered through Madison Financial Advisors, LLC, a wholly owned subsidiary of the Company. For the three months ended March 31, 2007, service charges on deposits decreased to $646,000 from $690,000, or 6.4%, for the same period in 2006. The decrease for the three months is due primarily to a decrease in non- sufficient funds transactions. For the three months ended March 31, 2007, earnings on investment in life insurance increased to $199,000 from $127,000, or 56.7%, for the same period in 2006. The increase is due primarily to the purchase of $5 million of additional bank owned life insurance ("BOLI"). For the three months ended March 31, 2007, other income including gain on sale of loans increased to $479,000 from $436,000, or 9.9%, for the same period in 2006. The increase for the three months is due primarily to an increase in gains on sales of SBA loans. Non-Interest Expense Total non-interest expense for the three months ended March 31, 2007 increased 1.6% to $10,199,000 compared to $10,035,000 for the same period in 2006. Salaries and benefits were $5,607,000 for the three months ended March 31, 2007, an increase of 0.5% compared to $5,579,000 for the same period in 2006. Included in salaries and benefits for the three months ended March 31, 2007 and March 31, 2006 were stock-based compensation costs of $89,000 and $37,000, respectively. The overall increase in salaries and benefits for the comparative three month period is primarily attributed to the hiring of a new commercial banking team. These experienced Relationship Managers joined the Madison Bank Division in December 2006, and are a reflection of the Company's strategic commitment to expanding its presence in the Philadelphia suburban market. For the three months ended March 31, 2007, occupancy expense and furniture and equipment expense decreased to $1,742,000 from $1,866,000, or 6.6%, for the same period in 2006. The decrease is due primarily to a reduction in building lease expense and equipment depreciation expense. Income Tax Expense Income tax expense for the three months ended March 31, 2007 was $544,000, a 20.2% decrease as compared to income tax expense of $682,000 for the three months ended March 31, 2006. The effective income tax rate for the three months ended March 31, 2007 and 2006 was 21.5% and 23.1%, respectively. The decrease in the effective income tax rate for the three month periods is due primarily to tax exempt income increasing while income before income taxes decreased. Earnings Per Share Diluted earnings per share for the three months ended March 31, 2007 were $0.37 on average shares outstanding of 5,440,419, an 11.9% decrease as compared to diluted earnings per share of $0.42 on average shares outstanding of 5,394,802 for the three months ended March 31, 2006. Share amounts and per share amounts reflect a 5% stock dividend distributed to shareholders on June 15, 2006. Assets, Liabilities and Equity Total assets as of March 31, 2007 were $1,051,974,000, an annualized increase of 4.0% compared to December 31, 2006. Total loans as of March 31, 2007 increased $4,224,000 to $769,007,000, and total deposits increased $31,508,000 to $734,347,000, respectively, compared to December 31, 2006. Total loan and total deposit balances had annualized increases of 2.2% and 17.9%, respectively. Commercial loan balances as of March 31, 2007 had an annualized increase of 4.7% compared to December 31, 2006. Total borrowings as of March 31, 2007 were $203,430,000, an annualized decrease of 17.5% as compared to December 31, 2006. Shareholders' equity increased as of March 31, 2007 to $103,290,000 from $102,130,000 at December 31, 2006, an annualized increase of 4.5%. Included in shareholders' equity is an unrealized loss position on available for sale securities, net of taxes, at March 31, 2007 of $929,000 compared to an unrealized loss position on available for sale securities, net of taxes, of $2,526,000 at December 31, 2006. Included in shareholders' equity for the three months ended March 31, 2007 was a reduction to shareholders' equity of $500,000, net of tax, as a result of the Company's election to early adopt Statement of Financial Accounting Standards ("SFAS") No. 159 and No. 157 discussed earlier. As a result of the initial fair value measurement option for investment securities available for sale, effective January 1, 2007, the unrealized loss on available for sale securities of approximately $1.6 million, net of tax, included in accumulated other comprehensive loss was reclassified to retained earnings. As a result of the initial fair value measurement option for junior subordinated debt, effective January 1, 2007, the fair value adjustment of junior subordinated debt, including all unamortized debt issuance costs and prepayment fees, was recorded as a reduction in retained earnings of approximately $500,000, net of tax. Leesport Financial Corp. is a diversified financial services company headquartered in Wyomissing, PA, offering banking, insurance (Insurance products offered through Essick & Barr, LLC), investments (Securities offered through UVEST Financial Services, a registered independent broker/dealer, Member NASD/SIPC), wealth management, equipment leasing, and title insurance services throughout Southeastern Pennsylvania. This release may contain forward-looking statements with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, estimates, and intentions that are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company's control. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company LEESPORT FINANCIAL CORP. CONSOLIDATED SELECTED FINANCIAL DATA (Dollar amounts in thousands, except per share data) Quarter Ended Balances March 31, December 31, 2007 2006 (unaudited) Assets Investment securities and interest bearing cash $ 166,863 $ 168,048 Mortgage loans held for sale 6,672 5,582 Loans: Commercial loans 599,044 592,026 Consumer loans 129,730 132,685 Mortgage loans 40,233 40,072 Total loans $ 769,007 $ 764,783 Earning assets $ 942,542 $ 938,413 Total assets 1,051,974 1,041,632 Liabilities and shareholders' equity Deposits: Non-interest bearing deposits 113,568 108,549 NOW, money market and savings 294,457 290,857 Time deposits 326,322 303,433 Total deposits $ 734,347 $ 702,839 Federal funds purchased $ 69,560 $ 82,105 Securities sold under agreements to repurchase 96,220 90,987 Long-term debt 17,500 19,500 Junior subordinated debt 20,150 20,150 Shareholders' equity $ 103,290 $ 102,130 Actual shares outstanding 5,412,477 5,386,355 Book value per share $19.08 $18.96 Asset Quality Data For the Period Ended Three Months Twelve Months March 31, December 31, 2007 2006 (unaudited) Non-accrual loans $ 5,076 $ 3,989 Loans past due 90 days or more 865 93 Renegotiated troubled debt 316 319 Total non-performing loans 6,257 4,401 Other real estate owned 590 858 Total non-performing assets $ 6,847 $ 5,259 Loans outstanding at end of period $ 769,007 $ 764,783 Allowance for loan losses 7,792 7,611 Net charge-offs to average loans (annualized) -0.02% 0.15% Allowance for loan losses as a percent of total loans 1.01% 1.00% Allowance for loan losses as percent of total non-performing loans 124.53% 172.94% LEESPORT FINANCIAL CORP. CONSOLIDATED SELECTED FINANCIAL DATA (Dollar amounts in thousands) Average Balances For the Three Months Ended (unaudited) March 31, March 31, 2007 2006 Assets Investment securities and interest bearing cash $ 166,916 $ 184,650 Mortgage loans held for sale 4,308 11,311 Loans: Commercial loans 595,506 490,894 Consumer loans 132,533 134,877 Mortgage loans 39,973 39,450 Other - 359 Total loans $ 768,012 $ 665,580 Earning assets $ 939,236 $ 861,541 Goodwill and intangible assets 43,643 43,929 Total assets 1,045,392 964,228 Liabilities and shareholders' equity Deposits: Non-interest bearing deposits 103,543 111,875 NOW, money market and savings 297,578 292,494 Time deposits 315,228 272,466 Total deposits $ 716,349 $ 676,835 Short term borrowings $ 80,420 $ 54,017 Securities sold under agreements to repurchase 91,288 63,779 Long-term debt 18,200 41,689 Junior subordinated debt 20,150 20,150 Shareholders' equity $ 103,196 $ 95,814 LEESPORT FINANCIAL CORP. CONSOLIDATED SELECTED FINANCIAL DATA (Dollar amounts in thousands, except per share data) For the Three Months Ended (unaudited) March 31, March 31, 2007 2006 Interest income $ 16,586 $ 14,285 Interest expense 8,456 6,371 Net interest income 8,130 7,914 Provision for loan losses 150 200 Net Interest Income after provision for loan losses 7,980 7,714 Securities gains (losses), net (75) 104 Commissions and fees from insurance sales 2,725 2,673 Mortgage banking activities 553 1,055 Brokerage and investment advisory commissions and fees 226 192 Service charges on deposits 646 690 Earnings on investment in life insurance 199 127 Other income 479 436 Total non-interest income 4,753 5,277 Salaries and employee benefits 5,607 5,579 Occupancy expense 1,101 1,205 Furniture and equipment expense 641 661 Other operating expense 2,850 2,590 Total non-interest expense 10,199 10,035 Income before income taxes 2,534 2,956 Income taxes 544 682 Net income $1,990 $2,274 Per Share Data: Basic average shares outstanding 5,404,338 5,332,106 * Diluted average shares outstanding 5,440,419 5,394,802 * Basic earnings per share $0.37 $0.43 * Diluted earnings per share 0.37 0.42 * Cash dividends per share 0.19 0.17 * Profitability Ratios: Return on average assets 0.77% 0.96% Return on average shareholders' equity 7.82% 9.63% Return on average tangible equity (equity less goodwill and intangible assets) 13.55% 17.77% Net interest margin (fully taxable equivalent) 3.62% 3.84% Effective tax rate 21.47% 23.07% * References to share amounts and per-share amounts reflect the 5% stock dividend distributed to shareholders on June 15, 2006. LEESPORT FINANCIAL CORP. UNAUDITED CONSOLIDATED BALANCE SHEETS (Dollar amounts in thousands, except share data) March 31, March 31, 2007 2006 Assets Cash and due from banks $ 27,845 $25,277 Interest-bearing deposits in banks 739 158 Total cash and cash equivalents 28,584 25,435 Mortgage loans held for sale 6,672 11,371 Securities available for sale 163,019 176,168 Securities held to maturity 3,105 4,165 Loans, net of allowance for loan losses 3/2007 - $7,792; 3/2006 - $7,355 761,215 667,313 Premises and equipment, net 6,854 7,614 Identifiable intangible assets 4,356 4,990 Goodwill 39,189 38,805 Bank owned life insurance 17,356 11,814 Other assets 21,624 20,765 Total assets $1,051,974 $968,440 SELECTED HIGHLIGHTS Liabilities And Shareholders' Cash Dividends Equity Declared Liabilities 1st Qtr. 2006 $0.17 * Deposits: 2nd Qtr. 2006 $0.18 Non-interest bearing $113,568 $116,476 3rd Qtr. 2006 $0.19 Interest bearing 620,779 568,288 4th Qtr. 2006 $0.19 Total deposits 734,347 684,764 1st Qtr. 2007 $0.19 Securities sold under agreements to repurchase 96,220 68,579 Federal funds purchased 69,560 48,536 Long-term debt 17,500 41,000 Junior subordinated debt 20,150 20,150 Common Stock (FLPB) Other liabilities 10,907 9,269 Quarterly Closing Price Total liabilities 948,684 872,298 03/31/2006 $24.74 * 06/30/2006 $23.00 Shareholders' Equity 09/30/2006 $22.78 Common stock, $5.00 par value ; 12/31/2006 $23.91 Authorized 20,000,000 03/31/2007 $21.62 shares; 03/31/2007 $21.62 5,467,330 shares issued at March 31, 2007 and 5,142,018 shares issued at March 31, 2006 27,337 25,710 Surplus 59,028 53,236 Retained earnings 19,201 22,148 Accumulated other comprehensive loss (929) (3,576) Treasury stock; 54,853 shares at March 31, 2007 and 57,562 shares at March 31, 2006, at cost (1,347) (1,376) Total shareholders' equity 103,290 96,142 Total liabilities and shareholders' equity $1,051,974 $968,440 * References to share amounts and per-share amounts reflect the 5% stock dividend distributed to shareholders on June 15, 2006 LEESPORT FINANCIAL CORP. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (Dollar amounts in thousands, except share data) Three Months Ended March 31, 2007 2006 Interest Income Interest and fees on loans $ 14,494 $ 12,116 Interest on securities: Taxable 1,721 1,813 Tax-exempt 135 203 Dividend income 227 149 Other interest income 9 4 Total interest income 16,586 14,285 Interest Expense Interest on deposits 5,799 4,428 Interest on short-term borrowings 1,077 624 Interest on securities sold under agreements to repurchase 941 553 Interest on long-term debt 156 354 Interest on junior subordinated debt 483 412 Total interest expense 8,456 6,371 Net interest income 8,130 7,914 Provision for loan losses 150 200 Net interest income after provision for loan losses 7,980 7,714 Other income: Customer service fees 646 690 Mortgage banking activities, net 553 1,055 Commissions and fees from insurance sales 2,725 2,673 Broker and investment advisory commissions and fees 226 192 Earnings on investment in life insurance 199 127 Gain on sale of loans 10 8 Gain (loss) on sales of securities (75) 104 Other income 469 428 Total other income 4,753 5,277 Other expense: Salaries and employee benefits 5,607 5,579 Occupancy expense 1,101 1,205 Furniture and equipment expense 641 661 Marketing and advertising expense 307 294 Identifiable intangible amortization 157 160 Professional services 344 227 Outside processing expense 779 732 Insurance expense 154 109 Other expense 1,109 1,068 Total other expense 10,199 10,035 Income before income taxes 2,534 2,956 Income taxes 544 682 Net income $ 1,990 $ 2,274 Per Share Data Average shares outstanding 5,404,338 5,332,106 * Basic earnings per share $ 0.37 $ 0.43 * Average shares outstanding for diluted earnings per share 5,440,419 5,394,802 * Diluted earnings per share $ 0.37 $ 0.42 * Cash dividends declared per share $ 0.19 $ 0.17 * * References to share amounts and per-share amounts reflect the 5% stock dividend distributed to shareholders on June 15, 2006 DATASOURCE: Leesport Financial Corp. CONTACT: Edward C. Barrett, Chief Financial Officer, +1-610-478-9922, ext. 251, Web site: http://www.leesportbank.com/

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