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Two River Bancorp Reports 2019 Second Quarter Financial Results Highlighted by 15.0% Increase in Net Income

695 Days ago

TINTON FALLS, N.J., July 23, 2019 (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, 2019, highlighted by higher net interest income and lower non-interest expenses.

2019 Second Quarter Financial Highlights
(comparisons to 2018 second quarter)

  • Net income increased 15.0% to $3.0 million, or $0.35 per diluted share
  • Return on average assets of 1.07%, up from 1.00% 
  • Return on average equity of 10.18%, up from 9.67%
  • Net interest margin decreased 5 basis points to 3.54%
  • Net interest income increased 5.2% to $9.4 million
  • Efficiency ratio(1) improved to 59.58%, compared to 62.59%


(Totals at June 30, 2019; comparisons to December 31, 2018)

  • Total loans were $953.1 million, an increase of $31.8 million, or 6.9% annualized
  • Total deposits were $972.6 million, an increase of $55.2 million, or 12.0% annualized
  • Total assets increased to a record $1.154 billion, compared to $1.096 billion
  • Tangible book value per share(2) increased to $11.93, compared to $11.43

(1) Efficiency ratio represents the ratio of non-interest expense to the sum of net interest income and non-interest income.
(2) Non-GAAP Financial Information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.

Management Commentary
William D. Moss, Chairman, President, and CEO, stated, “The Company’s net income increased 15.0% as a result of solid improvement in net interest income coupled with controlled expenses. During the quarter, we recognized a $188,000 gain on the sale of an OREO property recorded during the period, which partially contributed to a reduction in operating expenses. Loans grew $4.6 million during the quarter as originations were mostly offset by higher than expected payoffs, which included $3.2 million of adversely classified credits. On an annualized basis, loans grew 6.9%, predominantly in the commercial real estate and residential mortgage sectors. We expect that this growth, coupled with a strong loan pipeline and efficiencies from our new banking platform, will help drive profitability for the remainder of 2019.”

Mr. Moss continued, “Our non-interest income declined during the quarter, largely due to lower gains on the sale of SBA loans. Interest rates and loan quality in the SBA sector will remain headwinds in the near term. This decline was partially offset by higher residential mortgage banking revenues during the period.”

Dividend Information

On July 17, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.07 per share, payable on August 30, 2019 to shareholders of record as of the close of business on August 9, 2019. This marks the 26th consecutive quarterly cash dividend.

Key Quarterly Performance Metrics

  2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 6 Mo. Ended 6 Mo. Ended
2019 2019 2018 2018 2018 6/30/2019 6/30/2018
Net Income (in thousands) $3,048   $2,783   $3,046   $2,834   $2,650     $5,831   $5,326  
Earnings per Common Share – Diluted $0.35   $0.32   $0.35   $0.33   $0.30     $0.67   $0.61  
Return on Average Assets 1.07 % 1.01 % 1.10 % 1.04 % 1.00 %   1.04 % 1.02 %
Return on Average Tangible Assets(1) 1.08 % 1.02 % 1.11 % 1.06 % 1.02 %   1.05 % 1.04 %
Return on Average Equity 10.18 % 9.59 % 10.52 % 9.98 % 9.67 %   9.89 % 9.87 %
Return on Average Tangible Equity(1) 11.98 % 11.33 % 12.49 % 11.90 % 11.57 %   11.66 % 11.84 %
Net Interest Margin 3.54 % 3.60 % 3.56 % 3.55 % 3.59 %   3.57 % 3.61 %
Efficiency Ratio(2) 59.58 % 59.95 % 60.69 % 61.78 % 62.59 %   59.77 % 62.10 %
Non-Performing Assets to Total Assets 0.37 % 0.39 % 0.18 % 0.18 % 0.18 %   0.37 % 0.18 %
Allowance as a % of Loans 1.23 % 1.22 % 1.24 % 1.26 % 1.26 %   1.23 % 1.26 %
 
(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, 2019 and December 31, 2018 are as follows:  

  (in thousands)      
  June 30,
2019
  December 31,
2018
  %
Change
   
Commercial and industrial $   110,791   $ 109,362   1.3   %
Real estate – construction   144,404     144,865   (0.3 ) %
Real estate – commercial   574,660     552,549   4.0   %
Real estate – residential   92,829     84,123   10.3   %
Consumer   31,185     31,144   0.1   %
Unearned fees   (789 )   (742 ) 6.3   %
    953,080     921,301   3.4   %
Allowance for loan losses   (11,684 )   (11,398 ) 2.5   %
Net Loans $  941,396   $ 909,903   3.5   %
                   

Deposit Composition
The components of the Company’s deposits at June 30, 2019 and December 31, 2018 are as follows:  

  (in thousands)      
  June 30,
2019
  December 31,
 2018
  %
Change
   
Non-interest-bearing $    179,886   $   176,655   1.8   %
NOW accounts   200,044     193,347   3.5   %
Savings deposits   251,057     258,666   (2.9 ) %
Money market deposits   39,561     43,936   (10.0 ) %
Listed service CD’s   44,508     39,807   11.8   %
Time deposits / IRA   179,131     130,863   36.9   %
Wholesale deposits   78,405     74,080   5.8   %
  Total Deposits $   972,592   $   917,354   6.0   %
                   

2019 Second Quarter Financial Review

Net Income
Net income for the three months ended June 30, 2019 increased 15.0% to $3.0 million, or $0.35 per diluted common share, compared to $2.7 million, or $0.30 per diluted common share, for the same period last year. The increase was largely due to higher net interest income, a lower loan loss provision and a decrease in non-interest expenses. In addition, the Company reported a $188,000 one-time gain on the sale of OREO, which reduced non-interest expense for the period.

On a linked quarter basis, second quarter 2019 net income increased 9.5% compared to the first quarter of 2019.

Net Interest Income
Net interest income for the quarter ended June 30, 2019 was $9.4 million, an increase of 5.2% compared to $9.0 million in the corresponding prior year period. This was largely due to an increase of $66.9 million, or 6.7%, in average interest-earning assets, primarily attributable to the growth in the loan portfolio. Additionally, $86,000 of late fees were received during the current quarter from one adversely classified loan payoff.

Net Interest Margin
The Company reported a net interest margin of 3.54% for the second quarter of 2019, compared to 3.60% in the first quarter of 2019 and 3.59% reported for the second quarter of 2018. The slight decline from both prior periods was primarily due to higher cost of funds.

Non-Interest Income
Non-interest income for the quarter ended June 30, 2019 decreased to $1.2 million, compared to $1.5 million in the corresponding prior year period. This decrease was largely the result of lower gains on the sale of SBA loans and service fees on deposit accounts, and was partially offset by higher mortgage banking revenues and higher other income.  

On a linked quarter basis, non-interest income increased by $75,000, or 6.5%, from the first quarter of 2019, mainly due to higher residential mortgage banking revenues.

Non-Interest Expense
Non-interest expense for the quarter ended June 30, 2019 totaled $6.4 million, a decrease of $197,000, or 3.0%, from the $6.6 million reported in same period in 2018, primarily due to lower salary and employee benefit expenses and the aforementioned gain from the sale of an OREO property. The Company’s efficiency ratio improved to 59.58% for the quarter, compared to 62.59% for the same period in 2018.

On a linked quarter basis, non-interest expense increased $59,000, or 0.9%, primarily due to higher salary and employee benefit expenses and professional fees.

Income Tax Expense
The Company’s effective tax rate was 27.6% for the three months ended June 30, 2019, compared to 28.2% for the same period last year. The Company recognized no tax benefit related to the accounting treatment of equity-based compensation in the second quarter of 2019, compared to a $43,000 benefit in the same period last year.

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

Provision for Loan Losses
During the quarter, a provision for loan losses of $100,000 was expensed, compared to $225,000 in the same prior year period. The majority of the second quarter 2019 provision was to support the Company’s loan growth. The Company had $2,000 and $14,000 in net loan recoveries during the second quarter of 2019 and 2018, respectively.

2019 First Half Financial Review

Net Income
Net income for the six months ended June 30, 2019 increased 9.5% to $5.8 million, or $0.67 per diluted share, compared to $5.3 million, or $0.61 per diluted share, in the same prior year period. This increase was due to the same reasons noted earlier in the second quarter review.

Net Interest Income
For the first half of 2019, net interest income increased 5.7% to $18.8 million from $17.8 million in the prior year period. This was largely due to an increase of $66.7 million, or 6.7%, in average interest-earning assets, primarily attributable to the growth in the loan portfolio.

Net Interest Margin
The net interest margin for the first half of 2019 was 3.57% compared to 3.61% in the prior year period, primarily due to higher cost of funds.

Non-Interest Income

For the six months ended June 30, 2019, non-interest income decreased $417,000, or 14.9%, to $2.4 million from the same period in 2018 mainly due to the same reasons noted earlier in the second quarter review.

Non-Interest Expense
For the six months ended June 30, 2019, non-interest expense decreased $129,000, or 1.0%, to $12.6 million compared to $12.8 million the same period last year mainly due to the same reasons noted earlier in the second quarter review. Efficiency ratio for the six months ended June 30, 2019 improved to 59.77% from 62.10% compared to the same prior year period.

Income Tax Expense
For the six months ended June 30, 2019, the effective tax rate was 27.0% compared to 25.7% for the same period last year. The Company recorded a $38,000 tax benefit related to the accounting treatment of equity-based compensation, as compared to $133,000 for the same period last year.

Provision for Loan Losses
For the first half of 2019, a provision of $525,000 was expensed, compared to $625,000 for the same prior year period. The Company had $239,000 and $92,000 in net loan charge-offs for the first half of 2019 and 2018, respectively.

Financial Condition / Balance Sheet

At June 30, 2019, the Bank maintained capital ratios that were in excess of regulatory standards for well capitalized institutions. The Bank’s Tier 1 capital to average assets ratio was 9.99%, its common equity Tier 1 to risk weighted assets ratio was 11.16%, its Tier 1 capital to risk weighted assets ratio was 11.16%, and its total capital to risk weighted assets ratio was 12.31%.

Total assets as of June 30, 2019 were $1.154 billion, compared to $1.096 billion at December 31, 2018 and $1.056 million as of June 30, 2018.

Total loans as of June 30, 2019 were $953.1 million, compared to $921.3 million at December 31, 2018 and $890.4 million as of June 30, 2018. This loan growth was funded primarily from the increase in deposits.

Total deposits as of June 30, 2019 were $972.6 million, compared to $917.4 million as of December 31, 2018 and $880.9 million as of June 30, 2018. Core checking deposits at June 30, 2019 were $379.9 million, compared to $370.0 million at December 31, 2018 and $364.9 million at June 30, 2018. The Company continues to focus on building core checking account deposit relationships, which can vary from quarter to quarter due to the seasonality in municipal and other relationships.

Allowance for Loan Losses
As of June 30, 2019, the Company's allowance for loan losses was $11.7 million, compared to $11.4 million as of December 31, 2018. The loss allowance as a percentage of total loans was 1.23% at June 30, 2019 compared to 1.24% at December 31, 2018.

Asset Quality
The Company's non-performing assets at June 30, 2019 were $4.3 million as compared to $4.5 million at March 31, 2019 and $2.0 million at December 31, 2018. Non-performing assets to total assets at June 30, 2019 were 0.37%, compared to 0.39% at March 31, 2019 and 0.18% at December 31, 2018.

Non-accrual loans were $1.3 million at June 30, 2019, compared to $1.4 million at December 31, 2018, and $1.9 million at June 30, 2018. Non-accrual loans, which had increased by $2.5 million during the first quarter of 2019, declined by $2.6 million during the second quarter of 2019 as two loans totaling $2.8 million transferred into OREO while one loan totaling $278,000 was placed into non-accrual status.  OREO increased by $2.3 million due to the aforementioned transfers, partially offset by the sale of an OREO property, which had a book balance of $490,000.

Troubled debt restructured loan balances amounted to $5.5 million at June 30, 2019, with all but $555,000 performing. This compared to $7.7 million at December 31, 2018 and $6.7 million at June 30, 2018.

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, Union, Essex, 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 "continuing," "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, 2018. 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 Six Months Ended June 30, 2019 and 2018
(in thousands, except per share data)
 
  Three Months Ended
June 30,
    Six Months Ended
June 30,
 

 
  2019     2018     2019     2018  
INTEREST INCOME:                      
Loans, including fees $    11,731     $ 10,243     $   23,043     $ 20,064  
Securities:                      
  Taxable   298       290       629       587  
  Tax-exempt   234       280       473       562  
Interest-bearing deposits   216       94       403       161  
Total Interest Income   12,479       10,907       24,548       21,374  
INTEREST EXPENSE:                      
Deposits   2,771       1,641       5,189       2,999  
Securities sold under agreements to repurchase   9       15       20       29  
Federal Home Loan Bank ("FHLB") and other borrowings   101       116       233       246  
Subordinated debt   166       165       331       330  
Total Interest Expense   3,047       1,937       5,773       3,604  
Net Interest Income   9,432       8,970       18,775       17,770  
PROVISION FOR LOAN LOSSES   100       225       525       625  
Net Interest Income after Provision for Loan Losses   9,332       8,745       18,250       17,145  
NON-INTEREST INCOME:                      
Service fees on deposit accounts   173       239       339       477  
Mortgage banking   424       409       704       747  
Other loan fees   138       137       298       248  
Earnings from investment in bank owned life insurance   128       132       271       262  
Gain on sale of SBA loans   130       387       336       718  
Net realized gain on sale of securities   1       -       1       -  
Other income   238       192       440       354  
Total Non-Interest Income   1,232       1,496       2,389       2,806  
NON-INTEREST EXPENSES:                      
Salaries and employee benefits   3,942       4,010       7,783       7,895  
Occupancy and equipment   1,030       1,043       2,072       2,133  
Professional   472       488       906       828  
Insurance   66       64       131       121  
FDIC insurance and assessments   114       123       238       246  
Advertising   120       130       190       190  
Data processing   174       174       362       326  
Outside services fees   60       80       114       161  
OREO expenses, impairment and sales, net   (154 )     (14 )     (150 )     (15 )
Loan workout expenses   17       45       9       96  
Other operating   513       408       994       797  
Total Non-Interest Expenses   6,354       6,551       12,649       12,778  
Income before Income Taxes   4,210       3,690       7,990       7,173  
  Income Tax Expense   1,162       1,040       2,159       1,847  
Net Income $   3,048     $   2,650     $   5,831     $   5,326  
Earnings Per Common Share:                      
Basic $   0.35     $   0.31     $   0.68     $   0.63  
Diluted $   0.35     $   0.30     $   0.67     $   0.61  
Weighted average common shares outstanding:                      
Basic   8,596       8.488       8,594       8,480  
Diluted   8,709       8,690       8,715       8,695  
                               



TWO RIVER BANCORP
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
 
  June 30,     December 31,  
  2019     2018  
ASSETS              
Cash and due from banks $ 19,798     $ 24,067  
Interest-bearing deposits in bank   50,242       24,059  
Cash and cash equivalents   70,040       48,126  
               
Securities available for sale   23,604       24,407  
Securities held to maturity   43,774       47,455  
Equity securities   2,548       2,451  
Restricted investments, at cost   6,447       6,082  
Loans held for sale   1,093       1,496  
Loans   953,080       921,301  
Allowance for loan losses   (11,684 )     (11,398 )
Net loans   941,396       909,903  
               
OREO   2,912       585  
Bank owned life insurance   22,188       22,098  
Premises and equipment, net   6,505       5,917  
Operating right-of-use asset   5,004       -  
Accrued interest receivable   2,929       2,583  
Goodwill   18,109       18,109  
Other assets   7,248       7,207  
               
TOTAL ASSETS $ 1,153,797     $ 1,096,419  
               
LIABILITIES              
Deposits:              
Non-interest-bearing $ 179,886     $ 176,655  
Interest-bearing   792,706       740,699  
Total Deposits   972,592       917,354  
               
Securities sold under agreements to repurchase   14,162       19,402  
FHLB and other borrowings   20,700       22,500  
Subordinated debt   9,942       9,923  
Accrued interest payable   94       119  
Lease liability   5,137       -  
Other liabilities   9,754       10,623  
               
Total Liabilities   1,032,381       979,921  
               
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 – 9,017,520 and 8,935,437 at June 30, 2019 and December 31, 2018, respectively              
Outstanding – 8,656,830 and 8,606,992 at June 30, 2019 and December 31, 2018, respectively   80,954       80,481  
Retained earnings   43,857       39,109  
Treasury stock, at cost; 360,690 and 328,445 shares at June 30, 2019 and December 31, 2018   (3,129 )     (2,647 )
Accumulated other comprehensive loss   (266 )     (445 )
Total Shareholders' Equity   121,416       116,498  
               
TOTAL LIABILITIES and SHAREHOLDERS’ EQUITY $ 1,153,797     $ 1,096,419  
               

  

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: 2019   2019   2018   2019   2018
Total Interest Income $    12,479   $ 12,069   $ 10,907   $    24,548   $ 21,374
Total Interest Expense   3,047     2,726     1,937     5,773     3,604
Net Interest Income   9,432     9,343     8,970     18,775     17,770
Provision for Loan Losses   100     425     225     525     625
Net Interest Income after Provision for Loan Losses   9,332     8,918     8,745     18,250     17,145
Other Non-Interest Income   1,232     1,157     1,496     2,389     2,806
Other Non-Interest Expenses   6,354     6,295     6,551     12,649     12,778
Income before Income Taxes   4,210     3,780     3,690     7,990     7,173
Income Tax Expense   1,162     997     1,040     2,159     1,847
Net Income $    3,048   $ 2,783   $ 2,650   $    5,831   $ 5,326
                   
Per Common Share Data:                  
Basic Earnings $  0.35   $ 0.32   $ 0.31   $  0.68   $ 0.63
Diluted Earnings $  0.35   $ 0.32   $ 0.30   $  0.67   $ 0.61
Book Value $    14.03   $ 13.75   $ 13.02   $    14.03   $ 13.02
Tangible Book Value(1) $    11.93   $ 11.66   $ 10.90   $    11.93   $ 10.90
Average Common Shares Outstanding (in thousands):                  
Basic   8,596     8,583     8,488     8,594     8,480
Diluted   8,709     8,712     8,690     8,715     8,695

(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,  
  2019   2019   2018   2018   2018  
Total Assets $  1,153,797   $ 1,140,521   $ 1,096,419   $ 1,086,299   $ 1,055,527  
Investment Securities and Restricted Stock   76,373     77,904     80,395     91,296     94,449  
Total Loans   953,080     948,493     921,301     900,895     890,369  
Allowance for Loan Losses   (11,684 )   (11,582 )   (11,398 )   (11,390 )   (11,201 )
Goodwill and Other Intangible Assets   18,109     18,109     18,109     18,109     18,109  
Total Deposits   972,592     959,655     917,354     905,745     880,879  
Repurchase Agreements   14,162     15,185     19,402     22,153     19,878  
FHLB and Other Borrowings   20,700     20,700     22,500     24,500     24,500  
Subordinated Debt   9,942     9,932     9,923     9,914     9,905  
Shareholders' Equity   121,416     119,156     116,498     113,891     111,347  
                               


Asset Quality Data (by Quarter)
(dollars in thousands)
 
 
  June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,  
  2019   2019   2018   2018   2018  
Nonaccrual Loans $   1,346   $ 3,908   $ 1,390   $ 1,390   $ 1,930  
OREO   2,912     585     585     585     -  
Total Non-Performing Assets   4,258     4,493     1,975     1,975     1,930  
                     
Troubled Debt Restructured Loans:                    
Performing   4,969     6,726     6,842     5,678     5,831  
Non-Performing   555     711     877     877     877  
                     
Non-Performing Loans to Total Loans   0.14 %   0.41 %   0.15 %   0.15 %   0.22 %
Non-Performing Assets to Total Assets   0.37 %   0.39 %   0.18 %   0.18 %   0.18 %
Allowance as a % of Loans   1.23 %   1.22 %   1.24 %   1.26 %   1.26 %
                               



Capital Ratios
 
  June 30, 2019
  December 31, 2018
  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 10.24 % 9.17 % 10.24 % 12.39 %   10.14 % 9.10 % 10.14 % 12.34 %
Two River Community Bank 11.16 % 9.99 % 11.16 % 12.31 %   11.09 % 9.95 % 11.09 % 12.26 %
"Well capitalized" institution (under prompt corrective action regulations.)* 6.50 % 5.00 % 8.00 % 10.00 %   6.50 % 5.00 % 8.00 % 10.00 %
 
*Applies to Bank only. For the Company to be “well capitalized” under the Federal Reserve definitions for bank holding companies, the Company is only required to have a Tier 1 Capital to Risk Weighted Assets ratio of at least 6.00% and a Total Capital to Risk Weighted Assets ratio of at least 10.00%.
 


Net Loan Charge-offs
(dollars in thousands)
 
  Three Months Ended
    Six Months Ended
  June 30,     March 31,     Dec. 31,   Sept. 30,   June 30,
    June 30,
    June 30,
   
  2019     2019     2018   2018   2018     2019     2018    
Net loan (charge-offs) recoveries:                                          
Charge-offs $   -     $ (247 )   $ -   $ -   $ (13 )   $   (247 )   $ (128 )  
Recoveries   2       6       8     39     27       8       36    
Net loan (charge-offs) recoveries $     2     $ (241 )   $ 8   $ 39   $ 14     $   ( 239 )   $ (92 )  
Net loan (charge-offs) recoveries to average loans (annualized)   0.0 0 %     (0.10 ) %   0.00 %   0.02 %   0.01   %   (0.05 ) %   (0.02 ) %
                                                     


Consolidated Average Balance Sheets & Yields
With Resultant Interest and Average Rates
 
  Three Months Ended   Three Months Ended
(dollars in thousands) June 30, 2019   June 30, 2018
    Interest /
Income
Expense
      Interest /
Income
Expense
 
ASSETS Average
Balance
    Average
Yield /
Rate
  Average
Balance
    Average
Yield /
Rate
Interest-Earning Assets:          
Interest-bearing due from banks $ 34,679   $ 216   2.50 %   $ 21,206   $ 94   1.78 %
Investment securities 77,409   532   2.75 %   95,801   570   2.38 %
Loans, net of unearned fees(1) (2) 956,225   11,731   4.92 %   884,450   10,243   4.64 %
                           
Total Interest-Earning Assets 1,068,313   12,479   4.69 %   1,001,457   10,907   4.37 %
                           
Non-Interest-Earning Assets:                          
Allowance for loan losses (11,703 )           (11,108 )        
All other assets 90,796             74,616          
                           
Total Assets $ 1,147,406               $ 1,064,965            
                           
LIABILITIES & SHAREHOLDERS' EQUITY                          
Interest-Bearing Liabilities:                          
NOW deposits $ 212,267   422   0.80 %   $ 220,421   306   0.56 %
Savings deposits 250,489   636   1.02 %   262,379   494   0.76 %
Money market deposits 38,682   20   0.21 %   53,393   23   0.17 %
Time deposits 293,333   1,693   2.32 %   188,862   818   1.74 %
Securities sold under agreements to repurchase 13,325   9   0.27 %   21,190   15   0.28 %
FHLB and other borrowings 20,713   101   1.96 %   24,503   116   1.90 %
Subordinated debt 9,939   166   6.68 %   9,902   165   6.67 %
                           
Total Interest-Bearing Liabilities 838,748   3,047   1.46 %   780,650   1,937   1.00 %
                           
Non-Interest-Bearing Liabilities:                          
Demand deposits 172,962             165,416          
Other liabilities 15,566             8,925          
                           
Total Non-Interest-Bearing Liabilities 188,528             174,341          
                           
Stockholders’ Equity 120,130             109,974          
                           
Total Liabilities and Shareholders’ Equity $ 1,147,406               $ 1,064,965            
                           
NET INTEREST INCOME     $ 9,432             $ 8,970      
                           
NET INTEREST SPREAD(3)         3.23 %           3.37 %
                           
NET INTEREST MARGIN(4)         3.54 %           3.59 %
                           

(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, 2019   June 30, 2018
    Interest /
Income
Expense
      Interest /
Income
Expense
 
ASSETS Average
Balance
    Average Yield /
Rate
  Average
Balance
    Average
Yield /
Rate
Interest-Earning Assets:          
Interest-bearing due from banks $ 32,368   $ 403   2.51 %   $ 19,679   $ 161   1.65 %
Investment securities 78,316   1,102   2.81 %   96,708   1,149   2.38 %
Loans, net of unearned fees(1) (2) 948,897   23,043   4.90 %   876,541   20,064   4.62 %
                           
Total Interest-Earning Assets 1,059,581   24,548   4.67 %   992,928   21,374   4.34 %
                           
Non-Interest-Earning Assets:                          
Allowance for loan losses (11,570 )           (10,974 )        
All other assets 85,502             73,756          
                           
Total Assets $ 1,133,513               $ 1,055,710            
                           
LIABILITIES & SHAREHOLDERS' EQUITY                          
Interest-Bearing Liabilities:                          
NOW deposits $ 208,976   835   0.81 %   $ 228,502   616   0.54 %
Savings deposits 253,074   1,228   0.98 %   255,471   848   0.67 %
Money market deposits 40,123   43   0.22 %   55,857   48   0.17 %
Time deposits 275,070   3,083   2.26 %   178,651   1,487   1.68 %
Securities sold under agreements to repurchase 14,431   20   0.28 %   20,417   29   0.29 %
FHLB and other borrowings 23,198   233   2.02 %   26,349   246   1.88 %
Subordinated debt 9,934   331   6.66 %   9,898   330   6.67 %
                           
Total Interest-Bearing Liabilities 824,806   5,773   1.41 %   775,145   3,604   0.94 %
                           
Non-Interest-Bearing Liabilities:                          
Demand deposits 173,950             162,753          
Other liabilities 15,820             8,981          
                           
Total Non-Interest-Bearing Liabilities 189,770             171,734          
                           
Shareholders’ Equity 118,937             108,831          
                           
Total Liabilities and Shareholders’ Equity $ 1,133,513               $ 1,055,710            
                           
NET INTEREST INCOME     $ 18,775             $ 17,770      
                           
NET INTEREST SPREAD(3)         3.26 %           3.40 %
                           
NET INTEREST MARGIN(4)         3.57 %           3.61 %
                           

(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,  
  2019   2019   2018   2018   2018   2019   2018  
Total shareholders' equity $ 121,416   $ 119,156   $ 116,498   $ 113,891   $ 111,347   $ 121,416   $ 111,347  
Less: goodwill and other tangibles   (18,109 )   (18,109 )   (18,109 )   (18,109 )   (18,109 )   (18,109 )   (18,109 )
Tangible common shareholders’ equity $ 103,307   $ 101,047   $ 98,389   $ 95,782   $ 93,238   $ 103,307   $ 93,238  
                                           
Common shares outstanding   8,657     8,668     8,607     8,584     8,555     8,657     8,555  
Book value per common share $ 14.03   $ 13.75   $ 13.54   $ 13.27   $ 13.02   $ 14.03   $ 13.02  
                                           
Book value per common share $ 14.03   $ 13.75   $ 13.54   $ 13.27   $ 13.02   $ 14.03   $ 13.02  
Effect of intangible assets   (2.10 )   (2.09 )   (2.11 )   (2.11 )   (2.12 )   (2.10 )   (2.12 )
Tangible book value per common share $ 11.93   $ 11.66   $ 11.43   $ 11.16   $ 10.90   $ 11.93   $ 10.90  
                             
Return on average assets 1.07 % 1.01 % 1.10 % 1.04 % 1.00 % 1.04 % 1.02 %
Effect of average intangible assets 0.01 % 0.01 % 0.01 % 0.02 % 0.02 % 0.01 % 0.02 %
Return on average tangible assets 1.08 % 1.02 % 1.11 % 1.06 % 1.02 % 1.05 % 1.04 %
                             
Return on average equity 10.18 % 9.59 % 10.52 % 9.98 % 9.67 % 9.89 % 9.87 %
Effect of average intangible assets 1.80 % 1.74 % 1.97 % 1.92 % 1.90 % 1.77 % 1.97 %
Return on average tangible equity 11.98 % 11.33 % 12.49 % 11.90 % 11.57 % 11.66 % 11.84 %
                             

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