The Bank of Princeton Announces Third Quarter 2018 Results

PRINCETON, N.J., Oct. 25, 2018 /PRNewswire/ -- The Bank of Princeton (the "Bank") (NASDAQ: BPRN) today reported unaudited results of operations and financial condition for the quarter ended September 30, 2018.  The Bank reported net income of $3.7 million, or $0.54 per diluted common share, for the third quarter of 2018, compared to net income of $3.6 million, or $0.53 per diluted common share, for the second quarter of 2018, and net income of $3.2 million, or $0.51 per diluted common share, for the third quarter of 2017.

For the nine month period ended September 30, 2018, the Bank reported net income of $10.9 million, or $1.59 per diluted common share, compared to $9.3 million, or $1.71 per diluted common share for the same period in 2017. The diluted earnings per shares calculation in 2018 was impacted by the common stock offering that was completed August 2017.

            Highlights for the quarter-ended September 30, 2018 are as follows:

• Net-interest income for the three month period ended September 30, 2018 increased $593 thousand, or 6.0%, over the same period in 2017.
• Total net income for the third quarter of 2018 increased $527 thousand, or 16.6%, when compared to the same period in 2017.
• Total net income for the nine month period ended September 30, 2018 increased $1.6 million, or 17.3%, when compared to the same period in 2017.
• Net loans increased $90.1 million, from $970.0 million at December 31, 2017. This reflects an annualized increase of 9.3%

"The Bank of Princeton third quarter results continued to build on the momentum for 2018.  Year over year 2018 earnings increased 17% due to strong loan and deposit growth along with continued expense management.   The Bank's balance sheet and capital positon remains a source of strength allowing the bank to evaluate future organic and inorganic growth opportunities," stated Edward Dietzler, President/CEO.

Chairman Richard Gillespie states that, "The Bank continues to look for expansion opportunities within our footprint and will be opening three new branch locations within the next several months.  We are also pleased to have announced our first ever cash dividend to shareholders."

Balance Sheet Review

Total assets were $1.23 billion at September 30, 2018, an increase of $34.3 million, or 2.9%, when compared to $1.20 billion at the end of 2017. The primary reason for the increase in total assets was due to an increase in net loans of approximately $90.1 million, primarily consisting of commercial and residential real estate loans, partially offset by a reduction of $50.9 million in cash and cash equivalents, used to fund loan growth.

Total deposits at September 30, 2018 decreased by $2.9 million, or 0.3%, when compared to December 31, 2017. Since December 31, 2017, we experienced deposit increases of $62.6 million in time deposit, $39.9 million in money markets deposits, which were more than offset by a $99.3 million decrease in demand accounts (approximately $50.0 million was related to municipal deposits).  At September 30, 2018, the Bank had borrowings of $25.0 million in short-term advances to fund its loan growth.   

Total stockholders' equity increased $11.2 million, or 6.7% when compared to the end of 2017. This increase was primarily due to earnings reported during the first nine months of 2018.  The ratio of equity to total assets was 14.5%, 0.5% higher than year-end 2017.

Asset Quality

At September 30, 2018, non-performing assets were $4.9 million, a decrease of $5.1 million or 51.3% when compared to $10.0 million at December 31, 2017.  This decrease was primarily the result of two large commercial real estate credits totaling $6.4 million that paid-off and partially offset with addition of one commercial real estate property totaling $1.7 million and one construction and development $487 thousand. Total troubled debt restructuring ("TDRs") balance totaled $2.8 million at September 30, 2018, a decline of $3.6 million from year-end 2017. All TDRs are performing to their agreed upon terms.

Review of Quarterly Financial Results

Net interest income was $10.5 million for the third quarter of 2018, compared to $10.3 million for the second quarter of 2018 and $9.9 million for the third quarter of 2017.  The increase from the previous quarter was a result of an increase in interest income of $672 thousand, or 5.0%, offset by an increase in interest expense of $398 thousand.  The net interest margin for the third quarter 2018 was 3.51%, decreasing six basis points, when compared to the second quarter of 2018. This decrease was primarily associated with an increase of 11 basis points paid on cost of funds, partially offset by an increase of three basis points earning on interest earning assets.  When comparing the same three month period ended September 30, 2018 and 2017, net interest income increased $593 thousand, which was primarily due to a higher volume of average earnings assets of approximately $157.0 million. For the nine month period ended September 30, 2018, net interest income was $30.7 million, an increase of $1.9 million, or 6.6%, over the same period in 2017, which was primarily due to a higher volume of average earning assets of approximately $151.0 million.  Total rate on interest-bearing liabilities, which includes non-interest-bearing deposits for the three month period ended September 30, 2018 and 2017 was 1.22% and 0.92%, respectively. 

The Bank did not record a provision for credit losses this quarter and recorded $665 thousand for the nine months ended September 30, 2018, compared to $850 thousand for both the three and nine months periods in 2017.  When compared to the prior quarter, the Bank recorded a $410 thousand provision for credit losses for the three months ended June 30, 2018. The primary reason for the provision in the second quarter of 2018 was due to an increase in the outstanding loans balance.  The Bank realized net recoveries of $93 thousand in this quarter compared to net charges-offs of $213 thousand in the quarter ended June 30, 2018. The ratio of allowance for credit losses to period end loans was 1.15% at September 30, 2018, compared to 1.20% at December 31, 2017 and 1.19% at September 30, 2017, which reflects management's assessment of the credit quality in the loan portfolio.

Total non-interest income for the third quarter of 2018 decreased $498 thousand, to $649 thousand, when compared to the same period in 2017. This decrease was primarily due to a decrease in income from fees and service charges, primarily due to a lower level of fees generated on loans earned between the two periods.  The increase in non-interest income from the previous quarter was $22 thousand primarily due to loan fees collected, partially offset by a reduction in service charges collected during the current quarter.  For the nine month period ended September 30, 2018, non-interest income increased $32 thousand, or 1.6%, primarily due to increases in bank-owned life insurance, partially offset due to a lower level of fees generated on loans.

Total non-interest expense for the third quarter of 2018 increased $813 thousand, or 13.9%, when compared to the same period in 2017.  This increase was primarily due a one-time charge the Bank recorded against an OREO property, along with increases in salaries and employee benefit expense and advertising expense, partially offset by a reduction in professional fees, FDIC deposit insurance and occupancy expense.  When comparing September 30, 2018 to the prior linked quarter, non-interest expense increased $385 thousand, or 6.1%, primarily due a one-time charge the Bank recorded against an OREO property, partially offset by a decrease in salaries and benefits expense. For the nine month period ended September 30, 2018, non-operating expense was $19.0 million, compared to $17.8 million for the same period in 2017. The increase was attributed to an increase of salaries and benefits expense and a one-time charge against an OREO property, partially offset by a reduction in professional fees and FDIC deposit insurance expense.

For the three month period ended September 30, 2018, the Bank incurred income tax expense of $830 thousand, resulting in an effective tax rate of 18.3%, compared to $579 thousand, resulting in an effective tax rate of 13.7%, for the three month period ended June 30, 2018, and compared to $1.2 million, resulting in an effective tax rate of 27.8%, for the three month period ended September 30, 2017. The current effective tax yield for the three and nine months ended September 30, 2018, were reduced, in part, as a result of the new corporate tax rate of 21.0% from the prior rate of 34.0%.  In addition, both three and nine months ended September 30, 2018 and three months ended June 30, 2018 were positively impacted by recording a tax benefit related to the exercise of warrants and stock options.  The Bank is continuing to evaluate the impact of recent New Jersey tax legislation, which increases Corporation Business Tax rate and the Bank does not anticipate having a material impact. 

About The Bank of Princeton

The Bank of Princeton is a community bank founded in 2007.  The Bank is a New Jersey state-chartered commercial bank with ten branches in New Jersey, including three in Princeton and others in Hamilton, Pennington, Montgomery, Monroe, Lambertville, Lawrenceville, and New Brunswick.  There are also three branches in the Philadelphia, Pennsylvania area, operating as MoreBank, a division of The Bank of Princeton. The Bank of Princeton is a member of the Federal Deposit Insurance Corporation ("FDIC").

Forward-Looking Statements

The Bank of Princeton may from time to time make written or oral "forward-looking statements," including statements contained in the Bank's filings with the FDIC, in its reports to stockholders and in other communications by the Bank (including this press release), which are made in good faith by the Bank pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended.

These forward-looking statements involve risks and uncertainties, such as statements of the Bank's plans, objectives, expectations, estimates and intentions that are subject to change based on various important factors (some of which are beyond the Bank's control). The following factors, among others, could cause the Bank's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Bank conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; market volatility; the value of the Bank's products and services as perceived by actual and prospective customers, including the features, pricing and quality compared to competitors' products and services; the willingness of customers to substitute competitors' products and services for the Bank's products and services; credit risk associated with the Bank's lending activities; risks relating to the real estate market and the Bank's real estate collateral; the impact of changes in applicable laws and regulations and requirements arising out of our supervision by banking regulators; other regulatory requirements applicable to the Bank; technological changes; acquisitions; changes in consumer spending and saving habits; and the success of the Bank at managing the risks involved in the foregoing.

The Bank cautions that the foregoing list of important factors is not exclusive. The Bank does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Bank, except as required by applicable law or regulation.