The Bank of Princeton Announces First Quarter 2019 Results

PRINCETON, N.J., April 22, 2019 /PRNewswire/ -- The Bank of Princeton (the "Bank") (NASDAQ – BPRN) today reported unaudited results of operations and financial condition for the quarter ended March 31, 2019.  The Bank reported net income of $229 thousand or $0.03 per diluted common share for the first quarter of 2019, compared to net income of $3.8 million or $0.55 per diluted common share for the fourth quarter of 2018, and net income of $3.6 million or $0.52 per diluted common share for the first quarter of 2018. The decrease in net income, when comparing the three months ended December 31, 2018, was primarily due to an increase in the Bank's provision for loan losses of $4.2 million. The decrease in net income, when comparing the three months ended March 31, 2018, was primarily due to an increase in the Bank's provision for loan losses of $3.9 million.

During the first quarter of 2019, the Bank identified three separate borrowing relationships that required the Bank to record charge-offs. One relationship, a commercial and industrial participation loan with six other banks, with our portion totaling $1.9 million, was fully charged-off due to significant operating losses resulting from the loss of several large contracts, which fully negated the value of the collateral. This loan was placed on non-accrual status in the fourth quarter of 2018. The remaining charge-offs totaling $2.4 million were associated with two separate commercial real estate loans with the primary portion being delinquent taxes associated with the properties and selling costs.

"We are disappointed with the credit loss performance during the quarter, however the Bank's fundamental performance remained strong as evidenced by our loan growth," stated Edward Dietzler, President/CEO.

Chairman Richard Gillespie noted that, "It was unfortunate to report the credit losses, but the Bank continues to progress in line with its growth expectations and anticipates opening two new branches in the 3^rd quarter and closing on the acquisition of five branches being purchased from Beneficial Bank in the 2^nd quarter, all of which will enhance shareholder value."

Balance Sheet Review

Total assets were $1.30 billion at March 31, 2019, an increase of $45.7 million or 3.6% when compared to $1.25 billion at the end of 2018. The primary reason for the increase in total assets was an increase of $33.6 million in net loans and the addition of a $12.5 million right-of-use asset resulting from the adoption of FASB Update No. 2016-02, ("Leases"). The loan growth, excluding the $4.2 million in charge-offs, represented a 13.99% increase on an annualized basis.

Total deposits at March 31, 2019 increased by $5.3 million, or 0.5% when compared to December 31, 2018. The increase in deposits consists of increases of $30.7 million in interest checking and $24.4 million in time deposits, partially offset by a $38.5 million decrease in money markets, and decreases of $10.0 million in non-interest deposits and $1.3 million in savings accounts. In addition, during the quarter, the Bank borrowed $79.8 million in short-term advances to fund the loan growth.

Total stockholders' equity increased $1.9 million or 1.0% when compared to the end of 2018. This increase was primarily due to exercises of stock options from the Bank's equity incentive plans and an increase in the fair-value of the available-for-sale investment portfolio.   The ratio of equity to total assets was 14.4% compared to 14.7% at December 31, 2018.

Asset Quality

At March 31, 2019, non-performing assets were $9.5 million, an increase of $3.8 million, or 65.7% when compared to $5.7 million at December 31, 2018.  This increase was primarily due to the addition of a large commercial real estate loan partially offset by the $4.2 million in charge-offs recorded during the quarter.  Total troubled debt restructuring ("TDR") balance totaled $1.3 million at March 31, 2019, a decline of $8 thousand from year-end 2018. All TDR's are performing to their agreed upon terms.

Review of Quarterly Financial Results

Net interest income was $9.9 million for the first quarter of 2018 compared to $10.3 million for the fourth quarter of 2018 and $9.9 million for the first quarter of 2018.  The decrease from the previous quarter was a result of an increase in interest expense of $484 thousand, or 12.5%, partially offset by an increase in interest income of $88 thousand.  The net interest margin for the first quarter 2019 was 3.34%, declining 13 basis points when compared to the fourth quarter of 2018. This decrease was primarily due to a 19 basis point increase on the rate paid on interest-bearing liabilities. When comparing the same three month period ended March 31, 2019 and 2018, net interest income increased $15 thousand.

The provision for credit losses was $4.2 million for the three months ended March 31, 2019.  The comparable amounts were $0 and $255 thousand for the three months ended December 31, 2018 and March 31, 2018, respectively. The primary reason for the provision in the first quarter of 2019 was due to $4.3 million in charge-offs recorded against three separate borrower relationships discussed above.  The rate of allowance for credit losses to period end loans was 1.07% at March 31, 2019, compared to 1.10% at December 31, 2018 and 1.19% at March 31, 2018, which reflects management's assessment of the credit quality in the loan portfolio.

Total non-interest income for the first quarter of 2019 was $785 thousand compared to $786 thousand for the same period in 2018 and $601 thousand for the previous quarter.  When comparing March 31, 2019 to the prior quarter, non-interest income increased $184 thousand, or 30.6%, which was due to an increase in loan fees collected during the respective periods.

Total non-interest expense for the first quarter of 2019 increased $286 thousand, or 4.7%, when compared to the same period in 2018.  This increase was primarily due to increases in occupancy and equipment expense and data processing expenses due to our growth.  When comparing March 31, 2019 to the prior quarter, non-interest expense increased $23 thousand, or 0.4%, primarily due to growth-related increases in salaries and employee benefits' expense, occupancy and equipment expense and data processing expense, partially offset by a reduction in both professional fees and advertising expenses.

For the three month period ended March 31, 2019, the Bank recorded an income tax benefit of $74 thousand, resulting in an effective tax rate of -47.7%, compared to an income tax expense of $801 thousand resulting in an effective tax rate of 18.3% for the three month period ended December 31, 2018 and compared to an income tax expense of $790 thousand resulting in an effective tax rate of 18.1% for the three month period ended March 31, 2018. The effective tax rate for the three months ending March 31, 2019 was positively impacted by the exercise of stock option from the Bank's equity incentive plans, when compared to the previous quarter and the three months ended March 31, 2018.

About The Bank of Princeton

The Bank of Princeton is a community bank founded in 2007.  The Bank is a New Jersey state-chartered commercial bank with 11 branches in New Jersey, including three in Princeton and others in Cream Ridge, Hamilton, Pennington, Montgomery, Monroe, Lambertville, Lawrenceville, and New Brunswick.  There are also three branches in the Philadelphia, Pennsylvania area. The Bank of Princeton is a member of the Federal Deposit Insurance Corporation ("FDIC").

Forward-Looking Statements

The Bank of Princeton may from time to time make written or oral "forward-looking statements," including statements contained in the Bank's filings with the FDIC, in its reports to stockholders and in other communications by the Bank (including this press release), which are made in good faith by the Bank pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended.

These forward-looking statements involve risks and uncertainties, such as statements of the Bank's plans, objectives, expectations, estimates and intentions that are subject to change based on various important factors (some of which are beyond the Bank's control). The following factors, among others, could cause the Bank's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Bank conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; market volatility; the value of the Bank's products and services as perceived by actual and prospective customers, including the features, pricing and quality compared to competitors' products and services; the willingness of customers to substitute competitors' products and services for the Bank's products and services; credit risk associated with the Bank's lending activities; risks relating to the real estate market and the Bank's real estate collateral; the impact of changes in applicable laws and regulations and requirements arising out of our supervision by banking regulators; other regulatory requirements applicable to the Bank; technological changes; acquisitions; changes in consumer spending and saving habits; the possibility that expected benefits of the Bank's pending branch acquisition mentioned in this release may not materialize in the timeframe expected or at all, or may be more costly to achieve; that the branch acquisition may not be timely completed, if at all; that prior to the completion of the branch acquisition or thereafter, the Bank's business may not perform as expected due to transaction-related uncertainty or other factors; that Bank is unable to successfully implement integration strategies relating to the branch acquisition; that required regulatory or other approvals are not obtained or other customary closing conditions are not satisfied in a timely manner or at all; reputational risks and the reaction of the Bank's customers, employees and other constituents to the transaction; the diversion of management time on branch acquisition-related matters; those risks set forth in the Bank's Annual Report on Form 10-K for the year ended December 31, 2018 under the heading "Risk Factors" and the success of the Bank at managing the risks involved in the foregoing.

The Bank cautions that the foregoing list of important factors is not exclusive. The Bank 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 Bank, except as required by applicable law or regulation.

Contact George Rapp
609.454.0718
grapp@thebankofprinceton.com