U.S. Markets closed

Two River Bancorp Reports Record 2018 Fourth Quarter and Annual Financial Results

Two River Bancorp Reports Record 2018 Fourth Quarter and Annual Financial Results

TINTON FALLS, N.J., Jan. 29, 2019 (GLOBE NEWSWIRE) -- Two River Bancorp (TRCB) (the "Company"), the parent company of Two River Community Bank (the “Bank"), today reported financial results for the fourth quarter and twelve months ended December 31, 2018, highlighted by record net income, strong loan and deposit growth, and a 9.5% increase in tangible book value per share(1) from the prior year.

2018 Fourth Quarter Financial Highlights
(comparisons to respective prior year’s period)

  • Net income increased to $3.0 million, or $0.35 per diluted share, from $335,000, or $0.04 per diluted share.  The 2017 fourth quarter included a charge to income tax expense of $1.78 million, or $0.21 per diluted share, as part of the Tax Cuts and Jobs Act. This charge impacted several metrics throughout the prior year’s quarter and annual results. 
  • Excluding this one-time 2017 charge, 2018 fourth quarter net income increased 44.0% from 2017 fourth quarter net income of $2.1 million, or $0.24 per diluted share.
  • Return on average assets of 1.10%, up from 0.13%
  • Return on average equity of 10.52%, up from 1.24%
  • Net interest income increased 8.5% to $9.3 million
  • Net interest margin remained unchanged at 3.56%
  • Efficiency ratio(2) was 60.69% compared to 59.96%

2018 Annual / Year-End Financial Highlights
(comparisons to prior year)

  • Net income increased 72.3% to a record $11.2 million, or $1.29 per diluted share. Net income for 2017 was impacted by the above-mentioned charge to income tax expense of $1.78 million, or $0.21 per diluted share.
  • Excluding the one-time 2017 charge, 2018 net income increased 35.3% from 2017 net income of $8.3 million, or $0.96 per diluted share.
  • Return on average assets of 1.04%, up from 0.66%
  • Return on average equity of 10.07%, up from 6.22%
  • Net interest income increased 11.0% to $36.1 million
  • Net interest margin improved to 3.58%
  • Efficiency ratio(2) improved to 61.66% compared to 63.02%
  • Total loans at December 31, 2018 were $921.3 million, an increase of $70.4 million, or 8.3%
  • Total deposits at December 31, 2018 were $917.4 million, an increase of $55.8 million, or 6.5%
  • Total assets increased to a record $1.096 billion, or 5.4%, compared to $1.040 billion
  • Tangible book value per share(1) increased to $11.43, compared to $10.44

(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.

Management Commentary
William D. Moss, Chairman, President and CEO, stated, “2018 was an exceptional year for the Company. We reported solid bottom line improvement and book value appreciation, while still reinvesting in our infrastructure through the implementation of a new banking platform during the third quarter. Loan activity was strong during the fourth quarter, and we achieved an 8.3% growth in total loans for the year, despite an unanticipated high level of payoffs. This growth is due to solid, fundamental lending in the commercial real estate, construction and residential sectors, and our pipeline continues to remain strong as we enter 2019. Deposits grew by 6.5% in 2018, despite a highly competitive environment. Looking forward into 2019, we believe the initiatives put in place over the past several months have the Company poised to continue delivering solid bottom line improvements and continued returns for our shareholders.”

Dividend Information
On January 16, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.055 per share, payable on February 28, 2019 to shareholders of record at the close of business on February 6, 2019. This marks the Company’s 24th consecutive quarterly cash dividend payment.

Key Quarterly Performance Metrics

    4th Qtr.   3rd Qtr.   2nd Qtr.   1st Qtr.   4th Qtr.   12 Mo. Ended   12 Mo. Ended
  2018   2018   2018   2018   2017   12/31/2018   12/31/2017
Net Income (in thousands)   $3,046     $2,834     $2,650     $2,676    
$335
    $11,206      $6,502  
Earnings per Common Share – Diluted   $0.35     $0.33     $0.30     $0.31     $0.04     $1.29     $0.75  
Return on Average Assets   1.10 %   1.04 %   1.00 %   1.04 %   0.13 %   1.04 %   0.66 %
Return on Average Tangible Assets(1)   1.11 %   1.06 %   1.02 %   1.06 %   0.13 %   1.06 %   0.67 %
Return on Average Equity   10.52 %   9.98 %   9.67 %   10.08 %   1.24 %   10.07 %   6.22 %
Return on Average Tangible Equity(1)   12.49 %   11.90 %   11.57 %   12.12 %   1.49 %   12.03 %   7.52 %
Net Interest Margin   3.56 %   3.55 %   3.59 %   3.63 %   3.56 %   3.58 %   3.53 %
Efficiency Ratio(2)   60.69 %   61.78 %   62.59 %   61.59 %   59.96 %   61.66 %   63.02 %
Non-Performing Assets to Total Assets   0.18 %   0.18 %   0.18 %   0.19 %   0.20 %   0.18 %   0.20 %
Allowance as a % of Loans   1.24 %   1.26 %   1.26 %   1.26 %   1.25 %   1.24 %   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 December 31, 2018 and December 31, 2017 are as follows:  

    (in thousands)    
    December 31,
2018
    December 31,
2017
  % Change    
Commercial and industrial   $   109,362     $   101,371   7.9   %
Real estate – construction     144,865       118,094   22.7   %
Real estate – commercial     552,549       537,733   2.8   %
Real estate – residential     84,123       64,238   31.0   %
Consumer     31,144       30,203   3.1   %
Unearned fees     (742 )     (765 ) (3.0 ) %
      921,301       850,874   8.3   %
Allowance for loan losses     (11,398 )     (10,668 ) 6.8   %
Net Loans   $   909,903     $   840,206   8.3   %


Deposit Composition

The components of the Company’s deposits at December 31, 2018 and December 31, 2017 are as follows:  

    (in thousands)      
    December 31,
2018
    December 31,
 2017
  % Change    
Non-interest-bearing   $   176,655     $   167,297   5.6   %
NOW accounts     193,347       232,673   (16.9 ) %
Savings deposits     258,666       242,448   6.7   %
Money market deposits     43,936       59,818   (26.6 ) %
Listed service CD’s     39,807       44,436   (10.4 ) %
Time deposits / IRA     130,863       74,183   76.4   %
Wholesale deposits     74,080       40,702   82.0   %
  Total Deposits   $   917,354     $   861,557   6.5   %

2018 Fourth Quarter Financial Review

Net Income
Net income for the three months ended December 31, 2018 increased to $3.0 million, or $0.35 per diluted common share, compared to $335,000, or $0.04 per diluted common share, for the same period last year. The increase in net income was largely the result of the aforementioned $1.8 million, or $0.21 per diluted share, charge to income tax expense in the fourth quarter of 2017, resulting from the write-down of the Company’s deferred tax asset from 34% to 21% (the Company’s new corporate tax rate). Excluding this charge, 2018 fourth quarter net income increased 44.0% from 2017 fourth quarter net income of $2.1 million, or $0.24 per diluted share. Additionally, increases were achieved in both net interest and non-interest income coupled with both a lower loan loss provision and Federal corporate income tax rate.

On a linked quarter basis, fourth quarter 2018 net income increased 7.5% compared to the third quarter of 2018, primarily due to higher net interest income, a lower loan loss provision and a decrease in non-interest expenses.

Net Interest Income
Net interest income for the quarter ended December 31, 2018 was $9.3 million, an increase of 8.5% compared to $8.5 million in the corresponding prior year period. This was largely due to an increase of $79.9 million, or 8.4%, in average interest-earning assets, primarily attributable to growth in the loan portfolio.

On a linked quarter basis, net interest income increased $150,000, or 1.6%, from $9.1 million.

Net Interest Margin
Despite higher costs of funds, the Company reported a net interest margin of 3.56% for the fourth quarter of 2018, compared to 3.55% in the third quarter of 2018 and 3.56% reported for the fourth quarter of 2017. 

Non-Interest Income
Non-interest income for the quarter ended December 31, 2018 increased slightly to $1.4 million, compared to $1.3 million in the corresponding prior year period. This was largely due to higher other loan fees, primarily due to loan prepayment fees, and higher gains from the sale of SBA loans, partially offset by lower residential mortgage banking revenue and service fees on deposit accounts.

On a linked quarter basis, non-interest income remained largely unchanged from the third quarter of 2018, as higher residential mortgage banking revenue and gains from the sale of SBA loans were offset by lower loan prepayment fees.

Non-Interest Expense
Non-interest expense for the quarter ended December 31, 2018 totaled $6.4 million, an increase of $528,000, or 8.9%, from the $5.9 million reported in the corresponding period in 2017. This was primarily due to salary increases, new hires within the lending and deposit teams, and higher data processing expenses, mainly due to one-time final costs resulting from the implementation of the new banking platform. The Company’s efficiency ratio was 60.69% for the quarter, compared to 59.96% for the same period in 2017.

On a linked quarter basis, non-interest expense remained largely unchanged.

Provision for Loan Losses
During the quarter, no provision for loan losses was recorded, compared to $675,000 in the same prior year period, largely due to a decline in the Company’s historical loan loss rates. The Company also had $8,000 in net loan recoveries during the quarter, compared to $230,000 in net loan charge-offs during the same period last year.  

2018 Annual Financial Review

Net Income
Net income for the year ended December 31, 2018 increased 72.3% to $11.2 million, or $1.29 per diluted share, compared to $6.5 million, or $0.75 per diluted share, in the prior year. Excluding the effect of the previously mentioned deferred tax asset write-down in 2017, net income increased 35.3% for the twelve months ended December 31, 2018. This increase was largely due to both higher net interest and non-interest income and a lower loan loss provision coupled with a lower Federal corporate income tax rate.

For the full year of 2018, the Company recorded a $216,000 tax benefit related to the accounting treatment of equity-based compensation, as compared to a benefit of $191,000 for the same period last year.

At the present time, the Company is anticipating a 2019 effective tax rate of 28%.

Net Interest Income
For the year ended December 31, 2018, net interest income increased 11.0% to $36.1 million from $32.5 million in the prior year. This was largely due to an increase of $87.5 million, or 9.5%, in average interest-earning assets, primarily attributable to growth in the loan portfolio.

Net Interest Margin
The net interest margin for the twelve months ended December 31, 2018 increased to 3.58%, compared to 3.53% in the prior year, primarily due to higher yielding interest-earning assets coupled with an increase in average non-interest-bearing demand deposits, which were partially offset by higher cost of funds.

Non-Interest Income
For the year ended December 31, 2018, non-interest income increased $72,000, or 1.3%, to $5.5 million from the prior year. This was largely due to higher gains on the sale of SBA loans, service fees on deposit accounts and other loan fees. Mortgage banking revenues were $1.3 million during 2018, compared to $1.6 million in the prior year. The slowdown in residential lending activity was mainly due to the change in the mix of mortgage originations to more portfolio adjustable rate products versus saleable fixed rate mortgages, coupled with higher interest rates and tighter competition.

Non-Interest Expense
For the year ended December 31, 2018, non-interest expense increased $1.7 million, or 7.3%, to $25.7 million compared to the same prior year period. The Company’s efficiency ratio for the year ended December 31, 2018 improved to 61.66%, compared to 63.02% for the same period in 2017.

Provision for Loan Losses
For the year ended December 31, 2018, a provision for loan losses of $775,000 was expensed, compared to $1,530,000 in the prior year, with the majority of the provision due to loan growth. The Company also had $45,000 in net loan charge-offs during the year, compared to $427,000 during the same period last year.

Allowance for Loan Losses
As of December 31, 2018, the Company's allowance for loan losses was $11.4 million, compared to $10.7 million as of December 31, 2017. The loss allowance as a percentage of total loans was 1.24% at December 31, 2018 compared to 1.25% at December 31, 2017. 

Financial Condition / Balance Sheet

At December 31, 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 9.10%, its common equity Tier 1 to risk weighted assets ratio was 10.14%, its Tier 1 capital to risk weighted assets ratio was 10.14%, and its total capital to risk weighted assets ratio was 12.34%.

Total assets as of December 31, 2018 were $1.096 billion, compared to $1.040 billion at December 31, 2017.

Total loans as of December 31, 2018 were $921.3 million, compared to $850.9 million at December 31, 2017.

Total deposits as of December 31, 2018 were $917.4 million, compared to $861.6 million as of December 31, 2017. Core checking deposits at December 31, 2018 were $370.0 million, compared to $400.0 million at December 31, 2017. Our balances at year-end 2017 included a high level of prepaid real estate taxes resulting from the Tax Cuts and Jobs Act. The Company continues to focus on building core checking account deposit relationships, which can vary from quarter to quarter due to seasonality in municipal depository relationships.

Asset Quality
The Company's non-performing assets were unchanged at $2.0 million at both December 31, 2018 and September 30, 2018, compared to $2.1 million at December 31, 2017. Non-performing assets to total assets was 0.18% at both December 31, 2018 and September 30, 2018, compared to 0.20% at December 31, 2017.

Non-accrual loans were $1.4 million at both December 31, 2018 and September 30, 2018 and $2.1 million at December 31, 2017. OREO was $585,000 at December 31, 2018 and September 30, 2018, compared to no OREO at December 31, 2017. 

Troubled debt restructured loan balances amounted to $7.7 million at December 31, 2018, with all but $877,000 performing. This compared to $6.6 million at September 30, 2018 and $7.1 million at December 31, 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 13 branches along with two loan production offices throughout Monmouth, Union, and Ocean Counties, New Jersey. More information about Two River Community Bank and Two River Bancorp is available at www.tworiver.bank.

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



 
 
TWO RIVER BANCORP
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months and Twelve Months Ended December 31, 2018 and 2017
(in thousands, except per share data)
           
    Three Months Ended
December 31,
  Twelve Months Ended
December 31,
 

 
      2018       2017     2018       2017  
INTEREST INCOME:                      
Loans, including fees   $   11,006     $   9,438   $   41,726     $   35,801  
Securities:                      
 Taxable     314       273     1,175       988  
 Tax-exempt     266       270     1,108       1,101  
Interest-bearing deposits     190       93     483       350  
Total Interest Income     11,776       10,074     44,492       38,240  
INTEREST EXPENSE:                      
Deposits     2,231       1,193     7,154       4,363  
Securities sold under agreements to repurchase     15       16     58       66  
Federal Home Loan Bank ("FHLB") and other borrowings     112       171     494       620  
Subordinated debt     165       165     660       658  
Total Interest Expense     2,523       1,545     8,366       5,707  
Net Interest Income     9,253       8,529     36,126       32,533  
PROVISION FOR LOAN LOSSES     -       675     775       1,530  
Net Interest Income after Provision for Loan Losses     9,253       7,854     35,351       31,003  
NON-INTEREST INCOME:                      
Service fees on deposit accounts     167       237     880       772  
Mortgage banking     302       325     1,288       1,583  
Other loan fees     276       186     902       588  
Earnings from investment in bank owned life insurance     130       133     525       544  
Gain on sale of SBA loans     276       235     1,197       1,052  
Other income     219       227     739       920  
Total Non-Interest Income     1,370       1,343     5,531       5,459  
NON-INTEREST EXPENSES:                      
Salaries and employee benefits     4,022       3,492     15,941       14,046  
Occupancy and equipment     1,048       1,026     4,147       4,241  
Professional     343       395     1,603       1,497  
Insurance     62       58     242       216  
FDIC insurance and assessments     123       113     497       467  
Advertising     80       105     360       450  
Data processing     228       147     738       553  
Outside services fees     75       126     325       473  
OREO expenses, impairment and sales, net     13       4     5       48  
Loan workout expenses     20       59     144       233  
Other operating     433       394     1,684       1,718  
Total Non-Interest Expenses     6,447       5,919     25,686       23,942  
   Income before Income Taxes     4,176       3,278     15,196       12,520  
       Income Tax Expense     1,130       2,943     3,990       6,018  
Net Income   $   3,046     $   335   $   11,206     $   6,502  
Earnings Per Common Share:                      
Basic   $  0.36     $   0.04   $   1.32     $   0.78  
Diluted   $   0.35     $   0.04   $   1.29     $   0.75  
Weighted average common shares outstanding:                      
Basic     8,536       8,420     8,508       8,388  
Diluted     8,693       8,673     8,702       8,658  
                               



 
TWO RIVER BANCORP
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
         
  December 31,   December 31,  
  2018   2017  
ASSETS            
Cash and due from banks $ 24,067   $ 29,575  
Interest-bearing deposits in bank   24,059     18,644  
Cash and cash equivalents   48,126     48,219  
             
Securities available for sale   24,407     28,684  
Securities held to maturity   47,455     58,002  
Equity securities   2,451     2,448  
Restricted investments, at cost   6,082     5,430  
Loans held for sale   1,496     2,581  
Loans   921,301     850,874  
Allowance for loan losses   (11,398 )   (10,668 )
Net loans   909,903     840,206  
             
OREO   585     -  
Bank owned life insurance   22,097     21,573  
Premises and equipment, net   5,917     6,239  
Accrued interest receivable   2,583     2,554  
Goodwill   18,109     18,109  
Other assets   7,208     5,753  
             
TOTAL ASSETS $ 1,096,419   $ 1,039,798  
             
LIABILITIES            
Deposits:            
Non-interest-bearing $ 176,655   $ 167,297  
Interest-bearing   740,699     694,260  
Total Deposits   917,354     861,557  
             
Securities sold under agreements to repurchase   19,402     27,120  
FHLB and other borrowings   22,500     25,800  
Subordinated debt   9,923     9,888  
Accrued interest payable   119     70  
Other liabilities   10,623     8,792  
             
Total Liabilities   979,921     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 –  8,935,437 and 8,782,124 at December 31, 2018 and 2017, respectively            
 Outstanding –  8,606,992 and 8,470,030 at December 31, 2018 and 2017, respectively   80,481     79,678  
Retained earnings   39,109     29,593  
Treasury stock, at cost; 328,445 and 312,094 shares at December 31, 2018 and 2017, respectively   (2,647 )   (2,396 )
Accumulated other comprehensive loss   (445 )   (304 )
Total Shareholders' Equity   116,498     106,571  
             
TOTAL LIABILITIES and SHAREHOLDERS’ EQUITY $ 1,096,419   $ 1,039,798  

    

 
 
TWO RIVER BANCORP
Selected Consolidated Financial Data (Unaudited)
 
Selected Consolidated Earnings Data
(in thousands, except per share data)
   Three Months Ended   Twelve Months Ended
  Dec. 31,   Sept. 30,   Dec. 31,   Dec. 31,   Dec. 31,
Selected Consolidated Earnings Data:   2018     2018     2017     2018     2017
Total Interest Income $   11,776   $   11,342   $   10,074   $   44,492   $   38,240
Total Interest Expense   2,523     2,239     1,545     8,366     5,707
Net Interest Income   9,253     9,103     8,529     36,126     32,533
Provision for Loan Losses   -     150     675     775     1,530
Net Interest Income after Provision for Loan Losses   9,253     8,953     7,854     35,351     31,003
Other Non-Interest Income   1,370     1,355     1,343     5,531     5,459
Other Non-Interest Expenses   6,447     6,461     5,919     25,686     23,942
Income before Income Taxes   4,176     3,847     3,278     15,196     12,520
Income Tax Expense   1,130     1,013     2,943     3,990     6,018
Net Income $   3,046   $   2,834   $   335   $   11,206   $   6,502
                   
Per Common Share Data:                  
Basic Earnings $   0.36   $   0.33   $   0.04   $   1.32   $   0.78
Diluted Earnings $   0.35   $   0.33   $   0.04   $   1.29   $   0.75
Book Value $   13.54   $   13.27   $   12.58   $   13.54   $   12.58
Tangible Book Value(1) $   11.43   $   11.16   $   10.44   $   11.43   $   10.44
Average Common Shares Outstanding (in thousands):                  
Basic   8,536     8,513     8,420     8,508     8,388
Diluted   8,693     8,700     8,673     8,702     8,658
                             

(1) Non-GAAP Financial Information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.

null
 
 
Selected Period End Balances
(in thousands)
  Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31,  
    2018     2018     2018     2018     2017  
Total Assets $   1,096,419   $   1,086,299   $   1,055,527   $   1,042,277   $   1,039,798  
Investment Securities and Restricted Stock   80,395     91,296     94,449     96,251     94,564  
Total Loans   921,301     900,895     890,369     872,327     850,874  
Allowance for Loan Losses   (11,398 )   (11,390 )   (11,201 )   (10,962 )   (10,668 )
Goodwill and Other Intangible Assets   18,109     18,109     18,109     18,109     18,109  
Total Deposits
  917,354     905,745     880,879     870,904     861,557  
Repurchase Agreements   19,402     22,153