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Polonia Bancorp, Inc. Reports Results for the Three and Nine Months Ended September 30, 2014

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Polonia Bancorp, Inc. (the “Company”) (NASDAQ Capital Market: PBCP), the holding company of Polonia Bank (the “Bank”), reported net income of $102,000 for the quarter ended September 30, 2014 versus a net loss of $187,000 for the quarter ended September 30, 2013. The Company reported net income of $114,000 for the nine months ended September 30, 2014 versus a net loss of $206,000 for the nine months ended September 30, 2013.

Net interest income decreased $38,000 to $2.0 million and increased $72,000 to $6.1 million for the three and nine months ended September 30, 2014 as compared to the same prior year periods. The decrease in net interest income for the three month period in 2014 was due primarily to a higher average balance of FHLB advances-long term, a lower average balance of investment securities, a lower average yield on loans and a higher average rate paid on interest bearing liabilities, partially offset by a higher average balance of loans and a higher rate earned on other interest earning assets. The increase in net interest income for the nine month period in 2014 was due primarily to an increase in the average balance of loans and a higher rate earned on other interest earning assets, partially offset by a higher average balance of FHLB advances-long term, a lower average rate earned on loans, a lower average balance of investment securities and a lower average rate earned on investment securities.

The provision for loan losses decreased $310,000 to $50,000 for the three months ended September 30, 2014 and decreased $375,000 to $99,000 for the nine months ended September 30, 2014 as compared to the same periods in the prior year. At September 30, 2014, nonperforming loans totaled $2.6 million compared to $2.9 million at December 31, 2013. A decrease in nonperforming one-to-four family loans of $613,000, partially offset by an increase in nonperforming multi-family and commercial real estate loans of $321,000 contributed to the lower balance of nonperforming loans at September 30, 2014. There were no loan charge-offs for the quarter ended September 30, 2014 compared to $123,000 in net loan charge-offs the quarter ended September 30, 2013. Net loan charge-offs for the nine months ended September 30, 2014 were $45,000, compared to $679,000 in net loan charge-offs for the nine months ended September 30, 2013.

Noninterest income was $1.6 million and $1.4 million for the three months ended September 30, 2014 and 2013, respectively, and $3.5 million and $4.3 million for the nine months ended September 30, 2014 and 2013, respectively. The increase in noninterest income for the three months ended September 30, 2014 was primarily attributable to an increase of $237,000 in the gain on the sale of loans as compared to the prior year period. The decrease in noninterest income for the nine months ended September 30, 2014 was primarily attributable to a decrease of $734,000 in the gain on the sale of loans as compared to the prior period. The increase in the gain on the sale of loans in the quarter ended September, 30, 2014 was primarily due to an increase in volume during the period. The decrease in the gain on the sale of loans during the nine months ended is due to a rise in interest rates from the same period last year and the effects from the severe weather during the first quarter of 2014.

Noninterest expenses were $3.4 million for the three months ended September 30, 2014 and 2013, respectively, and $9.3 million and $10.1 million for the nine months ended September 30, 2014 and 2013, respectively. Changes in expenses during the three month period ended September 30, 2014 were due to higher compensation and employee benefits and higher federal deposit insurance premiums offset by lower occupancy and equipment, lower other expenses, lower data processing expenses and lower professional fees. Lower expenses in the nine month period ended September 30, 2014 were due to lower salary and compensation expenses and lower professional fees, partially offset by higher occupancy and equipment expenses and higher federal deposit insurance expenses.

Total assets decreased $7.7 million, or 2.5%, to $297.9 million at September 30, 2014 from $305.6 million at December 31, 2013, partially due to an $8.1 million decrease in cash and cash equivalents. Total loans increased $9.8 million, or 4.9%, to $209.8 million at September 30, 2014, compared to $200.0 million at December 31, 2013. Loans held for sale decreased $1.0 million, or 16.4%, to $5.1 million at September 30, 2014. Investment securities decreased $8.0 million, or 12.0%, to $58.6 million at September 30, 2014. Cash and cash equivalents decreased $8.1 million, or 51.3%, to $7.7 million at September 30, 2014.

Total liabilities at September 30, 2014 were $259.0 million compared to $265.3 million at December 31, 2013, a decrease of $6.3 million. The decrease in liabilities was primarily due to a $5.6 million decrease in deposits. Total stockholders’ equity decreased $1.4 million, or 3.5%, to $38.9 million at September 30, 2014. The decrease in stockholders’ equity was primarily the result of the repurchase of shares at a cost of $1.8 million during the period.

Polonia Bancorp, Inc. is the holding company for Polonia Bank. Polonia Bank is headquartered in Huntingdon Valley, Pennsylvania and has provided community banking services to customers for almost 91 years. We currently operate five full-service locations in Montgomery and Philadelphia Counties, Pennsylvania.

This release contains “forward-looking statements” that are based on assumptions and may describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by the use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in market interest rates, regional and national economic conditions, legislative and regulatory changes, monetary and fiscal policies of the United States government, including policies of the United States Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area, changes in the real estate market values in the Company’s market area and changes in relevant accounting principles and guidelines. For discussion of these and other risks that may cause actual results to differ from expectations, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, including the section entitled “Risk Factors,” and Quarterly Reports on Form 10-Q on file with the SEC. These risks and uncertainties should be considered in evaluating any forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

At September 30, At December 31,
2014 2013
(In thousands, except per share data) (unaudited) (unaudited)
Financial Condition Data:
Total assets $297,885 $305,583
Securities available-for-sale 11,950 15,271
Securities held-to-maturity 46,602 51,320
Loans held for sale 5,056 6,143
Loans receivable 194,291 183,428
Covered loans 15,518 16,523
Total loans 209,809 199,951
Less: allowance for loan losses 1,432 1,378
Net loans 208,377 198,573
Cash and cash equivalents 7,732 15,764
Deposits 195,682 201,322
FHLB Advances – long-term 59,000 59,000
Stockholders’ equity 38,881 40,300
Book value per common share $11.66 $11.48
At or For the

Three Months Ended

September 30,

At or For the

Nine Months Ended

September 30,

2014 2013 2014 2013
(unaudited) (unaudited)
Operating Data:
Interest income $2,842 $2,738 $8,497 $7,859
Interest expense 805 663 2,391 1,825
Net interest income 2,037 2,075 6,106 6,034
Provision for loan losses 50 360 99 474
Net interest income after provision for loan losses 1,987 1,715

6,007

5,560

Noninterest income 1,558 1,366 3,522 4,262
Noninterest expense 3,362 3,365 9,313 10,141
Income (loss) before income tax expense (benefit) 183 (284 ) 216 (320 )
Income tax expense (benefit) 81 (97 ) 102 (114 )
Net income (loss) $102 $(187 ) $114 $(206 )
Basic and diluted earnings per share $0.03 $(0.05 ) $0.04 $(0.06 )
At or For the

Three Months Ended

September 30,

At or For the

Nine Months Ended

September 30,

2014 2013 2014 2013
(In thousands, except per share data) (unaudited) (unaudited)
Performance Ratios (1):

Return on average assets

0.14 % (0.27 )% 0.05 % (0.10 )%
Return on average equity 1.04 (1.81 ) 0.38 (0.66 )
Interest rate spread (2) 2.69 2.95 2.71 3.04
Net interest margin (3) 2.84 3.11 2.86 3.19

Noninterest expense to average assets

4.50 4.81 4.13 5.04
Efficiency ratio (4) 93.52 97.82 96.73 98.49

Average interest-earning assets to average interest-bearing liabilities

113.10

115.82

113.10

116.28

Average equity to average assets

13.18 14.76

13.22

15.39

At or For the

Nine Months Ended

September 30,

2014 2013
(In thousands, except per share data) (unaudited)
Asset Quality Ratios:
Allowance for loan losses as a percent of total loans 0.68 % 0.70 %
Allowance for loan losses as a percent of nonperforming loans

56.16

38.02
Net charge-offs to average outstanding loans during the period

0.02

0.41
Nonperforming loans as a percent of total loans

1.22

1.84
Nonperforming assets as a percent of total assets

1.02

1.28
_______________________
(1) Performance ratios for the three and nine month periods have been annualized.
(2) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.
(3) Represents net interest income as a percent of average interest-earning assets.
(4) Represents noninterest expense divided by the sum of net interest income and noninterest income.

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