2015 Annual Report

2015 Annual Report

Dear Stockholders:

Apollo Bancorp, Inc. delivered another consistent year of earnings and continues to outperform a vast majority of Pennsylvania banking organizations using measurements relative to earnings, shareholder returns (including dividends), and asset quality. In 2015, consolidated net income totaled $1,403,000, which demonstrated a moderate increase from $1,353,000 of earnings reported in 2014. Net interest income increased by $114,000 compared with 2014 due to a noteworthy increase in interest and fees on loans totaling $321,000, which was offset by a reduction in securities portfolio income of $217,000. A remarkable 27% growth in loan balances facilitated this increase with asset reallocation from investment securities moving into higher yielding loans, which is consistent with the bank’s strategic plan.

Loan portfolio growth totaled $13.6 million. Commercial balances increased by $9.6 million, or 34%. Residential mortgage balances increased by $4.1 million, or 27%. Loan fees also increased significantly from $18,000 to $55,000. Competitive pricing, experienced community banking lenders, and timely underwriting provide an advantage over larger, less nimble financial institutions in attracting and retaining creditworthy borrowers who value customer service and personal banking relationships.

The allowance for loan losses was strengthened with a $120,000 provision due to loan portfolio growth while net charge-offs were minimal. The bank remains diligent ensuring sound asset quality and has few watchlist credits and minimal delinquency levels. Additional resources were deployed to ensure robust lending activity is executed with appropriate risk management practices.

Noninterest income growth leveled out in 2015 with a $10,000 increase compared with 2014 after several years of steady growth. Fees on deposit accounts decreased $31,000 compared with 2014 as newer product usage stabilized following notable introductory growth. Trust department income decreased by a modest $15,000 compared with 2014 as nonrecurring income from executorships declined but still continued to enhance income. Securities and insurance brokerage activity decreased to $76,000 in 2015 from $101,000 reported in 2014, which was the first full year of operation. Also, net securities gains totaled $200,000 and were recognized to take advantage of market opportunities resulting from bank equity portfolio acquisitions and fixed income securities sales due to a lower interest rate environment than widely forecasted.

Core deposit balances increased about 2% in 2015. Internet banking services were further expanded to include mobile deposit capture and accommodate customers who are unable to visit a branch office or prefer this convenience, which is offered by competing banks.

Overhead expenses were managed at a mostly flat level during 2015 compared with the previous year. Overhead expenses have increased in only one (2014) of the three most recent fiscal years. Nevertheless, ongoing investments in human resources, technology and risk management tools continue to ensure the bank remains competitive and independent.

Earnings per share totaled $2.81 in 2015 compared with $2.71 in 2014. The Board of Directors prudently increased the quarterly dividend from $0.47 to $0.48 per share, or 2.1%, in the fourth quarter. In addition to increasing cash dividends per share from $1.85 in 2014 to $1.89 in 2015, the Bancorp retained earnings of $461,000 and further enhanced your investment with $744,000 of net treasury stock purchases consistent with its capital plan.

Future growth achieved with sound lending is expected to strengthen earnings and improve shareholder investment returns. On behalf of the Board of Directors, your commitment and loyalty is greatly appreciated.

Sincerely,

Nelson L. Person
President and CEO