Liberty Bell Bank Reports Second Quarter 2016 Results of Operations

MARLTON, N.J.--(BUSINESS WIRE)--

Liberty Bell Bank LBBB today reported net income of $27,000 for the three months ended June 30, 2016, compared to net income of $20,000 for the same period in 2015, an improvement of $7,000. The second quarter of 2016 is the Bank's sixth consecutive quarter of reported net income. Net income for the six months ended June 30, 2016 was $77,000, an improvement of $53,000 as compared to net income of $24,000 for the same period in 2015. At June 30, 2016, the Bank is adequately capitalized by all regulatory measures.

The increase in the Bank's net income for this quarter over the same quarter in 2015 was due primarily to an increase in its other non-interest income of $60,000, resulting mainly from an increase in loan related fees, a decrease in its non-interest expenses of $21,000 and an increase in gains from the sale of investment securities of $8,000, partially offset by an increase its provision for loan losses of $5,000 and a decease in the Bank's net interest income of $71,000. The decrease in net interest income was due to a $45,000 decrease in interest and dividend income and a $26,000 increase in interest expense from interest paid on deposits. The decrease in interest and dividend income was due primarily to a decrease of $17,000 in interest and fees from loans and a decrease of $27,000 in interest earned from investments. The increase in interest expense from interest paid on deposits was due an increase in the average rate paid on deposits from 0.63% in last year's second quarter to 0.70% this quarter caused by an increase in the rate of interest paid on certificates of deposit. In addition, the average balance in interest-bearing accounts increased $3.7 million to $119.5 for the quarter ended June 30, 2016.

The decrease of $17,000 in interest and fees from loans was due primarily to a decline in the interest yield from the loan portfolio of 0.15% from 4.97% for the second quarter of 2015 to 4.82% for the same time period in 2016. Partially offsetting the negative impact on interest income of the lower yield from the loan portfolio, average loan balances outstanding for the three months ended June 30, 2016 increased $2.1 million as compared to the three months ended June 30, 2015.

The $21,000 decrease in non-interest expense was due primarily to a $35,000 decrease in compensation expense due to a reduction in salary and medical expenses. In addition, decreases in expenses related to equipment licensing fees, other real estate owned, occupancy expenses related to amortization of leasehold improvements, and marketing of $23,000, $21,000, $12,000 and $7,000, respectively, contributed to lower non-interest expense. Also, legal expenses, primarily relating to the Bank's non-performing assets, decreased $12,000 and loan related expenses decreased $5,000. Partially offsetting these positive variances, other operating expenses increased $77,000 due primarily to a $54,000 increase in data processing expenses as the Bank outsourced data processing functions, a $15,000 increase in other professional fees, a $15,000 increase in director fees, a $4,000 increase in audit expense, a $4,000 increase in other expenses and a $3,000 increase in printing expense. Also during the quarter, the Bank's provision for income tax expense increased $7,000.

Net interest margin for the second quarter of 2016 was 3.23%, a decrease of 0.38% from the 3.61% net interest margin for the second quarter of 2015. The decline in the net interest margin resulted from a reduction of 0.34% in the yield from earning assets, primarily the loan portfolio.

The $53,000 net income improvement for the six months ended June 30, 2016 as compared to the six months ended June 30, 2015 can be primarily attributed to an increase in gains from the sale of investment securities of $68,000, an increase in other non-interest income of $69,000 and a decline in other expenses. A decline in net interest income of $49,000, an increase in the provision for loan losses of $20,000 and an increase in the provision for income taxes of $18,000 partially reduced the impact of the favorable variances.

The decrease of $49,000 in net interest income was due to a $7,000 decrease in interest and dividend income, as well as a $42,000 increase in interest expense, primarily resulting from an increase in interest expense on deposits. The $7,000 decrease in interest and dividend income was due primarily to a decrease of $71,000 in interest earned from investment securities partially offset by an increase of $34,000 in interest from cash and cash equivalents and a $30,000 increase in interest and fees from loans. The increase in interest expense from interest paid on deposits was due an increase in the average rate paid on deposits from 0.63% in last year's first six months to 0.68% this year-to-date caused by an increase in the rate of interest paid on certificates of deposit. In addition, the average balance in interest-bearing accounts increased $4.4 million to $120.5 for the six months ended June 30, 2016.

The decrease of $71,000 in interest earned from investment securities was due primarily to a $4.1 million decrease in the average investment balance outstanding, as the bank sold securities primarily to fund the growth in loans and to monetize gains in the portfolio. In addition, the interest yield from the investment securities portfolio decreased 39 basis points from 1.97% to 1.58%. The $34,000 increase in interest earned from interest-bearing cash deposits, primarily at the Federal Reserve Bank, was due to an increase of $8.1 million in average balances outstanding. The increase of $30,000 in interest and fees from loans was due primarily to the average loan balances outstanding for the six months ended June 30, 2016 as compared to the six months ended June 30, 2015 which increased by $3.2 million. Partially offsetting the impact of an increase in average loan balances outstanding, the interest yield for the loan portfolio decreased 10 basis points from 4.97% to 4.87%.

The $2,000 decrease in other expenses for the six months ended June 30, 2016 as compared to the six months ended June 30, 2015 was due primarily to a $65,000 decrease in compensation related expenses due to a reduction in staffing, a $49,000 decrease in equipment expenses due to data processing outsourcing, a $44,000 decrease in expenses related to other real estate owned, a $19,000 decrease in occupancy expenses due to lower real estate taxes, a $12,000 decrease in loan related expenses, a $9,000 decrease in legal expense related to the Bank's ongoing troubled asset reduction plan, and a $3,000 decrease in communication related expenses. Partially offsetting these positive variances, data processing expenses increased by $115,000 as the Bank outsourced data processing functions, director fees increased by $36,000, miscellaneous expenses increased by $33,000 and other professional fees increased by $17,000.

Net interest margin for the six months ended June 30, 2016 was 3.28%, a decrease of 0.26% from the 3.54% net interest margin for the six months ended June 30, 2015. The decrease in the net interest margin resulted from a decrease of 0.24% in the yield generated from interest-earning assets coupled with an increase of 0.05% in the rate paid for interest bearing deposits and borrowings.

Total assets at June 30, 2016 were $149.3 million, representing a decrease of $2.1 million from $151.4 million at December 31, 2015. The decrease was due primarily to a $3.3 million reduction in investment securities, a $948,000 decrease in net loans receivable and a $176,000 decrease in other assets. Partially offsetting these negative variances, cash and cash equivalents increased $2.2 million primarily in interest-bearing cash deposits at the Federal Reserve Bank.

Total deposits decreased by $2.1 million to $136.0 million at June 30, 2016 from $138.1 million at December 31, 2015. This was primarily due to a $4.6 million decrease in interest bearing accounts, offset by a $2.5 million increase in non-interest bearing accounts.

The decrease in interest-bearing deposit accounts of $4.6 million was due primarily to Interest bearing checking accounts, including money market accounts which decreased $9.1 million. Savings accounts, however, increased $1.2 million and certificates of deposit increased $3.3 million from December 31, 2015 to $57.9 million at June 30, 2016.

At June 30, 2016, our criticized/classified loans totaled $7.4 million which represents a decrease of $283,000 since December 31, 2015. Other real estate owned totaled $2.6 million at June 30, 2016 and at December 31, 2015. In July 2016, the Bank sold four properties of other real estate which was valued at $755,000 incurring no loss from the sale.

The Bank's President and Chief Executive Officer, Benjamin Watts indicated, "Non-performing assets, like other real estate, are a drain on the earnings of the Bank. As we continue to reduce the level of non-performing assets, we increase the Bank's earnings potential and reduce the overall risk profile of the Bank." The Chairman of the Board of Directors of the Bank, William Dunkelberg added, "We have made substantial progress redeploying our assets into earning activities. This has strengthened our bank and positioned us to continue to improve our earnings. Bank management is doing a great job with excellent support from our Board of Directors."

Set forth below is certain selected balance sheet and income statement data at June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015.

SELECTED BALANCE SHEET DATA
(Unaudited, in thousands)		June 30,				December 31,
		2016				2015
Cash and cash equivalents		$	19,295			$	17,050
Investment securities			14,465				17,422
Net loans receivable			109,764				110,711
Total assets			149,266				151,402
Deposits			136,006				138,128
Shareholders' equity			9,817				9,538
Capital Ratios:
Common Equity Tier 1 Capital to Risk Weighted Assets			9.08	%			8.85	%
Leverage Capital			6.41	%			6.44	%
Tier 1 Capital to Risk Weighted Assets			9.08	%			8.85	%
Total risk based capital			10.33	%			10.10	%

SELECTED INCOME STATEMENT DATA
(Unaudited, in thousands except per share data)
		Quarter ended June 30,						Six months ended June 30,
		2016			2015			2016			2015
Net interest income		$	1,166		$	1,237		$	2,370		$	2,419
Provision for loan losses			15			10			30			10
Gain on sale of securities			8			0			68			0
Other Non-interest income			195			134			377			308
Loss on write-down of ORE			0			0			0			1
Other expenses			1,318			1,339			2,688			2,690
Provision for income taxes			9			2			20			2
Net income		$	27		$	20		$	77		$	24
Earnings per share:
Basic		$	0.00		$	0.00
Diluted		$	0.00		$	0.00

Liberty Bell Bank is a full-service, state-chartered commercial bank, whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC). The Bank provides diversified financial products through two locations in Burlington County, New Jersey and one location in Camden County, New Jersey.

The Bank may from time to time make written or oral "forward-looking statements", including statements contained in this release. Such statements are not historical facts and include expressions about management's confidence and strategies and management's current views and expectations about new and existing programs and products, relationships, opportunities, taxation, technology and market conditions. Actual results may differ materially from such forward-looking statements, and no undue reliance should be placed on any forward-looking statement. Factors that may cause results to differ materially from such forward-looking statements include, but are not limited to, unanticipated changes in the financial markets and the direction of interest rates; volatility in earnings due to certain financial assets and liabilities held at fair value; stronger competition from banks, other financial institutions and other companies; insufficient allowance for credit losses; a higher level of net loan charge-offs and delinquencies than anticipated; material adverse changes in the Bank's operations or earnings; a decline in the economy in our primary market areas; changes in relationships with major customers; changes in effective income tax rates; higher or lower cash flow levels than anticipated; inability to hire or retain qualified employees; a decline in the levels of deposits or loss of alternate funding sources; the inability to increase our loan portfolio; the inability to increase our capital to sustain our growth and meet regulatory requirements; changes in laws and regulations, including issues related to compliance with anti-money laundering and the bank secrecy act laws; adoption, interpretation and implementation of new or pre-existing accounting pronouncements; operational risks, including the risk of fraud by employees and customers; the inability to successfully implement our strategic plan as well as new lines of business or new products and services and other factors, many of which are beyond the Bank's control. The words "may", "could", "should", "would", "will", "project", "continue", "believe", "anticipate", "expect", "intend", "plan", and similar expressions are intended to identify forward-looking statements. All such statements are made in good faith by the Bank pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. 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.

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