The Bank of Princeton Announces Second Quarter 2019 Results

PRINCETON, N.J., July 25, 2019 /PRNewswire/ -- The Bank of Princeton (the "Bank") BPRN today reported unaudited results of operations and financial condition for the quarter ended June 30, 2019.  The Bank reported net income of $2.8 million, or $0.41 per diluted common share, for the second quarter of 2019, compared to net income of $229 thousand, or $0.03 per diluted common share, for the first quarter of 2019, and net income of $3.6 million, or $0.53 per diluted common share, for the second quarter of 2018. The increase in net income, when comparing the three months ended March 31, 2019, was primarily due in a decrease of $3.9 million to the Bank's provision for loan losses, and a $452 thousand increase in net-interest income, partially offset by an increase of $975 thousand in non-interest expenses and $692 thousand increase in income tax expenses. The decrease of $827 thousand in total net income, when comparing the three months ended June 30, 2018 was primarily due to a $627 thousand one-time expense related to the acquisition of five former Beneficial Savings Bank ("Beneficial") branches from WSFS Bank, which was completed on May 17, 2019, and the $96 thousand core deposit intangible expense associated with that acquisition. For the six month period ended June 30, 2019, the Bank recorded net income of $3.0 million, or $0.44 per diluted common share, compared to $7.2 million, or $1.05 per diluted common share for the same period in 2018, primarily due to an increase in the Bank's provision for loan losses of $3.9 million recorded in the first quarter of 2019. 

Highlights for the quarter-ended June 30, 2019 are as follows:

• The Bank completed the acquisition of five Beneficial branches located in Bordentown, Browns Mills, Chesterfield, Deptford and Sicklerville, New Jersey.
• Total deposits increased $143.2 million, or 14.2% from the $1.01 billion at December 31, 2018.
• Net loans increased $48.6 million (excluding $4.3 million in charge-offs) from the $1.07 billion at December 31, 2018. This reflects an annualized increase of 9.1%.
• Non-performing assets decreased $3.0 million, or 52.6%, from $5.7 million at December 31, 2018 and decreased $6.8 million from the previous quarter.
• Interest income for the three month period ended June 30, 2019 increased $1.5 million, or 11.5%, over the same period in 2018.
• Non-interest income for the three month period ended June 30, 2019 increased $102 thousand, or 16.3%, over the same period in 2018.

"We are excited with the Beneficial branch expansion which fits our long term growth strategy," stated Edward Dietzler, President/CEO.

Chairman Richard Gillespie noted that, "With the acquisition of five branches from Beneficial and numerous new branches scheduled to open this year and early next, the Bank is on an exciting growth trajectory.  Our plan to build a substantial and valuable footprint along the I95 corridor is well underway.  Along with this growth, and equally valuable, is the rapid improvement of our credit quality."

Balance Sheet Review

Total assets were $1.36 billion at June 30, 2019, an increase of $109.7 million or 8.8% when compared to $1.25 billion at the end of 2018. The primary reason for the increase in total assets was a result of the Beneficial branch acquisition in which the Bank received $159.9 million in cash and recorded $8.9 million in goodwill, a $4.1 million core deposit intangible and $2.7 million in premises attributed to four branch buildings. The Bank also recorded a $13.4 million right-of-use asset resulting from the adoption of FASB Update No. 2016-02 ("Leases"). Net loans also increased $48.6 million (excluding $4.3 million in charge-offs) from the $1.07 billion at December 31, 2018.

Total deposits at June 30, 2019 increased by $143.2 million, or 14.2%, when compared to December 31, 2018, primarily due to acquiring $177.9 million in deposits in the Beneficial branch acquisition, partially offset by not renewing $31.1 million of brokered deposits which carry a higher cost.  When comparing June 30, 2019 to balances at December 31, 2018, interest checking increased $62.4 million, savings accounts increased $61.5 million, time deposits increased $41.7 million and non-interest deposits increased $30.8 million, partially offset by a $53.2 million decrease in money markets. In addition, during the quarter, the Bank used proceeds from the acquisition to payoff FHLB short-term advances.    

Total stockholders' equity increased $5.0 million or 2.7% when compared to the end of 2018. This increase was primarily due to earnings recorded during the first six months of 2019, 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 13.9% compared to 14.7% at December 31, 2018.

Asset Quality

At June 30, 2019, non-performing assets were $2.7 million, a decrease of $3.0 million, or 52.6%, when compared to $5.7 million at December 31, 2018, and a decrease of $6.8 million when compared to the previous quarter.  This decrease at June 30, 2019 from December 31, 2018 was primarily due to $2.6 million in charge-offs recorded in the first quarter consisting of a $1.9 million commercial and industrial loan and a $750 thousand partial charge-off of a commercial real estate loan.  Total troubled debt restructurings ("TDR") totaled $7.6 million at June 30, 2019, an increase of $6.3 million from year-end 2018 resulting from the restructure of one commercial real estate loan. All TDR's are performing to their agreed upon terms.

Review of Quarterly Financial Results

Net interest income was $10.4 million for the second quarter of 2019, compared to $9.9 million for the first quarter of 2019 and $10.3 million for the second quarter of 2018.  The increase from the previous quarter was a result of an increase in interest income of $723 thousand, or 5.1%, offset by an increase in interest expense of $452 thousand.  The net interest margin for the second quarter 2019 was 3.30%, decreasing 3 basis points, when compared to the first quarter of 2019. This decrease was primarily associated with a decrease of 4 basis points of yield on earning assets.   When comparing the same three month period ended June 30, 2019 and 2018, net interest income increased $96 thousand, which was primarily due to a higher volume of average earnings assets of approximately $107.7 million.  For the six month period ended June 30, 2019, net interest income was $20.3 million, an increase of $112 thousand, or 0.6%, over the same period in 2018.  This slight increase was primarily due to a higher volume of average earning assets of approximately $14.5 million.  The total rate on interest-bearing liabilities, which includes non-interest-bearing deposits, for the three month period ended June 30, 2019 and 2018 was 1.65% and 1.15%, respectively.   

The provision for credit losses was $350 thousand and $4.6 million for the three and six months ended June 30, 2019, respectively, compared to $410 thousand and $665 thousand for the same periods in 2018, respectively.  When compared to the three months ended March 31, 2019, the provision for credit losses decreased by $3.9 million. The primary reason behind the amount of the provision in the second quarter of 2019 was an increase in the qualitative factors, specifically in the historical loss factor component, of the Bank's methodology used in determining the overall allowance. The ratio of allowance for credit losses to period end loans was 1.10% at June 30, 2019 and December 31, 2018 and 1.13% at June 30, 2018, which reflects management's assessment of the credit quality in the loan portfolio.

Total non-interest income for the second quarter of 2019 increased $102 thousand to $729 thousand, or 16.3%, when compared to the same period in 2018. This increase was primarily due to an increase in service charges collected.  Total non-interest income, comparing the three month periods ended June 30, 2019 and March 31, 2019, reflected a decrease of $56 thousand, primarily due to a lower level of fees generated on loans recorded between the two periods.  For the six month period ended June 30, 2019, non-interest income increased $101 thousand, or 7.1%, primarily due to increases in service charges collected and income from bank-owned life insurance.

Total non-interest expense for the second quarter of 2019 increased $1.0 million, or 16.7%, when compared to the same period in 2018.  This increase was primarily due to the one-time acquisition cost of $627 thousand related to the Beneficial branch acquisition, and an additional $97 thousand core deposit intangible expense related to such acquisition.  Also, salaries and benefits expense and occupancy and equipment expenses were partially impacted as a result of the acquisition.  When comparing June 30, 2019 to the prior linked quarter, non-interest expense increased $975 thousand, or 15.4%, primarily due to the overall expenses related to the Beneficial branch acquisition. For the six month period ended June 30, 2019, non-interest expense was $13.7 million, compared to $12.3 million for the same period in 2018. The increase was attributed to expenses recorded relating to the Beneficial branch acquisition and an increase in other operating expenses.

For the three month period ended June 30, 2019, the Bank recorded income tax expense of $618 thousand, resulting in an effective tax rate of 18.0%, compared to $74 thousand income tax benefit, resulting in an effective tax rate of (47.7%), for the three month period ended March 31, 2019, and compared to an income tax expense of $579 thousand, resulting in an effective tax rate of 13.7%, for the three month period ended June 30, 2018. The current effective tax yields for the three and six months ended June 30, 2019, were reduced, in part, as a result of the new federal corporate tax rate of 21.0% from the prior rate of 34.0%.  In addition, both three and six months ended June 30, 2019 and June 30, 2018 were positively impacted by recording a tax benefit related to the exercise of warrants and stock options. 

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 16 branches in New Jersey, including four in Princeton and others in Bordentown, Browns Mills, Chesterfield, Cream Ridge, Deptford, Hamilton, Lambertville, Lawrenceville, Monroe, New Brunswick, Pennington and Sicklerville.  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 Beneficial 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 Bank is unable to successfully implement integration strategies relating to the branch acquisition; reputational risks and the reaction of the Bank's customers, employees and other constituents to the transaction; 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.