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Two River Bancorp Reports 2018 Second Quarter Financial Results Highlighted by 24.5% Increase in Net Income

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TINTON FALLS, N.J., July 24, 2018 (GLOBE NEWSWIRE) -- Two River Bancorp (NASDAQ:TRCB) (the "Company"), the parent company of Two River Community Bank (the "Bank"), today reported financial results for the second quarter and six months ended June 30, 2018, highlighted by higher net income driven by solid loan growth during the quarter.

2018 Second Quarter Financial Highlights
(comparisons to respective prior year's period)

  • Net income increased 24.5% to $2.65 million, or $0.30 per diluted share, which included $137,000, or $0.02 per diluted share, of additional income tax expense due to New Jersey's newly enacted Corporation Business Tax (CBT) surtax, for which the Company recorded six months of retroactive state income tax expense in the second quarter of 2018.
  • Effective tax rate will increase from 26% to approximately 28% in future periods due to the impact of CBT changes
  • Return on average assets of 1.00%, up from 0.87%
  • Return on average equity of 9.67%, up from 8.26%
  • Net interest margin improved 10 basis points to 3.59%
  • Net interest income increased 12.7% to $8.97 million
  • Efficiency ratio(1) improved to 62.6% compared to 63.9%
  1. Efficiency ratio represents the ratio of non-interest expense to the sum of net interest income and non-interest income.

(Totals at June 30, 2018; comparisons to December 31, 2017)

  • Total loans were $890.4 million, an increase of $39.5 million, or 9.3% annualized
  • Total deposits were $880.9 million, an increase of $19.3 million, or 4.5% annualized
  • Total assets increased to a record $1.056 billion, compared to $1.040 billion, or 3.0% annualized
  • Tangible book value per share(1) increased to $10.90, compared to $10.44
  1. Non-GAAP Financial Information. See "Reconciliation of Non-GAAP Financial Measures" at end of release.

Management Commentary
William D. Moss, President and CEO, stated, "The Company's net income increased 24.5% as a result of strong loan growth and an improvement in key performance metrics during the period. We remain on track to achieve our growth and earnings goals. Higher net interest income, lower credit costs and well controlled expenses led to a 21.0% increase in income before taxes for the quarter. Although second quarter and first half results were negatively impacted by the newly enacted state tax legislation on July 1, 2018, our overall effective tax rate is expected to be comparably lower for the second half of 2018 from the prior year. Growing our lending business, while expanding core deposit relationships, continue to be our priorities. On an annualized basis, loans grew 9.3%, predominantly in the commercial real estate and construction sectors. We expect that this growth, coupled with a strong loan pipeline, will help drive profitability for the remainder of 2018."

Dividend Increased to $0.055 per share
On July 18, 2018, the Company's Board of Directors declared a quarterly cash dividend of $0.055 per share, payable on August 29, 2018 to shareholders of record as of the close of business on August 10, 2018. This marks the 22nd consecutive quarterly cash dividend, which represents a 22.2% increase from the prior quarter, and is the fifth consecutive year in which the Company has raised its cash dividend. 

Key Quarterly Performance Metrics

  2nd Qtr.
1st Qtr.
4th Qtr. 3rd Qtr. 2nd Qtr. 6 Mo.
Ended
 
6 Mo.
Ended
 
 2018
2018
 2017
 2017
 2017
6/30/2018
6/30/2017
Net Income (in thousands) $2,650   $2,676   $335   $2,237   $2,128   $5,326   $3,930  
Earnings per Common Share – Diluted $0.30   $0.31   $0.04   $0.26   $0.25   $0.61   $0.45  
Return on Average Assets   1 %   1.04 %   0.13 %   0.89 %   0.87 %   1.02 %   0.81 %
Return on Average Tangible Assets(1)   1.02 %   1.06 %   0.13 %   0.91 %   0.88 %   1.04 %   0.83 %
Return on Average Equity   9.67 %   10.08 %   1.24 %   8.39 %   8.26 %   9.87 %   7.73 %
Return on Average Tangible Equity(1)   11.57 %   12.12 %   1.49 %   10.13 %   10.01 %   11.84 %   9.39 %
Net Interest Margin   3.59 %   3.63 %   3.56 %   3.62 %   3.49 %   3.61 %   3.47 %
Efficiency Ratio(2)   62.59 %   61.59 %   59.96 %   62.57 %   63.93 %   62.1 %   64.92 %
Non-Performing Assets to Total Assets   0.18 %   0.19 %   0.2 %   0.23 %   0.32 %   0.18 %   0.32 %
Allowance as a % of Loans   1.26 %   1.26 %   1.25 %   1.25 %   1.25 %   1.26 %   1.25 %
 
(1)  Non-GAAP Financial Information. See "Reconciliation of Non-GAAP Financial Measures" at end of release.
(2)  Efficiency ratio represents the ratio of non-interest expense to the sum of net interest income and non-interest income.
 

Loan Composition
The components of the Company's loan portfolio at June 30, 2018 and December 31, 2017 are as follows:  

    (in thousands)    
    June 30,
2018
    December 31,
2017
  %
Change
 
Commercial and industrial   $   107,398     $   101,371   5.9 %
Real estate – construction     134,520       118,094   13.9 %
Real estate – commercial     551,216       537,733   2.5 %
Real estate – residential     66,855       64,238   4.1 %
Consumer     31,214       30,203   3.3 %
Unearned fees     (834 )     (765 ) 9.0 %
      890,369       850,874   4.6 %
Allowance for loan losses     (11,201 )     (10,668 ) 5.0 %
Net Loans   $    879,168     $   840,206   4.6 %
 

Deposit Composition
The components of the Company's deposits at June 30, 2018 and December 31, 2017 are as follows:  

    (in thousands)    
    June 30,
2018
    December 31,
 2017
  %
Change
 
Non-interest-bearing   $    166,506     $   167,297   (0.5 )%
NOW accounts     198,393       232,673   (14.7 )%
Savings deposits     264,371       242,448   9.0  %
Money market deposits     51,567       59,818   (13.8 )%
Listed service CD's     46,441       44,436   4.5  %
Time deposits / IRA     94,151       74,183   26.9  %
Wholesale deposits     59,450       40,702   46.1  %
  Total Deposits   $   880,879     $   861,557   2.2  %
 

2018 Second Quarter Financial Review

Net Income
Net income for the three months ended June 30, 2018 increased 24.5% to $2.65 million, or $0.30 per diluted common share, compared to $2.13 million, or $0.25 per diluted common share, for the same period last year. The increase was largely due to higher net interest income and a lower loan loss provision coupled with a lower Federal corporate income tax rate, which was partially offset by an increase in non-interest expense and an increase in the New Jersey state income tax expense, as discussed below.

On July 1, 2018, New Jersey enacted Assembly Bill No. 4202 to make several changes to the New Jersey Corporation Business Tax (CBT), most notably establishing a temporary CBT surtax, effectively increasing the current CBT tax rate of 9% to 11.5%, retroactive to January 1, 2018. The CBT surtax will reduce to 1.5% from 2.5% for tax years beginning on or after January 1, 2020 through December 31, 2021. As a result of this increase, the Company recorded six months of additional state income tax expense in the second quarter of 2018 of $137,000, or $0.02 per diluted share.

On a linked quarter basis, second quarter 2018 net income remained flat compared to the first quarter of 2018, despite this additional tax expense.

Net income for the six months ended June 30, 2018 increased 35.5% to $5.33 million, or $0.61 per diluted share, compared to $3.93 million, or $0.45 per diluted share, in the same prior year period. For the first half of 2018, the Company recorded a $133,000 tax benefit related to the accounting treatment of equity-based compensation, as compared to $145,000 for the same period last year.

Net Interest Income
Net interest income for the quarter ended June 30, 2018 was $8.97 million, an increase of 12.7% compared to $7.96 million in the corresponding prior year period. This was largely due to an increase of $87.4 million, or 9.6%, in average interest-earning assets, primarily attributable to growth in the loan portfolio. On a linked quarter basis, net interest income increased $170,000, or 1.9%, from $8.80 million.

For the first half of 2018, net interest income increased 14.0% to $17.8 million from $15.6 million in the prior year period.

Net Interest Margin
The Company reported a net interest margin of 3.59% for the second quarter of 2018, compared to 3.63% in the first quarter of 2018 and 3.49% reported for the second quarter of 2017. Net interest margin declined slightly from the first quarter of 2018 largely due to a higher cost of funds.

The net interest margin for the first half of 2018 was 3.61%, compared to 3.47% in the prior year period, primarily due to higher yielding interest-earning assets.

Non-Interest Income
Non-interest income for the quarter ended June 30, 2018 declined slightly to $1.50 million, compared to $1.54 million in the corresponding prior year period.  This was largely due to lower residential mortgage banking revenues, partially offset by higher other loan fees, primarily due to loan prepayment fees, and service fees on deposit accounts.

On a linked quarter basis, non-interest income increased by $186,000, or 14.2%, from the first quarter of 2018, mainly due to higher gains on the sale of SBA loans and residential mortgage banking revenues.

For the six months ended June 30, 2018, non-interest income increased $143,000, or 5.4%, to $2.8 million from the same period in 2017.

Non-Interest Expense
Non-interest expense for the quarter ended June 30, 2018 totaled $6.55 million, an increase of $480,000, or 7.9%, from the $6.07 million reported in same period in 2017, primarily due to salary increases, new hires within the lending and deposit teams, and higher data processing expenses. The Company's efficiency ratio was 62.6% for the quarter, compared to 63.9% for the same period in 2017.

On a linked quarter basis, non-interest expense increased $324,000, or 5.2%, largely due to higher salaries and professional expenses.

For the six months ended June 30, 2018, non-interest expense increased $930,000, or 7.8%, to $12.8 million compared to the same prior year period. Efficiency ratio for the six months ended June 30, 2018 improved to 62.1% from 64.9% compared to the same prior year period.

Provision for Loan Losses
During the quarter, a provision for loan losses of $225,000 was expensed, compared to $375,000 in the same prior year period. The majority of the second quarter 2018 provision was to support the Company's strong loan growth. The Company had $14,000 in net loan recoveries during the quarter, compared to $11,000 in net loan recoveries during the same period last year.

For the first half of 2018, a provision of $625,000 was expensed, compared to $600,000 for the same prior year period. The Company had $92,000 of net loan charge-offs during the first half of 2018, compared to $212,000 of net loan charge-offs in the same prior year period.

As of June 30, 2018, the Company's allowance for loan losses was $11.20 million, compared to $10.67 million as of December 31, 2017. The loss allowance as a percentage of total loans was 1.26% at June 30, 2018 compared to 1.25% at December 31, 2017. 

Financial Condition / Balance Sheet

At June 30, 2018, the Company maintained capital ratios that were in excess of regulatory standards for well capitalized institutions. The Company's Tier 1 capital to average assets ratio was 8.95%, its common equity Tier 1 to risk weighted assets ratio was 9.82%, its Tier 1 capital to risk weighted assets ratio was 9.82%, and its total capital to risk weighted assets ratio was 12.04%.

Total assets as of June 30, 2018 were $1.056 billion, compared to $1.040 billion at December 31, 2017 and $983.1 million as of June 30, 2017.

Total loans as of June 30, 2018 were $890.4 million, compared to $850.9 million at December 31, 2017 and $794.9 million as of June 30, 2017.

Total deposits as of June 30, 2018 were $880.9 million, compared to $861.6 million as of December 31, 2017 and $810.7 million as of June 30, 2017. Core checking deposits at June 30, 2018 were $364.9 million, compared to $400.0 million at December 31, 2017 and $357.3 million at June 30, 2017. The Company continues to focus on building core checking account deposit relationships, which can vary from quarter to quarter due to seasonality in its municipal relationships.

Asset Quality
The Company's non-performing assets at June 30, 2018 were $1.93 million as compared to $2.07 million at December 31, 2017 and $3.18 million at June 30, 2017. Non-performing assets to total assets at June 30, 2018 were 0.18% compared to 0.20% at December 31, 2017 and 0.32% at June 30, 2017.

Non-accrual loans were $1.93 million at June 30, 2018, compared to $2.07 million at December 31, 2017 and $2.95 million at June 30, 2017. There was no OREO at June 30, 2018 and December 31, 2018, compared to $233,000 at June 30, 2017. 

Troubled debt restructured loan balances amounted to $6.71 million at June 30, 2018, with all but $877,000 performing. This compared to $7.05 million at December 31, 2017 and $7.95 million at June 30, 2017.

About the Company
Two River Bancorp is the holding company for Two River Community Bank, which is headquartered in Tinton Falls, New Jersey. Two River Community Bank operates 14 branches along with two loan production offices throughout Monmouth, Middlesex, Union, and Ocean Counties, New Jersey. More information about Two River Community Bank and Two River Bancorp is available at www.tworiverbank.com

The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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, technology and market conditions. These statements may be identified by such forward-looking terminology as "continue," "expect," "look," "believe," "anticipate," "may," "will," "should," "projects," "strategy," or similar statements. Actual results may differ materially from such forward-looking statements, and no 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; competition levels; loan and investment prepayments differing from our assumptions; insufficient allowance for credit losses; a higher level of loan charge-offs and delinquencies than anticipated; material adverse changes in our operations or earnings; a decline in the economy in our 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; a decrease in loan origination volume or an inability to close loans currently in the pipeline; changes in laws and regulations; adoption, interpretation and implementation of accounting pronouncements; operational risks, including the risk of fraud by employees, customers or outsiders; and the inability to successfully implement or expand new lines of business or new products and services. For a list of other factors which would affect our results, see the Company's filings with the Securities and Exchange Commission, including those risk factors identified in the "Risk Factor" section and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2017. The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company assumes no obligation for updating any such forward-looking statements at any time, except as required by law.

   
Investor Contact:
Adam Prior, Senior Vice President
The Equity Group Inc.
Phone: (212) 836-9606
Email: aprior@equityny.com
Media Contact:
Adam Cadmus, Marketing Director
Two River Community Bank
Phone: (732) 982-2167
Email: acadmus@tworiverbank.com
   

 

   
TWO RIVER BANCORP
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months and Six Months Ended June 30, 2018 and 2017
(in thousands, except per share data)
 
   
    Three Months Ended
June 30,
  Six Months Ended
June 30,
 
      2018       2017     2018       2017  
INTEREST INCOME:                      
Loans, including fees   $    10,243     $   8,733   $   20,064     $   17,136  
Securities:                      
Taxable     290       235     587       468  
Tax-exempt     280       279     562       564  
Interest-bearing deposits     94       102     161       174  
Total Interest Income     10,907       9,349     21,374       18,342  
INTEREST EXPENSE:                      
Deposits     1,641       1,063     2,999       2,101  
Securities sold under agreements to repurchase     15       17     29       32  
Federal Home Loan Bank ("FHLB") and other borrowings     116       147     246       292  
Subordinated debt     165       164     330       329  
Total Interest Expense     1,937       1,391     3,604       2,754  
Net Interest Income     8,970       7,958     17,770       15,588  
PROVISION FOR LOAN LOSSES     225       375     625       600  
Net Interest Income after Provision for Loan Losses     8,745       7,583     17,145       14,988  
NON-INTEREST INCOME:                      
Service fees on deposit accounts     239       161     477       311  
Mortgage banking     409       474     747       900  
Other loan fees     137       122     248       214  
Earnings from investment in bank owned life insurance     132       138     262       274  
Gain on sale of SBA loans     387       394     718       511  
Other income     192       249     354       453  
Total Non-Interest Income     1,496       1,538     2,806       2,663  
NON-INTEREST EXPENSES:                      
Salaries and employee benefits     4,010       3,460     7,895       6,913  
Occupancy and equipment     1,043       1,049     2,133       2,103  
Professional     488       395     828       736  
Insurance     64       53     121       101  
FDIC insurance and assessments     123       108     246       231  
Advertising     130       125     190       235  
Data processing     174       125     326       255  
Outside services fees     80       124     161       227  
OREO expenses, impairment and sales, net     (14 )     22     (15 )     19  
Loan workout expenses     45       139     96       166  
Other operating     408       471     797       862  
Total Non-Interest Expenses     6,551       6,071     12,778       11,848  
Income before Income Taxes     3,690       3,050     7,173       5,803  
Income Tax Expense     1,040       922     1,847       1,873  
Net Income   $   2,650     $   2,128   $   5,326     $   3,930  
Earnings Per Common Share:                      
Basic   $   0.31     $   0.25   $   0.63     $   0.47  
Diluted   $   0.30     $   0.25   $   0.61     $   0.45  
Weighted average common shares outstanding:                      
Basic     8,488       8,372     8,480       8,363  
Diluted     8,690       8,654     8,695       8,642  
                               

 

         
TWO RIVER BANCORP
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
         
  June 30,   December 31,  
  2018   2017  
ASSETS            
Cash and due from banks $ 16,839   $ 29,575  
Interest-bearing deposits in bank   7,443     18,644  
Cash and cash equivalents   24,282     48,219  
             
Securities available for sale   28,174     28,684  
Securities held to maturity   57,953     58,002  
Equity securities   2,417     2,448  
Restricted investments, at cost   5,905     5,430  
Loans held for sale   2,537     2,581  
Loans   890,369     850,874  
Allowance for loan losses   (11,201 )   (10,668 )
Net loans   879,168     840,206  
             
Bank owned life insurance   21,835     21,573  
Premises and equipment, net   6,134     6,239  
Accrued interest receivable   2,707     2,554  
Goodwill   18,109     18,109  
Other assets   6,306     5,753  
             
  TOTAL ASSETS $ 1,055,527   $ 1,039,798  
             
LIABILITIES            
Deposits:            
Non-interest-bearing $ 166,506   $ 167,297  
Interest-bearing   714,373     694,260  
Total Deposits   880,879     861,557  
             
Securities sold under agreements to repurchase   19,878     27,120  
FHLB and other borrowings   24,500     25,800  
Subordinated debt   9,905     9,888  
Accrued interest payable   78     70  
Other liabilities   8,940     8,792  
             
Total Liabilities   944,180     933,227  
             
SHAREHOLDERS' EQUITY            
Preferred stock, no par value; 6,500,000 shares authorized, no shares issued and outstanding   -     -  
Common stock, no par value; 25,000,000 shares authorized;            
Issued –  8,867,337 and 8,782,124 at June 30, 2018 and December 31, 2017, respectively            
Outstanding –  8,555,243 and 8,470,030 at June 30, 2018 and December 31, 2017, respectively   80,088     79,678  
Retained earnings   34,173     29,593  
Treasury stock, at cost; 312,094 shares at June 30, 2018 and December 31, 2017   (2,396 )   (2,396 )
Accumulated other comprehensive loss   (518 )   (304 )
Total Shareholders' Equity   111,347     106,571  
             
TOTAL LIABILITIES and SHAREHOLDERS' EQUITY $ 1,055,527   $ 1,039,798  
   

 

   
TWO RIVER BANCORP
Selected Consolidated Financial Data (Unaudited)
 
   
Selected Consolidated Earnings Data  
(in thousands, except per share data)  
   
   Three Months Ended   Six Months Ended  
  June 30,   March 31,   June 30,   June 30,   June 30,  
Selected Consolidated Earnings Data:   2018     2018     2017     2018     2017  
Total Interest Income $   10,907   $   10,467   $    9,349   $   21,374   $   18,342  
Total Interest Expense   1,937     1,667     1,391     3,604     2,754  
Net Interest Income   8,970     8,800     7,958     17,770     15,588  
Provision for Loan Losses   225     400     375     625     600  
Net Interest Income after Provision for Loan Losses   8,745     8,400     7,583     17,145     14,988  
Other Non-Interest Income   1,496     1,310     1,538     2,806     2,663  
Other Non-Interest Expenses   6,551     6,227     6,071     12,778     11,848  
Income before Income Taxes   3,690     3,483     3,050     7,173     5,803  
Income Tax Expense   1,040     807     922     1,847     1,873  
Net Income $   2,650   $   2,676   $   2,128   $   5,326   $   3,930  
                     
Per Common Share Data:                    
Basic Earnings $   0.31   $   0.32   $   0.25   $   0.63   $   0.47  
Diluted Earnings $   0.30   $   0.31   $   0.25   $   0.61   $   0.45  
Book Value $   13.02   $   12.78   $   12.40   $   13.02   $   12.40  
Tangible Book Value(1) $    10.90   $   10.66   $   10.25   $   10.90   $    10.25  
Average Common Shares Outstanding (in thousands):                    
Basic   8,488     8,447     8,372     8,480     8,363  
Diluted   8,690     8,675     8,654     8,695     8,642  
 
(1) Non-GAAP Financial Information. See "Reconciliation of Non-GAAP Financial Measures" at end of release.
 

Selected Period End Balances
(in thousands)

  June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,  
    2018     2018     2017     2017     2017  
Total Assets $   1,055,527   $   1,042,277   $   1,039,798   $   1,000,245   $   983,099  
Investment Securities and Restricted Stock   94,449     96,251     94,564     92,641     92,634  
Total Loans   890,369     872,327     850,874     816,078     794,908  
Allowance for Loan Losses   (11,201 )   (10,962 )   (10,668 )   (10,223 )   (9,953 )
Goodwill and Other Intangible Assets   18,109     18,109     18,109     18,109     18,109  
Total Deposits   880,879     870,904     861,557     821,872     810,725  
Repurchase Agreements   19,878     18,472     27,120     22,576     25,823  
FHLB and Other Borrowings   24,500     24,500     25,800     30,300     24,300  
Subordinated Debt   9,905     9,896     9,888     9,879     9,871  
Shareholders' Equity   111,347     108,980     106,571     106,567     104,524  
                               

Asset Quality Data (by Quarter)
(dollars in thousands)

  June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,  
    2018     2018     2017     2017     2017  
Nonaccrual Loans $   1,930   $   1,972   $   2,070   $   2,345   $   2,946  
OREO   -     -     -     -     233  
Total Non-Performing Assets   1,930     1,972     2,070     2,345     3,179  
                     
Troubled Debt Restructured Loans:                    
Performing   5,831     5,965     6,053     6,925     6,990  
Non-Performing   877     878     994     1,129     960  
                     
Non-Performing Loans to Total Loans   0.22 %   0.23 %   0.24 %   0.29 %   0.37 %
Non-Performing Assets to Total Assets   0.18 %   0.19 %   0.20 %   0.23 %   0.32 %
Allowance as a % of Loans   1.26 %   1.26 %   1.25 %   1.25 %   1.25 %
                               

Capital Ratios

  June 30, 2018   December 31, 2017  
  CET 1
Capital
to Risk
Weighted
Assets
Ratio
  Tier 1
Capital
to
Average
Assets
Ratio
  Tier 1
Capital
to Risk
Weighted
Assets
Ratio
  Total
Capital
to Risk
Weighted
Assets
Ratio
  CET 1
Capital
to Risk
Weighted
Assets
Ratio
  Tier 1
Capital
to
Average
Assets
Ratio
  Tier 1
Capital
to Risk
Weighted
Assets
Ratio
  Total
Capital to
Risk
Weighted
Assets
Ratio
 
Two River Bancorp 9.82 % 8.95 % 9.82 % 12.04 % 9.68 % 8.85 % 9.68 % 11.93 %
Two River Community Bank 10.78 % 9.82 % 10.78 % 11.95 % 10.66 % 9.76 % 10.66 % 11.82 %
"Well capitalized" institution (under prompt corrective action regulations.)* 6.5 % 5 % 8 % 10 % 6.5 % 5 % 8 % 10 %
                                 
*Applies to Bank only.  For the Company to be "well capitalized," the Tier 1 Capital to Risk Weighted Assets has to be at least 6.00%.  
                                 

Net Loan Charge-offs
(dollars in thousands)

  Three Months Ended  
  June 30,   March 31,     Dec. 31,     Sept. 30,   June 30,  
  2018   2018     2017     2017   2017  
Net loan charge-offs (recoveries):                        
  Charge-offs (12 ) (115 )   (239 )   -   -  
  Recoveries 26   9     9     15   11  
Net loan (charge-offs) recoveries 14   (106 )   (230 )   15   11  
Net loan charge-offs (recoveries) to average loans (annualized) (0.01 )% 0.05 %   0.11 %   (0.01 )% (0.01 )%
                         

Consolidated Average Balance Sheets & Yields
With Resultant Interest and Average Rates

  Three Months Ended   Three Months Ended
(dollars in thousands) June 30, 2018   June 30, 2017
   
   
ASSETS
Interest-Earning Assets:
Average
Balance

  Interest /
Income
Expense

  Average
Yield /
Rate
    Average
Balance

  Interest /
Income
Expense

  Average
Yield /
Rate
 
Interest-bearing due from banks $ 21,206   $ 94   1.78 %   $ 40,422   $ 102   1.01 %
Investment securities 95,801   570   2.38 %   94,123   514   2.18 %
Loans, net of unearned fees(1) (2) 884,450   10,243   4.64 %   779,508   8,733   4.49 %
                           
        Total Interest-Earning Assets 1,001,457   10,907   4.37 %   914,073   9,349   4.10 %
                           
Non-Interest-Earning Assets:                          
Allowance for loan losses (11,108 )           (9,698 )        
All other assets 74,616             80,633          
                           
       Total Assets $ 1,064,965               $ 985,008            
                           
LIABILITIES & SHAREHOLDERS' EQUITY                          
Interest-Bearing Liabilities:                          
NOW deposits $ 220,421   306   0.56 %   $ 197,949   231   0.47 %
Savings deposits 262,379   494   0.76 %   259,860   336   0.52 %
Money market deposits 53,393   23   0.17 %   63,841   26   0.16 %
Time deposits 188,862   818   1.74 %   131,209   470   1.44 %
Securities sold under agreements to repurchase 21,190   15   0.28 %   23,577   17   0.29 %
FHLB and other borrowings 24,503   116   1.90 %   24,303   147   2.43 %
Subordinated debt 9,902   165   6.67 %   9,868   164   6.65 %
                           
       Total Interest-Bearing Liabilities 780,650   1,937   1.00 %   710,607   1,391   0.79 %
                           
Non-Interest-Bearing Liabilities:                          
Demand deposits 165,416             163,198          
Other liabilities 8,925             7,854          
                           
       Total Non-Interest-Bearing Liabilities 174,341             171,052          
                           
Stockholders' Equity 109,974             103,349          
                           
       Total Liabilities and Shareholders' Equity $ 1,064,965               $ 985,008            
                           
NET INTEREST INCOME     $ 8,970             $ 7,958      
                           
NET INTEREST SPREAD(3)         3.37 %           3.31 %
                           
NET INTEREST MARGIN(4)         3.59 %           3.49 %

(1)  Included in interest income on loans are loan fees.
(2)  Includes non-performing loans.
(3)  The interest rate spread is the difference between the weighted average yield on average interest-earning and the weighted average cost of average interest-bearing liabilities.
(4)  The interest rate margin is calculated by dividing annualized net interest income by average interest earning assets.

 

Consolidated Average Balance Sheets & Yields
With Resultant Interest and Average Rates

  Six Months Ended   Six Months Ended
(dollars in thousands) June 30, 2018   June 30, 2017
ASSETS
Interest-Earning Assets:
Average
Balance
  Interest /
Income
Expense
  Average
Yield /
Rate
    Average
Balance
  Interest /
Income
Expense
  Average
Yield /
Rate
 
Interest-bearing due from banks $ 19,679   $ 161   1.65 %   $ 39,359   $ 174   0.89 %
Investment securities 96,708   1,149   2.38 %   95,072   1,032   2.17 %
Loans, net of unearned fees(1) (2) 876,541   20,064   4.62 %   770,860   17,136   4.48 %
                           
        Total Interest-Earning Assets 992,928   21,374   4.34 %   905,291   18,342   4.09 %
                           
Non-Interest-Earning Assets:                          
Allowance for loan losses (10,974 )           (9,671 )        
All other assets 73,756             78,119          
                           
       Total Assets $ 1,055,710               $ 973,739            
                           
LIABILITIES & SHAREHOLDERS' EQUITY                          
Interest-Bearing Liabilities:                          
NOW deposits $ 228,502   616   0.54 %   $ 194,943   443   0.46 %
Savings deposits 255,471   848   0.67 %   258,189   663   0.52 %
Money market deposits 55,857   48   0.17 %   62,760   52   0.17 %
Time deposits 178,651   1,487   1.68 %   133,827   943   1.42 %
Securities sold under agreements to repurchase 20,417   29   0.29 %   21,488   32   0.30 %
FHLB and other borrowings 26,349   246   1.88 %   24,374   292   2.42 %
Subordinated debt 9,898   330   6.67 %   9,864   329   6.67 %
                           
       Total Interest-Bearing Liabilities 775,145   3,604   0.94 %   705,445   2,754   0.79 %
                           
Non-Interest-Bearing Liabilities:                          
Demand deposits 162,753             158,219          
Other liabilities 8,981             7,522          
                           
       Total Non-Interest-Bearing Liabilities 171,734             165,741          
                           
Shareholders' Equity 108,831             102,553          
                           
       Total Liabilities and Shareholders' Equity $ 1,055,710               $ 973,739            
                           
NET INTEREST INCOME     $ 17,770             $ 15,588      
                           
NET INTEREST SPREAD(3)         3.40 %           3.30 %
                           
NET INTEREST MARGIN(4)         3.61 %           3.47 %

(1)  Included in interest income on loans are loan fees.
(2)  Includes non-performing loans.
(3)  The interest rate spread is the difference between the weighted average yield on average interest-earning and the weighted average cost of average interest-bearing liabilities.
(4)  The interest rate margin is calculated by dividing annualized net interest income by average interest earning assets.

 

Reconciliation of Non-GAAP Financial Measures

The press release contains certain financial information determined by methods other than in accordance with generally accepted accounting policies in the United States (GAAP). These non-GAAP financial measures are "book value per common share," "tangible book value per common share," "return on average tangible assets," and "return on average tangible equity." This non-GAAP disclosure has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. Our management uses these non-GAAP measures in its analysis of our performance because it believes these measures are material and will be used as a measure of our performance by investors.

(in thousands, except per share data)

 
       
  As of and for the Three Months Ended   As of and for the
Six Months Ended
 
  June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   June 30,   June 30,  
  2018   2018   2017   2017   2017   2018   2017  
Total shareholders' equity $ 111,347   $ 108,980   $ 106,571   $ 106,567   $ 104,524   $ 111,347   $ 104,524  
Less: goodwill and other tangibles   (18,109 )   (18,109 )   (18,109 )   (18,109 )   (18,109 )   (18,109 )   (18,109 )
Tangible common shareholders' equity $ 93,238   $ 90,871   $ 88,462   $ 88,458   $ 86,415   $ 93,238   $ 86,415  
                                           
Common shares outstanding   8,555     8,525     8,470     8,454     8,429     8,555     8,429  
Book value per common share $ 13.02   $ 12.78   $ 12.58   $ 12.60   $ 12.40   $ 13.02   $ 12.40  
                                           
Book value per common share $ 13.02   $ 12.78   $ 12.58   $ 12.60   $ 12.40   $ 13.02   $ 12.40  
Effect of intangible assets   (2.12 )   (2.12 )   (2.14 )   (2.14 )   (2.15 )   (2.12 )   (2.15 )
Tangible book value per common share $ 10.90   $ 10.66   $ 10.44   $ 10.46   $ 10.25   $ 10.90   $ 10.25  
                             
Return on average assets 1.00 % 1.04 % 0.13 % 0.89 % 0.87 % 1.02 % 0.81 %
Effect of average intangible assets 0.02 % 0.02 % -   0.02 % 0.01 % 0.02 % 0.02 %
Return on average tangible assets 1.02 % 1.06 % 0.13 % 0.91 % 0.88 % 1.04 % 0.83 %
                             
Return on average equity 9.67 % 10.08 % 1.24 % 8.39 % 8.26 % 9.87 % 7.73 %
Effect of average intangible assets 1.90 % 2.04 % 0.25 % 1.74 % 1.75 % 1.97 % 1.66 %
Return on average tangible equity 11.57 % 12.12 % 1.49 % 10.13 % 10.01 % 11.84 % 9.39 %

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